Value-Based Payment Models – Five Things You Need to Know as an Independent Practice

 In Articles, Provider Notes

The hot phrase in healthcare right now is value-based care (VBC), but what is it exactly and how will it impact private practices in the future? In general, VBC is a shift from the purely volume-based payment system that rules healthcare today – fee for service (FFS) – to a payment system tied to patient outcomes.

Under FFS, providers are paid a set rate for each specific service they provide. Under VBC, a share of their payments will be based on whether the patient’s health status actually improves, regardless of how many times he or she visits the doctor. VBC changes the provider incentive from the volume of treatment to the quality of treatment.

Here are five things you need to know as an independent practice:

1. Fee for service is phasing out

CMS and commercial insurers will transition to value-based payment models over time, but the changes are coming fast. CMS passed the Medicare Access and CHIP Reauthorization Act (MACRA) last year and commercial payers are advertising their programs and plans more and more.

There is no set time table for the transition, but the goal is to get to 50% of payments being connected to VBC by 2020. Fee for service will still exist, but higher and higher percentages of provider payments will be tied to a value based care model. Do not get left behind!

Fee for service is phasing out

2. Medicare is already making plans

Passed last year, MACRA moved CMS a step closer to value-based reimbursement by ending SGR, putting into place the infrastructure for merit-based pay with Alternative Payment Models (APMs), and combining already established programs (PQRS, Meaningful Use and Value-Based Modifiers) into one program called MIPS. With the legislation, there are alternatives for moving your practice towards VBC with Medicare: Modified Incentive Based Payment Systems (MIPS) and Alternative Payment Models (APMs) in which bundled payments, accountable care organizations and patient-centered medical homes are examples. (CMS, 2016).

So as an independent practice, you can continue with current PQRS & EHR incentive programs and change to the new MIPS. Or you can determine if an APM fits your practice and specialty. Which are you going to pursue?

3. Commercial carriers are investing in VBC models

Commercial payers are following CMS’ lead in driving towards value-based payment models. Most of the large payers [UHC, Aetna (Coventry/Humana), Blue Cross Blue Shield, and Cigna] offer ACO contracts, provide incentives to primary care groups for becoming patient centered medical homes, offer P4P bonus programs that pay incentives for improving the quality of patient care, while reducing costs and bundled payments options for particular treatments or conditions. Some examples for each payer include:

  • Aetna/Coventry (and Humana – merging end of 2016) are moving forward with value-based provider contracts (28% value based provider contracts (2015); goal to be at 75% in 2020). These contracts tie particular measures of quality to the providers’ reimbursement in some way. Similarly, Humana has 54% of its members in ACO relationships. (Aetna, 2016)
  • Blue Cross and Blue Shield of North Carolina has setup limited networks Blue Value and Blue Local (similar to the ACO approach). Providers must be specifically chosen to participate and the contract ties population outcomes to provider incentives. Further, Blue Cross offers a few contracts that include limited bundled payment options. (Blue Cross Blue Shield of North Carolina, 2016).
  • United Healthcare has their UHC Premium designation program, Centers of Excellence, Patient Centered Medical Home and ACO pilots. These programs pay a per-member-per-month additional fee to providers who reach particular quality measures for their specialty. Currently, 11.5% of total spending tied to incentive contracts. (United Healthcare Services, Inc., 2016).
  • Cigna offers ACO contracts, has a growing bundled payment model focus, and has created “delivery system alliances” with hospital employees. Providers with these contracts have a growing percentage of their reimbursement tied to quality (Eastwood, 2015).

Success in any offered value-based care model requires more provider-payer communication. To get more information on your top payer programs, it’s important to reach out to provider network representatives now.

4. Data, data and more data

The key to any value-based care model is analytics. At a basic level, you must know your practice, know your population and know your patient. More specifically, providers need sophisticated analytics to help them measure financial and quality performance for each population of patients. However, getting the data you need will be difficult as an independent practice, as most standalone EHRs do not have comparable data for benchmarking, market comparison, or cost by diagnosis.

As value-based models become more real, practices are going to have to work with payers, other providers, hospitals and other organizations to mine their data more than ever. Payers have the data and the patients. Aetna, for example, has invested in ActiveHealth Management (providing data analytics products and services to Aetna as well as other insurance companies and employers) and Medicity (providing solutions to aggregate medical data and securely exchange it – enables hospitals, physicians, and health exchanges to securely access and exchange information, leading to coordinated care and better outcomes). (Patrick, 2015)

Payer products like this are vital to the shift. In order to lower costs and increase patient quality, the sharing of information and attribution (tying a patient to the provider and the payer) will be required to get paid. The conversation needs to start now with your vendors.

5. There’s a lot you can be doing today

Right now you should be participating in the CMS programs that are available (PQRS, Meaningful Use, etc.). Even if you have not participated in the past, the best course of action today is to begin participating in the current programs. This will allow you and your providers to “get your feet wet” and learn more about your practice.

The first step should be to download your QRUR reports and begin to understand how your providers are being measured. In addition to participation with Medicare, the best advice is to do your due diligence. Research your options. Work with an expert that can help your practice make the best decisions in the VBC world that will soon be transforming healthcare. It’s your payments on the line!

Works Cited

Aetna. (2016, 02 08). Aetna and Humana. Retrieved from

Blue Cross Blue Shield of North Carolina. (2016, 02 08). BCBSNC.COM. Retrieved from

CMS. (2016, 02 08). The Merit-Based Incentive Payment System (MIPS) & Alternative Payment Models (APMs). Retrieved from

Eastwood, B. (2015, 04 15). Cigna wants more value-based reimbursements for systesm treating at-risk patients. Retrieved from Fierce Health Payer.

Patrick, M. (2015, 03 16). Aetna: An Analysis of the Health Insurance Giant. Retrieved from A Key Overview of Aetna, One of the Largest Insurance Providers.

United Healthcare Services, Inc. (2016, 02 08). Retrieved from

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