Posted: 11 Feb. 2020 14 min. read

More Blues plans are embracing value based care…what does that mean for hospitals, physicians, and other carriers?

by Mark Bethke, managing director, and Christopher Murray, senior manager, Deloitte Consulting LLP

A growing number of regional Blue Cross and Blue Shield plans are transitioning patient risk to providers via value-based care (VBC) payment models. Some of these Blues plans had previously indicated they would not drive their markets toward VBC. That mantra appears to be changing, however. As more Blues plans embrace VBC, competing health plans could respond by moving in the same direction, which could have profound implications for hospitals and physician groups in those markets.

VBC contracts are typically designed to improve care quality and to reduce costs for health plans and providers, which can translate to lower premiums for employers and members. Blues plans in Kansas, South Dakota, South Carolina, and several other states are already using accountable care organizations (ACOs), data-driven insights, heightened coordination of care, bundled payments, and other innovative techniques to improve outcomes and measure success at the local level.1 While the barriers to VBC success can be high, the inherent challenges do not seem to be hindering the transition. VBC is becoming an increasingly larger share of provider revenue in many markets.

Don’t wait for value based care to arrive

Hospitals, health systems, physician groups, and health plans that take a proactive approach to VBC might avoid future market share losses, while organizations that try to avoid it could be forced to adapt or be left behind. As employers and members demand more value from their health plans, some Blues plans might drop providers that are hesitant to share risk.2

Here’s a look at a few Blues plans that have publicly announced VBC initiatives: 

Blue Cross Blue Shield of North Carolina: Blue Premier, which the North Carolina Blues plan describes as a next-level VBC program, includes five major health systems covering hundreds of thousands of patients. In January, the Blues plan said it had partnered with New York City-based Quartet to launch a value-based payment model for mental-health care. Blue Premier Behavioral Health will reward mental health providers with incentive payments for achieving improvements and meeting benchmarks in quality measures.3

Horizon Blue Cross Blue Shield of New Jersey: Nearly half of Horizon’s 3.5 million members are covered under value based arrangements, and 68 percent of the health plan’s total medical spend goes through value based providers. OMNIA Health Alliance is Horizon’s largest value based program, and cost savings generated by the program have reduced premiums by 15 percent, according to the company.4

Blue Cross Blue Shield Kansas: Matt All, president and CEO of the Kansas Blues plan, said his company intends to improve health outcomes by “partnering with providers and making sure that they have an incentive to give higher quality care [and] to coordinate care,” by switching to VBC.5

Blue Cross Blue Shield of Nebraska: The company’s Primary Blue VBC initiative has more than 102,000 patients, more than 450 participating providers, and over 160 clinic locations.6

Providers that have not yet made the switch to VBC might soon feel pressure to make the transition and should work closely with their health plans to develop mutually beneficial arrangements. Nationwide, more than 62 million BCBS members now have access to VBC programs, according to the Blue Cross and Blue Shield Association. In 2018, regional Blues plans held more than 50 percent of the market share in 13 states.7

Common barriers to VBC success in payer/provider arrangements

Value-based contracts tend to be highly varied and require regular monitoring of the financial, clinical, and quality measures outlined in each arrangement. Incomplete or inaccurate data, or a lack of transparency, can pose enormous challenges on both sides of the partnership—from privacy issues on the payer side to lagging analytics capabilities on the provider side. Both providers and health plans should identify and assess their potential pain points before entering into a value-based arrangement. Mature health plans and providers should be able to adapt to new regulations and establish best practices for the entire market—such as next-generation technology platforms and automation.

Ready or not, value based care is here

To prepare for what seems to be a collective shift to VBC by Blues plans, hospitals, health systems, and provider groups should look to possess the following attributes to be well-positioned for a successful transition:

A strong data-analytics engine: Players on both sides should have access to real-time data, advanced enterprise data warehouse (EDW) capabilities, and user report enablement, which are essential for contract management, pricing strategy, and value-based performance tracking. Tools such as these can be vital enablers for both health plans and providers to effectively administer VBC programs.    

Impactful performance metrics: Targeted financial and clinical measures should be measured and tracked across patient segments. Agreed-upon performance metrics by both health plans and providers can establish base lines for success, costs control, and improved quality. Conditions to allow providers to fully tap into population health capabilities can be key in helping performance in value-based arrangements.

Innovation: Digital health technologies could help to improve care quality and efficiency. Providers should try to work closely with Blues plans and other health plans to develop thoughtful, focused, and effective initiatives to coordinate care and improve patient experience. 

Each provider’s state of VBC-readiness is unique and adopting value based practices together with a Blues plan is a process. It’s important that providers and plans continue to take steps forward in order to avoid being left behind in a fee-for-service world.


1. Blues are shaping the future of value-based care, The Blue Cross Blue Shield Association, April 26, 2018
2. Value-based care requires payer and provider collaboration, Healthcare Finance, June 27, 2019
3. Blue Cross NC, Quartet roll out value-based payment model for mental health, FierceHealthcare, January 28, 2019
4. Partnering on Value-Based Care is Key to Reining In Health Care Costs, Horizon blog post, August 16, 2019
5. Matt All YouTube video, Blue Cross Blue Shield Association, November 18, 2019
6. Improving outcomes and lowering costs, BlueCross BlueShield Nebraska
7. Market share and enrollment of largest three insurers—large group market, Kaiser Health News, 2018 

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Mark J. Bethke, FSA, MAAA

Mark J. Bethke, FSA, MAAA

Managing Director | Deloitte Consulting LLP

Mark has been a health care consultant for Deloitte Consulting LLP since June 1999. He is also a Fellow of the Society of Actuaries (FSA) and a Member of the American Academy of Actuaries (MAAA). Mark is the Health Actuarial and Financial Modeling leader for Deloitte’s Value Based Care and MACRA market offerings. He helps his hospital, physician, and health plan clients bridge their financial business needs through strategic collaboration in value-based accountable care models. His core competencies include value-based aligned incentive models and health information analytics by developing data models to help assess risk and model potential business scenarios. Mark works on issues such as provider contracting, risk/gain sharing, product development, financial analysis and management, data structure design, and health status-based risk adjustment. He also has extensive experience in health care data analysis and modeling, benefits pricing, and health care provider payment systems.