As health care transitions to value-based care, physicians are capable of driving costs down and quality up.


Published 6/1/2018
Maureen Leahy

Experts Offer Suggestions to Manage Transition to Value-based Care

According to Dr. Bozic, delivering better value to patients first requires reorganizing the delivery system around the patient, then honing a strategy for measuring value (outcomes and cost), and finally, optimizing the payment model. The goal, he said, is to “deliver the greatest amount of health we can to patients in a way that reduces the cost of care over time.” As health care shifts from volume to value, some orthopaedic surgeons may be concerned about how to effectively manage the transition. During a symposium held at the AAOS 2018 Annual Meeting, moderator Kevin J. Bozic, MD, MBA, of the Dell Medical School at the University of Texas at Austin, and other experts explored a variety of different principles and pathways for implementing value-based care.

He noted that the outcome measures that matter most to orthopaedic patients are patient-reported measures of pain, function, and quality of life. “Being able to measure pain, function, and quality of life in our patients is essential to understanding if what we are doing is effective. Another important reason we measure outcomes is to improve our performance as providers.”

With respect to payment models, Dr. Bozic pointed out that the fee-for-service (FFS) model has been criticized for contributing to overutilization of services. He also feels that FFS disincentivizes efficiency and improvement. “However, I would argue that the other end of the spectrum—full capitation—incentivizes underutilization of services and is not value-based either.” Therefore, the sweet spot, he said, is in the middle—a multi-provider episode-of-care payment for the management of a condition. “Ultimately, over time, you will not only improve your clinical outcomes, but also your financial performance. It is exactly the opposite of the FFS model.”

Dr. Bozic believes that transitioning from FFS to a value-based payment model is something providers in all practice settings can manage as they shift payers toward more risk-based contracting. “As you set up a value-based payment program, it’s important to make sure you are incentivized around the performance risk for things that are within your control and risk-adjust for, or leave to the insurer, the actuarial risk,” he said.

He added, “What you will increasingly see is bundling at the condition level—accepting risk for the management of a condition, rather than a procedure. If we only bundle at the procedure level, we will miss opportunities to define appropriateness of care and improve value.”

Financial challenges

“Something we don’t talk enough about is the inherent financial challenges involved in transitioning to value-based health care,” said Daniel B. Murrey, MD, MPP, chief medical officer of OptumCare Specialty Practices in Charlotte, N.C., and chair of the AAOS Healthcare Systems Committee. Increased care coordination and responsible risk management require significant upfront investment in infrastructure, he said. Examples of the infrastructure required include data collection and reporting tools, physician and staff training on quality improvement principles, and redesigning care based on those principles. Value-based care also requires standardization of care and consensus processes among the clinicians. Other investments include data interfaces for communication with other providers, and patient navigation and care management programs.

Noting that physicians are best equipped to generate enhanced value in an episode of care, Dr. Murrey outlined specific opportunities to reduce spending that are under physicians’ control. In Medicare programs such as the Bundled Payment Care Initiative and Comprehensive Care for Joint Replacement, there is a relatively fixed fee schedule, but utilization is highly variable, he said. “Therefore, you can reduce unwarranted utilization by eliminating excess hospital days or reducing inpatient rehabilitation and skilled nursing facility stays, home health and physical therapy, or readmissions and reoperations—all of which lower your total spend. Essentially, it’s a shared-savings model.”

On the commercial side, although the fee schedule is highly variable, utilization is more standard than in the Medicare population. “Therefore, the primary way to reduce the cost of care is to shift to a lower-cost site of service; you can also reduce rehabilitation spend and divert emergency room visits to the office,” Dr. Murrey said.

Both models—Medicare and commercial—have shown savings of between 15 percent and 30 percent, while also significantly reducing complications, he said.

Contract essentials
“Before entering into a value-based payment model, it’s important that you get the contract right,” Dr. Murrey said. He noted that bundled payment contracts should be designed to reward success for simple, straightforward improvements in cost and outcome. He explained that to be effective, particularly on the commercial side, bundled payment contracts should include the following seven elements:

  1. Homogeneous patient populations
    Homogeneous patient populations allow for the identification of performance risk rather than actuarial risk, enabling providers to consistently perform cases well and for less money.
  2. Appropriate provider attribution
    Attribute accountability to those who are most able to do something about it. However, this can be challenging when there are multiple providers—the attribution has to be correct, and the compensation should drive back to the attribution.
  3. Appropriate episode charge attribution
    To isolate performance risk from actuarial risk, an episode grouper that removes unrelated care from the episode is needed. This action will be increasingly important with longer episodes and for patients with multiple disease processes.
  4. Achievable metrics
    Readily achievable targets engender buy-in. To have faith in the program, providers need to know what they are being measured on and how it is being measured.
  5. Real-time reporting of results
    Timely feedback generates trust in the data and, when necessary, a more rapid response or change in behavior.
  6. Aligned incentives
    Fewer complications and readmissions, for example, equal lower cost and better outcomes.
  7. Protection from outliers
    Outlier cases can stifle innovation and limit providers’ willingness to participate in the program.

“Ultimately, physicians need capital and confidence to invest in value-based care, but we are capable of driving costs down and quality up. To be willing to do so, we have to see a clear path to success. Certain contractual structures can create greater certainty and ease the transition,” Dr. Murrey said.

Additional presenters during Symposium E, “Leading Musculoskeletal Care Delivery Systems in the Era of Value-Based Health Care,” were Karl Koenig, MD, MS; David C. Ring, MD, PhD; and Michael Suk, MD.

Maureen Leahy is assistant managing editor of AAOS Now. She can be reached at