by Jordan Roberts
Director of Government Affairs, John Locke Foundation
In the past, I have written about a healthcare payment model commonly referred to as “patient-centered” or “value-based” care (see here, here, and here). The idea behind patient-centered care is that the provider is reimbursed for services based on the health outcomes of the patients covered by the insurer. If outcomes rise and people are healthier, the insurer will reimburse the provider at a higher level. If outcomes begin to decline, the provider will receive less in payments and in some cases may even be responsible for payments back to the insurer.
Most people would read the above paragraph and believe that this is a worthwhile goal. Changing the payment model from one that focuses on quality of care over quantity of services is recognized by most (including myself) as the direction our system should try to steer towards. However, the main problem with a payment system like this is the amount of regulation that forces physicians to divert resources to administrative duties instead of patient care, especially with regard to Medicare and Medicaid. John O’Shea, writing for Health Affairs, shares a similar view of the problem with the amount of regulation governing “value-based” care:
The current administrative burden faced by providers diverts limited time and resources that could be better spent on patient care. A 2016 study published in Health Affairs estimated that an average-size medical practice spends 785.2 hours ($40,069 per physician, $15.4 billion per year in the aggregate) reporting on quality measures that do little to help improve care or assist patients with treatment decisions.
In addition, physician practices spend a sizeable amount of time and resources trying to get paid for the care they provide. According to a recent analysis, the aggregate cost of dealing with billing complexities, including the denial of claims, is as much as $54 billion a year, just for outpatient visits. This is a particular problem in the Medicaid program, where reimbursement rates often fail to cover the cost of care. In addition, Medicaid denies initial claims at a rate that is substantially higher (17.8 percent) than any other payers, citing providers’ failure to comply with various complex billing requirements. Again, these inefficiencies divert limited health care resources from patient care.
Hospitalized patients are also affected by these burdens. The American Hospital Association reported that an average-size hospital uses 59 full-time employees, at a cost of $7.6 million annually, to carry out administrative activities related to regulatory compliance. At least a quarter of these full-time employees are physicians, nurses, and allied health staff—professionals whose talents could be better used in direct patient care, especially given projected shortages in the health care workforce.
It’s a counterintuitive process for a payment model that focuses on patient care to be burdened by enough administrative work that it causes physicians to spend more time focused on quality measures reporting than actual quality. I believe there is enough support to make “value-based” care a payment model that works — let’s give it a chance by removing the amount of regulation:
Transitioning to a patient-centered and value-based health care payment and delivery system is a good idea. However, initiatives that divert physician time away from clinical care are not patient-centered, and investing precious resources on administrative and reporting requirements without any improvement in the quality of care is anything but value-based. The administration has promised to address the excessive regulations that have so far hindered meaningful payment and delivery reform. Now, the administration and Congress need to follow through on that promise. Otherwise, the terms “patient-centered” and “value-based” will remain largely hollow buzzwords.