The Elusive Value-based Payment

With the big, looming, amorphous payment reform known as value-based payment on its way (the one no one can describe or, therefore, anticipate, the one that will replace fee-for-service), a great deal of activity is being undertaken for the purpose of delineating and demonstrating the specialty’s value proposition in healthcare. Studies are being launched, matrices are being created, and much consideration is being given to the definition of quality in radiology.

In fact, in planning and producing this current issue of Radiology Business Journal, it is clear that the specialty has made and continues to make tremendous strides in parsing out what high-quality radiology looks like and in identifying methods and strategies to improve clinical and operational excellence: We explore some of those efforts in these pages. The ingenuity, discipline, and sheer brilliance of these endeavors are impressive.

For the time being, however, the rewards are largely intrinsic—radiologists, practices, and departments can take pride in delivering a service of operational, clinical, and experiential excellence that results in the best patient radiological care. They can demonstrate meeting or exceeding national benchmarks and clients’ expectations—which may be rewarded by loyalty. What they can’t do at the moment is command a price differential.

Many of the incentive payments for which radiology can qualify for from the one payor that appears to be willing to pay for performance—CMS—have more to do with managing overutilization than clinical excellence (though overutilization is hardly a hallmark of a quality radiology service). This disconnect between what radiology perceives as quality and what the marketplace perceives as quality demands some attention.

Capturing value

In this issue, we include a synopsis (page 12) of an intriguing article from the Harvard Business Review by Stefan Michel in which he explores the related activities of value creation and value capture, by which a company captures the value it creates rather than leaves money on the table. A professor of marketing and service management in Lausanne, Switzerland, Michel says that most companies spend time on value creation, but value capture is rarely considered.

One of five value-capture innovation categories identified by Michel is “changing the payor in the value constellation.” When there are multiple players (rather just a buyer and a seller) as there are in radiology—e.g. government, private payors, health care systems, patients, employers, referring physicians—there is a greater number of options and possibilities for funding value. This seems to be an advantage, as well as a positive note on which to proceed.

As radiology invests intellectual and financial capital in creating value, it is mission critical that effort is made to innovate the capture of that value. Not all customers will understand and appreciate each improvement or measure of value that you create within your radiology service. It goes without saying that if customers don’t understand the value, customers will not be willing to buy that improvement. This is why Michel says the first step in innovating value capture is to make people aware of the value.

A source of frustration

One long-standing issue of frustration for radiology has been the unwillingness of payors to pay more for a study acquired on “high” or new technology than “low” or old technology, a ready example being the chest radiograph acquired on the rusty, old x-ray machine in the urgent care center versus the fully loaded state-of-the-art digital x-ray technology with digital subtraction software at the hospital or accredited imaging center: same study, same reimbursement.

The value of new technology has, on the other hand, been readily understood by referring physicians and educated consumers, and it is something hospitals and practices have exploited to gain market share. A good example of that is the successful dissemination of digital mammography, the value of which referring physicians, patients, and significantly payors have recognized.

In the hoped-for event that CMS will do the right thing and make LDCT screening available to high-risk Medicare beneficiaries, it must require that the study is acquired on a technology that meets a specified threshold (best-case scenario, a 64-slice CT scanner) or risk failing to replicate the results achieved by the National Lung Screening Trial and minimize the radiation exposure to patents. CMS must bake that into the CPT code before the horse is out of the barn or referring physicians will refer screening patients out to the 4-slice CT on the corner—trust me, it almost happened to me.

While we await the arrival of Linus van Pelt’s Great Pumpkin, there is plenty of work to do to define, measure, and improve quality and value in radiology.  While you are at it, don’t forget to innovate value capture, as well.