Will Value Based Reimbursement Finally Bend the Cost Curve?

On April 19, I had the pleasure of moderating a Georgia Association of Healthcare Executives panel addressing The Shift to Value-Based Purchasing.  Panelists were Ray Snead (Interim CEO, Grant Memorial Hospital in Petersburg, WV), Ellis “Mac” Knight, MD (SVP and CMO, The Coker Group), and Mike Cadger (Founder/CEO, Monocle Health Data).  

 Ray Snead, Dr. Mac Knight, Mike Cadger, and Glenn Pearson

Ray Snead, Dr. Mac Knight, Mike Cadger, and Glenn Pearson

To kick things off, I observed that, over my 30+ year career, I have lived through various inflation control attempts:  DRGs, HMOs, Provider-Sponsored Organizations, and others.  Few would argue that the strategies of the last three decades have been a smashing success.  Thirty years ago, healthcare represented 11.0% of GDP, and in 2016 it was 17.9%.  Is Value-Based Reimbursement (VBR) just another in the long string of marginally successful efforts?

One of the great things about panel discussions is the variety of opinions.  True to form, our group had varying predictions about VBR’s ultimate impact.  Dr. Knight had the most positive expectations, while Ray Snead was more skeptical.  

Dr. Knight pointed to evidence from such risk-bearing organizations as Intermountain Healthcare whose emphasis on prevention and coordinating care has yielded modestly favorable results –  Intermountain’s ability to tamp down its inflation level to CPI plus 2%.  

As CEO of a small, rural hospital, Ray was not so upbeat.  Although all hospitals face daunting financial challenges, rurals seem unusually stressed.  The fact that rural hospitals are disproportionately represented in the hospital closure statistics demonstrates their extraordinary hardships.  Ray lives them out every day, and he is not all-that-optimistic about smaller hospitals (or, for that matter, safety net hospitals) being able to adapt the VBR model to their settings.

Although I appreciate the points Dr. Knight made, I lean more towards Ray’s position.  VBR is a great idea.  I’m all for stressing common sense preventive care and aligning incentives.  However, so many factors must be in place for true sustainable impact.  Among other things, hospitals need working relationships with primary care physicians, specialists, community-based services, and post-acute care providers.  Furthermore, patients and their families and/or extended communities must be actively engaged.  Tying all this together requires reliable wrap-around communications processes.  All this is challenging for many hospitals, and all-the-more so for rurals.

For years, I have suspected that the designers of each new approach to cost containment has a particular hospital profile in mind:  a medium-to-large hospital or health system, probably suburban-based and at least reasonably successful financially.  (Intermountain fits this description.)  Even though these systems may include rural hospitals, those rurals have the advantages of a deeper healthcare delivery system backing them up. 

I don’t want to in any way diminish the successes of Intermountain or others in response to VBR incentives.  However, I sympathize with rural and inner-city hospitals that face such extra challenges as poor payer mixes, difficulties in attracting physicians and other clinical personnel, typically out-dated facilities, and other problems.

So will VBR succeed in controlling costs?  I certainly hope so, but I think the complexities healthcare faces outstrip the ability of a single concept to deliver the silver bullet.

VBR Panel GP.jpg