What is needed to win in value-based care models?

Article co-authored with Melinda Durr and Niyati Upadhyayula

Despite the healthy debate within the health care industry on the merits and limitations of the 50+ value-based care (VBC) models, there is widespread consensus on the need for increased accountability in care, particularly in Medicare and Medicaid. This view is reflected as the first objective in the refreshed strategy recently released by the Centers for Medicare & Medicaid Services (CMS) Innovation Center – “drive accountable care.” 

As we wait for further guidance from CMS on the VBC models that will persevere into the next decade (initial rumblings suggest the Medicare Shared Savings Program could be the winner), we looked at the foundational capabilities needed to operate in fee-for-value arrangements and translated these into opportunities, challenges and potential roles for existing players and new entrants.

Key success factors and challenges for providers in delegated risk-sharing models

While the nuances may vary, the common attributes needed to be successful in risk-sharing models are:

• Strong data and analytics to enable understanding and tracking of patient characteristics, needs, behaviors and outcomes 
•  Coordinated, multidisciplinary care programs (including behavioral health, community-based partners) to provide holistic guidance  
• High-touch member engagement to influence behavior and outcomes  
• Up-front investment capital to build infrastructure and ongoing cash reserves to hedge risk

Figure 1: Value-based care value chain

CMS’s value-based care models, such as the Next Generation Accountable Care Organization (Next Gen ACO) and Direct Contracting Entity (DCE), differ from carrier- or payer-backed risk-sharing models such as Medicare Advantage programs in the following ways (refer Figure 1 above):

• Several administrative functions typically performed by carriers are either not applicable or will be performed by CMS.
• Risk-sharing models rely on utilization management to manage quality and rein in costs. However, traditional Medicare members are not subject to such controls. As CMS models move toward two-sided risk and capitated payment systems, risk-bearing entities can proactively control utilization by influencing how members use health care. 
• As a result, providers participating in these models may need to create a “pseudo-network” of providers aligned on member outcomes, quality and experience, given the lack of financial repercussions for beneficiaries who use non-value-additive services and/or go out of network. 
• Member engagement may play a dual role: (1) providers will want members to voluntarily align to their ACO, DCE or other VBC organization to reduce risk from member attribution, and (2) providers can encourage members into using the provider’s pseudo-network to facilitate quality and manage costs.

In summary, strong population stratification and member engagement capabilities, combined with true clinical transformation around care delivery, will likely be critical for success.

Opportunities for payers and managed services

While providers are adept at managing clinical interactions at point of care, most don’t actively engage members across the full spectrum of health care needs and activities. Smaller or less experienced providers may also lack at-scale data and analytics or the clinical and operational capabilities to deliver needed oversight and outcomes. 

This represents an opportunity for health service entities such as payers, aggregators, third-party administrators (TPAs) and others across the ecosystem to support providers with risk-enabling capabilities, including:  

• Building a 360-degree member view and performing robust analytics to establish a basis for population health management
• Helping to enable voluntary network creation and provider quality management
• Offering an electronic medical record (EMR) agnostic platform to share patient information with providers at the point of care
• Augmenting provider care teams (especially with multidisciplinary teams or community partners) and providing the financial backing to build these teams at scale
• Accelerating management and performance of value-based contracts, including monitoring and reporting against quality metrics and regulatory requirements  

Entities starting down this path have a choice of different business models, each with its unique capability needs and risk levels:

•  Pay-vider model: The industry has seen a number of payer-provider partnerships, where payers have acquired or invested in provider practices across the patient care journey, such as primary care, post-acute care and other care delivery assets. While this aligns incentives, it represents a big shift in an organization’s business model.
• Risk-bearing enabler model: In this model, the entity (typically an aggregator or management services organization (MSO)) provides some, or all, of the capabilities discussed above to a provider, along with the capital needed to engage in risk.
• Scalability model: In this model, typically the provider entity already has experience with VBC and in taking on risk but needs additional capital or resources to scale, which is the value brought by a partner such as a payer or investor.

 Regardless of the business model, the key questions that these entities need to ask are:

1. What is my long-term strategy by line of business (Medicare, Medicaid, commercial)? How can I leverage my existing experience and capabilities to optimize performance across all lines of business?
2. How does the payvider or MSO model align with this?
3. How do my capabilities benchmark against the market expectations, and where are the gaps?

The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other member firms of the global EY organization. Nothing in this blog should be viewed as providing a legal opinion, prediction or advice.