Value-Based Care: Players, Challenges, Opportunities

Value-Based Services in Healthcare: ‘One-Size-Fits-All’ Solutions Need Not Apply

We’ve been talking about value-based services in healthcare since at least 2005 when the Centers for Medicare and Medicaid Services (CMS; a division of the U.S. Department of Health and Human Services) began a pilot project to connect quality of care to compensation. The idea being, that if at least 75 percent of U.S. companies link an employee’s performance to their pay, why shouldn’t the value-based services in healthcare replace fee-for-service?

The idea of value-based services in healthcare, also referred to as pay-for-performance, was tested with ten, large, and multi-specialty physician practices, serving more than 200,000 Medicare beneficiaries, who began establishing and tracking quality standards for both preventative care and the management of chronic diseases, things like heart disease and diabetes. Those practices that effectively tracked improvements — less sick and costly patients — would be able to share in the rewards: Medicare savings. Those practices that performed poorly — resulting in injury, illness, or death — would see Medicare reimbursements reduced or eliminated.

From this, other payment models such as “capitation” were born, the idea that a provider has a set payment amount for each patient they see, per period of time. Eventually, the “bundled payment” concept evolved, where a single payment is rendered to providers and health care facilities for all services to treat a given condition or “episode of care” — both of these compensation models in opposition to the “fee-per-service” model which has often been viewed as the Achilles heel most responsible for exorbitant and inconsistent pricing.

Factor in those chronically ill patients who must also enlist a team of specialists to manage their conditions (on average, this might involve two primary care physicians and five specialists, per patient), and how do you fairly assign accountability across that patient’s network of care providers?

Fast-forward some 13 years, and there’s still no disputing the data — health care in America is the most expensive yet the least cost-effective in the world. And if reform doesn’t come quickly enough, we could be spending one in every five dollars on health care by the year 2026.

The heated conversations debates around getting the Affordable Care Act passed, then dismantled, were not only taking place in our nation’s capital but were added to the list of “hot topics to avoid at holidays or dinner parties” for families all across the country.

Maybe one of the only take-aways everyone can agree on is that when it comes to fixing the U.S. health care system, there is no one-size-fits-all solution.

What is clear is that it’s going to take innovation and cooperation. Below, we’ll identify key stakeholders, challenges, and opportunities when it comes to delivering value-based services in healthcare.

Government Payers

The Medicare Shared Savings Program (MSSP) showed net savings for Medicare for the first time ever in 2017, as calculated against their benchmarks. This is based on actual payments to Accountable Care Organizations (ACOs), those participating in the MSSP program, and is likely attributed to both a thinning of the herd (some poor ACO performers end up dropping out of the program altogether) and the fact that the program was then four years old (the savings rate has jumped substantially after each ACO’s third performance year).

While the savings have been minimal (only around $35 per beneficiary) and they are slow to matriculate, enough promise has been shown to identify a couple of themes here:

– Slow and steady (sort of) wins the race. As in, the ACO’s length of time participating seems to eventually become proportional to some amount of savings realized.

– Aside from the policy reform that was being discussed at the end of 2018, shifting more ACOs to more risk, more quickly, the more learning and sharing we can do, and the more quickly we can apply it across other verticals, the better.

Which brings us to…

Commercial Payers

Let’s talk about commercial payers, aka the for-profit health insurance companies currently operating in the U.S., the top five of whom cover approximately half of the insured population.

When value-based services in healthcare models and payment strategies were evaluated by a line of business (commercial, Medicare or Medicaid)… it was commercial lines, for the first time ever, not the government, that were leading innovation and adoption on all fronts.

Despite the gradual dissolution of federal mandates, these commercial lines of business have continued to invest in value-based services in healthcare, and their returns have already shown to be significant, with a 5.6 percent reduction in unnecessary medical costs, as released in a 2018 report. Commercial payers have also been faster to eliminate “fee-for-service” payment models, the problems of which were described above.

Even still, commercial payers say they’d like to be able to roll out new episode-of-care programs more quickly, and better engage providers to this end, while over half are not satisfied with their current value-based analytics, automation or reporting capabilities.


Nearly one in two Americans receives health care insurance through an employer-sponsored plan (over twice the amount of people who are Medicare or Medicaid beneficiaries). And, 75 percent of these employer plans are self-insured, mainly to gain some control over their spending in this area.

When you consider that health care expenses are the second-most expensive line item for U.S. employers, just under employee wages, surely some employers have earned (and might genuinely want) a seat at the table when it comes to identifying and enacting solutions to drive down costs and achieve better outcomes? More quickly, than say, government or insurance companies, acting in silos or even in concert, have been able to achieve.

Even though self-insured employers use commercial lines as “Third Party Administrators,” there are some fresh ideas being tested via enterprise-level employee wellness programs. One such program that is worth exploring is BP’s wearables campaign, the “Million Steps Challenge,” where employees who become more physically active are rewarded with richer benefits or gift cards. BP has been named to the Healthiest 100 Workplaces in America multiple times, alongside a wide array of various industry sectors including (you guessed it) many health care companies who score top marks on this annual list. The 2018 winner was United Healthcare, who also incorporates wearables and has developed a niche focus on cycling teams.

It is interesting to consider these three stakeholders, and how they might be able to achieve innovation more collaboratively, to reduce unnecessary medical costs while improving care quality and patient engagement — the trifecta of #squadgoals, if you will, driving all value-based health care reform.

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