Hospitals, Policy

Report: Fee for service still dominant method of healthcare payments

Commercial health plans have “dramatically shifted” in how they pay hospitals and physicians, with 40 […]

Commercial health plans have “dramatically shifted” in how they pay hospitals and physicians, with 40 percent of all payments reflecting value over volume, but 60 percent of payments remain tied to the traditional fee-for-service model, according to the nonprofit Catalyst for Payment Reform.

The San Francisco-based organization issued the findings as part of its annual scorecard on payment reform efforts. Although a majority of health plans are still seemingly stuck to the fee-for-service model, the 40 percent who have shifted away from the old model is a 29 percent increase over the previous year, when just 11 percent of payments were based on values and outcomes over sheer volume.

The National Scorecard on Payment Reform uses data submitted by commercial health plans on a voluntary, self-reported basis to eValue8, the National Business Coalition on Health’s annual request for information to health plans. The plans responding to the Scorecard questions represent 65 percent of the commercially-insured lives in the U.S., according to the nonprofit, which it says offers a good snapshot of trend in how healthcare is paid for across the country.

The scorecard also found that 53 percent of payments that are value-oriented put providers at risk – so-called “skin in the game” – if care outcomes didn’t improve or spent over budget. Much of those value-based payments offer financial incentives but no financial risk.

Not surprisingly, hospitals are most impacted by the evolving payment changes, with 38 percent of payments to hospitals being value-based versus 10 percent in the outpatient setting and for specialty care. Twenty-four percent of payments to primary care physicians were value-oriented.

The scorecard also found that a tiny portion of healthcare spending flows through shared-risk arrangements or bundled payments, with just 1 percent and .1 percent, respectively.

“We are struck that the use of pay-for-performance just jumped after being around for more than a decade,” said Andréa Caballero, program director, CPR, who led the work on the Scorecard. “With today’s pressure to reform payment, health plans and providers are building on a method they know, despite limited evidence it improves care or saves money.”

While that may be the case nationally, the nonprofit also conducted a California Scorecard on Payment Reform, which showed a significant increase in value-oriented payment since 2013.

Fifty-five percent of the payments commercial health plans made to California hospitals and physicians were value-oriented, up from 42 percent in 2013. That’s mostly attributable to capitation payments with a quality component, which California has been quicker to embrace than other parts of the country.

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