• Article
  • July 29, 2019

The State of Value-Based Care in Pediatrics

Children’s hospitals navigate new contracts and standards for patient outcomes.

By Kelly Church

Learn the lingo of value-based care

  • Alternative payment models: Value-based contracts where providers assume increased accountability for quality and total cost of care with a greater focus on management.
  • Upside risk: Shares cost savings between providers and payers; a way for providers to try risk contracting without the possibility of financial loss.
  • Downside risk: Providers share in the savings and are responsible for losses.

Learn more about value-based care

In April, the Centers for Medicare & Medicaid Services (CMS) introduced five voluntary value-based care (VBC) payment models, the latest effort to steer health care away from fee-for-service (FFS) models. The move puts an emphasis on quality over quantity to “empower patients and providers to drive better value and results.”

Medicare beneficiaries are the target for now, but Medicaid programs adopting similar payment models in the future would be in line with CMS’ current strategy for achieving the Triple Aim—improve patient experience and overall health of the population, and lower health care costs—through value-based programs. 

Ian Morrison, Ph.D., author and consultant, views FFS as an invitation to provide more services, even if they don’t affect patient outcomes. VBC may encourage providers to think twice about the appropriateness of utilization. “There’s an incentive to leave no stone unturned,” Morrison says.

“In a risk-based contract [under VBC] is this notion you’re thinking twice about the services you’re delivering.” As institutions continue the push toward VBC, children’s hospitals are left to navigate new contracts and anticipate new standards for patient outcomes with uncertainty.

Addressing risk

Under alternative payment models, the insurer or the hospital covers the payment gap. In a FFS model, there’s no incentive for a provider to reduce services. The more services a provider performs, the larger the payment. VBC introduces risk contracts, sharing the financial burden between the payer and the provider.

With two-sided risk, Morrison says providers must care about volume of services. “In value-based systems, there is economic penalty if you don’t perform in terms of quality of utilization,” he says.

Risk-based contracts require agreed-upon performance measures that hold providers accountable and determine who’s paying. “That’s the concern people have about capitation where you have a per member per month fee to cover all the health care needs of that patient,” says Morrison. “There is an incentive to skimp on care. That’s why you need good quality metrics.”

Industry-accepted pediatric-specific quality measures have yet to be formally developed. Many measurements used in adult care need to be adjusted for the needs of pediatric populations. Even when quality metrics are established, the challenge then becomes meeting them. “The care redesign that will yield significant improvements in value is hard clinical work,” Morrison says. “You have the incentive to do it, but it requires changing the way you do things.”

Drawbacks of VBC

VBC models aren’t perfect due to the industry balancing a mix of FFS and VBC. That poses a conflict for hospitals as they attempt to find equilibrium between contradictory payment models.

“If you’re in a VBC model where you’re rewarded for limited utilization, you end up with strategic schizophrenia where you’re trying to fill the hospital and also trying to empty it,” Morrison says. “This has caused problems for almost every organization.” Hospitals may need to adjust their strategy if VBC drives providers into narrow networks.

The idea is to provide higher quality care at a lower cost for routine care. The unintended side effect is if a children’s hospital doesn’t meet metrics for routine care, it may be required to survive on quaternary services. “The dream of a value-based system is it’s attentive to the needs of the sickest kids,” Morrison says. “The downside is payers try to drive care of the non-sickest kids to lower cost settings and undermine the finances of children’s hospitals.” 

Moving forward 

While results in VBC have been mixed—particularly within adult care—Morrison is an advocate of VBC. But, the cost, he says, of continuing to provide care without accountability metrics for quality, performance and spend could result in harm and inappropriate care. “There’s arguments on both sides that we’re wasting our time, but compared to what?” Morrison says. “Compared to doing nothing, that is a bad idea.” 

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