Value-Based Healthcare a Future Reality in Otolaryngology

Value-based care is poised to transform the practice of otolaryngology.

Will Harrill, MD
Will Harrill, MD

Otolaryngology is one of several specialties to be spared the initial angst of moving from fee-for-service reimbursement to valued-based payment models. That exception is being challenged as value-based alternative payment models gain acceptance within health systems and primary care practices that refer patients to our specialty.

“A paradigm shift in reimbursement is being built around us,” said Will Harrill, MD, partner in Carolina Ear Nose & Throat Sinus and Allergy Center PA in Hickory, North Carolina. “It is challenging the way our services and patient care are going to be judged by those who refer us patients within the next three years.”

Dr. Harrill will explore ways value-based care is poised to transform the practice of otolaryngology during an on-demand session, “Value-Based Healthcare: What Should Otolaryngologists Know About This Evolving Paradigm?” He will share the session with Randal S. Weber, MD, chief patient experience officer and professor in the Department of Head and Neck Surgery at The University of Texas MD Anderson Cancer Center in Houston, Texas. Their Panel Presentation is available on demand to registered AAO-HNSF 2021 Annual Meeting & OTO Experience attendees.

Value-based healthcare is not directly affecting otolaryngologists today, Dr. Harrill continued. Instead, new approaches are being integrated around otolaryngology. Within familiar fee-for-service systems, expectations, and metrics are being replaced by a variety of value-based alternative payment shared savings models. 

An alternative payment model is a modified capitated model with bi-directional risk-sharing, Dr. Harrill said. Reward and risk are shared by providers and payers. 

The payer allocates a set budget to reimburse care for a specified population of patients based on predetermined risk metrics.

If providers spend less than the risk-based budget, they split the savings with the payer—shared savings.

If providers spend more than the allocated amount, future payments are reduced—shared risk.

Value-based reimbursement has been embraced by the Centers for Medicare & Medicaid Services (CMS), starting with Medicare, and is spreading to commercial payers.  CMS’ stated goal is to move 50% of all Medicare reimbursement to alternative payment models by 2023 and eliminate fee-for-service by 2025.

Some specialties, including otolaryngology, will largely retain a fee-for-service structure within this new alternative payment system.  Not being directly engaged within this change model poses payment and prior authorization risk as the rules and definitions change for the perceived value of care delivered by otolaryngologists. The specialty must collectively address these challenges, he said.

“Shared savings means primary care physicians and health systems are receiving payment for efficient, high-value, lower-cost care,” Dr. Harrill said. “Those are your referring physicians and health systems. Referrals in the future are based on who is, and is not, costing-referring physicians and institutions shared savings. If your episode-of-care costs are an outlier relative to the patient’s disease severity, you won’t be seeing referrals from physicians participating in alternative payment models. You would be adversely affecting shared savings revenue of both payer and referring entity.”

That doesn’t mean otolaryngologists must slash costs across the board, he said. Instead, otolaryngologists must deliver appropriate care in the appropriate cost setting relative to the disease severity risk. For some patients, that means office-based procedures. For others, ambulatory surgical centers or a full-service hospital as indicated clinically. Shared savings indirectly moves otolaryngologists into a judgment-based model of how and where to deliver care as the value-based paradigm changes how primary care and specialists are reimbursed.

“We have always focused on quality, outcomes, and availability of care, and we’ve got to now factor in cost, which does not mean lower quality; it just means cost-appropriate care for the disease severity risk,” Dr. Harrill said. “It may not be fair, or easy, for some.”

Otolaryngologists and health systems in non-Certificate of Need (CON) states can more easily invest in freestanding ambulatory surgery centers, diagnostic infrastructure, and other lower-cost, higher-efficiency facilities. In CON states, high-quality lower-cost options will be more challenging.

“Some patients will be challenging to treat cost-effectively in certain site-of-service settings given the coming cost and quality metrics,” Dr. Harrill said. “This new paradigm is changing the way we are expected to practice medicine because it is redefining the cost and value expectations of patients, payers, and referring physicians.”