Health care providers are caught in a conundrum just now, as our system slowly shifts from a business model of fee-for-service reimbursement to a new model of value-based care. 

Fee-for-service arrangements reward the volume of services, and treating illnesses and injuries as they occur. Providers respond by filling beds and appointment slots, and increasing (or at least not worrying about limiting) the number of tests and procedures they perform. 

Value-based care rewards the value of services, and proactive management of health: preventing illnesses and injuries or catching them at an earlier stage when they are less expensive to treat. Providers respond by continuously and consistently monitoring their patients' health and working with them on ways to improve it, averting hospital stays and unnecessary emergency room visits, and making sure each test and procedure is clinically optimal. 

Eventually, the health care system may settle into a reimbursement model where financial incentives are consistently aligned with the goal of coordinated and high-quality care at optimal cost. But during the transition, providers will juggle two models that in some respects reward opposite behaviors. Maintaining the margins that allow them to function effectively, while providing a consistent standard of care, will be even more challenging than usual. 

According to the Health Care Payment Learning and Action Network of the Centers for Medicare & Medicaid Services, federal efforts to advance alternative payment models are starting to have an impact. Pure fee-for-service payments dropped to 43 percent of revenue overall in 2016, down from 62 percent the previous year. Fee-for-service arrangements with some quality-measurement component (that is, a fee-for-service/value-based care hybrid) took up 28 percent, almost doubling from 15 percent the previous year. Full-risk, value-based care arrangements accounted for 29 percent, up from 23 percent in 2015. 

It's clear that we're headed to a value-based world, but equally clear that it's going to take a while. Years from now, fee-for-service health care will still be here, even if it accounts for a significant but minor share of a provider's revenue. Business-model transitions, across industries, can take years or even decades, and new models often never completely replace prior models. For example, retailers must support both e-commerce and physical stores; and banks still have tellers, even though apps and ATMs have made it possible for many customers to go months, or even years, without talking to one of them.

Providers who will be straddling two business models for an extended period must make sure their information technology (IT) investments can fully support both, even when the models have needs that are different. Timing can also be an issue: when so many reimbursement models are still in an experimental phase, IT systems built on one set of assumptions may not continue to meet a provider's needs if those assumptions change. 

The Common Core

When organizations face multiple futures, they must make investments that are useful in as many futures as possible. Which IT investments are valuable in both a fee-for-service world and a value-based care world? We see several. Among them are:

Consumer apps

Consumer-directed applications help patients or their caregivers communicate with their care team, obtain information about their health and health care, remind them of actions to be taken, track their progress towards achieving health goals, and engage with communities that focus on health issues important to them.

Regardless of the business model, providers still need to attract patients; these applications support the delivery of a superior service and health care experience. These applications also help patients manage their health and make sound decisions. Patients don't care what business model their provider is operating under, but they know whether they are healthier and whether their provider has helped them achieve their goals.

Analytics on care costs, quality and organizational performance

A well-run organization that delivers consistently great care, is operationally efficient and manages its costs will prosper in both worlds. Analytics and good data are essential for providers to understand their performance and improve it. 

Integrating the continuum

Care and operations need to be integrated across the continuum of care delivered by the organization. This integration usually requires the implementation of a common electronic health record (or advancing EHR interoperability) and a common revenue-cycle system.

Most value-based care models require managing a patient’s care across the continuum. Fee-for-service arrangements place a premium on ensuring a great patient care and service experience across the continuum, and on managing in- versus out-of-network care. An integrated continuum both encourages patients to stay in-network and makes it easier to manage their care, making it a winning strategy under either model. 

Addressing targeted value-based care opportunities and requirements

While their revenue contribution may be modest, every provider doing business with Medicare already has several "value-based" obligations that its IT must support, such as tracking and managing 30-day readmissions and assigning Hierarchical Condition Category codes. 

Clinician Perspective

Straddling two business models requires the clinician, the clinic/practice and the organization/health system to adjust their work practices to fit the needs of both models simultaneously. How should they do this? And what can IT do to help? We see opportunities at three levels.

The encounter

Clinicians tell us that business models do not make any fundamental difference in their day-to-day treatment decisions. They will always do what they think is best for the patient. 

