Beyond Theory: Harnessing Incentives to Drive Value-Based Care Initiatives

Healthcare Unbound episode recap:

• On this episode of the Healthcare Unbound podcast, behavioral economics expert Dr. Zeke Emanuel discusses how to create physician incentives to control costs and improve outcomes in healthcare.
• Physician incentives should be real, substantial, and timely to get the desired positive response from doctors and drive value-based care payment models.
• Incentives should be as targeted to the doctor’s specific practice as possible for maximum effectiveness.

Value-based payment models may offer a promising solution to rising healthcare costs and declining population health. However, shifting the incentive structure around physician reimbursement is key to unlocking the full potential of value-based care, says Zeke Emanuel, MD, PhD, co-director of the Healthcare Transformation Institute at the University of Pennsylvania and the Diane v.S. Levy and Robert M. Levy University Professor at the University of Pennsylvania Perelman School of Medicine.

Dr. Emanuel — an oncologist by training who is well-known for his work as an architect of the Affordable Care Act (ACA) — has deep insights about alternative payment models, physician reimbursement, and how to fine-tune incentives using the lens of behavioral economics to effect change.

Dr. Emanuel joined Jean Drouin, MD, on an episode of Healthcare Unbound to discuss strategies for changing physician behavior through a combination of behavioral economic principles and payment innovation.

Dr. Emanuel has spent most of his career thinking about the implementation of value-based payment models in a variety of spaces — from academia to government to the private sector.

Scaling any intervention in the healthcare system, he’s learned, can be done faster by a for-profit business than by a nonprofit or academic institution. Unlike nonprofits or academic institutions, businesses are fast and efficient at raising capital, hiring people, and implementing an effective sales operation.

“If you want to take an intervention and you want to scale it — not just do it as an academic exercise for a paper — you really need to have a company,” he says. “It’s the blind spot of academics. Our thinking has always been: Publish a paper, people will see it’s brilliant and adopt it. Well, that is false.”

The idea of using business as a vehicle for transformation ultimately led Dr. Emanuel to help found Embedded Healthcare, a behavior change platform company acquired by Clarify Health in March 2022.

Use the three “I’s” to transform physician behavior

Sharing what he learned from his work at Embedded and with provider groups across the U.S., he outlines three “I’s” for transforming physician behavior.

Information

Physicians need very specific, actionable information about how they can more effectively deliver quality care at a lower cost. “You can’t just say, ‘Go to lower-cost places.’ They don’t know where the lower-cost place is. You’ve got to educate them about it,” Dr. Emanuel says. If they know which changes to make, where to make them, and which patients each change will benefit, it will go a long way toward guiding their behavior.

Additionally, physicians need feedback to understand how well they’re performing against the new program. Providing them with personalized and easy-to-understand insights encourages them and focuses their efforts.

Infrastructure

The barriers to change in healthcare can seem intractable. Even the best intentions are easily thwarted by outdated infrastructure. That’s why, to facilitate change, it’s important to provide a new infrastructure to bring those barriers down as much as possible.

Whether making it easier for physicians to refer to specialists or buying the software for implementing value-based payment systems, progressively eliminating the barriers to adoption is a key step in going from concept to reality.

Incentives

Like other industries, healthcare operates with financial considerations, balancing economic sustainability with patient outcomes. To get physicians to change habits, the money has to follow.

“Physicians need to be paid to do the change, or the change has to be revenue-positive for them,” he says.

These incentives must be:

1. Real and substantial: When physician pay is split over multiple payments connected to complex metrics, doctors don’t feel like they are getting rewarded for their work. Old pay-for-performance models result in “the peanut effect,” says Dr. Emanuel. “Any individual change gets you peanuts.” When there’s real money on the line, it becomes a motivating factor.
2. Timely: Historically, incentives have come too late — often a year or two after a physician implements a behavioral change. Bonuses should be given swiftly to get a positive response.
3. Micro-targeted: Doctors are more likely to take serious initiatives that target very specific factors, such as the frequency of referrals or other metrics personalized to a physician’s practice. Define and refine high-quality metrics based on the real performance improvements desired from each doctor. This approach will enable physicians to perceive the personal benefit of shifting their behavior.

Value-based payment models are here to stay

Value-based payment models have gotten a slow start, but we’ve learned a lot about what works and what doesn’t. After a decade, the technology infrastructure needed to power value-based payments is finally catching up to the industry’s interest in adopting VBCs.

The payment innovation of the future will be characterized by personalization, better-aligned incentive structures, and greater transparency.

This article is based on an episode of the Healthcare Unbound podcast, which provides front-row access to healthcare visionaries discussing advancements and groundbreaking solutions — subscribe for free and get future episodes delivered to your preferred platform.