“Value-based” pricing and reimbursement is at the core of healthcare reforms in many parts of the world, especially in the US. What does value mean? The value here refers to “patient outcomes” or “benefits realized by a patient” for every dollar spent. There is immense pressure on pharmaceutical companies and other healthcare providers to demonstrate the value of the drugs, medical devices and other healthcare services provided to the patient. Policymakers and payers (insurance companies) now expect pharmaceutical companies and healthcare service providers to prove how patient outcomes have improved with certain treatment options, and how these outcomes are better compared to other alternatives. There has been an increase in outcomes-based or value-based contracts in recent years. These contracts are much similar to “Payment for Performance” models that exist in many other industries. Although it sounds simple, there are several challenges involved in value-based pricing and reimbursement. Also, there has been a high level of skepticism if the value-based pricing model is practical. This post discusses these issues in detail.
What is the Difference Between Pricing and Reimbursement?
Before going into details of value-based pricing and reimbursement, let us understand the key difference between two confusing terms
A Brief Background on Value-based Pricing and Reimbursement
Earlier, the volume of services provided was considered as a major rewarding factor by insurance companies. However, now the trend has changed, and the providers are being paid for offering innovative solutions to improve the health of patients, at low costs. One of the key examples of this is the value-based pricing program (VBP) introduced by the Centers for Medicare and Medicaid Services (CMS), which offer lucrative incentives to health care service providers. This program offers payments based on the quality of services offered. During the reimbursement, the payers take into account various factors such as the best practices adopted by a healthcare provider and patient outcomes.
The following are some of the advantages of the value-based care system.
Thus, value-based pricing and reimbursement or value-based care system offer value to everyone involved right from the pharmaceutical companies, insurance players, patients, and healthcare organizations. However, the transition to value-based care model comes with its own challenges.
Challenges in Value Based Pricing Implementation
While value-based pricing approach is an attractive proposition, there are several implementation challenges to overcome. The key challenges include:
Both these challenges and the concept of value-based pricing emphasizes on the importance of healthcare economic research and evidence generation. This becomes only possible when you partner with a reliable partner like Black Rock Health. The company been helping healthcare players in achieving a seamless transition from traditional quantity-based models to value-based care models. Black Rock Health utilizes its deep understanding of the global healthcare landscape and various health economic modeling tools to provide value to its customers.
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