However, the clinician does need to know the details of the patient’s insurance contract in order to make certain choices within the context of the overall treatment decision. "Contractually aware" EHR and population health management logic should be able to flag whether an MRI or a medication will need a pre-authorization or should be ordered from a specific source, and should remind the clinician to do routine monitoring, such as ordering an A1C. This capability is an increasingly important component of EHRs, because contracts in general, whether value-based or not, are becoming more complicated. 

Value-based care does require the clinical team to be more aware of the patient's broader context (e.g., family and community issues, or risk factors for future health problems) and to coordinate the actions of all members of the team, including those providing social support. 

The day

While an individual patient encounter is not particularly affected by the business model, the clinic's overall day is a different story. Under fee-for-service models, planning the day means trying to keep the schedule full, worrying about no-shows, and checking whether a patient's co-pays are up to date and whether they have had the tests they needed to get before their visit. 

Under value-based care, the medical practice has a broader range of concerns, and the day is more holistic. For example, if tests show a diabetic patient's blood sugar is out of control, the practice may go beyond a change of medication and try to identify nonmedical factors, such as lack of access to healthy food or a place to exercise, problems getting her medication, or difficulty keeping to a schedule. She may need help getting signed up for Medicaid. She may need to see a social worker in addition to a physician or physician assistant, and to get referrals to community services. 

For these types of scheduling and patient-management issues, the practice needs “business-model-aware" logic built into its scheduling and office-management systems. Its IT must be able to identify the patients coming that day who are covered under value-based contracts, and the tasks associated with those arrangements, and guide the physician and the clinic staff through the accomplishment of those tasks.

The practice/clinic

There's some good news here: analytics applications available today can assess and manage both business models. Analytics have long been used to assess the performance of the practice under fee-for-service models: to understand its costs and revenues, referral patterns, payer mix, physician relative value units and distribution of patient problems.

Most population health management applications can address the needs of practice analytics for value-based care. These applications enable the practice to understand how well it's managing the costs and quality of care for various populations, financial performance under different new payment models and, increasingly, the degree to which the social needs of the patients are being managed. 

New Tasks and Services

Perhaps the most difficult aspect of value-based care for a medical practice, both logistically and financially, is the extra tasks it adds: wellness coaching, documenting of quality measures, obtaining authorization for procedures, or coordinating with care managers and social workers. 

Clinicians may spend more time reviewing data on their practice patterns and how they compare with those of colleagues. They may have different formulary restrictions or chronic disease management protocols. And as we discussed in a previous column, they may need to address social determinants, such as inadequate housing, or coordinate with school programs. These extra tasks should theoretically increase their value-based reimbursement, but they also reduce the amount of time and energy clinicians can devote to their fee-for-service patients. 

There are also cost demands: the practice or organization may need to hire additional care coordinators, staff to help patients work through social issues, and data scientists to tackle the additional analysis needs.

Hence, the problem with juggling two business models is not so much that clinicians are conflicted about what to do for their patients, but rather that complying with the requirements of value-based care can impair the ability of the practice to thrive under fee-for-service arrangements. Since value-based care constitutes a minority of most practice revenue at this point, the impact of complying with those requirements is disproportionate: even if the practice reaps the maximum reward from its value-based arrangements, its fee-for-service revenue may drop and its costs increase by more than it gains from that reward. 
There are no simple IT solutions for this challenge, but IT can help care teams and the overall practice both be as efficient as possible – for example, by supporting the team’s efforts to practice at the top of their license. Vendors could help by structuring the costs of IT support so that they are directly related to the size of the value-based care business ¬– for example, by charging a per-member, per-month support fee rather than a flat amount. 


Health care is hardly the first sector to have to support multiple business models for prolonged periods of time. For example, the advent of the commercial Internet has disrupted many industries. Some, like banks and certain large retailers, have managed the associated challenges well. Others, like news organizations and travel agencies, have struggled. The auto industry grapples with how to introduce electric vehicles in a gas-powered world, and may live to regret its quest for a self-driving car. 

What makes health care uniquely challenging is that, regardless of the business model, we all need health care and its providers, and we must help them thrive through this time of transition. Information technology can be a major contributor to their success and the health of the communities they serve.

John Glaser, Ph.D., is senior vice president of population health with Cerner in Kansas City, Mo. He is also a regular contributor to AHA Today. Bharat Sutariya, M.D., is chief medical officer of population health with Cerner.


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