Volume Vs Value-Based Care: What Wins Post COVID-19?
It’s no secret that COVID-19 is hammering the nation’s hospitals, but what you may not see covered by the news media as much is the toll the disease has taken on the bottom lines of primary care practices from coast to coast.
For decades, policy makers and medical professionals have debated the merits of fee-for-service vs value-based payment models for funding American health care. Although the majority of providers in the United States operate as fee-for-service, the current crisis has thrown into sharp focus the advantages inherent in value arrangements (where success is measured not on volume, but on the results achieved). In particular, the most extreme form of value-based payment, capitation — giving providers an up-front budget to stay within (usually per patient based on their expected costs) — is proving to be the secret formula behind the handful of provider groups that were thriving before and also now during COVID-19.
With few, if any, patients walking through their doors, fee-for-service providers simply aren’t generating the revenue they need to keep paying their staff, much less keep the doors open and lights on. It’s a struggle for survival. Contrast that with value-based capitation-funded providers, like ChenMed, that don’t have a revenue problem and are continuing at full capacity serving patients.
Fee-for-Service Vs Value-Based Care
If you operate a business purely based on volume — like fee-for-service providers do —when your volume dips, your revenue dips, and you have few levers to pull to stay afloat. As we are seeing across many industries, all you can do is cut your operating costs (fire or furlough staff, skip rent or other payments, cut advertising or other overhead), dip into your “piggy bank” (borrow from your own balance sheet assets), or see if someone else will give or lend you money. Most volume-based industries, including many fee-for-service providers, are relegated to looking for a bailout right now.
Now, imagine a different kind of business. A subscription-funded business where the revenue is already there. Rather than trying to cut costs or get a bailout, you would actually step things up to make sure you keep your subscribers. It wouldn’t be a time for layoffs. Rather, you would have all your revenue and you could work to evolve, innovate, and improve because you need your whole team to serve the subscribers you have in whatever way works best — uncharted stay-at-home orders or otherwise.
ChenMed is one of the minority of providers that has embraced value-based care, specifically the capitation payment model, for decades. Because of this, our business is not paring down. It is ramping up, evolving, thriving. Telehealth is in full swing because reimbursement per visit doesn’t drive us. And, every clinic is open for urgent situations, allowing our patients who must leave their home for acute care to avoid the emergency room. There are no layoffs or furloughs. No elimination of services. In fact, we’ve dramatically enhanced what we’re doing for our patients.
Yes, it’s expensive to pay for extra cleaning, buy personal protective equipment, and invest in bolstering our technology platform for virtual care. But we are paid to deliver solutions to our patients regardless of volume. In this case, we must keep them healthy (despite their many chronic conditions) and free of COVID-19. Thankfully, because we are financially accountable for the health outcomes of our members, and we’ve had access to our whole wallet, so to speak, we’ve been able to — and also had a moral and economic incentive to — pivot quickly to do whatever it takes to keep our patients healthy, happy, and at home. It’s a lot more inspiring to our staff, and helpful to our patients, to change our services to meet the need rather than worry about billing rules and whether or not we’re going to be bailed out.
More Care Now Instead of Later
Yes, there are horror stories and scars from when the capitation model was used to abuse the system to the detriment of patients. The prime example most point to is the HMO debacle of the 1980s, when providers began blocking access to certain types of care so they could keep more of the capitation payments they received up front. That model has proven immoral and unsustainable. Providers blocking care will soon find themselves in dire financial straits if they adopt a capitation funding model without providing high-touch, prevention-focused care. The other cardinal sin of the early days of risk was “lemon dropping” (where sicker patients are dumped to other providers so risk is only taken on the healthy patients who won’t cost a lot). That, too, doesn’t work for long — and the risk-adjustment models where sicker patients come with higher capitation rates disincentivizes it anyway.
The “enlightened” capitation model is actually about providing more care now, so other, more expensive care can be avoided later. That means better outcomes for patients and a better financial situation for primary care providers (PCPs). Of course, you can’t keep patients out of the hospital just by giving them pills, tests, and referrals — the care we give is far more holistic.. The pivot to capitation is not simple, but it’s far more attainable — and beneficial — now than ever before. We have more useful data and technology applications than ever to guide us in knowing which patients to manage proactively.
Best of all, the changes needed are things most doctors want to do, which should make changing mindsets that much easier. Embracing the tenets of value-based care by seeing their patients as partners, understanding their lifestyles, and recognizing the social determinants of their health to extend their healthy years — those are the motivating factors that inspired most doctors to go into medicine in the first place. I haven’t met a doctor who really prefers to do only the things they can bill for. It’s just that the system they’re in forces a focus on billing and there is not a CPT code for caring. Yes, caring takes time and effort, but it’s the only way you, as a provider, will spend less per patient and stay profitable as a practice.
Capitation: the Path Forward
Simply put, there is so much more that goes into someone’s health than their clinical care. Capitation empowers doctors to have freedom to solve all kinds of problems — even if that means solving how to help patients get what they need to stay healthy and away from COVID-19 infection.
I realize the United States may never move to a fully capitated structure, but doctors and health system leaders are at a fork right now. On one path: Try to salvage some of their lost fee-for-service revenue. On the other path: Think big and use this time to rapidly evolve. To jump into capitation.
From what I am hearing, the former option is winning, and this is saddening. Historically speaking, big changes often happen in bursts — often during unstable times when survival is in the balance. Decades ago, my father forced himself into that crucible of innovation. He pivoted to capitation. He got all the revenue he could imagine … and then nearly went broke. But he made big changes and solved care delivery innovation so he could spend less than the capitation while improving quality and experience of care. It’s possible. If we want doctors to win when patients win, and vice versa, we simply cannot move forward with business as usual in health care once the pandemic subsides.
Learn more about how ChenMed is reinventing the doctor-patient relationship with our high-touch, value-based care model.