Blog Post

Digital Health Is Central to Value-Based Payment Strategies

Digital Health Is Central To Value Based Payment Strategies Web

The COVID-19 pandemic has highlighted the need for providers to create alternative revenue sources and opportunities. Most providers still rely on a fee-for-service (FFS) payment model that rewards them for volume. When the pandemic began and patient demand for services dried up, so did revenue. In the scramble to provide services to patients and offset lost volume, providers quickly implemented telehealth and other virtual services, spurred on by unprecedented government and commercial payer support that included reimbursement for telehealth visits equal to that of an in-person visit.

While these measures may have helped with FFS revenue in the short term, telehealth visits alone cannot make up the revenue loss from the overall decrease in volume. Value-based payment (VBP) models, on the other hand, enable providers to generate non-visit-based revenue by maximizing opportunities to increase the value to patients, health plans, and employers. The explosion of digital health used during the pandemic can help providers optimize their performance under value-based models. These digital competencies and capabilities will continue to pay dividends as VBP models proliferate in response to market forces shaping the industry’s COVID-19 recovery and the long-term delivery of care.

Even before COVID-19, several key market forces were driving providers to adopt VBP models—site-neutral payment policies, an aging population, shifting utilization, physician shortages, and policy regulations, among others. But these forces have become more pressing in the wake of the pandemic, as providers seek to manage their impact in conjunction with declining revenue. Below, we will describe how other market forces, namely payer initiatives and digital health adoption, have accelerated as providers seek ways to generate revenue and manage care delivery virtually.

Market Forces Driving Value-Based Care (VBC) Adoption

Payer Initiatives Supporting and Expanding VBP

Admittedly, over the past decade, the transition to value has been slower than initially projected. However, COVID-19 has made it clear the time for value is now—and payers are taking notice. CMS has stated that its FFS system “is insufficient … because it limits payment to what goes on inside a doctor’s office. The transition to a value-based system has never been so urgent.” CMS has signaled that it will likely continue to implement and expand VBP programs in order to ensure healthcare access, innovation, and improved outcomes.

Commercial payers are also indicating a greater focus on value. They are offering economic support to providers who agree to enter value-based arrangements. For example, Blue Cross NC announced an initiative called Accelerate to Value, which focuses on immediately moving primary care practices into value-based arrangements. In exchange for advance payments, practices must join Blue Cross NC’s VBC program by 2021, after which they have the option to receive capitated payments starting in 2022.

Providers who can create a steady source of payments independent from in-person visits will be in a stronger post-PHE financial position. Providers looking to take advantage of payer acceleration of VBP should evaluate their current capabilities and determine which model(s) best fits their organization. With more advanced capabilities, the greater the degree of provider risk-taking opportunities.

Digital Health Adoption Creates Success in VBP

To maximize financial gains under a VBP model, providers should take stock of digital health solutions (some of which they may have recently implemented to manage COVID-19) that will optimize performance and address some of the challenges of VBP models.

Consumers who utilized virtual care during the PHE will continue to drive the demand for telehealth and remote monitoring to avoid crowded waiting rooms, appointment delays, and potential exposure. Providers and patients have discovered that these technologies can close gaps in care and improve the patient experience. Providers are looking to use these technologies to enhance clinical offerings.

Organizations that want to expand need to examine the spectrum of complexity, technology, and competencies needed. Virtual visits can be more transactional and require limited infrastructure, while home and community-care programs will draw on several resources, such as care coordination, technology outside of the hospital walls, and community involvement. Digital health strategies are most successful when they match the resources and needs of the provider. The graphic below illustrates how providers can adopt digital health strategies to help achieve outcomes that provide success under VBP models.

Digital Health Strategies to Succeed in VBC

Many of these technologies were implemented with the hope that reimbursement would follow. While the pandemic forced payers to expand telehealth, the long-term commitment remains unknown. Providers who can demonstrate their value to payers (i.e., higher quality, improved patient satisfaction, and lower costs) are more likely to be successful in negotiating the long-term inclusion of telehealth services into their commercial contracts. In the meantime, providers should think about the return on investment that digital health capabilities can provide under VBP models.

Providers who are focusing their strategies for COVID-19 recovery will need to embrace the increased focus on value-based arrangements and telehealth adoption, the combination of which provides the most success.

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