How to Drive Optimal Physician Performance in Value-Based Care Models


Written by: Arash Araghi, DO

Chief Medical Officer and Chief Compliance Officer for HOPCo

“Our nation cannot control runaway medical spending without fundamentally changing how physicians are paid.” –  Report of The National Commission on Physician Payment Reform, March 2013

US healthcare has been in a state of disruption for the past 15 to 20 years.  This is primarily driven by the escalating costs of healthcare without a commensurate improvement in the quality of care that is being delivered.  US healthcare costs in 2019 were 17% of the GDP, compared to 8.8% for the average of the OECD (Organization for Economic Co-operation and Development) countries.  Furthermore, based on data from the OECD, the quality of care being rendered is below the mean, as measured by indices such as life expectancy at birth or at age 65, infant mortality rate, suicide rates, and obesity rates.  A study by the World Health Organization ranked the US 37th out of 191 member nations on global health care based on steady financing mechanism, a properly trained and adequately compensated workforce, well-maintained facilities, and access to reliable information to base decisions on.  This is, however, not new information.  US healthcare stakeholders have been called on for over 20 years to effect change. The Institute of Medicine’s landmark 1999 publication “To Err is Human” highlighted deficiencies leading to preventable medical errors.

In 2012 the Society of General Internal Medicine recognized the unsustainable level of spending in healthcare along with its poor return on investment and convened the National Commission on Physician Payment Reform to recommend new ways to pay physicians that would lead to better outcomes at a lower cost.  The number one recommendation of the report published in 2013 was “over time, payers should largely eliminate stand-alone fee-for-service payment to medical practices because of its inherent inefficiencies and problematic financial incentives.”  The twelve recommendations adopted by the commission have essentially served as a “blueprint” for healthcare reform, driven largely by CMS (Centers for Medicare & Medicaid Services), and followed closely by commercial payors.

“Value-based care is here to stay”

It has now been 10 years since the Center for Medicare and Medicaid Innovation (CMMI) was created to test various innovative VBC models, and 8 years since CMS launched the Bundled Payments for Care Improvement (BPCI) initiative.  Over the past decade, the Center has launched 54 models addressing various critical areas of healthcare, involving 1 million healthcare providers and 26 million patients.  Currently, 40% of Medicare FFS payments, 30% of commercial payments, and 25% of Medicaid payments are made through some form of value-based arrangement.  Five of these models have shown significant savings, with the rest resulting in varying losses.  One major reason for the absence of net savings has been attributed to the up-front payments made to providers to incentivize participation in these voluntary models.

“Physician compensation continues to emphasize volume over value”

The 2020 Deloitte Center for Health Solutions’ biennial survey of US physicians revealed that traditional sources such as salary and FFS are the predominant way physicians are still paid.  77% of physicians reported that 5% or less of their personal compensation was derived from bonuses or other incentive payments tied to achieving specified performance goals, and this was not significantly different from the 2018 or the 2016 survey.

In order to optimize physician performance in VBC models, there must be improved adoption of the model by the participants.  The VBC model goals must be consistent with the triple aim of reducing per capita cost, improving patient care quality and satisfaction, and improving the health of the population.  Additionally, the model should have achievable goals and engage stakeholders in an equitable fashion.

To truly decrease the total cost of care for a given population while maintaining or improving outcomes, risk models need to shift from episodic care to true population health care. 

Popular musculoskeletal bundle payment initiatives (such as BPCI, CCJR, and BPCI-A) can only impact quality of care within the episode and only contribute to optimizing the cost of care during that episode.  Although that is very important and valuable, by only managing the surgical episode, one forgoes a tremendous opportunity to manage the chronic conditions for that population and the opportunity to manage to wellness and not just illness.

Shifting the VBC program from episodic care and upstream to population health and longitudinal care means thinking in terms of diagnosis-based clinical pathways.  For instance, a patient with acute low back pain should receive the same type of evaluation, work-up and treatment regardless of whether the rendering provider is a PCP, ED physician, or a spine surgeon.

Physicians also need to have timely access to high-quality data in terms of cost and outcomes.  The overall success of any population health VBC model is contingent upon a solid understanding of what the true cost of care and outcomes have been for the past several years, what the current benchmarks are and what the trend going forward looks like, as well as where the opportunities lie.  Based upon the identified opportunities, specific strategies need to be developed to achieve those goals.  These strategies should then be tied to specific process and/or outcome measures that, when achieved, will directly lead to earned quality incentives or quality bonus payments that encourage alignment to goals.  To maintain long-term physician engagement, it is counterproductive to regularly reset benchmark targets based on targets achieved in prior years.  That structure instead ironically reduces opportunities and incentives for the highest performing physicians who have driven down costs through delivering value and undercuts support for an equitable distribution of savings.

Improving care outcomes and reducing the cost of care should be led by the appropriate physician specialists who bring subject matter expertise to bear.  Although PCP “gatekeeper” models have shown some benefit in decreasing overall utilization in certain populations, there has not been an improvement in quality or outcomes for specialty care, and a significant portion of the net savings are often offset by increased capitated payments to the PCP’s.

How Far We’ve Come

Although the road ahead continues to present challenges to all healthcare stakeholders, it is important to recognize some of our achievements in the past decade.  We have come a long way from experimenting with various models, to models that have been proven, such as HOPCo’s population health platform.

HOPCo is the only comprehensive, vertically integrated organization designed to manage the entire continuum of musculoskeletal healthcare.  It has demonstrated solutions that have been proven to improve visibility in data, improve clinical quality outcomes, empower physician specialists to more than just participate in, but to truly champion population health measures while reliably decreasing the total cost of care.  We can now see the successful shift of providers from volume- to value-based compensation in a meaningful way that provides sustainable benefits for patients. 



CMS Innovation Center at 10 Years – Progress and Lessons Learned

N Engl J Med. 2021 Feb 25;384(8):759-764.doi: 10.1056/NEJMsb2031138. Epub 2021 Jan 13.


Despite Big Spending, U.S. Ranks 37th in Study of Global Health Care

Los Angeles Times June 21, 2000


Equipping physicians for value-based care

Deloitte Center for Health Solutions


How providers can best confront the reality of value-based care

April 2019 | Kyle Gibler, MD; Ed Levine, MD; Joseph Mitchell, MD; Suzanne Rivera; and Jordan VanLare, MD

McKinsey & Company


Measuring Overall Health System Performance for 191 Countries

World Health Organization


OECD Health Statistics 2020


Phasing out fee-for-service payment.

Schroeder SA, Frist W; National Commission on Physician Payment Reform.

N Engl J Med. 2013 May 23;368(21):2029-32. doi: 10.1056/NEJMsb1302322. Epub 2013 Mar 27.PMID: 23534546


Report of the National Commission on Physician Payment Reform