The Impact of Value-Based Care on Medical Billing: A Shift from Fee-for-Service
The land of US health care has undergone a great shift over the past couple of years, with the most impactful shift being the transition from the fee-for-service (FSS) model to value-based care (VBC). These shifts fundamentally affect medical billing, reimbursement rates, and revenue cycles. For healthcare providers and for medical billing companies in general, an understanding of the subtleties of the change is important both to staying financially sustainable and providing quality patient care. Here we discuss the evolution of the two billing paradigms, explore ways the shift to value-based care impacts billing practice, and look toward the more general implications of these changes for reimbursement and revenue cycles.
The Fee-for-Service Model: An Overview
Traditionally, in the United States, the fee-for-service (FSS) method has been the most commonly used approach for healthcare billing. In the fee-for-service model, healthcare providers and medical billing companies are usually paid on a per-service basis for every procedure or service they perform. Every office visit, test, or treatment translates into a billable event, which means providers receive compensation in proportion to the volume of services performed. On the face of it, this can be considered pretty straightforward to use and also supports providers in working towards providing medical care. It was later discovered that significant shortcomings in this methodology eventually emerged.
The criticism against the fee-for-service model is that it encourages quality over quantity. There may be an incentive for service providers to solicit unnecessary tests, treatments, or follow-ups, in which the service number billed shows more importance than the patient outcome. This contributes to patients as well as insurance companies having higher bills but may also lead to a waste of healthcare resources as well as substandard care at times. This can result in more burdens for a medical billing company in the submission of claims and medical billing collection as many services are collected.
The Emergence of Value-Based Care
In response to this, value-based care (VBC) was taken into place to shift the focus from volume to value. The aim of VBC has been to ensure the betterment of patient outcomes while controlling healthcare costs through the accountability of providers based on the quality of care delivered. Rather than getting paid for the amount of services that providers deliver, they are remunerated according to attaining set quality measures—for example, improving healthcare results for patients, reducing hospital readmissions, and lowering the total cost of care. This means reversing the traditional practice of payment posting and revenue cycle management to make them align with the VBC goals.
Value-based care models, therefore, tend to be more focused on preventive care and coordination between providers and patient-centered strategies. Value-based care is poised to make the health care system much more sustainable by recognizing that quality is much more important than just quantity. This is particularly essential at this time since the expenses on health care keep increasing in the United States, thereby putting considerable strain on public as well as private resources. Insurance Eligibility verification would be all the more crucial in a VBC system, thereby ensuring that patients are properly insured for the coordinated and preventative care that they will be receiving.
The Shift from Fee-for-Service to Value-Based Care
Transitioning from fee-for-service to value-based care is one enormous change for the healthcare industry. For the providers and medical billing and coding specialists, this transition has actually opened up many challenges as far as billing procedures, reimbursement rates, and revenue cycle management are concerned.
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Billing Procedure in a Value-Based Care System
The new value-based care system is, therefore, very different from the way previous medical billing looked in terms of documentation and billing. In the fee-for-service model, billing was almost always easy; every service has an associated charge. However, under value-based care, measurements along with the documentation of the outcomes of patients become very important, like, for example, the quality of care.
Providers will now have to measure and report on certain quality care metrics delivered. This will necessarily entail a more fundamental oversight of patient data management and documentation. For example, under VBC structures like Accountable Care Organizations (ACOs) or Patient-Centered Medical Homes (PCMHs), providers will be responsible for care coordination across sites of care. This means, by extension, that billing by medical coding professionals has to be accurate and also reflects the work of a multitiered care team.
Value-based care also includes bundles, where providers are paid a fixed sum for patient care during a predetermined time, independent of the number of services rendered. In this setting, fee-for-service billing does not apply, for the care is paid for with one singular fee rather than as a fee for every separate service. Bundled payments require more strategic approaches to billing, where the provider has to manage his resources well to ensure that they can offer quality care within the bundling of the payment. This thus further influences the process of submission of claims and medical billing collection.
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Reimbursement Rates and Risk-Sharing Models
That is, one central feature of value-based care is the risk-sharing model. Under traditional fee-for-service, providers bear virtually no financial risk: they are paid for every service rendered, no matter what the outcome. Under value-based care, payers often demand that providers share some of the financial risk for delivering that care. If providers can deliver care less expensively and with better results, they will be paid more generously or share bonuses. However, if they fail to attain certain quality benchmarks or exceed cost targets, they suffer financial penalties, which affects accounts receivable management.
This change in risk dynamics is directly associated with the current tension on reimbursement rates. In MSSP under Medicare, for example, participating providers in an ACO may benefit from sharing in the savings if they reduce the total cost of care for Medicare patients. Conversely, providers are liable to share in the losses when the costs incurred by the ACO exceed a given threshold.
