New data shows Virginia is increasingly rewarding value over volume in medical billing, but there’s still a lot of work to do

The logic is pretty simple: If you pay someone based on the number of services they provide, they’re probably going to provide more services.

It’s the inherent problem with the fee-for-service payment model in health care. Doctors’ incentive is quantity — like the number of scans or blood tests they order — rather than the quality of the care they provide the patient.

Payment reform has been a major talking point in the health care world for years as a way to rein in exorbitant health care spending, and now Virginia actually has an idea of how well it is performing in shifting reimbursements from volume to value.

A new scorecard by Catalyst for Payment Reform, the Virginia Center for Heath Innovation and the Virginia Association of Health Plans shows that in 2016, 67.3 percent of payments made to doctors and other providers by commercial insurers in the state were value-oriented, meaning they had some payment component that rewarded doctors for the quality of care they provided.

Meanwhile, 36.6 percent of the total payments that the state’s Medicaid program made in 2016 through the insurers, or managed care organizations, that it contracts with were tied to value.

Andréa Caballero, program director with Catalyst for Payment Reform, said Virginia stacks up relatively well compared to the rest of the country.

However, it’s hard to make direct comparisons, she cautioned, because the national statistics come from the Learning & Action Network, which has a slightly different way of counting value-oriented payment models.

But, roughly, Virginia’s commercial insurers did about 20 percent better in making the shift to value-based payments than the national market, while Medicaid did about 4 percent better.

Beth Bortz, CEO and president of the Virginia Center for Health Innovation, said she sees the new data as a baseline that she hopes will foster conversations about how to shift to value-based payments.

“We can’t improve if we’re not even measuring,” she said.

The data was compiled voluntarily, with five commercial health plans participating, representing about 72 percent of the commercially-insured people in the state. On the Medicaid side, four of the managed care organizations participated, representing about 58 percent of Medicaid enrollees.

Medicaid has its own set of challenges, Bortz said, that make it more difficult to shift to value-based payments. Networks are already narrower, their patient population is generally sicker and their reimbursements are smaller than they are on the commercial side.

All those factors, while trying to ensure adequate access, means it’s tough to shift providers to a value-based payment.

Bortz pointed out that there is still a lot of work to do in setting a benchmark for the state. Since the health plan survey was voluntary, it was difficult to parse out those contracts with doctors that are completely or just partially value based.

If only 1 percent of a $100 commercial contract is tied to value, for example, while the rest is based on the old fee-for-service model, that whole contract would still be considered value oriented and count toward the 67.3 percent.

“I would bet we’re not at a tipping point yet, but I am also encouraged by the fact that Virginia appears to be doing better than the nation in general on those measures,” Bortz said.

In the U.S., there are fewer physician office visits and hospitalizations compared to other countries — yet it still spends twice as much on health care than comparable countries. Bortz said the idea isn’t necessarily to slash spending on health care altogether, but to make sure that money is being spent in the right way.

“We all have a collective feeling that we’re not getting enough value for what we’re paying,” she said. “If we were all getting great care and were super healthy, we may be okay paying more than we do now. So we’re in the very early days of trying to help move this transition along by providing data.”

Catalyst for Payment Reform worked with three states, including Virginia, to develop its scorecard on payment reform based on 2016 data. It’s unclear if the work will be replicated to illustrate any trends in reimbursement reform, though, because the work was done thanks to grant funding. But Bortz said some on her group’s board have expressed interest in funding the data analysis so that it continues.