Value, shmalvue

More than a decade into the "value-based care" revolution, the needle has barely budged

My grandniece, who graduates from medical school this spring, is anxiously awaiting her residency assignment. In her quest to familiarize herself with the academic medical centers where she may get matched for advanced training, she visited Chicago last week where I had a chance to engage this intelligent, self-assured budding physician on her thoughts about the profession she is about to enter.

To my pleasant surprise, I learned over the course of two long conversations that her pre-med and medical school training provided her with a sophisticated understanding of value-based care. For readers not familiar with the concept, value-based care, as broadly defined by one of the concept’s original architects, “is the measured improvement in a patient’s health outcomes for the cost of achieving that improvement.

“The goal of value-based care transformation,” wrote Elizabeth Teisberg, executive director of the Value Institute for Health and Care at the University of Texas’ Dell Medical School in Austin, “is to enable the health care system to create more value for patients.”

In the 15 years since she and Michael Porter of Harvard Business School published Redefining Health Care, the federal government, some state governments, some health insurers and numerous corporate purchasers of health care have attempted to push the myriad providers of care (hospitals, doctors, drug and device companies, clinics, and the like) into value-based payment arrangements. They go by many names: accountable care organizations, shared savings, bundled payment programs, direct contracting, capitation. Each rewards providers that deliver better outcomes at lower cost.

Based on conversations with my grandniece, I got the strong sense that she, like most young physicians, would feel perfectly at home in medical practice environments governed by value-based payment arrangements. Yet that is not how the world she is about to enter operates.

Two feet on the dock, one hand on the canoe

According to a new study in JAMA Health Forum, the vast majority of physician practices in the U.S. are still paid predominantly through fee-for-service reimbursement, where the more you do, the more you earn, regardless of outcomes. The Rand Corp. survey of 31 large physician organizations affiliated with 22 health systems found volume-based compensation predominated in 84% of the primary care practices within those groups and 81% of physician income on average came from fee-for-service medicine.

The specialty practices within those physician organizations were even more volume-driven. Fully 93% of the multi-specialty practices reported their specialists operated primarily through fee-for-service payment and derived 91% of their income that way, according to the study.

Indeed, 70% of the large physician groups surveyed indicated that “increasing the volume of services” was their primary way of increasing physician pay. “Performance-based financial incentives for value-oriented goals, such as clinical quality, cost, patient experience, and access, were commonly included in compensation but represented a small fraction of total compensation for primary care physicians and specialists in health systems,” the Rand authors wrote. Those goals “operat(ed) at the margins to affect physician behavior.”

Drug prices rising

While we’re on the subject of value denied, the Wall Street Journal reported this morning that drug companies raised prices an average of 6.6% on existing drugs at the beginning of the year. That’s just a shade less than the 7% overall increase in inflation reported last month. There have been almost no reported incidents of drug shortages due to COVID-related supply chain issues, with industry executives claiming to have programs in place to avoid shortages.

This year’s price increase would be the largest on prescription drugs since 2015 when double-digit price increases on existing drugs triggered Congressional hearings and pledges by both political parties to rein in unreasonable price hikes. Nothing happened.

If the Democrats can get their act together, the revised version of Build Back Better will include drug price controls on a handful of the most expensive drugs purchased by Medicare. I’m still somewhat optimistic. Failure to raise revenue from reining in some drug prices means there will probably be no extension of the extra subsidies for low-and-moderate income people to Obamacare plans, which woud be politically disastrous for the Democrats.

Back to the larger question of value-based care. The latest research shows providers of all stripes are still firmly rooted in fee-for-service medicine, which is driving the high levels of unnecessary care among the well-insured that is endemic throughout the U.S. health care system. And that, sadly, doesn’t look like it is going to change anytime soon.