Is It Time for a Pay-If-You're-Cured Health Care Model? - OZY | A Modern Media Company

Is It Time for a Pay-If-You're-Cured Health Care Model?

Is It Time for a Pay-If-You're-Cured Health Care Model?

By Andrew Hirschfeld

Senior doctor taking a bribe at his office.


The pandemic and a Joe Biden presidency could combine to move America to a new health care model that might reduce $1 trillion in wasted medical expenses.

By Andrew Hirschfeld

  • For decades, Americas have mostly been charged for each treatment they receive at hospitals, irrespective of whether it helps them.
  • Now a growing movement within the medical community is spotting advantages in an alternative model called value-based care, where payments depend on the quality of treatment.
  • It’s of course beneficial for most patients. But many hospitals too are now eyeing this model as a route to financial security.

When the U.S. first announced a national emergency in the face of COVID-19 last March, it partly halted nonessential procedures at America’s hospitals. That was aimed at preparing medical facilities for the onslaught of coronavirus patients that would overwhelm the country’s health care system.

But that also meant some hospitals, especially those in rural areas or ones that specialize in certain procedures, suffered and eventually shuttered, because they depend on a model known as fee-for-service health care. In other words, you pay for each treatment at these hospitals instead of shelling out money for a desired health outcome. Without patients opting for expensive elective surgeries, these hospitals couldn’t make the money they needed to stay afloat. Layoffs followed.

Now, a growing movement of medical professionals, public health policy experts and major firms like Philips are arguing for an alternative model of value-based care, where patients pay for an outcome rather than a particular procedure. For patients it’s a win-win — they get the best possible care without needless and expensive procedures. After all, up to $1 trillion of Americans’ health care spending is wasted each year.  

It’s an approach that’s been gaining steam in recent years. The concept was encouraged in the text of the Affordable Care Act. But a decade after that law was passed, only 36 percent of medical facilities in the U.S. follow alternative models to fee-for-service health care. Now, value-based care appears poised for takeoff with two key factors fueling its rise: lessons from the pandemic and a Joe Biden presidency.

The drop in volumes for elective business for health systems has had a dramatic negative impact on their financials.

Mitu Ramgopal, Lumeris

Research by Duke University experts shows that health facilities that follow a value-based payment model were able to adapt faster to COVID-19. Unlike counterparts that depend on elective procedures and so were reticent about charting a new course, hospitals familiar with value-based payment could shift their attention and resources because the outcome critical for their earnings — keeping regular patients healthy — hadn’t changed. It was a stunning reminder to hospitals of their frailty if they depend predominantly on expensive elective procedures.

“The drop in volumes for elective business for health systems has had a dramatic negative impact on their financials,” says Mitu Ramgopal, national vice president of strategic operations and population health services for health care company Lumeris. 

By contrast, hospitals that previously embraced the value-based care models were significantly better prepared to weather the COVID-19-induced economic downturn, according to a recent report from health care consultancy Numerof & Associates.

But experts are pointing to a second factor as also critical in potentially turning value-based care into the future of medical health in America. While it brings predictability in revenue for health systems and can prove vital in times like these, it means hospitals might earn less money in normal years. More importantly, they have to wait for longer durations for reimbursements, since those are based on the patient’s recovery and not specific treatments.

That’s something large research hospitals can do but smaller hospitals and community health care centers with fewer financial reserves often can’t. And that in turn widens America’s health care divide: Those with the means to access top research hospitals can receive value-based care, while others have to pay for each treatment at smaller medical facilities.

This could finally change under a Biden administration. The president-elect has promised to double the current investment in community care centers, a move that would give them more of a buffer to experiment with value-based care.

“In most other sectors of the economy, a business that has an opportunity to switch from transactional revenue to predictable revenue is something that most businesses would jump at,” says Michael Abrams, managing partner at Numerof. “Hospitals have worked on a transactional basis … and fought it.”

That might now change, with the Biden plan reducing the risks smaller hospitals need to take to make the switch in their financial model.

“One of the ways we could see an inflection point is more people being willing to be paid by bundled payments over full cycles of care,” says Dr. Elizabeth Teisberg, director of the Value Institute for Health and Care at University of Texas at Austin.

Biden’s plan also focuses on mental health parity — again, an important part of any valued-based care, since health care issues do not live in silos. And the ability of value-based care providers to move to telehealth during the pandemic with greater ease than their fee-for-service peers could be particularly relevant for mental health. “For the vast majority of patients in mental health care, telehealth is a medium of care delivery that provides everything that is required,” Abrams says. Both Biden and Vice President-elect Kamala Harris have long been advocates for mental health access and parity — and not just this past year.

To be sure, an entirely value-based payment model can also pose challenges for hospitals. There’s less incentive for them to take on patients with more complicated diseases, where the outcome is unlikely to be favorable. In the initial stages of the pandemic, when the virus was more of a mystery, more than half of U.S. hospitals that participate in a Medicare program that mimics elements of value-based care considered dropping out, a survey showed.

And politically, in a fractured Congress, the best-intended plans sometimes never make it past the floor of the House. Still, for Biden’s team, facilitating a shift to value-based care could turn into a legacy he’ll be remembered for, if he succeeds. Will the pandemic wake America’s health care system up from its nightmare?

Sign up for the weekly newsletter!

Related Stories