This brings new challenges for the medical billing companies to handle related to reimbursement management. Billing departments need to monitor quality metrics, cost benchmarks, and outcome measures to be certain that their organization gets maximum reimbursements under value-based care models. More than this, for these new payment models, the billing staff must be more prepared to work with increasingly more complicated billing codes and documentation requirements. Payment posting processes have to be adapted to reflect shared savings or losses.
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Revenue Cycle Management (RCM) in Value-Based Care
Change from fee-for-service to value-based care also has a deep impact on the practice of revenue cycle management (RCM). Under fee-for-service, the focus of RCM had been on claims being submitted and reimbursed as quickly as possible and as accurately as possible. Under value-based care, the process of RCM may be even more lengthy and time-consuming to get paid, as payers will withhold reimbursement collections until quality and outcome data are reviewed and validated. This slows down payment posting and medical billing collection.
To be successful in the value-based care environment, healthcare organizations and medical billing companies should become far more proactive in RCM. It means investing in sophisticated data analytics and revenue cycle management systems that can track quality metrics, recognize patterns in outcomes, and align billing procedures in accordance with principles for value-based care. Providers have to work on optimizing their workflows to provide quality care and remain financially stable as well.
Cash flow management is one of the significant obstacles of RCM in a value-based care model. Payment cycles might go up to months in the conduct of quality metrics, and hence strong financial management practices are required so that healthcare organizations can cover their operating costs while waiting for reimbursement. This may include renegotiation with payers for new terms, improved collections from patients, or other alternative financing strategies to maintain cash flow in the event that reimbursement cycles become longer.
The Impact on Healthcare Providers
Value-based care might be very promising as it would reward those providers who could deliver quality care at reduced costs with higher reimbursements and bonuses. Challenges, however, the added complexity of various value-based care models requires significant investments in technology and staff training with proper infrastructure.
Many providers are now realizing that they need to install new EHR systems and billing software in order to be able to track quality metrics for value-based care and to manage bundled payments. Providers will also have to invest their time and resources into staff training to empower the billing and administrative teams to be aware of the value-based care requirements. The roles have to be enriched in compliance with VBC standards.
Providers must also rethink how to care for the patient in this environment of value-based care. So far, the model has been fee-for-service and, as you may have seen, tends to center on the treatment of individual symptoms or conditions without too much consideration for the totality of a patient’s needs. In value-based care, providers need to be more holistic and patient-centered with an emphasis on prevention, care coordination, and long-term health outcomes.
This change means a lot to many providers in terms of better patient relationships, investment in care coordination services, and better communication by healthcare teams. Though changes promise better outcomes for the patients in the long run, they require an awful amount of time and energy before coming into effect.
Challenges in Adapting to Value-Based Care
Although some benefits of VBC are very obvious, the transition from fee-for-service can be challenging for both providers as well as medical billing companies. Some of these challenges include:
Data Management: VBC requires providers to collect, analyze, and report on great amounts of patient data, showing that they will meet quality benchmarks. That will require robust data management systems and expertise in interpreting and acting on the data.
Complex Billing Systems: Value-based care introduces many additional complexities in billing, with bundled payments, shared savings, and quality incentives being a few of them. Professionals in the field of medical coding and billing should be prepared for all these new systems that would often bring demanding more detailed coding and documentation.
Financial Risk: A provider or provider group that agrees to enter into a value-based care arrangement may incur more financial risk because the provider’s reimbursement may depend on achieving quality and cost savings, which may present an extreme deviation from the predictable stream of revenues that takes place in fee-for-service models.
Extended Payment Periods: Since some value-based care models pay claims only after quality measurement, the payment cycle may be more extended in healthcare organizations. This will pose a liquidity issue as well as require new ways to manage the cash flow.
Conclusion
One of the biggest changes in healthcare over the past few decades is the shift from fee-for-service to value-based care. Fee-for-service “incentivized volume-driven care,” whereas value-based care incentivizes high-quality, patient-centered outcomes and cost efficiency for providers. This change throws new challenges toward billing procedures, reimbursement rates, and revenue cycle management for both medical billing companies and providers alike.
To successfully operate a value-based care environment, healthcare organizations and medical billing companies will have to make appropriate investments in necessary tools, technologies, and processes to deliver against quality benchmarks and manage financial risk. Providers will also have to begin taking a more patient-centric approach to their delivery of care, which means more preventive care and paying attention to long-term health outcomes. That way, they’ll be able to continue to serve high-quality health outcomes while enjoying financial success in this new landscape of the US healthcare system.
In this context, it is a must for medical billing companies, providers, and healthcare organizations to be on the curve and keep updating in new demands that will represent value-based care. Value-based care has the potential of bringing a more sustainable and patient-centered future in healthcare and medical billing collection, which minimizes claim denials and streamlines workflow.
