medical billing

What is Value-Based Care?

The healthcare industry is experiencing a significant shift from traditional volume-based care to value-based care (VBC), which emphasizes patient outcomes and quality of care over the number of services provided. This transition aims to improve patient health, reduce healthcare disparities, and manage the escalating healthcare costs. The success of VBC depends on creating a collaborative environment where healthcare providers are incentivized to deliver the highest quality care, with payments directly linked to patient outcomes.

Understanding Value-Based Payment Models

Value-based payment (VBP) models deviate from traditional fee-for-service models by reimbursing providers based on performance and patient outcomes rather than the volume of services. There are several types of VBP models, including but not limited to:

• Pay-for-Performance: Providers receive bonuses for meeting quality metrics, such as reduced hospital readmissions or improved patient satisfaction scores.
• Bundled Payments: A single payment is made for all services related to a specific treatment or condition, promoting efficiency and coordination among providers.
• Shared Savings Program: Providers share in the savings achieved when they deliver care within a certain cost threshold while meeting quality benchmarks. This VBP model offers a range of risk-based pathways that may allow providers to “lean into” value-based care initiatives. For example, if generated, “Upside Risk” payment arrangements reward a portion of the savings arrangement to the provider. The provider shares no downside risk and can develop critical value implementation workflows while learning and transitioning to VBP model pathways.
• Capitation and Specialty Subcapitation: Often, the entire payment is a risk, where the payment is tied to the patient or the population, typically referred to as PMPM (per person per month). Providers receive a set amount per patient per month, regardless of the number of services provided, incentivizing preventive care and efficient resource use.

Challenges and Opportunities

Implementing VBP models presents both challenges and opportunities for healthcare providers:

• Challenges:
  • Data Collection and Analysis: Providers need robust data capabilities to track and improve performance metrics.
  • Risk-Based Contracting: Providers must understand and manage various forms of risk, including financial incentives and penalties.
  • Complexity of Models: Navigating different VBP models and contracts can be complex and resource-intensive.
• Opportunities:
  • Improved Patient Care: By focusing on quality, providers can prioritize preventative and targeted care, potentially improving patient outcomes and reducing the inappropriate need for costly treatments.
  • Cost Reduction: Efficient care delivery can lead to significant cost savings, benefiting both providers and patients.

How to be Successful

Successful implementation of value-based care requires a strategic and operational shift:

• Leadership Commitment: Clear communication of leadership’s vision and goals of value-based care is crucial.
• Provider and Patient Engagement: Both providers and patients must be actively engaged in the transition, with providers involved in planning and implementation and patients educated about the benefits of value-based care.
• Data-Driven Decision-Making: Effective use of data analytics and performance metrics is essential for tracking progress and driving continuous improvement.

As healthcare costs continue to rise, the shift towards value-based payment models will likely accelerate. Providers who can deliver high-quality, cost-effective care will be well-positioned for success in this evolving landscape. The transition to value-based care is a challenging but necessary step towards a more efficient and effective healthcare system.

For more detailed insights and guidance on navigating value-based payment models, download our comprehensive guide.

The Department of Health and Human Services’ Office of Inspector General (OIG) calculates the Medicare Fee for Service improper payment rate on an annual basis through its Comprehensive Error Rate Testing (CERT) program. OIG selects and tests roughly 50,000 claims for services each year and publishes detailed testing results. Dean Dorton has developed the following interactive tool to explore the results of the testing and provided commentary to highlight some of the trends and hotspots that have emerged from the CERT results. Healthcare leaders can use this tool to help profile their organization’s service profile and identify areas of operations that may present more risk from an inaccurate coding perspective.

Part A – Hospitals

The overall error rate for hospital services has climbed over the past two years after a slight dip in 2021. Major Hip and Knee Joint Replacements is by far the most reviewed MS-DRG code in the Part A Hospital data set and the results are concerning. In 2019, only 7.7% of hip and knee replacements were found to be in error due to a lack of medical necessity. In 2023, that percentage has grown to over 41%. 

Other findings of note include:

• MS-DRG 057 – Degenerative Nervous System Disorders without MCC is the second most reviewed MS-DRG in the five-year period—while the main cause of the error has shifted from a lack of medical necessity in 2019 to incorrect coding in 2023.
• MS-DRG 274 – Percutaneous Intracardiac Procedures without MCC has a high error rate (28.8% of claims versus 13.6% of claims for all codes) and has gone from a relatively low number of claims tested in 2019 to one of the top 10 most tested MS-DRG codes in 2022 and 2023. The vast majority (85.5%) of errors for Percutaneous Intracardiac Procedures without MCC are due to insufficient documentation.
• MS-DRG 627 – Thyroid Parathyroid and Thyroglossal Procedures without CC/MCC has an overall high error rate (31.8% of claims versus 13.6% of claims for all codes), but further examination shows that both the error rate and the number of claims tested have decreased from 2019 to 2023. Most errors (94.0%) for this MS-DRG were categorized as a lack of medical necessity.

Part A – Laboratory, SNF, CORF

A wide variety of healthcare providers fall under the Part A – Non-Hospital category with the largest provider types by number of claims tested being Laboratories, Skilled Nursing Facilities (SNFs), Home Health Agencies (HHAs), and Hospices. This group of providers has the overall lowest error rate within the five-year period of 11.9%. The number of claims reviewed for laboratories has steadily increased over the five-year period, while the number of claims for SNFs, HHAs, and Hospices decreased during the pandemic while rebounding in 2023. Some highlights for the biggest provider types:

• Laboratory: Part A Laboratory services have an overall error rate of 14.05% for the five-year period. Most errors (82.9%) for laboratory services were found to be due to insufficient documentation. Some laboratory tests with a large volume of claims tested and error rates include lipid panels (CPT 80061), hemoglobin glycosylated a1c (CPT 83036), and assays of magnesium (CPT 83735).
• Skilled Nursing Facilities: HIPPS and HCPCS codes covering rehabilitation and therapy services continue to be the most tested codes. The overall error rate for SNF services is 11.7% and the most common reason for an error is insufficient documentation.
• Home Health Agencies and Hospices: Hospice services provided in the patient’s home continue to be the most tested claims for both HHAs and Hospices. One key difference between the two provider types is the most common error type. For HHAs, lack of medical necessity is the most cited error reason, while insufficient documentation is the main reason for Hospices.

Part B – Durable Medical Equipment

Durable Medical Equipment (DME) providers have the highest overall error rate of the four different provider types in the CERT data at 27.4%–however, that error rate has been decreasing. Insufficient documentation has been cited as the reason for over two-thirds of the errors identified. One particular hot spot within DME is knee orthoses. These items are some of the most frequently tested and have error rates of more than 40%. 

Pharmacies can fall under the DME umbrella as well when they provide lancets, infusion pumps, and other devices used for parental nutrition for use in the patient’s home. Lancets and blood glucose reagent strips are two such items that have been frequently tested and have overall error rates of more than 40%.

Part B – Professional Services

The most common error type found in professional services testing in 2023 continues to be Insufficient Documentation. The highest level of initial and subsequent hospital evaluation and management services were two of the three most reviewed HCPCS codes—and CERT testing reveals high error rates for both. Most of these errors indicate that documentation did not support the level of E/M service billed.

Clinical laboratory services continue to be the most tested professional provider type. Various urine drug testing codes continue to have high error rates. Radiation Oncology services have seen an increase in both the number of claims tested and the error rate over the past five years.