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While CMS has a target of getting 100% of Medicare beneficiaries into value-based payment (VBP) programs–such as accountable care organizations–by the end of the decade, implementing VBP in practice will be challenging. An editorial by Navathe et al. (2024) in Health Affairs provides some key considerations.

• Providers forego certain revenue for uncertain ‘bonus’ payments. “One flaw is built into many VBP incentive designs: They require participants to forgo revenue for the opportunity to earn just a fraction of it back as shared savings. The math doesn’t work. These VBP contracts ask participating organizations to relinquish $1 for the uncertain opportunity to receive 50 cents in the future. For instance, hospital-led ACOs participating in the MSSP forgo revenue from hospitalizations in the hope of realizing a fraction of that revenue in the shared savings.” Additionally, the amount of ‘savings’ typically grows over time so provider face a continuously rising bar.
• Ghost savings. CMS evaluates VBP success based largely on risk-adjusted cost savings. The goal of risk adjustment is to make sure providers are not penalized for treating a sicker patient population. However, there are 2 ways improve your risk-adjusted cost savings: …

Growing evidence demonstrates a counterintuitive phenomenon in healthcare: the cash price is often cheaper than insurance prices for the same service or product. Cash prices are unilaterally determined by a provider, while insurance prices are bilaterally negotiated between a provider and an insurance company. Don’t insurance companies presumably possess more bargaining power than individual patients?

Our study found that among common shoppable services—such as lab tests, imaging, and joint replacements—half of U.S. hospitals set cash prices lower than their median insurance negotiated prices. About 20% of hospitals even set cash prices equal to or lower than their …