Industry goals for healthcare payment transformation

Over the past several decades, the US Healthcare Industry has become increasingly complicated and has continued to face issues throughout the past several decades. According to CMS National Health Expenditure Data, healthcare spending for 2023 totaled $4.9 trillion dollars, averaging $14,570 per person, and constituting 17.6% of the nation’s gross domestic product (GDP). This unsustainable growth in healthcare expenditures is largely attributed to the traditional FFS reimbursement model, under which the vast majority of the industry continues to operate.1  

In an FFS model, providers are financially incentivized to perform services in large volumes with limited financial accountability over the quality of care delivered. This model does not align health plan and provider incentives and deemphasizes patient-centered care, often resulting in increased medical costs due to unnecessary or duplicative services and suboptimal care outcomes.  In recent years, there have been increasing pressures for the industry to address these issues and implement value-based care (VBC) programs, which are aimed at optimizing cost efficiencies, while aligning provider and health plan incentives and improving the quality of care. 

The Healthcare Payment & Learning Action Network (LAN) 

LAN is a group of private and public healthcare leaders that was launched in 2015 by the Department of Health and Human Services (HHS) through CMS. Their purpose is to provide thought leadership, publications, resources and other insights related to best practices that can help commercial, Medicare (i.e., both traditional and Medicare Advantage programs), and Medicaid health plans and providers transition from FFS models towards alternative payment models (APMs) that drive two-sided risk. 

Two-sided risk models substantially transform how healthcare is paid for and delivered by shifting more of the financial accountability from health plans to providers, while still holding providers accountable for quality of care standards. It is very unlikely for health plans of healthcare providers to quickly shift from an FFS model to a two-sided risk model; rather, it is a journey to first take on one-sided risk models before transitioning to two-sided risk models. 

The lack of sustainability in the current U.S. healthcare system has prompted LAN to set aggressive industry goals across all commercial and government lines of business by 2030, to increase the percentage of healthcare payments tied to two-sided risk payment models, which will require health plans and providers to continue to work closely together. Both parties must align on program goals and incentives, and at the same time, continue to update and advance their payment models, operational processes and technical systems, to meet the demands of the ever-changing healthcare landscape.