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Healthcare Sector Quarterly Update - Q3 2016


Trend: More Providers Switch to Value-Based Health Care Payments 

While fee-for-service reimbursements are still the primary mode of payment for US health care providers, insurers are making progress on goals to switch over to value-based contracts. Value-based payment systems include quality incentives, accountable care models, network management, and bundled payments. The US Department of Health and Human Services (HHS) is on track to meet its goal of tying 30% of traditional Medicare payments to value-based payments by the end of 2016, as well as higher targets over the next several years. Commercial insurers are also adopting new payment models; Aetna is aiming for 75% of spending through value-based contracts by 2020. According to a recent survey by McKesson reported by Healthcare Dive, hospitals are about 50% along the continuum towards full value-based reimbursement. However, challenges remain in areas including process automation and payer-provider collaboration. A majority of surveyed hospitals were not yet meeting value-based reimbursement goals including lower costs, better care coordination, and improved patient outcomes.

Industry Impact
A growing number of insurers and health providers are transitioning to value-based reimbursement methods, with the goal of containing costs and improving care. Providers must adjust processes to maintain efficient, high-quality operations during the transition period.


US consumer prices for medical care commodities, an indicator of healthcare costs, increased 2.7% in April 2016 compared to the same period in 2015.

US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 3.1% in April 2016 compared to the same month in 2015.

Total US revenue for healthcare and social assistance rose 3.5% in the fourth quarter of 2015 compared to the previous year.