Is value-based pricing doomed? #AHCJ17 session to address this question

Joseph Burns

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

Paul Levy, former chief executive of Boston’s Beth Israel Deaconess Medical Center, recently made a compelling argument in a blog post about why value-based pricing for hospital services ultimately will fail.

In “The Game That Shows Why Value-Based Pricing Is Doomed” on AthenaInsight, Levy argues that the incentives in value-based pricing are all wrong. As a payment model, value-based pricing promotes selfishness but at the same time requires all parties to cooperate, he writes.

It’s not often that anyone criticizes value-based care, and why would they? That would be like opposing the use of grocery coupons.

Levy is not alone in his view. Family physician Matthew Hahn, M.D., describes the deep flaws he sees in value-based payment for health care this post, “Value-Based Pay Is Doomed to Fail. Here’s Why,” at the popular MedPage Today blog KevinMD. One problem is the rising cost of prescription drugs, and Hahn asks: How can patients with a long-term chronic illness such as diabetes afford the medications they need to keep their condition under control? Levy and Hahn make some compelling arguments.

A panel that I will moderate at AHCJ’s Health Journalism 2017, April 20-23 in Orlando, Florida, will further explore this question with a panel of other distinguished experts.

Laura C. Wooster, M.P.H.

David J. Bailey, M.D.

Robert Pearl, M.D.

What the Value in Value-Based Care Really Means,” begins at 10:40 a.m. on Saturday, April 22. Scheduled panel members include: hospital administrator David J. Bailey, M.D., president and chief executive of the Nemours Foundation; physician Robert M. Pearl, M.D., executive director and chief executive of the Permanente Medical Group; and health policy expert Laura C. Wooster, M.P.H., interim senior vice president of public policy for the American Osteopathic Association.

We think of “value-based care” as an approach designed to cure the ills built into fee-for-service payment, long criticized for driving up costs and failing to get providers to focus on quality.

However, as with everything in health care, payment reform is complicated. In the fee-for-service model, for example, hospitals had an incentive to keep heads in beds, as administrators say. Under value-based care, though, those same hospitals now have an incentive to keep patients healthy and out of the hospital. So how do hospitals administrator generate enough income to pay for the emergency department to run 24-hours-a-day, seven days a week?

And, as Levy asks in his blog, how does a gastroenterologist benefit if he or she was once paid based on the number of procedures performed each year but now has reduced patient volume because primary care doctors are limiting referrals to specialists?

Hahn wants to know how he would earn a bonus for ensuring that his diabetic patients keep their hemoglobin A1c levels under control if they cannot afford the medications or the supplies needed to achieve this. He also notes that the federal government does not negotiate lower prices from pharmaceutical companies, and yet that same government aims to base 50 percent of its payments for Medicare on certain value-based contracts by the end of next year.

All good questions and worthy of a deep analysis from Bailey, Pearl, and Wooster.

Attendees and those following along can use the hashtags #AHCJ17 and #AHCJvalue. If you haven’t yet registered for the conference, on-site registration will be available. Fill out the registration form and bring it with you.

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