60 Percent of Commercial In-Network Payments are Value-Oriented. Does It Matter?

The Catalyst for Payment Reform has released this year’s Scorecard for Payment Reform, which reports a dramatic increase in employer-based provider contracts that are “value-oriented”. “The 2014 Scorecard shows a 29 percentage point increase over 2013, when just 11 percent of payments were value-oriented.” However, the details seem to deflate the potential for this transformation:

  • Many providers still don’t have financial “skin in the game.” Just over half (53 percent) of the payments that are value-oriented put providers at some financial risk if they fail to improve care or spend over budget; 47 percent do not put providers at financial risk.
  • Much of value-oriented payment is in “pay-for-performance” arrangements with providers, offering only potential financial reward and no financial risk.
  • A very small percentage of dollars flow through shared-risk arrangements and bundled payment (just 1 percent and .1 percent, respectively), despite the fact that these methods have strong potential to contain costs and improve care.

  • Hospitals are most impacted by value-oriented payment. Thirty-eight percent of payments to hospitals are value-oriented, compared to the outpatient setting where 10 percent of payments to specialists and 24 percent of payments to primary care physicians are value oriented. However, increasing value-oriented payment in the outpatient setting, including makings specialists more accountable for quality and costs, could dramatically reduce health care spending for both outpatient and inpatient care.
  • More patients are attributed to a provider with a payment reform contract. Fifteen percent of participating health plans’ patient members are formally “attributed” to a provider participating in a payment reform contract, which could range from Accountable Care Organizations (ACOs) and patient-centered medical homes to a provider subject to pay for performance. This is a significant increase over last year (2 percent).

The Catalyst is one of the organizations that speaks for large employers on the topic of health benefits. I wish these large employers the best of success with value-oriented reform, but I always have a somewhat empty feeling after reading these reports. Earlier this month, I discussed a surge in advocacy for large-employer-based health benefits. Although there are examples of successful cost containment by employer-based plans (e.g. reference pricing for surgery), reports covering the landscape of employer-based reform are nowhere near substantive enough to lead to a general argument in favor of employer-owned, rather than individually owned, health benefits.

We should not be surprised. If I had a choice between living in a house owned by my employer or the government, I’d go with my employer. I’m sure he would do a better job maintaining it than the government would. But I’d still prefer to own my own house outright, rather than rely on either my employer or the government.

Comments (2)

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  1. Don Levit says:

    In a recent blog on wendellpotter.com, he writes about Boeing striking a value-added contract recently with an ACO, cutting out the insurer completely.
    Does anyone have any specifics on this situation, particularly what happens if costs exceed the amount Boeing has set aside for the ACO?
    Don Levit

  2. John R. Graham says:

    I wonder if Mr. Potter gets a pension from CIGNA?

    But to the point: I think the Boeing situation is not easy to replicate unless its a big employer in a corporate town. Boeing always bore the risk: Insurers negotiated the contracts but did not bear actuarial risk.

    Plus Boeing has employees all over the world. They must be insured in some other way. They are not all going to Everett for their health care.