Should your doctor get paid more if you get better?

If you’re a Medicare or Medicaid recipient, this question should mean a lot to you. (And even if you aren’t, you’ll want to pay attention to it, too — because the way doctors are paid for the care they give you is changing.)

Medicine is moving toward value-based care, which means that doctors’ reimbursement is more closely tied to patient outcomes: whether or not patients get better, and how quickly. The Centers for Medicare and Medicaid Services is already changing to this model, and other medical communities are following suit as insurance companies adopt the new model.

Value-Based vs. Fee-for-Service

Before now, doctors have been paid mostly on a fee-for-service basis. They perform a test or a procedure on you, and they get paid for it. Easy peasy — and expensive.

Critics of the fee-for-service model claim that it runs up everyone’s health care costs. How? The more tests doctors order or the longer it takes you to recover from an illness, the more they get paid — and the more you have to pay for health insurance to cover those medical bills. Fee-for-service provides incentives for doctors to order as many tests and schedule as many follow-up appointments as possible.

Value-based care is different. Doctors have to follow up with patients and figure out whether their care has worked; when they can prove that is has, then they’ll get paid more for better outcomes. They’re rewarded when you don’t have to come back and see them, not when you do.

Here’s the most important takeaway: Supporters claim that value-based care will reduce healthcare costs for everyone.

How Value-Based Care May Lower Healthcare Costs

“The cost of healthcare in the U.S. is simply unsustainable.”
— Melanie Phelps, SVP, North Carolina Medical Society

Supporters claim that this change will be awesome for patients (that’s you!) because it will motivate doctors to provide effective, efficient care. That, in turn, will be awesome for the whole healthcare system — healthier patients cost insurance companies less money, which means they don’t have to keep raising your insurance premiums. Finally, value-based care could work in doctors’ favor, as well — Melanie Phelps from the North Carolina Medical Society, a doctors’ advocacy group, supports the move, saying that doctors and payers will be in better alignment. This will encourage an overall better job experience.

Under value-based care, doctors will be encouraged to:

  • Coordinate with other caregivers to make sure you have the full range of services you need to get well. For instance, doctors may work in partnerships, so you could get counseling services and medical care in the same place. Say you’re a diabetes patient who could benefit from education about what foods to avoid — you might be able to get that service at the same office in which you’re treated.
  • Eliminate unnecessary testing that wastes time and money. One criticism of the fee-for-service system is that doctors have no incentive to streamline testing. A 2012 article in the Journal of American the American Medical Association argued that as much as $900 billion was wasted in the U.S. in unnecessary testing every year. Critics argue that doctors should use evidence-based diagnostic tools rather than ordering expensive tests out of habit.
  • Reduce the length of the most expensive hospital stays. In order to collect the data needed to prove their care is working, hospitals must carefully track readmissions, with the goal of reducing them. Under the Hospital Readmissions Reduction Program, the Affordable Care Act lets Medicare pay acute care hospitals with high readmission rates less than other hospitals. (This means the hospital has extra reason to make sure you’re recovering from procedures like heart surgeries before you go home.)
  • Spend more quality time with patients. Under fee-for-service care, doctors have incentive to treat as many patients as possible as often as possible. With value-based care, they have an incentive to make sure they fully understand patients’ conditions the first time, which means spending the time it takes to get a diagnosis right. Another thing? Increased visit length is associated with fewer malpractice claims. (A win for both the patient and the doctor!)

So What’s the Downside to Value-Based Care?

Not everyone is a fan of this switch in systems — or at least, not of the way it’s being done.

Will small town, independent provider get priced out of their practices? The paperwork involved in collecting data and proving positive outcomes is extensive, and independent offices simply don’t have the resources to pull it off. Some argue they’ll have to consolidate with larger hospital systems in order to stay in business, and some simply may not want too, or they may not have access to larger systems in the first place. If small, rural practices close, rural populations may face even greater challenges getting healthcare — and they’re the people who need it most.

Hospitals may get penalized for serving poorer, sicker people. Critics say that the way the ACA (Obamacare) rules that govern value-based care don’t account for demographics. Poverty and worse health are correlated; this means hospitals in poorer areas may well be penalized for worse outcomes, not because they’re not performing well, but because they serve disadvantaged populations.

The rules are complicated and hard to follow. As recently as 2015, the American Medical Association objected to the rules that govern value-based care in Medicare. A third of large practices (100 physicians or more) across the country were being penalized for not meeting quality standards. The AMA’s position was that if the largest and most sophisticated practices in the country couldn’t comply with these laws, no one else could, either.

The change to value-based care is an evolving process, and we’re here to keep you updated. Stay tuned for news on how this change continues to affect North Carolinians!

The North Carolina Coalition for Fiscal Health brings you news that affects your healthcare — including news about legislation that might increase your healthcare costs. Join us, and stay updated on how YOU can help influence your legislators to fight high healthcare costs.

  1. E.H. Bradley, L.A. Taylor, and H.V. Fineberg. The American Health Care Paradox: Why Spending More Is Getting Us Less. Public Affairs, 2013.

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