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What Value-Based Care Really Means for Physicians

It doesn’t mean working harder; it means working differently.  And it also means a significant change in the composition and relative incomes of the physician workforce. 

 Value-based payment models aim to reduce the growth rate of spending while improving patient satisfaction and outcomes.  Industry observers generally agree that the transition from traditional fee-for-service to a model that promotes value is both unavoidable and in its early stages.  What’s unknown is what the destination value-based model will actually look like.  There are two major issues yet to be resolved: the reimbursement model and the care delivery model. 

 There are several alternative reimbursement models currently being tested, including (in order of increasing financial risk to providers): pay-for-performance; bundled/episode based payments; shared savings-shared risk; and capitation.  Last year, 20 percent of Medicare’s $417 million fee-for-service payments were made through alternative payment models like these, and CMS recently set the goals of increasing the percentage to 30 percent by 2016 and 50 percent by 2018. Commercial payers are following suit, and it’s widely predicted that by 2020 up to 80 percent of all provider payments will be value-based.  Though no one knows what common reimbursement model eventually will emerge, most observers believe it will be one which shifts significant financial risk from payers to providers. 

 The second issue is how the new care delivery model will be organized.  Though individual organizations will differ depending upon their respective mission, values and culture, what’s clear is that the transition to value-based care will fundamentally transform the care delivery model, from a craft-based industry of individual physicians organized around practice specialization to a profession organized around patient or disease state.  In this latter model, groups of peers will treat similar patients in a shared setting utilizing coordinated care delivery processes, e.g., agreed upon clinical guidelines and disease management protocols.  Physicians will be required to work as part of a team rather than as unquestioned independents. This is not how most physicians were trained, and adapting to this model will require a fundamental change in both work processes and attitudes about hierarchy and authority. 

 A 2008 national survey found that approximately 39% of direct patient care physicians were engaged in primary care (family and internal medicine, pediatrics), 35% percent were medical specialists and 26% surgeons.   It’s widely predicted that a new value-based care delivery model—one organized around patient or disease state instead of practice specialization—will significantly increase the demand for primary care physicians and physician extenders at the expense of medical specialists and surgeons.  The inference is that a large number of current practitioners will be forced to retool their skills over the next few years if they want to continue to practice.  Unfortunately, many are likely to delay this process until forced to, which will further damage the already fraying bonds of collegiality that hold the physician community together. 

 Another impact of the transition to value-based care will be on relative incomes.  Wringing costs out of the healthcare system will require those responsible for the highest shares of spending to bear most of the burden, meaning hospitals first, followed by specialists and finally by primary care.  To be made whole financially, hospitals will have to either eliminate excess capacity or increase market share at the expense of their competitors.  This will be a major impetus for even greater hospital consolidation than has been witnessed to date. 

 A recent UC Davis Health System study found that over the course of their lifetimes specialist physicians currently earn roughly $2.8 million more on average than primary care physicians.  This gap will close under value-based purchasing as economic leverage shifts from specialists to primary care doctors.  It’s more likely, however, that the incomes of medical specialists and surgeons will face downward pressure rather than primary care doctors seeing their incomes rise significantly. 

 The theory is that a value-based care model will result in care that is less expensive, less prone to error and has better patient outcomes.  Admittedly, this is still theory; it has yet to be proven in practice.  But that’s the direction of change, and it’s unlikely to be reversed.  A stronger, healthier healthcare system is expected to emerge, but it will not be without pain to industry participants.  That’s always one of the prices to be paid for industry transformation.

John McCracken, PhD