Emerging Lessons From Regional and State Innovation in Value-Based Payment Reform: Balancing Collaboration and Disruptive Innovation

September 2014 | Douglas A. Conrad, David Grembowski, Susan E. Hernandez, Bernard Lau, Miriam Marcus-Smith | Original Investigation

Policy Points:

  • Public and private purchasers must create a “burning bridge” of countervailing pressure that signals “no turning back” to fee-for-service in order to sustain the momentum for value-based payment.
  • Multi-stakeholder coalitions must establish a defined set of quality, outcomes, and cost performance measures and the interoperable information systems to support data collection and reporting of value-based payment schemes.
  • Anti-trust vigilance is necessary to find the “sweet spot” of competition and cooperation among health plans and health care providers.
  • Provider and health plan transparency of price and quality, supported by all-payer claims data, are critical in driving value-based payment innovation and cost constraint.

Context: In recent decades, practitioners and policymakers have turned to value-based payment initiatives to help contain spending on health care and to improve the quality of care. The Robert Wood Johnson Foundation funded 7 grantees across the country to design and implement value-based, multi-stakeholder payment reform projects in 6 states and 3 regions of the United States.

Methods: As the external evaluator of these projects, we reviewed documents, conducted Internet searches, interviewed key stakeholders, cross-validated factual and narrative interpretation, and performed qualitative analyses to derive cross-site themes and implications for policy and practice.

Findings: The nature of payment reform and its momentum closely reflects the environmental context of each project. Federal legislation such as the Patient Protection and Affordable Care Act and federal and state support for the development of the patient-centered medical home and accountable care organizations encourage value-based payment innovation, as do local market conditions for payers and providers that combine a history of collaboration with independent innovation and experimentation by individual organizations.

Multistakeholder coalitions offer a useful facilitating structure for galvanizing payment reform. But to achieve the objectives of reduced cost and improved quality, multistakeholder payment innovation must overcome such barriers as incompatible information systems, the technical difficulties and transaction costs of altering existing billing and payment systems, competing stakeholder priorities, insufficient scale to bear population health risk, providers’ limited experience with risk-bearing payment models, and the failure to align care delivery models with the form of payment.

Conclusions: From the evidence adduced in this article, multistakeholder, value-based payment reform requires a trusted, widely respected “honest broker” that can convene and maintain the ongoing commitment of health plans, providers, and purchasers. Change management is complex and challenging, and coalition governance requires flexibility and stable leadership, as market conditions and stakeholder engagement and priorities shift over time. Another significant facilitator of value-based payment reform is outside investment that enables increased investment in human resources, information infrastructure, and care management by provider organizations and their collaborators. Supportive community and social service networks that enhance population health management also are important enablers of value-based payment reform. External pressure from public and private payers is fueling a “burning bridge” between the past of fee-for-service payment models and the future of payments based on value. Robust competition in local health plan and provider markets, coupled with an appropriate mix of multistakeholder governance, pressure from organized purchasers, and regulatory oversight, has the potential to spur value-based payment innovation that combines elements of “reformed” fee-for-service with bundled payments and global payments.

Author(s): Douglas A. Conrad, David Grembowski, Susan E. Hernandez, Bernard Lau, Miriam Marcus-Smith

Keywords: payment reform, innovation, multistakeholder coalitions

Read on Wiley Online Library

Volume 92, Issue 3 (pages 568–623)
DOI: 10.1111/1468-0009.12078
Published in 2014