I've been taking a tour through the world of value-based care, which is the most recent place where the Centers for Medicare and Medicaid (CMS) have changed the rules of the game for reimbursement at the organizational level.
Value-based care is defined as as positive health outcomes divided by cost.
It's a new and interesting body of knowledge to learn about, and as with most changes in healthcare, there are abundant pitfalls. Each time the goalposts move, the rules of the game change substantially.
Understand and consider the rules and their underlying incentives, and you stand to come out ahead in the game. Ignore them at your peril.
The legacy system for financing health care in the US is the fee-for-service model. Medicare reimburses each provider based on the service performed, not necessarily on whether that service improved the patient's health.
Our fee-for-service system has led us to a place where providers are incentivized to deliver as many services as possible, but are not held accountable for a) the cost those services incur to the system as a whole, nor b) whether those services improve health for the patient in question.
CMS is trying out new models that explore whether better health can be obtained at lower cost, as many other developed nations have managed to achieve. One of several models being tested is the Medicare Shared Savings Program (MSSP). Under MSSP, a provider-led organization is tasked with caring for a population of Medicare patients.
These patients are predicted to cost Medicare a set amount based on a review of the prior codes used to bill services for their care. Those codes are used to "risk-adjust" the expected cost for the patient, where those whose codes demonstrate that they are sicker are predicted to cost the system ore than those whose codes suggest their baseline level of health is less ill.
The total population attributed to the provider organization is risk-adjusted and then benchmarked to an expected cost. To use an example, his new primary care doc documents on his initial encounter that Joe has heart failure, diabetes and hypertension. Medicare expects to pay $10k per year for someone his age with those illness codes - that's Joe's benchmark.
If the provider organization cares for Joe and spends only $5k, under MSSP, Medicare and the provider organization get to split the difference between the actual spend and the expected spend - the shared savings - and everyone wins.
If the provider organization instead spends $15k to care for Joe, they have to pony up the additional cost - a two-sided risk arrangement where the organization has skin in the game.
The codes used at the time the patient is attributed by Medicare to a particular provider organization are critically important, because the fine print rules of Medicare use only this initial set of codes to predict what the patient will cost the system.
If Joe is coded more carefully by his new primary care physician (whom we will assume is documenting truthfully) to have heart failure, pulmonary hypertension (a consequence of his heart failure), diabetes with nephropathy, and hypertension with arteriosclerosis, Medicare might risk adjust Joe's benchmark and expect to spend $15k per year for someone this sick.
If the provider organization spends less, their take is bigger, and if they overspend, they swallow the risk.
The upsetting reality about Medicare rules is that from the moment Joe's illness is coded by his physician, Joe or any other patient is benchmarked to the expected cost associated with illness severity at the time a patient was attributed.
What if Joe's doc was rushed on the first meeting, and codes more carefully on the second encounter? According to Medicare's rules, they stick with the initial risk adjustment. You want a "do-over?" Better go back to the school yard.
The stakes are high and the rules are Byzantine. You get one chance to do it right, and if you flub it your income is adversely affected going forward.