Insights June 2023

Use Extreme Caution When Looking to the US For Guidance on “Value-Based” Healthcare

Ana Malinow


Value-based healthcare is all the rage these days. Who doesn’t want value in the form of lower costs, higher quality and improved patient outcomes? Yet, the vast majority of value-based payment experiments in the US have failed to improve value.

In a recent Longwood’s editorial in Healthcare Policy, “Provinces and Territories Are Overdue for an Update in Healthcare Funding Policies,” Editor-in-Chief Jason Sutherland welcomed news of a much-needed injection of federal funds for healthcare, noting that these funds should follow policies to “improve the health and wellbeing of [Canadian] residents.” While that is indeed good news, Canada must follow policies with proven track records of both improved health outcomes and cost savings, especially if importing funding reforms from the US, such as those mentioned

The US-based “global hotspot of healthcare funding policy and innovation” refers to the Center for Medicare and Medicaid Innovation (CMMI), also known as The CMS Innovation Center. It was created under the Affordable Care Act in 2010, with a mandate to develop and test alternative funding models that reduce Medicare spending while not worsening quality of care. The CMS Innovation Center was given a US$10 billion budget every 10 years, broad authority and no Congressional oversight. 

CMMI is hardly a “global hotspot.” A decade after its creation, “CMMI has not yet become the engine that it could be for transforming the nation’s healthcare finance and delivery,” lamented Donald M. Berwick, former administrator of the Centers for Medicare and Medicaid Services (CMS), and Rick Gilfillan, first director of CMMI.

In fact, CMMI has a dismal track record of only the 54 test models that the CMS Innovation Center tested in the first 10 years. As a more recent CMMI director cautioned, “the vast majority of the Center’s models have not saved money, with several on pace to lose billions of dollars … [and] the majority of models do not show significant improvement in quality.” 

Why have all these healthcare funding models failed to cut costs and improve quality of care in the US? 

Because, so far, they are all based on some form of capitation-style funding and risk sharing. Provider reimbursement models in the US are moving from fee-for-service to alternative payment models, such as capitation, that ostensibly incentivize value for money by shifting financial risk for both costs and quality onto providers. Capitation pays physicians a fixed amount of money per patient each year in advance to care for all patients in their practice. Risk sharing forces physicians to take the financial risk of delivering care to that set population of patients for that fixed amount. To come out financially whole or, ideally, ahead in the end, physicians in the US can only do this by skimping on care. Yet, despite the poor track record at finding any model that reduces cost without sacrificing quality, the CMMI is forging headlong into another decade of loser models. 

Sutherland mentions US initiatives, like the Medicare Shared Savings Program, which encourages groups of healthcare providers to create Accountable Care Organizations (ACOs) with the intent of providing coordinated high-quality care. Yet, again the evidence does not suggest investing in this program because “the programs [have] lost money or saved no more than a few tenths of a percent.” ACO REACH, a variant of this funding model is handing traditional Medicare to Wall Street investors by inserting middleman corporations between patients and providers that will “potentially manage the care of up to 30 million seniors [whose] health will be weighed against profit.” Other programs, such as the physician-focused Merit-Based Incentive Payment System (MIPS) uses a financial “stick” to improve quality and is universally maligned by physicians. The Readmissions Reduction Program, which penalizes hospitals if patients are readmitted, faces many challenges, including the program’s inability to accurately evaluate hospital performance. And the Bundled Payments model, promoted as one of CMMI’s “flagship value-based payment reforms,” has yielded favorable results in only one model, but not in others. 

When looking to the US for advice on health financing policy, Canada should thoroughly investigate the outcome evidence on the competing values of cost and quality. While Sutherland correctly cautions that “funding policies from the US [should] require ‘handle with care’ labels … ,” I suggest the warning should say, "Run for your life!" (Literally.)

About the Author(s)

Ana Malinow, MD, is a retired professor of Pediatrics from the University of California, San Francisco, and writes about how a national single payer in the US could improve patient care and bring us closer to social justice.


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