Value-Based Payment

Value Based Payment (VBP) is a concept by which purchasers of health care (government, employers, and consumers) and payers (public and private) hold the health care delivery system at large (physicians and other providers, hospitals, etc.) accountable for both quality and cost of care.

The American Academy of Family Physicians (AAFP) recognizes the urgency to improve both efficiency and effectiveness in the delivery of medical care, in which "efficiency" is understood to mean "doing the thing right" and "effectiveness" means "doing the right thing." VBP is one approach to achieving a balance between efficiency and effectiveness. However, given the technical, legal and ethical challenges in designing and implementing VBP, it is imperative that the key physician measurement processes used in VBP should be transparent and adhere to the AAFP policies on "Public Reporting of Physician Performance, Guiding Principles," "Data Stewardship," and "Transparency."

Value-Based Contracting
VBP aims to promote enhanced population health management, which should result in the improvement of health and/or systemic cost containment or reduction. VBP uses alternative payment models (APMs) or pay-for-performance (PFP) arrangements to create a combination of incentives and disincentives intended to encourage better health care decision making by tying compensation to certain performance measures. The AAFP supports the Health Care Payment Learning and Action Network APM Framework. The AAFP believes increased investments in primary care, as a part of the total spend, is a necessity for enhanced population health management. Increased investments in primary care, using APMs and PFP, can be structured in many ways using a blended payment model and the guidelines listed in the AAFP policy on "Care Management Fees." and "Capitation."  The most notable difference with value-based contracts is exposure of physicians to performance risk, or utilization of unnecessary services.

It is important to distinguish between insurance risk and performance risk. Insurance risk spreads the financial burden of disease, accident, or injury over a large number of people. Insurance companies or health plans are regulated by state law and have required financial reserves to take on the insurance risk. Physicians should not take on insurance risk but should be responsible for managing the rates of utilization of services along with the quality and availability of those services. Contracts that require physicians to assume performance risk should be tailored to specific market dynamics, socio-demographic factors, physician readiness, and available resources.

Performance Measures
In the current health care environment, family physicians face an unprecedented number of performance measures required by different payers. Because VBP incentives are tied to performance on specific quality and utilization measures outlined by each payer, the AAFP believes that measure harmonization across payers is imperative for success in value-based models. In addition, family physicians need to understand what is being measured and how those measurements are used in determining performance and payment. Appropriate criteria for performance measures can be found in the AAFP policy on "Performance Measures Criteria" and “Vision and Principles of a Quality Measurement Strategy for Primary Care (Position Paper)."

Value-Based Payment Principles
The AAFP recognizes the importance and potential of VBP and supports these principles in its design and deployment:

1. Be flexible in the following ways:
   1. Responsive to community needs, preferences, and resources
   2. Adaptable to different practice organizational models, structures of care, and physician specialties
   3. Responsive to individual patient preferences and socio-cultural and socioeconomic backgrounds
   4. Respectful of differences in adoption of health information technology (HIT) while encouraging its effective spread
2. Focus on tangible improvements in clinical outcomes.
3. Reduce the per capita cost of health care.
4. Utilize performance measures that are evidence-based, preferably endorsed through the National Quality Forum, clinically relevant, and aligned across payers.
5. Involve multidimensional and comprehensive measurement of both quality, cost and utilization.
6. Encourage the establishment of robust medical homes, including the systems and HIT that are structurally necessary.
7. Align payment models and performance measures among payers, providers, purchasers, and patients.
8. Use reliable, accurate, scientifically valid, transparent, and timely data.
9. Determine physicians' capacity to carry performance risk and tolerance for such risk.
10. Recognize, disclose, and balance the administrative burden and costs to physicians and measurement in VBP with the incentives of the program.
11. Recognize the path of quality improvement and cost containment or reduction in the medical practice and system, and not solely the outcome.
12. Be accountable to patients, providers, payers, and purchasers.
13. Advance knowledge of effective and efficient episodes of care.
14. Recognize explicitly the tradeoffs in value decisions.
15. Be sensitive to and address the issue of health disparities.
16. Involve practicing physicians in program design.
17. Offer voluntary physician participation.

(2009 COD) (April2021BOD)