April 7, 2015 – Curant Health President and CEO, Patrick Dunham, in Forbes – Believe it or not, Congress finally agreed on something.  On March 26th, the House passed legislation to repeal Medicare’s physician payment formula known as the sustainable growth rate (SGR), which compensates Medicare providers based on “activities and treatments,” and replace it with a payment system based on value (or outcomes relative to associated costs) instead of volume of care.  This is commonly known as the move from “fee-for-service” to “fee-for-outcomes” (also known as “fee-for-value” or “value-based care”).  If all goes well, the bill is expected to pass the Senate and be signed by the President by the end of April.

Changing the established fee-for-service healthcare model to the new value-based care model will not come easy or cheap.  Funds needed to cover the cost of repealing and replacing the SGR are estimated to be approximately $13.5 billion annually over the next 10 years, most of which would be needed to offset payment cuts under the existing SGR formula.  Not surprisingly, details on funding still need to be worked out.

Congress has already spent nearly 15 years and $150 billion providing short term SGR “fixes” avoiding a shift to outcome-based pay to further avert payment cuts to Medicare providers that some contend would compromise patient care.  These short-term fixes are an example of Congress treating the symptoms rather than the disease.

Several things must happen in order to successfully shift from a fee-for-service to a value-based pay model.  However we get there, getting to a value-based model is essential.  It will not only save tens of billions of dollars per year in healthcare spending, but will also create innovative new companies and technologies, hopefully improving healthcare for all Americans.

For additional insights into the changes needed to implement such a system, we reached out to Patrick Dunham, CEO of Curant Health.  Founded in 2000, Curant Health treats tens of thousands of patients every year through its medication management protocols.  Dunham offered the following four recommendations:

Standardize the definition of value that takes into account the savings opportunity associated with improved health outcomes.  Value can be illustrated by using the simple equation of value equals outcomes divided by costs.  For decades our system has attempted to increase value by cutting the denominator in this equation – costs.  Most would agree that we’ve reached a point where further cost reductions creates a risk of declining outcomes.  No value is realized when the outcomes numerator decreases in parallel with a decrease in the costs denominator.

Develop payment models designed to positively impact outcomes.  There is greater value potential in considering the savings impact generated by improved outcomes on overall costs than can be realized by blindly attacking costs.  Every Medicare hospital readmission avoided saves $10,000 – $13,000 – reducing cost, while of greater import, the patient enjoys a higher quality of life – improving outcomes.  Greater reimbursement should be considered for preventative services like medication management that drive higher levels of adherence.  Providers who demonstrate measurable improved outcomes and cost reductions should be highly compensated in any future payment models.  Conversely, those who don’t demonstrate improved outcomes should be appropriately penalized.

Align stakeholder interests and incentivize them the right way.  The formulas used to calculate both the cost effectiveness and savings of prevention activities have been the subject of much debate.  What’s not up for debate is that Americans use preventive services at about half the recommended rate according to the Centers for Disease Control and Prevention (CDC).  For every HIV infection prevented, an estimated $355,000 is saved in the cost of providing lifetime HIV treatment.

To read Patrick’s full article, visit Forbes.

To learn more about Curant Health, contact Kristin Lindsey, Marketing Director, at klindsey@curanthealth.com.