Checking up on Healthcare’s Hot Trend:
Value-Based Reimbursement

To offset increasing costs and expenditures, healthcare reimbursement has begun shifting from volume to value, most recently manifested in the 2010 Patient Protection and Affordable Care Act (ACA) and the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA).1 Although value-based reimbursement (VBR) programs are relatively new, recently-published preliminary evaluations of the programs have been disappointing, and, in conjunction with the organizational directives of newly-appointed Centers for Medicare and Medicaid Services (CMS) leadership, have prompted significant changes to existing VBR programs and the creation of a new VBR program.

The literature published to date has found that VBR programs are not achieving the intended results, and, in fact, indicates that VBR programs did not lead to improved patient care and outcomes.2 A recent study found that the use of the Value-Based Payment Modifier3 was not associated with better quality of care or lower spending, and did not provide any additional incentive for practices serving a disproportionately higher number of high-risk patients, e.g., complex or low income patients.4 The findings from this study, and other literature, have suggested that pay-for-performance programs may exacerbate existing healthcare disparities either by financially penalizing, or not providing enough support to, hospitals that serve a greater proportion of these high-risk patients.5 Additionally, two separate studies from Health Affairs and the U.S. Government Accountability Office found that the Hospital Value-Based Purchasing Program6 rewards hospitals for maintaining low costs, even if they have low quality scores.7 These results suggest that CMS’s goals of “Better Care. Smarter Spending. Healthier People8 are not being furthered by some of its current VBR models, and the unintended consequences of these policies may be the sacrifice of higher quality care in the name of cost containment. Perhaps as a result of this research, or due to political ideology, the current administration has developed a new bundled payment model while relaxing the participation requirements for physicians in other VBR programs.

On January 9, 2018, CMS announced the launch of the Bundled Payments for Care Improved Advanced model (BPCI Advanced).9 This new, voluntary payment model was unveiled subsequent to the November 2017 cancellation of the previously mandated hip fracture and cardiac bundled payment models and the reduction of the Comprehensive Care for Joint Replacement Model (CJR) program.10 In the press release related to the hip fracture and cardiac bundled payment models cancellation, CMS expressed its intention to release new voluntary payment bundles in order to “offer opportunities to improve quality and care coordination while lowering spending…[by] focusing on developing different bundled payment models and engaging more providers…to drive health system change while minimizing burden and maintaining access to care.”11

The BPCI Advanced payment program is considered an Advanced Alternative Payment Model (Advanced APM) under the Quality Payment Program (QPP) established by MACRA.12 In this program, participating providers can earn incentive payments for 32 different clinical episodes (29 inpatient and 3 outpatient)13 if all of the beneficiary’s expenditures during that episode and the subsequent 90-day period fall below a specified spending target, while concurrently maintaining or improving upon seven specific quality measures.14  From January 11, 2018 until March 12, 2018,15 providers may apply for participation in the initial version of the BPCI Advanced payment model, which will run from October 1, 2018 through December 31, 2023.16

On January 11, 2018, the Medicare Payment Advisory Commission (MedPAC) decided, in a 14 to 2 vote, to recommend that Congress repeal and replace the Merit-based Incentive Payment System (MIPS).17 MIPS is also part of the QPP established under MACRA.18 MedPAC had previously voiced dissatisfaction with the design of MIPS, stating in a June 2017 report that MIPS “…is unlikely to succeed in helping beneficiaries choose clinicians, helping clinicians change practice patterns to improve value, or helping the Medicare program reward clinicians based on value.”19 The report also noted concerns that submission of quality and outcome measures as required under MIPS may become too burdensome for clinicians.20 MedPAC recommended a replacement program for MIPS, in which providers would be evaluated on a set of population outcome measures as part of a group of physicians, and be compared against other groups to obtain incentive payments.21 MedPAC will provide further recommendations regarding potential replacement models to Congress in its March 2018 report.22

Shortly after being sworn in as the fifteen Administrator of CMS in March 2017, Seema Verma announced in a Wall Street Journal op-ed that, “[t]his administration plans to lead the [CMS] Innovation Center in a new direction,” which included plans not only to continue the “shift away from fee-for service…toward a system that holds providers accountable for outcomes…” but also to “increase flexibility by providing more waivers from current requirements.”23 On February 12, 2018, at the CMS Quality Conference, Verma reaffirmed this commitment, stating: “Let me be clear: Moving away from fee-for-service is something that [new Department of Health and Human Services] Secretary [Alex] Azar and I are committed to, and ensuring quality is an essential component of thisWe want to support quality, but there have been unintended negative consequences of too many quality measures.”24 Indications derived from CMS policy changes throughout the first year of Verma’s tenure suggest a movement from requiring physicians to participate in programs that include some form of downside risk to voluntary programs with fewer standardized metrics and reporting requirements.

Aside from political motivations, the concern that current VBR models are not appropriately incentivizing provider innovation and quality improvement (potentially due to fundamental flaws in program design) has likely prompted some of the recent (and suggested) changes in the QPP. While VBR programs will likely continue (at least in the short term) to shift from a mandatory to a voluntary basis under the current administration, it is yet unclear whether this latest VBR iteration will impact provider quality of care and spending levels, which may prompt CMS to continue to adjust, refine, or make wholesale changes to its programs. However, what is clear is that in order to determine the effectiveness of this iteration of VBR models (or any other model which reimbursement is based in part on higher quality care and lower cost), these programs will require significant provider participation. Otherwise, the U.S. healthcare industry may be no closer to the achievement of the “Triple Aim of Healthcare” than it was prior to the identification of a need for healthcare reform.

