• Cheryl L Damberg, Marissa Silverman, Lane Burgette, Mary E Vaiana, and M Susan Ridgely.
• RAND Corporation, 1776 Main St, Santa Monica, CA 90407. Email: damberg@rand.org.
• Am J Manag Care. 2019 Feb 1; 25 (2): e26-e32.

ObjectivesTo understand physician organization (PO) responses to financial incentives for quality and total cost of care among POs that were exposed to a statewide multipayer value-based payment (VBP) program, and to identify challenges that POs face in advancing the goals of VBP.Study DesignSemistructured qualitative interviews and survey.MethodsWe drew a stratified random sample of 40 multispecialty California POs (25% of the POs that were eligible for incentives). In-person interviews were conducted with physician leaders and a survey was administered on actions being taken to reduce costs and redesign care and to discuss the challenges to improving value. We performed a thematic analysis of interview transcripts to identify common actions taken and challenges to reducing costs.ResultsVBP helps to promote care delivery transformation among POs, although efforts varied across organizations. Investments are occurring primarily in strategies to control hospital costs and redesign primary care, particularly for chronically ill patients; specialty care redesign is largely absent. Physician payment incentives for value remain small relative to total compensation, with continued emphasis on productivity. Challenges cited include the lack of a single enterprisewide electronic health records platform for information exchange, limited ability to influence specialists who were not exclusive to the organization, lack of payer cost and utilization data to manage costs, inability to recoup care redesign investments given the small size of VBP incentives, and lack of physician cost awareness.ConclusionsTransformation could be advanced by strengthening financial incentives for value; engaging specialists in care redesign and delivering value; enhancing partnerships among POs, hospitals, and payers to align quality and cost actions; strengthening information exchange across providers; and applying other strategies to influence physician behavior.

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