Value Based Care
VBC is the future and can't come sooner
Overview
In my last two posts (The different payer models in Healthcare and Options for and Innovation in health insurance) we explored the different payment models in healthcare that exist today such as Fee for service (FFS), Capitation, and Value-based care. One of these models that stands out, is sustainable in the long run, and could be a win-win for all entities involved, is Value-based care (VBC).
Prevention is better than cure is a common saying but has been rarely applied to health insurance. In traditional fee-for-service models, healthcare providers are reimbursed based on the volume of services they deliver. This often leads to fragmented care, unnecessary procedures, and a lack of coordination among healthcare providers. Value-based care aims to address these issues by shifting the focus to value and outcomes.
Value-based care (VBC) focuses on prevention and keeping people healthy. Providers and care entities are paid based on the number of people they can keep healthy rather than get paid for treating sick people. The objective is to maintain the highest level of a healthy population that is feasible and avoid expensive treatments over time.
Value-based care is implemented in different ways:
Accountable Care Organizations (ACOs): ACOs are health networks or groups of hospitals, doctors, and other clinicians that are responsible for the quality of care and the cost that is transferred to patients. If certain quality and cost thresholds are met, the ACO may realize savings and continue to improve the overall wellness of the population.
Pay-for-Performance (P4P): This is the baseline model and the central concept around VBC. Providers and professionals get incentivized to providing specific services and meet quality thresholds to receive payments. In addition, they can realize increased earnings for improving care or exceeding certain standards.
Primary Care Arrangements: Primary care practices are transformed into medical homes that provide comprehensive, coordinated, and patient-centered care. This model focuses on preventive care, chronic disease management, and care coordination. These models have evolved more formally into the patient-centered medical home (PCMH). PCMHs, in addition to providing preventative care, help build better relationships between patients and clinical teams.
Bundled Payments: In this model, payments are made for an entire episode of care, including all services rendered and all clinics/providers visited or treated by.
How do we get to a Value-based care system?
While there is no doubt that Value-based care is much more effective in theory and should have been the model from the get-go, institutions, payers, and providers are resistant because of the massive changes, in most cases, that are required to enable VBC.
Financially, VBC requires significant financial investment; whether this be the tools and infrastructure needed or the contracts and relationships amongst entities that need to be established, the latter being much more complex. So far, the results have been mixed: The number of accountable care organizations (ACOs) plateaued at around 1,000 in recent years, while 15 of the 53 entities participating in CMS’s direct contracting program in 2021 experienced net savings losses.
However, CMS and healthcare spending in general, which continues to outpace GDP growth, maintain a positive outlook of VBC. As mentioned above, one of the core components of VBC is prevention, and who better than primary care doctors to help implement prevention-based models. VBC models have partnered with PCPs but this has largely been limited to the Medicare population, which is a direct, understandable market. However, systems or physician/provider-payer relationships which will realize higher savings and quality of care will be the ones that win in the market.
Outside of primary care, VBC is also gaining interest in specialty-based bundled payment models that are involved in an episode of care over a defined time period or manage patients’ conditions such as chronic pain and substance abuse recovery.
Pearl Health launched during the pandemic and has already grown to 29 states and worked with 75 physicians from 25 practices covering 4,000 Medicare lives. Pearl used data science tools to help PCPs identify the patients that need care the most and patients who would benefit from early intervention. This is VBC in a nutshell. Companies like Pearl are able to capitalize at the early stage because they can start small and focus on building a platform for limited users and then scale it.
Another startup using a similar approach is Vytalize. Vytalize focuses not only on using data-driven approaches to help PCPs and practices improve care for their patients but also helps them in converting to ACOs. By helping practices focus on VBC characteristics such as incentives, in-home care, care coordination, and payer contracting, practices can expedite their process to becoming an ACO. Joining ACOs is beneficial not only to meet CMS 2030 goal of 100% participation, but also to help practices maximize financial rewards, reduce healthcare costs, and attain better contracts with payers.
On the specialty side, the trend is for large practice groups to partner with or acquire other practices and implement VBC models. Valtruis (a WCAS company) has launched Oncology Care Partners (OCP), a first-of-its-kind platform of owned and affiliated oncology practices purpose-built to transform cancer care in the United States. Oncology is becoming more of a chronic disease and Oncology Care Partners will build its clinic platform nationally to support providers in their journey from a fee-for-service model toward data- and outcomes-based treatment.
Other specialty-based practice groups include Premier Orthopedics, which partnered with Healthcare Outcomes Performance Company (HOPCo) to leverage HOPCOs value-based infrastructure and provide value-based healthcare solutions to improve patient outcomes and access for patients with musculoskeletal conditions in Pennsylvania.
My thoughts
While there is much to come in the VBC space, it will be continued and consistent results from the solutions mentioned above and others that will drive VBC in the right direction and this is already happening to some extent. Growth in value-based care has accelerated from creating approximately $500 billion in enterprise value today and may be on track to reach $1 trillion.
Certain specialties including primary care will continue to gain ground and appear more of a viable option to practices and providers going forward. As practices and physicians start to gain significant ground in establishing VBC platforms, through the help of solutions such as Pearl and Vytalize of course, HCOs and national platforms could take notice. Gaining traction with large specialty care institutions and providers will likely also help more payers get on board.
One of the main points of resistance is the lack of support from other entities that are part of the patient journey in making care possible. As patients, providers, and payers start to embrace VBC nationally, it could pave the way for 2030.
Fantastic post as usual Rikin - keep them coming. I wonder if you have any thoughts on VBC models outside of the US? How would VBC work in a public health system?