Value-based payment has produced little value. It needs a time-out

“The concept of value-based payment became widespread among U.S. health policymakers and analysts during the 2000s. It collectively refers to interventions that offer doctors and hospitals financial incentives that, in theory, induce them to improve both components of health-care value — cost and quality — without generating the hostility provoked by managed care insurance companies during the HMO [health maintenance organization] backlash of the late 1990s.

[The Center for Medicare and Medicaid Innovation reviewed 54 models of value-based payment. Only four were certified to be expanded:]

  • The Home Health Value-based Purchasing Model demonstration cut Medicare spending by 1% with mixed effects on quality.
  • The Pioneer ACO [Accountable Care Organization] program, which saved no more than a few tenths of a percent net, suffered an astonishing attrition rate: the number of participating ACOs fell from 32 at the beginning of the program in 2012 to nine when the program ended in 2016. CMS rushed to certify the program based on data gathered in just the first two years using a questionable methodology.
  • The non-emergent ambulance prior authorization demonstration and diabetes prevention programs are not value-based programs. The ambulance program merely tested the use of prior authorization for ambulance service. The diabetes prevention program simply confirmed what previous research had shown: for individuals at high risk for developing type 2 diabetes, lifestyle changes can prevent or delay disease.

[..] A 2019 report in the journal Health Affairs found “a clear association between physician consolidation and county-level ACO penetration. In counties with the highest ACO penetration, there were large declines in the number of small practices and increases in the number of large practices.”

An honest analysis of why value-based payments have failed should consider at least these four explanations: [..]

  • Wrong diagnosis. Proponents of ACOs assume that the cost problem, be it rising costs for Medicare or for the country, is due to the excessive volume of medical services being rendered rather than excessive price (price times volume of services equals total spending), and that the fee-for-service method of paying providers induces overuse. To be sure, there are pockets of overuse in the U.S. health care system and in Medicare, but no evidence that they are caused by the fee-for-service method.
  • No definition. [..] The lack of a clear definition makes it extremely difficult for providers to know what they’re supposed to do, and it impedes intelligent discussion about why accountable care organizations fail. At least two evaluations of Medicare’s ACO programs have commented on the vague definition problem. A 2012 evaluation of the Physician Group Practice Demonstration (an early test of the ACO concept that demonstrated it doesn’t work) stated: “The demonstration was not designed to test specific interventions; therefore, participating sites had complete autonomy in determining strategies that would provide higher quality care and expenditure savings. Since these strategies … were not uniformly designed, defined, or implemented across the ten PGPs, evaluations of interventions could not be done.”
    Similarly, an evaluation of the Pioneer ACO program, which ran from 2012 through 2016, reported, “The ACO ‘treatment’ under investigation is not a prescribed set of activities or interventions.”
  • Assignment of ACO “members” rather than enrollment. To avoid a repeat of the backlash over health maintenance organizations, the Affordable Care Act required that Medicare beneficiaries be assigned to ACOs “based on their utilization of primary care services.” CMS measures “utilization of primary care services” by examining claims filed for beneficiaries over a look-back period. This method of populating ACOs results in high rates of leakage — the industry term for people assigned to accountable care organizations who seek care outside of their networks. Leakage rates are typically 30% annually. How are ACO providers supposed to be “accountable” for patients they never see?
  • Inaccurate measurement of “value.” Proponents of accountable care organizations assume that CMS and other insurers can accurately measure the cost and quality of providers and ACOs, and when financial carrots and sticks are attached to these measurements, only good things will happen.
    This assumption is sheer fantasy. Measurement of cost and quality is wildly inaccurate — especially at the level of the individual doctor — and always will be. The bonuses and penalties dished out to ACOs, and to individual providers, more closely resemble white noise than useful feedback. They create incentives to deny care and to game the measurements by upcoding and teaching to the test.”

Full article, K Sullivan, A Malinow and K Tillow, STAT, 2022.7.26