Value-based care payment models

The new reality of value-based care transformation

Fueled by consumer expectations, cost pressures, regulatory actions, and, most recently, COVID-19, many health care provider organizations are pursuing value-based care business models. Our new four-part blog series explores critical recovery considerations for leaders emerging from the pandemic to the new reality of value-based care, as well as steps to take for long-term success.

Part 1 – Motivators: What factors are convincing providers that the time to act is now?

A confluence of internal and external factors is driving the health care industry’s investment in value-based care business models, with implications that span strategic, financial, clinical, operations, technology, and change management for provider organizations.

In the traditional landscape surrounding health care payment models, many providers were given the latitude to protect their core business and adopt a wait-and-see approach to value-based care and what it might mean to their business. Now, as health care executives survey the state of local market conditions, it’s likely that one of these factors—consumer expectations, cost pressures, regulatory actions, or COVID-19—is evident and already influencing either their organization’s strategy or that of a major competitor.

Explore these above value-based care motivators, along with case examples, in our first blog post on value-based health care payment models.

Part 2 – Smart first steps: What immediate actions can be taken to enable growth through value-based care?

Macro trends like those described in part 1 of our series have accelerated adoption of value-based payment models as providers and payers continue to shift away from fee-for-service (FFS) structures. Once health care providers gain a sense of urgency to adopt a value-based care model, the question then becomes, “Where do we start?”

For organizations just beginning to develop a strategy for the transition to value-based care, the journey often starts with a current-state assessment. The goals of the assessment should be to determine market dynamics, evaluate key capabilities that enable success in value-based contracts, and formulate what a financially sustainable value-based care strategy looks like. Here are the four steps parties should take:

  1. Develop a fact base: Evaluate external market and internal enterprise information to build a baseline.
  2. Review capabilities: Assess organizational maturity across key value-based care capabilities.
  3. Evaluate contracts and perform financial modeling: Identify opportunity in current contracts, and forecast the financial impact of future value-based care strategy.
  4. Develop a road map and set goals: Plot future activities against a timeline to achieve enterprise value-based care goals.


Part 3 – “No-Regrets” VBC Initiatives: Balancing Between Two canoes: How do you grow your VBC portfolio while continuing FFS operations?

Throughout the first two parts of this four-part series, we have examined some of the key questions and challenges we often see provider organizations tackle as they increase participation in value-based care (VBC) arrangements. From the initial motivators that prompt leaders to move away from fee-for-service (FFS), to smart first steps they can take once in VBC, provider systems often face many of the same struggles in their journey to becoming more risk-capable organizations. Early on, the journey can feel like straddling two canoes- a now commonly used metaphor for having one foot moving in the directly of your FFS business, incentive by volume of services, with the other foot moving slowly in the opposite direction.

Explore these “no-regrets” initiatives along with case examples in this blog to realize quick wins, show faster return on investment to key stakeholders, and create savings that can be put towards long-term strategic, value-based initiatives.

Part 4 – Long-term success: What are the must-have requirements for a road map to success in value-based care and care delivery transformation?

The fourth and final part to the series highlights providers who have reached what we call the “tipping point” for value-based care. These providers have reached maturity in their payer relationships and are driving impact on patient outcomes, provider engagement, and market and financial results. They have built essential capabilities to drive success, including:

  • Care management. Mature value-based care programs recognize that ongoing contract success requires an integrated care management model that leverages a multidisciplinary team equipped with actionable insights to provide the most effective support to patients.
  • IT infrastructure and interoperability. An interoperable IT and data analytics infrastructure is necessary to aggregate data from disparate source systems (including clinical, operational, financial, and administrative) and improve transparency across all points of care.
  • Reporting and analytics. Once the right IT infrastructure is in place, providers are investing in predictive and prescriptive analytics across multiple domains, including actuarial and finance, provider network management, care management, pharmacy, and clinical documentation.
  • Provider compensation. The underlying structure for provider compensation is focused more toward rewards for quality and outcomes and less around volume.
  • Leadership, governance, and operating model. An effective operating model is essential for gaining alignment around value-based care priorities. The operating model should describe how functions and services within an organization come together to support the vision and strategy.
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