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Leveling Health Plan Costs Through Value-based Reimbursement Strategies

July 13, 2022

Originally featured in SBAM’s FOCUS magazine

With competition for employee hiring and retention skyrocketing, offering employees good health plan options can be a key differentiator for a small business. Yet the cost of health care continues to be challenging for many businesses. In the health care marketplace, physicians, health systems and health plans are talking about “value-based” and “risk-based” payment models as a way to contain rising health costs while improving health outcomes.

What do these terms truly mean and why should small business owners care?

In simple terms, paying for “value” means that physicians, physician groups and health systems accept financial accountability for patient care quality, cost effectiveness and patient experience. Physicians agree to be paid by health plans according to how successfully patient outcomes and total costs of care are managed. This is a departure from the traditional “fee-for-service” approach to payment, where physicians are compensated for every service a patient experiences—regardless of the outcome or quality.

For Blue Cross Blue Shield of Michigan (Blue Cross/BCBSM), evolving from “fee-for-service” to “value-based” payment models is paramount in our goal to consistently deliver affordable health care options to our customers and members. We understand the impact of rising health care costs on small business owners who often feel powerless to address them. By outlining the path to value-based care, we want our customers to understand the various strategies BCBSM is deploying to combat rising costs and help small business customers continue to thrive in Michigan.

Value-based models are evolving and include varying levels of accountability. For example, BCBSM’s Blueprint for Affordability program ties payment to how well providers manage the care of the Blue Cross patients they serve. Launched in 2020, this program already applies its new payment approach to nearly 40 percent of our membership.

Across the U.S., value-based models are including higher levels of financial accountability for physician groups that choose to participate. This means physicians who successfully manage the health, quality and cost of care for their patients will have the opportunity to earn a higher share of the savings generated through improved outcomes. Physicians who don’t meet those goals will forfeit greater financial incentives and will be responsible for losses incurred.

For physician organizations, this shift can require significant resources to invest in care management and coordination, analytics, home and virtual care and other practice capabilities. This can be particularly challenging for independent practices that do not have the capital or staffing resources of system-backed practices.

So, Blue Cross is engaging in partnerships with organizations that can support doctors in making the changes necessary to succeed in these models. Last summer we invested in a management service organization that works with doctors, particularly specialists, on their operations and business functions, giving them more time to focus on patient care and increasing their success in value-based care.

Recently, we announced a joint venture with Nashville-based Honest Medical Group. This partnership will offer primary care providers comprehensive support in transforming their practice operations to succeed in shared accountability Medicare contracts.

This is critically important because Medicare populations typically have more chronic conditions or multiple health issues that require a higher level of coordination and management. Honest Medical of Michigan will assess each practice’s capabilities and then tailor their support accordingly.

Both options align with the ongoing evolution of our member-focused, value-based care and payment models. And both options focus on delivering high-quality, personalized, cost-effective patient care for our members. These are just some of the ways BCBSM works to maintain affordable health care for our customers and members.

By continually evolving value-based reimbursement models, and through ongoing partnerships with physicians to support their health care quality and efficiency goals, we are managing customer costs while improving member health outcomes.

Stay tuned for more information on Blue Cross’ efforts to bend the curve on health insurance premiums through their value-based care and other cost containment initiatives.


Todd Van Tol is Executive Vice President of Health Care Value for Blue Cross Blue Shield of Michigan. In that role, he has responsibility for provider contracting and network management, medical and pharmacy management, as well as end-to-end management of the total cost and quality of care for individual and group customers.

Todd’s experience spans a broad range of strategic issues facing health plans and providers including market reform planning, customer strategy, building new value-based payer/provider partnership models and the development of next generation product offerings. He holds an MBA from the University of Michigan and a BS from Michigan State University.

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