As healthcare leaders navigate the complexities of modern medicine, the transition to value-based care (VBC) emerges as a pivotal strategy for enhancing patient outcomes and ensuring financial sustainability. Dependency on an unsustainable fee-for-service business model, coupled with unrelenting challenges associated in caring for an aging chronically ill population, is a recipe for financial strain and suboptimal patient care outcomes in the long-term.
For health systems, it is especially important to take decisive action in pursuing value-based care adoption as an imperative to ensure strategic positioning and financial security. Two-sided risk contracts are the only way forward to amplify upside opportunities in both clinical and financial transformation. According to recent research by EY-Parthenon, health systems must reconsider traditional models and embrace VBC to address the rising costs and reimbursement pressures exacerbated by the COVID-19 pandemic. The researchers depict the unsustainable trajectory for health systems that remain overly dependent on a fee-for-service model in the long-term.
Financial Implications
Transitioning to VBC can initially disrupt financial performance due to the significant upfront investments and operational changes required. However, as EY-Parthenon’s analysis reveals, health systems that successfully navigate this transition can achieve sustainable growth in profitability. VBC contracts can accelerate cash flow through prospective payments and improve margins by incentivizing clinicians to focus on outcomes rather than service volume. Over time, systems that mature in their VBC capabilities can recover margins and achieve steady financial performance.
“Continued improvement in managing the cost of care within VBC contracts can produce sustainable growth for health systems with the right capabilities, incentives and expectations. As contracts and operations ramp up, there likely will be short-term financial disruption, but this can be replaced with steady single-digit margin recovery as the system moves along the maturity curve. Compared to the lasting margin erosion that FFS models will experience, driven by demographics, coverage and expense trends, it is clear systems should consider a shift to VBC despite the known risks.”
Key Strategies for Successful Transition:
- Patient Attribution and Engagement: Effective patient attribution and long-term engagement are critical for maintaining a stable population under risk. Focusing on a single patient cohort, such as Medicare or Medicaid, during the initial stages of VBC adoption can streamline care and engagement strategies.
- Accurate Documentation: Comprehensive documentation of patient conditions ensures appropriate compensation for managing at-risk populations. Accurate risk coding not only aids reimbursement but also supports the creation of individualized care plans that address clinical gaps.
- Holistic Medical Management: Developing a holistic and evolving care plan is essential for preventing severe health issues and reducing hospitalizations. This approach leverages direct patient relationships to provide timely and appropriate care, ultimately lowering costs.
- Operating Expense Management: Effective cost management is crucial under VBC contracts. Hospitals must control expenses related to supplies, staffing, and administration to mitigate margin risks. Deploying technologies like generative AI can support these efforts by optimizing operations and reducing costs.
- Governance and Physician Alignment: Successful VBC adoption requires strong governance and physician buy-in. Clear responsibility, decision-making structures, and performance targets are essential for transforming care delivery. Physicians must be educated and engaged to lead efforts in improving care value and efficiency.
Health systems that strategically invest in VBC adoption can achieve long-term growth and redefine their business model for success. By focusing on patient outcomes, leveraging technology, and fostering collaborative care models, they can overcome initial financial disruptions and thrive in a value-driven healthcare environment.
Don’t Go It Alone
Lumeris has been partnering with health systems to deploy multi-service line, multi-payer type VBC solutions for years. We collaborate closely with health systems by utilizing cutting-edge technologies, advanced risk management, and value-based care capabilities. We are on a journey to empower health systems to fulfill the promise of value-based care.
We urge healthcare leaders to consider the critical importance of value-based care. Now is the time to take bold steps towards this transformative model. Invest in the necessary infrastructure, engage your clinical teams, and leverage innovative technologies to create a sustainable, patient-centered healthcare system. Connect with us to learn more about how an enabling partnership can empower your health system in achieving sustained financial viability while improving health care outcomes for all.