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Value-based provider payment: towards a theoretically preferred design

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  • Cattel, Daniëlle
  • Eijkenaar, Frank
  • Schut, Frederik T.

Abstract

Worldwide, policymakers and purchasers are exploring innovative provider payment strategies promoting value in health care, known as value-based payments (VBP). What is meant by ‘value’, however, is often unclear and the relationship between value and the payment design is not explicated. This paper aims at: (1) identifying value dimensions that are ideally stimulated by VBP and (2) constructing a framework of a theoretically preferred VBP design. Based on a synthesis of both theoretical and empirical studies on payment incentives, we conclude that VBP should consist of two components: a relatively large base payment that implicitly stimulates value and a relatively small payment that explicitly rewards measurable aspects of value (pay-for-performance). Being the largest component, the base payment design is essential, but often neglected when it comes to VBP reform. We explain that this base payment ideally (1) is paid to a multidisciplinary provider group (2) for a cohesive set of care activities for a predefined population, (3) is fixed, (4) is adjusted for the population’s risk profile and (5) includes risk-mitigating measures. Finally, some important trade-offs in the practical operationalisation of VBP are discussed.

Suggested Citation

  • Cattel, Daniëlle & Eijkenaar, Frank & Schut, Frederik T., 2020. "Value-based provider payment: towards a theoretically preferred design," Health Economics, Policy and Law, Cambridge University Press, vol. 15(1), pages 94-112, January.
  • Handle: RePEc:cup:hecopl:v:15:y:2020:i:1:p:94-112_7
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    Cited by:

    1. Thomas Reindersma & Isabelle Fabbricotti & Kees Ahaus & Sandra Sülz, 2022. "Integrated Payment, Fragmented Realities? A Discourse Analysis of Integrated Payment in the Netherlands," IJERPH, MDPI, vol. 19(14), pages 1-14, July.
    2. Chandeni S. Gajadien & Peter J. G. Dohmen & Frank Eijkenaar & Frederik T. Schut & Erik M. Raaij & Richard Heijink, 2023. "Financial risk allocation and provider incentives in hospital–insurer contracts in The Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(1), pages 125-138, February.
    3. Maud H. Korte & Gertjan S. Verhoeven & Arianne M. J. Elissen & Silke F. Metzelthin & Dirk Ruwaard & Misja C. Mikkers, 2020. "Using machine learning to assess the predictive potential of standardized nursing data for home healthcare case-mix classification," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(8), pages 1121-1129, November.
    4. Milstein, Ricarda & Schreyögg, Jonas, 2024. "The end of an era? Activity-based funding based on diagnosis-related groups: A review of payment reforms in the inpatient sector in 10 high-income countries," Health Policy, Elsevier, vol. 141(C).

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