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June 4, 2021

A National Goal to Advance Health Equity Through Value-Based Payment

Author Affiliations
  • 1Department of Medicine, University of Washington School of Medicine, Seattle
  • 2Leonard Davis Institute of Health Economics, University of Pennsylvania, Philadelphia
  • 3Department of Medical Ethics and Health Policy, Perelman School of Medicine, University of Pennsylvania, Philadelphia
  • 4Corporal Michael J. Crescenz VA Medical Center, Philadelphia, Pennsylvania
JAMA. 2021;325(24):2439-2440. doi:10.1001/jama.2021.8562

Intention matters in health policy. Nearly a decade ago, federal policy makers set an intention to make health care more financially sustainable, affordable, and efficient by shifting the national health care system toward value.1 Setting that policy intention proved to be a critical step for signaling direction and informing expectations for the health care industry, prompting years of broad engagement and work to improve health care delivery. However, that progress has not translated into analogous progress in reducing the critical problem of health inequities in the US.

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    3 Comments for this article
    Present Value-Based Care Entirely Wrong
    Michael Longley, MD | Immanuel Medical Center
    The present push for cost efficiency as stated by the author is entirely biased to make providing care for those who are financially/ educationally / socially disadvantaged the most disadvantageous for the clinician.

    Bundled care programs to date simply make those who need care after admission the most expensive to care for and simple analysis will make clinicians turn those away. Example - if the patient is likely to need skilled care after a total joint replacement over 50% of the allocated reimbursement may be easily consumed by the SNF costs.

    Thus the best
    and busiest clinicians will avoid these patients.
    Disparity is Built in to Value-Based Payment
    Stephen Kemble, M.D. | University of Hawaii John A. Burns School of Medicine
    The authors correctly point out that value-based payment has a problem with aggravating disparities in access to care. At its core, "value-based" payment means shifting insurance risk onto providers of care, with a fixed payment for an episode of care (bundled payment) or population (capitation) so that the provider makes more money by restricting care or achieving specified outcome measures. But far too much of the risk in health care is predictable due to pre-existing conditions, social determinants, and demographics, so the incentive becomes risk avoidance above all, instead of improving care. This means targeting low risk patients and populations and avoiding care of higher risk individuals and populations, hence aggravation of disparities. Factors affecting risk are quite complex and available risk adjustment formulas are far too crude to deter this problem. Risk adjustment cannot be made more accurate without encountering prohibitive escalation in administrative burdens and costs.

    This is a fundamental problem with risk-shifting that is at the heart of "value-based" payment. It cannot be fixed with tweaks to incentives that, like risk adjustment, cannot be made accurate or robust enough to solve the problem without escalating administrative burdens and costs. There are perverse incentives built into shifting risk onto providers when risk is too predictable. The reason "value-based" payment has not achieved reduced cost or improved equity is that correcting its perverse incentives requires too much data and administrative cost and burdens, and even then the corrections always fall short. This is a problem that cannot be fixed within the "value-based" payment paradigm.
    Mere "Intention" Cannot Fix Value-Based Payment
    Kip Sullivan, JD | Healthcare for All Minnesota
    This is a baffling article. On the one hand, Laio et al. concede value-based payment (VBP) schemes are worsening disparities because risk adjustment is inaccurate. On the other hand, they call on policy makers to announce they intend to double down on VBP, not because it’s working, but because “intention matters in health policy.” In other words, even though VBP schemes are harming sicker and poorer patients, policy makers should praise VBP so doctors and hospitals know “value-based payment is here to stay.”

    The authors rely on two assumptions: (1) VBP schemes have improved value so substantially that
    they should continue despite the damage they inflict on “marginalized populations”; (2) if someone collects enough data on factors such as “education; economic, racial, and ethnic minority status; housing stability; and food security,” risk adjustment could be made so accurate that VBP schemes will no longer unfairly punish providers who treat “marginalized populations.” Neither assumption is correct.

    VBP schemes are not improving, and may be degrading, value. Research on the most pervasive VBP schemes – ACOs, medical homes, bundled payments, the Merit-based Incentive Payment System (MIPS), and the Hospital Readmissions Reduction Program – demonstrate they are neither cutting costs nor improving quality (their impact on quality is mixed and miniscule). When the implementation and overhead costs incurred by providers are included, VBP raises costs. (Bundled payment for joint replacement might be an exception to the rule that VBP schemes do not lower costs.) When the damage done to sicker and poorer patients, and to patients whose care is not measured and who therefore suffer from the “teaching to the test” effect, is taken into account, VBP is probably damaging quality on balance.

    The authors’ assumption about risk adjustment is also wrong. Risk adjustment is crude now, and will never become accurate enough to end VBP’s “reverse Robin Hood” effect – the transfer of resources away from providers who treat the sick and the poor to those who treat the healthy and better off. There are several reasons why this is true. I mention just three here.

    First, the data collection cost imposed on providers by VBP schemes is already enormous; the additional cost of collecting data on all the other factors proposed by Liao et al. will be back-breaking. For example, JAMA recently reported that the data-collection requirements imposed on doctors by the MIPS program are costing each doctor about one-fifth of their income from Medicare [1]. The additional cost of collecting accurate information on education, income and other social determinants of health for hundreds of millions of Americans will be even higher than the onerous data-collection costs providers incur already.

    Second, turnover among doctors and patients within VBP entities (ACO, medical homes, MIPS) is very high – about 30 percent per year.

    Third, the sample sizes used to calculate “performance” on VBP cost and quality measures are far too small to produce accurate assessments. For example, in a study of the Partners HealthCare ACO (one of the largest of the Medicare ACOs), Hsu et al. reported that doctors in the ACO had an average of 91 ACO patients [2].

    Rote expressions of “intention” cannot fix these problems.


    [1] Time and Financial Costs for Physician Practices to Participate in the Medicare Merit-based Incentive Payment System, JAMA Health Forum

    [2] Substantial Physician Turnover and Beneficiary “Churn” in a Large Medicare Pioneer ACO, Health Affairs.