Health Law & Policy
| Mar 27 2015

Provider Payment Reform Spotlights Transparency

Molly Loftus
Chief Actuary, Health & Benefits, Mercer

While it’s difficult to measure the Affordable Care Act’s impact on provider payment reform, we’ve seen sweeping changes in the financing and delivery of health care among commercial health insurance carriers, as well as parallels in Medicare.

Historically, providers have been reimbursed on a fee-for-service basis. Under this model, there are no meaningful incentives for providers to limit supply. Volume drives revenue and compensation increases as more complicated procedures are performed. But the system is clearly evolving.

The trend is toward value-based reimbursement, which shifts the revenue stream to better align provider reimbursements with cost and quality outcomes. For example, a care-coordination fee is paid to providers to fund clinical resources for total population health management. Other new revenue sources include shared savings pools, in which providers are rewarded for holding down cost below a target threshold while also improving clinical outcomes. It’s estimated that 20% of carrier payments to providers currently feature some amount of value-based reimbursement incentives, and we can expect that percentage to more than double by 2020.

An important aspect of provider payment reform is the movement away from today’s heavily fragmented system. In the current model, primary care physicians and specialists independently manage their patients’ care, often leading to duplicative testing, failure to manage gaps in care, and incomplete knowledge of the patient’s medical history. The new focus is on quality of care and member satisfaction, featuring a more holistic integration of physical and behavioral care to eliminate redundancies and care gaps, and ensure that the most cost-effective care is being delivered. This integrated approach can lead to improved health outcomes and lower the cost of care for employers and their employees.

The call to action for employers on provider payment reform is to advocate for greater transparency around local value-based care options and their associated outcomes. Value-based care has the potential to drive meaningful cost savings and improved outcomes if appropriately structured and deployed. But it also introduces additional provider revenue streams, which could increase costs. Put another way, it’s important for employers to understand what sort of results they are getting for these new investments in employee health care benefits, and whether provider incentives are driving meaningful change.

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