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VBC enablement ripe for consolidation, analysts say

Illustration of a health plus-shaped price tag with dollar signs printed on it.

Illustration: Gabriella Turrisi/Axios

The long-hyped value-based care sector is finally gaining a commercial foothold thanks to a boom in VBC enablement companies.

Why it matters: By helping payers and providers move toward risk-based arrangements, VBC enablers proliferated this year — and consolidation may be on the horizon in 2024, analysts from PitchBook and Rock Health note in two recent reports.

How it works: VBC enablement companies help providers and payers shift away from fee-for-service arrangements and toward risk-based business models using tech-based administrative and clinical tools.

  • Critically, they also help payers and providers assess outcomes and risks by finding and analyzing relevant data.

The big picture: The VBC enablement sector saw the biggest 2023 boom in partnerships among the sectors Rock Health analyzed.

What they're saying: "Enablement is the most important mechanism by which the VBC transition will play out in the U.S. over the next five to 10 years," PitchBook lead health care analyst Rebecca Springer writes.

Zoom in: Investors were particularly drawn to VBC models in primary care and kidney care in 2023. Relevant deals include...

  • Value-based elder primary care provider Greater Good Health in October raised $20 million in Series A capital to build its first clinics.
  • CVS Health in May completed its $10.6 billion acquisition of senior value-based care business Oak Street Health.
  • Value-based senior care enabler Vytalize Health in February collected $100 million in unlabeled funds.
  • Healthmap in August raised $100 million in unlabeled funding to scale its value-based kidney care management approach.
  • Hybrid musculoskeletal care provider Commons Clinic in October clinched $19.5 million in Series A capital for its specialty VBC programs.

What's next: This year's boom in VBC deals and new companies has kickstarted competition among them for physicians, and PitchBook's Springer predicts at least two VBC enabler acquisitions in 2024, likely by other enablers.

  • "Enablers may look to acquire in order to expand into new geographies or even to consolidate markets where they are already competing," Springer writes.
  • Other potential buyers include retailers with primary care assets (such as CVS, Walgreens or Walmart), regional Medicare Advantage plans seeking to vertically integrate, or digital health companies pursuing a brick-and-mortar physician network to augment their tech stack, she adds.

Reality check: "While value-based care has been a topic of discussion for decades, it's easier to write about than it is to adopt at scale," write Rock Health's Irene Golden, Mihir Somaiya and Sari Kaganoff.

  • The share of practices reporting 5%-30% of revenue linked to value-based performance remained virtually unchanged from 2019 to 2022, shifting from 59% to 57%.
  • VBC headwinds include the wielding of disproportionate reimbursement negotiation leverage by powerful incumbents, insufficient data analytics capabilities, and suboptimal program design, per a 2022 article in the journal Health Affairs and a 2023 Lazard Healthcare Services survey.
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