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Dale Jarvis

Dale Jarvis and Associates

Creeping and Leaping from Payment for Volume to Payment for Value

September 4, 2014 | Uncategorized | Comments
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Believe it or not, we are finally beginning to make progress on health and behavioral health payment reform and now it’s time to pay attention, listen up, and get ready. Start by reading this post, and then head on over to the new paper on behavioral health payment reform just published by the National Council.

New Payment Models

Three “new” payment models are starting to roll out for behavioral health providers:

  1. Global Payments for providers working in medical homes;
  2. Bundled Payments through Prospective Payment Systems for providers that achieve the recently created designation of Certified Community Behavioral Health Clinics; and
  3. Case Rates for other specialty behavioral health clinics.

If you are working on integrated care and becoming known as a behavioral health center of excellence, you will likely be paid with all three payment models.

The Value Equation

In order to move away from paying for volume, we need to define “value” and we’re pretty close with the following 3-part definition:

  1. Services are effective in achieving individual outcomes or system-wide outcomes;
  2. Services are more cost-effective than alternatives that may have been selected;
  3. Service are lean, meaning that waste (excess costs) have been removed through process improvement activities.

Connecting the Payment Models and the Value Equation

Here’s how the payment models and value equation are connected:

  • Define the Episode: A payor will work with the delivery system to identify episodes of care; for behavioral health consumers this includes a year’s worth of integrated primary-behavioral health care or a time-limited episode of specialty behavioral healthcare.
  • Price the Episode: Utilization and cost are projected for each type of episode, taking into account evidence-based practices, appropriate clinician mix, prevailing wages, expected cost efficiencies, etc. (value definition parts 2 and 3).
  • Select the Payment Model: Based on the type of episode and service type, one or more of the new payment models are selected.
  • Develop the Performance Metrics: The payor will identify measurable individual and system-wide outcomes (value definition part 1), defining levels of performance, which are then tied to payment levels.
  • Variable Payments: The providers will be paid their global payment, prospective payment or case rate, adjusted for performance: full payment for hitting baseline performance, earning a bonus for higher performance, or possibly getting dinged due to poor performance.
  • Built-In Secondary Bonus Layer: Since we’ve “killed” fee for service, if a provider has provided services that are more cost effective and/or more lean than what was assumed for the payment model, their costs will be less than the baseline payment and they will earn a secondary bonus.

Want to Learn More?

Download the new National Council white paper, “Creeping and Leaping from Payment for Volume to Payment for Value: An Update on Behavioral Healthcare Payment Reform,” and then let us know what questions and thoughts you have.