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Value-Based Health Care

Overview

The U.S. health care system is transitioning from a fee-for-service and fee-for-product (volume-based) model to value-based paradigm to deliver more coordinated, high-quality, affordable health care.

Value-based arrangements – also referred to as results-based, outcomes-based, or performance-based payment arrangements – may condition payment or modify pricing for health care items or services based upon a clinical, economic, and / or patient-experience outcome, to increase shared accountability for both quality and the total cost of care.

To maximize the potential of value-based health care, we need to integrate all of the contributors to health care, including medtech manufacturers, who can play a pivotal role in delivering solutions to help physicians and hospitals meet the triple aim (achieve better outcomes, lower cost, and improve the patient experience).

Medtech Industry Transformation to Deliver Solutions

  • Medtech companies no longer just produce devices, they now produce solutions, a combination of technology and services to deliver a targeted outcome.  
  • We want to be partners in care to drive comprehensive solutions to detect, treat, and manage disease and share accountability for achieving better outcomes as well as managing costs.
  • Data Hub and Analytics Expertise – Value-based health care is largely driven by data.  While many medical devices are inherently data driven, they also can work as part of a larger ecosystem – or on their own – to enable data collection, aggregation and analysis.
  • Clinical Solutions to Improve Outcomes – Medtech companies are experts in how their technologies may affect clinical outcomes through the work of dedicated medical, clinical, and quality specialists, years of testing, scientific studies, and clinician feedback on device performance.  This specialized knowledge is key to designing clinical solutions that integrate medical technologies to improve outcomes.
  • Business Solutions to Reduce Costs – Medtech companies often have health care economics functions, reimbursement specialists, data analysts, and others who can contribute to designing value-based solutions that reduce the cost of care.

To realize the potential of value-based health care, we need to update the Anti-Kickback Statute (AKS) Safe Harbors to meaningfully integrate all contributors to health care in value-based arrangements.

  • The current interpretation of the Anti-Kickback Statute (AKS) and safe harbor regulations inappropriately deters manufacturers, providers, payors and others from engaging in beneficial value-based health care arrangements.
  • Although existing AKS safe harbors may protect some limited value-based offerings, changes are needed to make it easier for the participants to effectively engage in value-based arrangements and to allow for more comprehensive and efficient solutions.
  • Current anti-kickback laws make it hard for all involved – including hospitals, health care systems and medtech companies – to have a clear understanding of the roles they can play in value-based health care agreements, leading to fear of AKS enforcement for designing much needed forward-thinking solutions to address today’s health care challenges and patient needs.  
  • The current laws make it difficult or impossible for a medtech company to put its payment for use of its device truly “at risk” in a manner that is dependent on meeting clinical or other predetermined value outcomes.  By modernizing the laws to clearly allow for such arrangements, the system will better promote and reward those whose products deliver value, thereby reducing overall costs to the system and improving patient outcomes.  

AdvaMed developed proposals (2017 letter; 2018 letter) for new Value-Based Safe Harbors that would enable broader and more comprehensive engagement in value-based arrangements with appropriate safeguards.

  • Our proposal allows for performance incentive payments and results-based contracts between providers, between providers and manufacturers, and between manufacturers and payers.
  • Procompetitive - Modernizing the AKS safe harbors to enable value-based arrangements will allow companies of all sizes to compete based on outcomes. 
  • Broad support - Our proposal has broad support among our members, from the smallest to the largest innovators and companies.

AdvaMed recommends creating two new value-based safe harbors to the federal Anti-Kickback Statute:

  • Value-Based Pricing Arrangements Safe Harbor - that allows for price adjustments based on whether or not specified clinical or cost outcome targets were achieved (i.e., an outcome determined reduction or increase in a buyer’s net cost for reimbursable items or services).
  • Value-Based Warranties Safe Harbor – that allows manufacturers to make certain clinical and/or outcome assurances and provide an appropriate remedy where such outcomes are not achieved. The outcome warranty would allow a manufacturer to share risk by providing a payment, item, or service when a targeted clinical or economic outcome is not achieved.
  • The following are hypothetical examples of arrangements that are beneficial from a cost and quality perspective, but that require greater clarity and certainty than current fraud and abuse laws provide:
    • ​​​​​​Bundled Items and Services With Rebate Based on Clinical Outcome — A medtech company offering a hospital a bundle of products and services (e.g., technology, consulting, training, and ongoing patient monitoring) for a fixed price to achieve a specific clinical outcome (e.g., improvement in detection of early-stage cancer in Medicare beneficiaries or a reduction of costly adverse events such as preventable infections or readmissions based on established clinical evidence), and, if the clinical outcome is not achieved, the hospital receives a rebate calculated upon the purchase of the products and services, thereby reducing the hospital’s net cost for the purchase.
    • Payment for Corrective Services if Targeted Clinical Outcome Not Achieved — A medtech company warranting that its product will achieve a specific clinical outcome in a less invasive manner; and, if the clinical outcome is not achieved, offering to pay for a corrective surgery to accomplish the desired clinical outcome in the traditional manner.
    • Provision of Ancillary Items and Services at No Additional Cost — A medtech company offering to buyers of its products at no additional cost ancillary services (e.g., data analytics, follow-up lab testing, patient coaching, and mobile device applications to facilitate patient follow-up care) intended to measure and/or achieve the agreed-upon patient outcomes. 
    • Provision of Services Under Risk-Based Compensation Model — A medtech company offering to providers and/or patients services in addition to or separate from products (e.g., technical consulting services on surgical procedures, post-operative patient care management services) for a specific value-based purpose, such as improving clinical outcomes, reducing readmissions, or preventing adverse events, where compensation for such services is risk-based.