“CMS’ Value-Based Programs” Centers for Medicare and Medicaid Services, November 9, 2017, (Accessed 12/28/17).

“Road to Value-Based Payment Bumpy in 2017” By Maria Castellucci, Modern Healthcare (December 27, 2017), (Accessed 12/28/17).

The Value Modifier reimburses physicians based upon performance that compares quality and cost of care (“Value-Based Payment Modifier” Centers for Medicare & Medicaid Services, September 21, 2017, (Accessed 1/22/18).)

“The Value-Based Payment Modifier: Program Outcomes and Implications for Disparities” By Eric T. Roberts, Alan M. Zaslavsky, and J. Michael McWilliams, Annals of Internal Medicine, November 28, 2017, (Accessed 1/15/18); “Practices with High-Risk Patients are Vulnerable to Value-Based Payment Penalties” By Maria Castellucci, Modern Healthcare (November 29, 2017), (Accessed 1/15/18).

Eric T. Roberts, Alan M. Zaslavsky, and J. Michael McWilliams, November 28, 2017; “Could Pay-for-Performance Worsen Health Disparities?” By Mubeen Shakir, Katrina Armstrong, and Jason H. Wasfy, Journal of General Internal Medicine (January 4, 2018), (Accessed 1/16/18).

The HVBP scores and rewards hospitals for improved performance over time and in comparison to peers for a specific set of quality measures (“MLN Booklet: Hospital Value-Based Purchasing” Centers for Medicare & Medicaid Services, September 2017, (Accessed 1/22/18), p. 2-6).

“Adding A Spending Metric To Medicare’s Value-Based Purchasing Program Rewarded Low-Quality Hospitals” By Anup Das et al., Health Affairs, Vol. 35, No. 5 (May 2016); “Hospital Value-Based Purchasing:  CMS Should Take Steps to Ensure Lower Quality Hospitals Do not Qualify for Bonuses” United States Government Accountability Office, June 2017, (Accessed 12/29/17).

“Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume” Centers for Medicare and Medicaid Services, Press Release, January 26, 2015, (Accessed 1/22/18); “Better Care. Smarter Spending. Healthier People: Improving Quality and Paying for What Works” Centers for Medicare and Medicaid Services, Press Release, March 3, 2016, (Accessed 1/22/18).

“CMS Announces New Payment Model to Improve Quality, Coordination, and Cost-Effectiveness for Both Inpatient and Outpatient Care” Centers for Medicare & Medicaid Services, Press Release, January 9, 2018, (Accessed 1/15/18).

“CMS Finalizes Changes to the Comprehensive Care for Joint Replacement Model, Cancels Episode Payment Models and Cardiac Rehabilitation Incentive Payment Model” Centers for Medicare and Medicaid Services, Press Release, November 30, 2017, (Accessed 12/29/17); For an in-depth analysis on the implications of these cancellations see Health Capital Topics “Now You See It, Now You Don’t: Bundled Payment Programs Cancelled” Vol. 10, Issue 10 (October 2017), (Accessed 12/29/17).


Centers for Medicare & Medicaid Services, Press Release, January 9, 2018.

The three outpatient clinical episodes include: percutaneous coronary intervention; cardiac defibrillator; and, back & neck except spinal fusion.  Examples of the 29 inpatient clinical episodes include: acute myocardial infarction; cellulitis; fractures of the femur and hip or pelvis; gastrointestinal hemorrhage; renal failure; sepsis; stroke; and, urinary tract infection, among others. “BPCI Advanced: Fact Sheet” Centers for Medicare & Medicaid Services, January 2018, (Accessed 1/15/18), p. 3.

“BPCI Advanced: Fact Sheet” Centers for Medicare & Medicaid Services, January 2018, (Accessed 1/15/18), p. 2-3, 7; Centers for Medicare & Medicaid Services, Press Release, January 9, 2018; “Centers for Medicare & Medicaid Services, January 12, 2018.

Ibid, p. 1.


“MedPAC Votes 14-2 to Junk MIPS, Providers Angered” By Virgin Dickson, Modern Healthcare (January 11, 2018), (Accessed 1/12/18). MedPAC is an independent, nonpartisan legislative agency of 17 appointed members, established under the Balanced Budget Act of 1997, that provides analysis and policy advice to Congress and the Department of Health and Human Services regarding the Medicare program (“About MedPAC” Medicare Payment and Advisory Commission, (Accessed 1/22/18). Note that the government has no legal requirement to follow MedPAC recommendations.)

“Chapter 5: Redesigning the Merit-Based Incentive Payment System and Strengthening Advanced Alternative Payment Models” The Medicare Payment Advisory Commission in “Report to the Congress: Medicare and the Health Care Delivery System,” June 2017, (Accessed 1/15/18), p. 159. Note that MIPS and APMs under the QPP were established to replace the sustainable growth rate system that was repealed under MACRA, in order to create a physician payment program that better tied payments to measures to improve quality and cost of care.

Ibid, p. 160.


Virgin Dickson, January 11, 2018, p. 160-161.


“Medicare and Medicaid Need Innovation: Trump’s HHS Seeks to Encourage Health-Care Competition” By Seema Verma, The Wall Street Journal, September 19, 2017, (Accessed 1/22/18).

“Verma Renews Commitment to Value-Based Models” By Steven Porter, HealthLeaders Media, February 12, 2018, (Accessed 1/22/18).

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