November 21, 2022
Happy Monday, Health Tech readers.
1 big thing: Sticking points on the VBC train
The "shift to value-based care" was on everyone's lips at HLTH — but more than a decade after it began, ingrained provider dynamics and unequal market-wielding power continue to slow the fee-for-value train, Erin writes.
Why it matters: The current fee-for-service system is essentially the opposite of the "apple a day" philosophy: It rewards high-cost and high-volume procedures and disincentivizes preventive care.
Yes, and: A looming recession, skyrocketing costs of health care and a tight market are encouraging companies to dip their toes into value-based payments (VBP) models.
Yes, but: Despite renewed exuberance among executives about value-based payments at HLTH, the reality is less sunny.
By the numbers: Value-based payments made up just 6.7% of primary care revenue in 2021, according to a recent MGMA report.
Zoom in: The headwinds for VBC in the commercial space are formidable, per a January article in the journal Health Affairs.
- Powerful incumbent providers are wielding disproportionate market leverage when negotiating reimbursement with health plans, the authors write.
- "[M]any providers have significant ability to negotiate high commercial fee-for-service rates or gain 'must-have' status in a given market by offering differentiated services," the authors write, "for example, as the only hospital offering bone marrow transplants."
- Value-based programs "also suffer from the power of incumbency," they add, in which incumbent providers "wield tremendous power to bundle services, steer patients, and compete on familiarity and reputation."
Still, value-based payments have gotten traction in Medicare markets and have subsequently attracted significant investor interest.
- Oak Street Health, a Medicare-focused operator of a network of value-based primary care centers, on Wednesday received a $300 million credit facility from Silicon Valley Bank and Hercules Capital (NYSE: HTGC).
What they're saying: Executives at HLTH see that traction and, faced with their own skyrocketing health care budgets and the lasting financial impacts of the pandemic, are starting to experiment. For example:
- Carbon Health CEO Eren Bali, moved by spiraling health care costs among his own employees, is dipping a toe into VBP, he told Erin at HLTH. The company is rolling out its first risk-based contract in January 2023 with Blue Shield of Massachusetts.
- "The goal for the next five years is doing more," Bali says.
Meanwhile, executives including Availity CEO Russ Thomas and Biofourmis CMO Maulik Majmudar told Erin they see near-term potential in being able to create higher-touch care models that don't get bogged down in reimbursement for every individual service.
- "Value-based care is critical to us," Majmudar said. "As we're starting to take on risk we're seeing traction there."