Left Out of Value-Based Payment


Exciting things are happening in health care. Beyond advances in technology and medical science—which are expected over time but still amazing to see—there are pockets of innovation that may lead to fundamental changes in how care is delivered. Collaboration and coordination among providers within and across settings means care that was once fragmented is becoming more organized.

And this collaboration is extending beyond the traditional medical sector: clinicians, focused on health and prevention, are increasingly screening for and addressing non-medical needs related to the social determinants of health—such as housing security, food security, and financial security.


Many of the delivery system changes are driven by the expectation that a transition to value-based payment is on the horizon. The premise for value-based payment is simple: payment should reward better health outcomes rather than merely reimburse for health care visits and procedures. It makes sense that payment reform and delivery system reform go hand in hand, since changes designed to keep people healthy (and reduce preventable hospitalizations) can only be sustained by a payment model that prioritizes value over volume. And you can only implement value-based payment if the delivery system is prepared to accept it—you can’t make bundled payments when the delivery system is completely disorganized and fragmented.


As we move along the path toward delivery system and payment reform, there is another important question that deserves our attention: what worthwhile activities may be included in value-based payment and what’s left out?

Take a value-based payment system such as global capitation with quality incentives. Under this model, investing in interventions like home remediation for a patient with frequent asthma exacerbations makes financial sense, because the cost of doing so is offset by the cost-savings of reduced emergency room visits and hospitalizations. More broadly, value-based payment has the potential to support many types of activities outside of traditional medical care that are related to social determinants of health and that can help those who are currently, or will likely become, high-utilizers of care without intervention. This is because such nonmedical interventions provide a short-term return on investment to the health care sector.

That’s great, and it makes sense to pay attention to the sickest among us. However, it’s not only the sickest who have social needs that can have a long-term impact on health. Based on United Hospital Fund’s program work, we estimate that approximately one-third of Medicaid beneficiaries and other low-income patients assessed by health care providers will screen positive for at least one social need, such as food insecurity, unstable housing, or low education. And addressing these needs can yield not only important immediate and long-term benefits for patients—it can spur long-term savings for health care and other sectors, such as criminal justice and education, as well as generate increased tax revenue.

Yet, in most of these cases, the health care system will not see short-term savings. As a result, health care value-based payments, which generally have a short time horizon (12-18 months), will almost certainly not be able to sustain most of the activities related to screening for and addressing social needs—despite the longer-term benefits to society. This is particularly true for children, who are generally lower-cost health care patients, but for whom interventions related to social determinants can yield lifelong health and economic benefits.


There is genuine and well-deserved excitement about all the new partnerships being formed between the clinical delivery system and the social service sector to address patient needs related to social determinants of health. But we must acknowledge that, with the exception of the high-utilizers of care, value-based payment alone will not sustain these partnership activities—we must find other ways to support them.

Reprinted from Blueprint, Summer 2019.