Over the last several decades, health care costs in the United States have increased significantly without corresponding improvements in outcomes. States have increasingly looked to move away from volume-based fee-for-service (FFS) payments for health care, a system where a provider is paid a fee for each service, as a mechanism to combat this trajectory, and COVID-19 pandemic has strengthened the rationale for these efforts. Providers receiving value-based prospective payments have demonstrated greater financial resiliency than providers relying solely on FFS payments. In addition, value-based payment (VBP) models, where providers are rewarded for providing cost-effective and quality care, can offer states greater flexibility in care delivery, which may facilitate tailored approaches to addressing equity, disparities and social determinants of health through innovative workforce models, telehealth adoption and care coordination strategies.
The confluence of rising health expenditures and the pandemic’s disruption to the health care system may catalyze greater interest in VBP arrangements. However, the path forward is challenging and complex. In 2018, only 30% of Medicaid payments were made through value-based arrangements, a sign that providers were hesitant to transition to new models. Multiple factors influence this reluctance. High start-up costs to build data infrastructure and implement care transformation make the transition to VBP a multi-year process—especially to show significant savings—compounding provider uncertainty about making the leap. Also, because payers each have their own VBP models, payment methodologies and performance metrics, it can be challenging for providers to make targeted, confident investments. States can play a critical role in helping overcoming barriers to VBP participation with a unified vision by using their central role as regulator, convener, and administrator.
On October 27, 2020, the National Governors Association Center for Best Practices, in partnership with the Duke-Margolis Center for Health Policy, hosted an expert roundtable for senior state officials, national experts, and industry participants to discuss the state role in accelerating the transition to value post-COVID-19. This issue brief summarizes four key areas where state-driven strategies can standardize and streamline broader adoption of VBP, supplemented by case examples and priority areas where additional federal support could amplify efforts. The four key areas are:
- LONG-TERM VISION: Laying out a multi-year process that includes both strategic vision and substantial investment to secure buy-in and build the necessary infrastructure and care teams needed for success.
- PAYER ALIGNMENT: Standardizing quality metrics, reporting, and expectations that can simplify participation in VBP models.
- STAKEHOLDER CONVENING: Bringing together public and private stakeholders to develop a coordinated vision.
- DATA COLLECTION: Ensuring states, plans, and providers have access to timely and accurate information to monitor quality and make improvements.