Each year, a small group of senior strategy executives from the nation’s most prominent multi-hospital systems and provider groups are invited to attend a two-day retreat convened by Paul Keckley of The Keckley Report. Lumeris has been a long-standing supporter of the strategy executive retreat and brings unique perspective to the dialogue from experiences working with leading health systems and provider groups across the country for more than a decade. The retreat, held in November 2023, focused on the issues and challenges providers face today and their assessment of market opportunities and priorities in the near-term (3-5 years) and long-term (8-10 years) that will enable long term success and sustainability.

The Keckley Report published a summary of the retreat findings and one of the key themes that emerged from the discussed was that strategy executives are increasingly working inside their organizations to identify opportunities to drive “value” across services to lower costs and enhance revenues. Additionally, it was clear that participants believe risk-sharing opportunities with insurers will expand in the near-term and there was consensus that fee-for-service revenues will likely diminish, replaced by alternative payment models, or in some cases, capitation models.

Key Value-Based Care Themes:

• Though the participating strategy executives recognize that several of CMS’s alternative payment models have been unsuccessful, they believe accountable care organizations (MSSP & ACO REACH) and bundled payments have the greatest likelihood of generating Medicare spending reduction and producing surplus for provider organizations.
• Mandatory participation in alternative payment models (APMs) or risk-sharing arrangements with Medicare is not anticipated in the near term. Furthermore, widespread adoption of APMs by employers is not expected.
• The executives believe the concept of value in healthcare delivery has been unclear but expect regulators and payers to advance expectations that facilitate wider use.
• The executives recognize that risk-sharing with payers requires a well-run clinically integrated network (CIN) and infrastructure to measure and manage performance. Data capture and sharing are table stakes to success.
• Primary care plays a central role in risk-sharing because it is the foundation for managing referrals, accessing necessary services, and improving outcomes and patient experience.
• Primary care will increasingly be delivered in bi-model fashion (virtual and in-person).

“Value” is the Future
The dialogue observed with these senior executives was clear: Fee-For-Service is not the future. What also was clear is that what replaces this transactional model of payment is a concept around “value” though few define this in a consistent way. This ambiguity is not surprising given the transitory nature of the current healthcare marketplace as demographics change, markets consolidate, regulatory policies, and technologic changes rapidly reshape our world. To sort through this noise, we must pay attention to the demands and expectations of consumers, employers, and the government itself. All three key stakeholders are demanding more “value” for their healthcare dollars. To Lumeris, this means ensuring that care truly becomes about health and that all healthcare services are delivered in the most effective and efficient manner to achieve optimal patient and population centric outcomes. This doesn’t mean the lowest cost for a service but rather an operational, clinical, and economic model that aligns the interests of the parties and measures and reports the outcomes this experience delivers. With the participants clearly voicing they do not believe the future will offer a dramatically different healthcare economy, many believe that an enterprise “value” play, anchored around the respective organization’s provider networks, will be a key strategy to a sustainable future.

Capitation is Back on the Radar
The capitation experiment of 25 years ago had significant challenges. Capitation in the late 1990s to early 2000s was focused on capturing financial arbitrage, managing cost at the plight of access, and lacked appropriate accountability measures and the data and technology to accelerate informed decision-making. The result was lower quality of care and patient satisfaction, without a material improvement in the cost of care.

With a broader focus, capitation can now deliver on today’s consumer demands if the proper changes are made throughout care delivery. We now have access to technology platforms that aggregate and derive actionable insight from vast amounts of disparate data. With advanced visibility of the totality of the patient’s health and societal experience, we can intervene earlier to reduce negative outcomes and to better utilize clinical resources and decision-making. Provider organizations can then communicate and pay clinicians in a capitated model that aligns to their direct incentives. Organizations that commit to unlocking this wealth of information and behavioral economics to drive performance and efficiency in their provider network will have an exponentially greater likelihood of success in achieving growth and sustainability.

Looking Forward
New and improved value models are in play in 2024, and they will significantly influence the winners and losers in the next 10 years. This requires providers to get their integrated technology house in order and combine clinical, quality, experience, and financial outcomes into a “value” proposition that is clear to the three key stakeholders: consumers (patients), employers (purchasers), and government (purchaser and policy maker). These stakeholders will respond favorably or unfavorably and shift market forces accordingly. Incumbent providers cannot fall behind, and they know that, and it was highlighted at the retreat. Expect big moves by providers in value in the next couple years (or less).