It's time to refresh your value-based care strategy: Six trends to consider

Laura Jacobs
Vizient Senior Advisor, Consulting

Most healthcare systems have defined their strategy for addressing value-based care (VBC) — even if that strategy is to minimize their involvement in VBC arrangements. To remain relevant, strategies require regular evaluation to consider trends and market conditions. This is especially true for VBC, since it touches every aspect of healthcare financing and delivery. Any market changes that impact how care is delivered, who delivers it, how consumers interact with healthcare organizations and how care is paid for impacts VBC outcomes. With that in mind, here are six key trends that'll continue to play out over 2024. Does your VBC strategy take these trends into account?

1. Stormy economic climate: Financial pressures on healthcare systems are as challenging as ever. High labor and supply costs, coupled with high capital costs, continue to plague provider economics. Most healthcare systems also are experiencing payer mix degradation, with increasing reliance on government payers and increasing lengths of stay. This environment typically causes organizations to avoid at-risk payment arrangements, especially those with downside risk. But with fee-for-service payments increasing at rates considerably less than rising expenses, VBC arrangements can provide revenue opportunities if accompanied by targeted care redesign. Effective care management and discharge follow-up can help manage length of stay and avoid unnecessary medical readmissions and ED use. So instead of running for cover in this climate, look for ways that VBC initiatives can facilitate greater financial opportunities and performance.

2. Medicare = VBC opportunities (and challenges): Centers for Medicare & Medicaid Services (CMS) continues its quest to shift all traditional Medicare to accountable care payment arrangements by 2030. Through adjustments and refinements to the Medicare Shared Savings Program (MSSP) — as well as accountable care organization Realizing Equity, Access, and Community Health (REACH) and other programs — CMS is seeking to make participation in these initiatives more attractive and attainable for providers in many diverse markets. Of course, success requires active physician leadership, patient-focused care teams, analytic rigor and structures that ensure aligned incentives. Medicare Advantage (MA) payers are challenged by tightening margins due to changes to the risk adjustment and STAR ratings methodologies and rising utilization rates. In the short term, miserly fee increases on top of challenging claims and authorization processes plague many providers. But there can also be opportunities to create more positive payer relationships through VBC, especially if there is an opportunity to access resources to enhance care management and facilitate improved data exchange. With MA penetration at or above 50% in many large markets, looking for ways to succeed in the MA segment is paramount.

3. Commercial payer crunch: In most communities, commercial payers have been slow to embrace VBC, and payment is predominantly fee-for-service. With the recent tight labor market, employers have been reluctant to make major changes to health benefit plans. However, as premiums rose 7% on average in 2023 with double-digit rate increases for small employers, more and more  employers are looking for a way out. Large employers are typically self-insured, and smaller employers are simply directing their employees to the insurance exchange. Resulting health plan products are often high-deductible and/or with limited networks. Price transparency reporting adds another new dynamic (albeit probably more confusing than helpful) into this segment. It may be the right time in your market to reinvigorate direct-to-employer strategies. This might include bundles for specialty care or working on other total cost of care arrangements with self-insured employers.

4. Challenges to the System of CARE: Many healthcare systems have developed capabilities across the care continuum, either solely owned or in partnership with others. At the same time, payers (United, CVS/Aetna, Cigna) and consumer organizations (Amazon, Walmart) — not to mention the myriad of technology and provider start-ups — also are expanding their reach into healthcare delivery. The risk of all this diversification is the further fragmentation of healthcare delivery, with consumers hopscotching their way to various delivery sites, from virtual and home-based care to post-acute facilities. This provides both challenges and opportunities for healthcare organizations. The greatest risk to health systems is that consumers are siphoned off from all but acute care. This will happen to those organizations that fail to recognize more accessible and affordable options are offered by nontraditional providers. The opportunity exists to challenge the organization to meet market demands for patient-focused, consumer-oriented care and services, which can be achieved if the tenets of value-based care delivery are embraced and reinforced with alternative payment models. There may also be opportunities to partner with nontraditional providers to leverage capabilities and fill care gaps with less capital and risk — just be sure that these relationships are based on mutual goals with respect to VBC.

5. Post-acute care crisis: Many health systems face a daily challenge of finding appropriate post-acute care, especially skilled nursing care. This is especially problematic for Medicaid or dual-eligible patients. Skilled nursing facilities are closing due to staffing shortages and inadequate payment. Home care is an alternative for many patients but not for others already challenged with inadequate housing, food or day-to-day care. VBC can provide the payment structure and payer partnerships to fund resources to address social determinants of health and health equity. How post-acute care will be delivered and supported to prevent recurring inpatient admissions and the deterioration of patients' health must be included as a critical component of a robust VBC strategy.

6. Permanently high staffing costs: While staffing shortages and wage escalation may be improving in some areas, the fact is that labor costs are not declining, and shortages in many crucial clinical areas continue with no signs of abating. VBC encourages care redesign to maximize "top of license" roles. The adoption of artificial intelligence can also facilitate efficiencies in many areas critical to VBC: patient scheduling, claims processing, utilization management and risk profiling. Physician shortages and burnout challenge the successful implementation of VBC strategies, not to mention the maintenance of a healthy organizational culture. Approaches to physician compensation must be updated to align with VBC initiatives and to reduce reliance on the relative value unit "hamster wheel." If the organization is committing to VBC, then it must commit to uniform value-based performance expectations — the layering of conflicting initiatives and measures deflates morale and outcomes organization-wide.

As the dynamics of VBC continue to evolve and the overall environment changes, each healthcare organization must refresh its approach to payers, consumers and how care is delivered. Like it or not, VBC is a fact of life in today's healthcare delivery and financing infrastructure. It's best to identify where efforts need to be amplified, modified or eliminated, considering trends to ensure the organization's resources and performance are optimized.

Author

Laura P Jacobs is a Senior Advisor in Sg2's consulting practice for value-based care and has been at the forefront of driving change to improve healthcare delivery for over 35 years. She is a noted speaker, author and industry thought leader on the impact of current trends on healthcare delivery and critical strategies for success. Jacobs holds a Bachelor of Arts in human biology, public policy, from Stanford University and a Master of Public Health, corporate management, from the University of California, Berkeley.