ACOs and Value Based Purchasing

During a recent research expedition, I came across an interesting article in the December 2010 issue of Health Affairs. It provided a clear example of the issues surrounding a move from transaction-based reimbursement to value based reimbursement. As we all know, the US healthcare system is currently structured around transaction-based reimbursement. A provider provides items or services, creates a billing transaction and is then reimbursed by a payer. More transactions, greater reimbursement.

As we also know, the Accountable Care Organization movement is all about transitioning from this transaction-based approach to paying for value. Better outcomes, higher quality, efficiency equals greater reimbursement regardless of how many services are provided or how many claims are submitted. Seems quite logical. In any case, regardless of whether the future is the structure of the ACO or not, I firmly believe value based purchasing is the future.

Now for the interesting article I referred to. First, let me start by saying the physicians have one of the hardest jobs out there and one that is critically important as well. I respect the profession a lot. However, paying providers based on volume has inherent risks. This article took an interesting view of the situation. Basically, the premise was “What happens when physicians acquire MRI equipment in-office?

To answer this question, the researchers used Medicare claims data for approximately 11,000 orthopedic surgeons and 6,000 neurologists. The answer to the question, at least in this study was that the ability to bill for MRI in office led to substantial increases in MRI utilization. For example the orthopedists increased MRI usage by 38%. Of course there are several potential reasons why this might be, however it provides focus on one of the shortcomings of transaction based reimbursement. The economics behind it are flawed, hence the current push towards paying for quality, outcomes and efficiency, as is the case with value based purchasing.

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