Health Plans

The three value-based reimbursement design flaws that frustrate providers the most

By Peter Manoogian, Zander Magee, and Josh Lacey

June 30, 2019 | Article | 4-minute read

The three value-based reimbursement design flaws that frustrate providers the most

In our last post detailing providers’ experiences with value-based reimbursement (VBR) programs, we described the first improvement opportunity for health plans: developing a deeper understanding of provider organizations.

The second opportunity we learned about from our interviews with primary care providers (PCPs) stems from their frustrations with VBR program designs. These design issues contribute to the suboptimal perceptions and provider disengagement that work counter to the behavior change a VBR program seeks to drive.

PCPs told us about three sticking points in program design:

  1. Selection of the right performance measures: Providers voiced uncertainty about whether some metrics are the right ones if the aim is to drive patient outcomes. For example, one PCP told us about a health plan that is heavily focused on a measure tied to improving bladder control and felt that this is not a high priority outcome. As well-intentioned as these measures may be, one PCP said it best: “Sometimes I think we are being measured for measurement’s sake.” Focusing on a few meaningful measures is much more likely to drive provider engagement than a laundry list with unclear links to improving outcomes.
  2. Performance measures that providers believe they can control: Even if primary care providers agreed that a measure was strongly linked to quality patient care, they still expressed concern with their ability to control the results with that measure. For example, one PCP said, “I’m judged on depression going into remission, but a psychiatrist is the one treating it—not me.” PCPs also said that noncompliant patients should be excluded from the total patients who factor into their metric calculations. One PCP explained, “One health plan requires 90% flu vaccine in a measure. Patients who refuse the vaccine still count against me in my denominator even if I do all of the right things, which makes it very tough to achieve the goal.” While VBR program design may be calibrated to account for these issues, PCPs do not always see it that way. This perception may diminish the program’s effectiveness.
  3. Goals that are achievable: Even when PCPs support the measures included, they said that the goals tied to those measures were often out of reach. PCPs dislike the idea of being held to a percentile driven metric, such as top 10% of providers by measure, for two reasons: one, the objective is a moving target (they don’t find out how they stack up until the data is tallied at the end of the year), and two, sometimes the bar is set far too high, such as the 95th Goals that are based on an improvement from a prior year also create issues for top performing providers. As a provider told us, “I’ve been in one [VBR] program for five years, and I expect to make less bonus in the future because I can’t continuously improve my performance on some measures every single year.” Whether providers are sprinting toward a finish line that they can’t always see or toward one that is perpetually elongating, the message is clear: health plans have an opportunity to better calibrate goals to be more achievable and motivational.

A better path on the horizon?

As health plans continue to transition their payment models away from fee-for-service, they must continue to infuse longer-term and collaborative thinking in their value-based reimbursement designs.


We see three collaboration principles emerging:

  1. Seek and use input from the ‘front-line’ to increase buy-in As a medical director for a large integrated plan/provider said, “The most important thing is that program design can’t be top-down. Plans must engage those close to the front line who can ensure the program is realistic and be advocates for its success.” Health plans should consider empowering a “choose your own” option for part of the program to bring providers into the design process and address the top two frustrations raised above. Finally, plans should engage a panel of providers to revisit program design to evaluate success and adapt it for the future.
  2. Take a multi-year view: Many providers have outgrown programs that are based on performance in stand-alone years. As some providers have little room to improve after years of high performance, health plans need to rethink evaluation methods, allowing for longer time periods or focusing on maintaining high performance. This could also address concerns with the two to three-month data lags that hinder providers’ ability to adjust within a one-year program period.
  3. Co-create beyond the contract terms: While focus is placed on the pay-for-performance designs and financials of a contract, successful partnerships pay equal attention to co-designing the right support mechanisms to enable success. We will examine this topic in greater depth in an upcoming blog.

Co-creating with providers drives buy-in because it reframes the narrative from a plan’s goals to mutual goals that benefit their patients. There is evidence that many health plans are taking these steps to forge stronger partnerships with provider organizations. However, while we see this activity mostly with larger hospital systems and provider groups, health plans have an opportunity to apply the same principles to smaller practices, too.

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