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.

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