Value-based Care 101
Value-based Care 101
By: Emmanuelle Lipski
For more than a decade, value-based care (VBC) has been positioned as healthcare’s “next big thing”. While adoption has been slower than initially anticipated, we are seeing both macro forces such as rising cost, and VBC enablers maturing (e.g., data availability, analytics) coming together and encouraging adoption of risk-bearing models. We are excited by the opportunities that value-based care presents in terms of benefits to patient and the broader population as well as savings and we are eager to explore opportunities that will enable this transformation and its impact on the future of healthcare.
This blog post aims to highlight the pillars of value-based care, including what it aims to achieve & how, as well as challenges related to its implementation.
Context, why now
- *Rising cost, reimbursement under pressure, static physician salaries — most providers losing money on Medicare/Medicaid patients (who are growing as a proportion) and employers (who used to cover the gap) are looking to decrease their cost
- *Uneven quality of care: compared to other high-income countries, the US has the highest rate of infant deaths and preventable deaths despite spending the highest % of GDP in healthcare — ~20%
- *Increasing hospital M&A activity, increasing competition (e.g., CVS, Walmart in-store clinics at significant lower price than traditional providers)
- *Lots of incremental changes have happened to revolutionize healthcare (e.g., electronic EHR, reducing errors through best practice sharing, reducing fraud), reaching limited impact to date
Value-Based Care Ideology
- *The ideology of VBC lies in achieving the best outcomes at lowest cost, thus aligning incentives across stakeholder groups: patients (better outcomes), providers (focusing on delivering high quality care, not worrying about volumes), payers (reduced cost, and ultimately premiums), employers (productive workforce, competitive benefits to attract and retain employees at cheaper cost)
- *The aim is to shift from a physicians/supply-driven healthcare system (based on volume and profitability of services) towards a patient- and outcomes-driven system
- *This requires to restructure how healthcare is delivered, organized, measured and reimbursed and relies on a virtuous circle where payers/insurers will want to work with the most competitive providers
- *The main leadership body behind value-based care has arguably been the Center for Medicare and Medicaid Innovation (CMMI), established by Congress in 2010 to identify ways to improve healthcare quality and reduce costs in government-administered healthcare systems
- *Some early adopters of VBC (e.g., Cleveland clinic and Germany Schon Klinik) have proven improvements in outcomes, efficiency and growth in market share while in the US many often CMS-led programs are gaining popularity. One such initiative is the creation of provider groups called Accountable Care Organizations (ACOs) that can earn rewards by taking responsibility for caring for a defined group of Medicare beneficiaries, which CMS wants to expand among all of its Medicare beneficiaries by 2030.
Pillars of Implementation — 5 practical steps
- Organize by “patient condition” (called Integrated Practice Unit or IPU) instead of by specialty, including a multidisciplinary team with joint accountability for the patient’s full cycle of care
- Measure outcomes and costs for each patient: Tracking and reporting of actual quality measures as opposed to process measures that track compliance. This has been reported as one of the most important steps to drive improvement (e.g., US-based IVF clinics started reporting their results in 1997 and it is believed to have led to a massive improvement in outcomes), provided they are standardized (not yet the case across providers and countries). Cost tracking is also challenging given most accounting systems are department-based (vs. patient-based) and designed for fee-for-service contracts. Outcomes should be measured by condition and include:
- *Health status achieved: survival rate, functional outcomes/degree of health or recovery
- *Process recovery: time to recovery and other process measures
- *Sustainability of health: maintained functional ability, long term consequence, etc
3. Adopt bundled payments for care cycles: Models should either cover the full care cycle for acute medical conditions, overall care for a chronic condition per time period, or primary/prevention care for a defined population segment to incentivize the right behaviors (vs the current global capitation and fee-for-service models). Some countries such as Germany, Sweden, US have adopted this in some capacity — one interesting trend we see in the US is some employers programs driving the adoption of bundled payments, for example Walmart has, since 1997, launched Centers of Excellence programs to get organ transplants to workers in need but through selected top quality providers who get reimbursed in one bundle. Limits to adoption here include concerns around patient heterogeneity and lack of accurate cost data leading to financial exposure
4. Integrate care delivery systems and expand geographically: reduce fragmentation and duplication of care by concentrating volume in fewer locations (who will build specialization and thus lead to better outcomes/lower cost) and integrating the care across locations. Less complex conditions can be managed by lower cost locations to free up resources in academic hospitals. The care can then be expanded geographically through a hub-and-spoke model (satellite facilities established for each IPU, more complex cases are referred to the hub) or through a clinical affiliation/partnership (IPU partners with local providers)
5. Build a strong enabling IT platform that is patient-centric (across services and sites of care vs by department or location), standardized (language, processes) with data available to all relevant stakeholders (with meaningful analytical layers). Increasingly many services are expected to be automated (e.g., claims processing, fraud prevention, care workflows), leading to significant efficiency gains
- *Complexity of the transformation, involving many and fragmented stakeholders, requiring deep teamwork and shared accountability. There is a big question on current and future incentives and how to align them to drive behaviors (e.g., providers may want to avoid taking patients with more complex or chronic conditions, requiring more resources if not compensated accordingly)
- *Complexity related to outcome and cost measurement at the patient level (much of it includes shared resources that need to be attributed to individual patients), which is not encouraged by the fee for service model. Many instances of missing and bad quality data
- *Financial barrier: often requires upfront investment in IT and infrastructure to build a solid foundational system
- *Many more question marks on evolution of the sector, including the regulatory landscape (e.g., drug pricing and price transparency, data sharing, physician compensation)
The potential of value-based care models remain largely unrealized and highly dependent on external pressures (e.g., policy changes) in terms of pace and scope of adoption. That being said and despite its current limitations, we believe adopting a value agenda will support organizations in the long term with outcomes, reputation, patient volumes and cost (while reimbursement will plateau and maybe decline). This is especially true for systems serving disadvantaged populations.
Further research is needed to assess how these programs impact patients and the overall system to identify the factors associated with success and as such learn, adjust and expand the approach.
As investors, this is a space we will be exploring more thoroughly, both from the “direct value-based care” asset side, as well as from the “enabler” (services and technologies) one.