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Prepare for Value-Based Payment

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  • November 1, 2020
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Prepare for Value-Based Payment

Providers need to get with the program or be left behind.

What is value-based payment (VBP) and what does it mean for our healthcare system? These are two questions you should be asking and answering. Healthcare reform will affect everyone. Here’s what you need to know.

What Is Value-Based Payment?

The United States healthcare system is rapidly moving toward rewarding value over volume. Recent legislation, such as the Affordable Care Act and the Medicare Access and CHIP Reauthorization Act (MACRA), solidified the role of value-based payment in Medicare programs.

The VBP model for medical services is gradually replacing the traditional fee-for-service (FFS) model for payers and healthcare organizations. The goal is to cut rising healthcare costs by switching from a fee-based model based on quantity to a value-based model based on quality.

In contrast to the predominant FFS model, in which payers reimburse providers a fixed fee for each service they provide from an approved list, VBP models hold providers financially accountable for both the cost and quality of care they deliver. VBP models reward providers financially for delivering better, more cost-effective care, and can penalize them for failing to do so.

The VPB model is one approach to achieving a balance between efficiency and effectiveness and comes in different forms, varying in the level of provider accountability. The level of payment a provider receives is tied to cost and quality targets. These targets ensure that providers do not cut costs at the expense of patient outcomes. These targets are achieved through measured performance. Examples of quality measures include post-hospitalization readmission rates, provider-to-patient ratios, and percentage of patients receiving preventative care (such as immunizations).

VBP models support a three-part aim:

  • Better care for individuals
  • Better health for populations
  • Lower cost

What Are CMS’ Value-Based Programs?

There are several VBP models in operation today, as shown in Figure 1, and there will be more on the horizon. To date, there are:

  • End-Stage Renal Disease Quality Incentive Program (ESRD QIP)
  • Hospital Value-Based Purchasing (VBP) Program
  • Hospital Readmission Reduction Program (HRRP)
  • Value Modifier (VM) Program (ended Dec. 31, 2018)
  • Hospital-Acquired Conditions (HAC) Reduction Program
  • Skilled Nursing Facility Value-Based Program (SNF VBP)
  • Home Health Value-Based Program (HHVBP)

The Merit-Based Incentive Program (MIPS) is getting the most attention of late. This VBP program is a precursor to Advanced Alternative Payment Models (APMs).

Figure 1

VBP Calculations

VBP programs reward healthcare providers with incentive payments for the quality of care they give to people with Medicare. VBPs are calculated by using numerous measures of quality and determining the overall health of populations. Unlike the traditional FFS model, value-based care is driven by data; providers must report to the Centers for Medicare & Medicaid Services (CMS) on specific metrics and demonstrate improvement. Providers may also have to track and report on hospital readmissions, adverse events, population health, patient engagement, and more.

Under the new models, providers are incentivized to use evidence-based medicine, engage patients, upgrade health information technology, and use data analytics to get paid for their services. When patients receive more coordinated, appropriate, and effective care, providers are rewarded.

To participate in value-based care, CMS has developed several models for providers, including accountable care organizations (ACOs), bundled payments, and patient-centered medical homes.

Will VBP Make a Difference?

Value-based care is cited as one of the best ways to reform healthcare, stakeholders say. VBP is a catchall term for ACOs and other modes for restructuring healthcare around a system that puts more weight on quality metrics or the aggregate health of a population rather than how many visits someone makes to the hospital or how many procedures one has. The intent of the system is to maximize value for patients and define health outcomes achieved per unit of cost spent.

As we move forward, VBP models provide new opportunities for the development and participation of ACOs. The Affordable Care Act is promoting the use of ACOs and levies penalties for hospital readmissions to encourage better follow-up care outside the hospital. It is a more data-driven vision of healthcare reform that not only improves quality and efficiency but also reduces costs. As illustrated in Figure 2, the new world of healthcare focuses exactly where it should: on quality outcomes that benefit the patient.

Figure 2

What Is the Role of a Coder in VBP Models?

VBP models encourage a team-oriented approach to patient care. Under a VBP model, primary, specialty, and acute care specialties are integrated and healthcare providers work as a networked team to deliver the best-coordinated care. For example, treatment plans may require the contributions of pharmacists, behavioral health providers, social services, specialists, and others; all contributing parties share in the incentives of a positive outcome.

One common element in many value-based programs is risk adjustment using hierarchical condition categories (HCCs). HCCs can be used to classify patient conditions, and each has an associated risk adjustment factor (RAF). The health risk of an individual is represented by the sum of RAFs for their conditions, typically calculated annually based on all the conditions in billed claims during a calendar year. The HCC/RAF model assigns the highest scores to the sickest patients. Lower RAF scores suggest healthier patients.

To prepare for a successful VBP implementation, healthcare facilities and coders should consider doing the following:

  • Create a multidisciplinary team to ensure thorough oversight of hospital-acquired conditions and other issues relating to changing reimbursement.
  • Adopt best practices through nationally recommended evidence-based medicine practice guidelines and monitor compliance.
  • Take action based on data outcomes to protect patients, reduce adverse events, and increase efficiency.
  • Perform patient population-level analysis of HCCs and RAFs.
  • Educate physicians about how their care decisions and documentation will impact reimbursement. Include education on:
    • Documenting diagnoses for HCCs and other value-based programs.
    • Thinking beyond medical necessity; encourage documentation of all comorbid conditions, documentation of manifestations due to an underlying etiology, and documentation of wellness measures such as screenings, interventions, and social determinants.
    • Ensuring timely and ongoing education regarding VBP model changes associated with coding and reimbursement requirements.
    • Reviewing claims data prior to submission to ensure documentation meets standards and coding is based on documentation.
    • Performing periodic clinical documentation and coding reviews including post audit education with staff and physicians.

Diagnostic precision for all conditions is desirable and particularly necessary for correct classification, risk adjustment, severity of illness, and quality of care reporting. Although VBP may initially require coders to meet even higher standards for data accuracy, the program has great potential to significantly improve healthcare by better linking payment to performance.




Elhoms Toni, CPC, CRC, CCS. “Navigating the Coding Profession”


Viola Apostoli
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Viola Apostoli, CPC, CEMC, CRC, began her career as a medical biller in a small level 1 trauma and teaching community hospital in Ohio over 12 years ago. She worked as a facility coder; however, most of her experience entails providing coding and billing services to physician practices in freestanding and provider-based settings. Apostoli has played an important role in provider education as well as educating the office staff in coding and billing matters. She has assisted physician practices in a variety of specialties in new service lines, as well as her team in learning new systems such as value-based payments and risk adjustment. Apostoli continues to conduct provider audits, coder audits, and provider education, as well as staff education on a variety of topics.

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