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4 Key Areas of Value-Based Care Transformation

With healthcare spending at an all-time high, value-based care transformation can solve the cost problem while shifting healthcare dollars so providers can focus on population health outcomes.

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- Healthcare has a spending problem. For all the investments made in healthcare—$4.1 trillion to be exact—outcomes are not where they should be. In fact, the US has the lowest life expectancy compared to other high-income countries, including Australia, Canada, and the United Kingdom. The Commonwealth Fund also reports that, compared to these peers, the US has the highest chronic disease burden, highest number of hospitalizations from preventable causes, and highest rate of avoidable deaths.

“We have a life expectancy that is on par with Chile or the Czech Republic, which are not the countries we would consider our peers economically,” said Robert Fields, MD, MHA, EVP and chief population health officer at Mount Sinai Health System, citing data from the Organisation for Economic Co-operation and Development.

That is not to say the US doesn’t deliver high-quality care, Fields reassured attendees at Xtelligent Healthcare Media’s second annual Revenue Cycle Management Virtual Summit last week.

“If I need a complicated surgery, I want care at a US facility,” Fields explained. “But if you ask me whether we deliver better health from a population perspective or the outcomes that we think, as American citizens, we should expect from our healthcare system, well, there’s very little evidence that we are able to deliver that level of care across the board, across populations, and for the outcomes that actually matter for life expectancy.”

Transformation is necessary to overcome both the spending and quality issues plaguing the US, according to Fields. And by transformation, the value-based care lead and family physician does not mean simply implementing technology like the EHR system or giving patients access to innovative medicines and treatments, though those are both important steps.

“When I think about the steps toward building a better system…value-based care is that better step,” Fields asserts.

Value-based care provides the incentives and flexibility to truly transform care delivery. The basic set-up of care—making an appointment, seeing the physician, and getting a diagnosis or treatment—has been the same for decades despite innovations like telehealth or remote monitoring.

Upending the fee-for-service system and incorporating value-based care contracts where appropriate enables the healthcare system to invest its dollars differently, whether that by in addressing social determinants of health or improving preventive care. Importantly, value-based care contracts enable more upstream intervention to stop adverse outcomes later.

To get to value-based transformation, Fields identified four key areas providers should consider: contracting, physician compensation, digital medicine, and care delivery.

#1 Contracting

Value-based contracting hinges on the risk pyramid, Fields explained. At the bottom of the pyramid is your lower-risk, healthy patients, many of whom have commercial insurance. Meanwhile, the middle of the pyramid includes rising-risk patients, which means individuals or populations who are at risk of adverse outcomes but have yet to become high-need, high-cost. This group tends to be a mix of commercial and government coverage. Finally, the tip of the period is your highest-risk patients who are typically covered by Medicare, Medicaid, or some other government-sponsored plan. These patients tend to make up the most healthcare cost despite being the smallest group by number.

Fee-for-service can work for the lowest part of the pyramid since relatively healthy individuals require more on-demand care, and providers can more aggressively negotiate rates for these populations, Fields explained. However, population health management comes in with the top two sections of the pyramid so providers can lower costs and improve quality, all while ensuring their sustainability.

“As a CFO or someone that thinks about rev cycle or managed care, you recognize that you're never going to go negotiate high enough rates in Medicare to make operational margin here,” Fields says. “The key is going to be getting into risk-based contracts and driving that performance so you can make the care of those patients sustainable, especially with the growth in Medicare.”

#2 Physician Compensation

Primary care is the foundation of value-based care, yet the fee-for-service notoriously undervalues primary care.

“Many of our PCPs have been historically and intensely undervalued in the fee-for-service system since it's primarily built around procedural care and not built around management of panels or populations,” Fields states.

Compensation for primary care physicians is much lower compared to the salary of most specialists in the US, with the average annual income of a family physician in 2020 coming in at $234,000 versus $411,000 for a dermatologist, $427,000 for a radiologist, and $511,000 for an orthopedist. What’s more, the country is facing a shortage of up to 48,000 primary care physicians through 2034.

Whether in value-based contracts or not, healthcare organizations will be competing for primary care and even specialty physicians. They are also up against private equity and venture-backed groups, which have highly competitive rates.

Value-based contracts align system goals (better quality at lower costs) with physician compensation. At Mount Sinai, for example, Fields thought about “risk-adjusted panel size compensation models for our physicians.”

Providers who care for more Medicaid and/or Medicaid patients can also win under value-based contracts since the contracting strategy encourages higher quality care, not higher volumes of services. This also decreases physician burnout while keeping the healthcare organization competitive.

#3 Digital medicine

Digital medicine is key to the value-based care transformation, but providers need to be wise about how they integrate digital delivery of care into the traditional, face-to-face style of medicine.

“Digital for what,” asks Fields. “[That is] one of the things I always say about digital [medicine]. What are you trying to do with it? Sure, patient acquisition is an important part of this, but if you’re really going to transform delivery of care, it can’t just be around telemedicine.”

An important lesson from the COVID-19 pandemic was not just that telemedicine works, but that the healthcare system needs to change to support the continued, productive use of telemedicine. Fields explains that Mount Sinai, like many other health systems, has seen care revert back to face-to-face encounters to “a huge degree.”

“Consumers are driving that that…but it’s also partially because the operations around how we delivered care didn’t change enough to meet the challenge and sustain it long-term,” Fields said. “We didn’t build, for example, virtual-only environments or really drive e-consults as a way of doing things moving forward.”

Fields suggested that healthcare organizations consider scheduled and on-demand telemedicine, AI-enabled delivery, remote monitoring, consumer-level health data integration, and digital tools for customer acquisition. These digital medicine methods can deliver care at a lower cost and improve access.

#4 Care delivery

Fostering team-based care and providing support for care providers is key to value-based care transformation, especially in the face of a challenging labor market.

“We know nursing shortages are running rampant. We have physician shortages, as well. We essentially have shortages in almost every area of healthcare, so we have to think about how to divide the work differently and create environments where teams can really prosper and grow if we want to survive in these risk-based models,” Fields elaborated.

Building care teams and giving the necessary resources to deliver team-based care can improve patient access—a major priority for value-based care. It can also “debulk the process and remove physicians from being the tip of the funnel in a complicated system,” Fields stated.

Contracting, physician compensation, digital medicine, and care delivery must all change to support true healthcare system transformation. Value-based care is key to enabling the transformation necessary, so providers not only have the infrastructure in place to improve outcomes and reduce costs but also the support to invest healthcare dollars in value-adding activities, like connecting with a community-based organization to address food insecurity or housing instability.

Value-based care enables the US healthcare system to shift its investments so providers can go beyond the basic clinical appointment and create an ecosystem of health.