Insurers are moving away from fee-for-service toward value-based care more quickly than previously predicted, Change Healthcare reported in a new survey of 120 payers.
The report posits that for the first time private payers, rather than government programs, have taken the lead in implementing value-based care models and strategies.
However, payers are finding they need a long time to implement programs. Only 21% say they can roll out a new episode of care program in three to six months. More than one-third said they need a year, 21% need 18 months and 13% require up to two years or more. Taking longer than a year to implement a payment program could cause problems in a fast-moving healthcare market.
The survey found value-based care initiatives have made “significant headway” in achieving the triple aim of reducing costs and improving care quality and patient engagement.
Change Healthcare said nearly two-thirds of payments are now based on value, and that structure reduces unnecessary medical costs by 5.6% on average, according to survey respondents. The survey found that nearly 80% of payers reported improvements in care quality, 64% have seen provider relationship improvements and 73% said patient engagement improved.
Fee-for-service now accounts for 37.2% of reimbursement, according to survey respondents. Change Healthcare predicted that would further drop to 26% by 2021. The move to episode-of-care programs made two-thirds of payers invest in additional administrative staff.
However, there are still hurdles to a new payment model. The survey found 43% to 58% of payers said they’re struggling to engage providers in episode-of-care programs. It’s especially a problem to get providers to participate and agree on episode definitions, performance metrics, budgets and risk sharing.
Evolent Health CEO Frank Williams recently told Healthcare Dive that switching to value-based care presents challenges for providers, including taking on more risk.
“In the risk business, you can lose a lot of money quickly, so in larger risk arrangements or full health plans, you could lose $20-30 million a year. For an organization that's been relatively stable, those are pretty daunting numbers and they're scary for health systems' boards and physician groups that don't have a lot of capital,” Williams said.
Change Healthcare’s finding that private payers are moving faster than expected to value-based care contradicts a Healthcare Financial Management Association (HFMA) survey earlier this year. Value-based payment programs have doubled since 2015, but private payers have been slower than expected in launching those programs, HFMA said.
That report, sponsored by payer Humana, said nearly three-quarters of executives surveyed said their organizations achieved positive financial results from value-based programs.
Whether private payers are moving faster into value-based care as expected or not, the trend is just beginning. More value-based contracting is expected in the coming years and providers will increasingly feel pressure to move into risk-based contracts.