Category Archives: Value Based Care Model

Kaiser+Geisinger: Our take on the formation of Risant Health

Posted on by • Posted in Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Kaiser Permanente, Market Consolidation, Market Trends, Mergers & Acquisitions, Value Based Care Model, Value-Based Healthcare • Leave a comment
https://www.advisory.com/daily-briefing/2023/04/27/kaiser-geisinger?utm_source=member_db&utm_medium=email&utm_campaign=2023apr27&utm_content=member_headline_final_x_x_x_x&elq_cid=4838956&x_id=0033b00002owB9sAAE

Kaiser Permanente  on Wednesday announced it is acquiring Geisinger Health, and Geisinger will operate independently under a new subsidiary of Kaiser called  Risant Health.

Deal details

The combination of the two companies will need to be reviewed by federal and state agencies, but if approved, the two companies will have more than $100 billion in combined annual revenue.

Geisinger will operate independently as part of Risant Health, which will be headquartered in Washington, D.C. and will be led by Geisinger president and CEO Jaewon Ryu. The health systems said they intend to acquire four or five more hospital systems to fold into Risant in an effort to reach $30 billion to $35 billion in total revenue over the next five years.

In an interview, Ryu and Kaiser chair and CEO Greg Adams said Risant will specifically target hospital systems already working to move into value-based care.

According to Adams, Risant Health “is a way to really ensure that not-for-profit, value-based community health is not only alive but is thriving in this country.”

“If we can take much of what is in our value-based care platform and extend that to these leading community health systems, then we extend our mission,” Adams said. “We reach more people, we drive greater affordability for health care in this country.”

Why we’re ‘cautiously optimistic’ about this acquisition 

Just when you thought healthcare couldn’t get more interesting, Kaiser and Geisinger announce their union through newly established Risant Health. At first pass, it is hard to see a downside with this deal — and that’s something that raises my “spidey-senses.”

Kaiser and Geisinger are coming together through a vehicle that could allow them to clear an increasingly skeptical  Federal Trade Commission. It affords two health systems — both in comparatively weaker financial positions than before the pandemic — the ability to get bigger through the merger. Its pitch is decidedly hospital- (and in the future provider) led, with Geisinger retaining its brand and elevating its CEO to the head of Risant. It also gives Geisinger and future partners the latitude to pursue their own payer relationships.

In addition, it is ostensibly a play to increase providers’ control over the nature and pace of value-based care (VBC) adoption. In its press release, Kaiser acknowledges that its closed network model of care management hasn’t scaled well to other markets. And Geisinger, with its own health plan and a track-record of developing its own VBC incentives, is no neophyte and brings a clear wealth of expertise.

Without a doubt, the offer to future partners is compelling: “Come for the size and stay for the value-based care.” But like all things in life, it’s all in the details. And that’s where my “spidey-sense” kicks in.

Partnership and affiliation models alone do not make the hard work of VBC easier. While this emerging group could become a valuable, provider-led clearing house for VBC concepts, applying them in communities remains a stubborn challenge that requires individual work and leadership.

The true test of the concept will come when the first new partner joins. How they decide to participate and whether the model has the right mix of scale and flexibility is what I’ll be watching closely. The overall objective and success measure of this endeavor remains somewhat opaque, but I would say that the concept has real legs here. Right now, I’m leaning toward “cautiously optimistic.”

Value-based Care

Posted on by • Posted in Accountable Care Organization (ACO), Artificial Intelligence, Board, Electronic Health Record (EHR), Health System, Hospital, Hospital Industry, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Stakeholder Communication, Strategic Imperative, Strategy, Strategy Development, Value Based Care Model • Leave a comment
Frontline Voices: What Artificial Intelligence and Value-based Models mean for Not-for-Profit Hospitals and Health Systems

Context: 

Value-based care is widely accepted as key to the health system’s transformation. Changing provider incentives from volume to value and engaging provider organizations in risk-sharing models with payers (including Medicare) are means to that end. But implementation vis a vis value-based models has produced mixed results thus far and current financial pressures facing providers (esp. hospitals) have stymied momentum in pursuit of value in healthcare. Last week, CMS indicated it intends to continue its value-based insurance design (VBID) model which targets insurers, and last month announced continued commitment to its bundled payment and ACO models. But they’re considered ‘works in process’ that, to date, have attracted early adopters with mixed results.

Questions:

What’s ahead for the value agenda in healthcare? Is it here to stay or will something replace it? How is your organization adapting?

Key takeaways from Discussion:

  • ‘Not-for-profit hospitals and health systems are fighting to survive: near-term investments in value-based models are unlikely unless they’re associated with meaningful near-term savings that hospitals and physicians realize. Unlike investor-owned systems and private-equity backed providers, NFP systems face unique regulatory constraints, increasingly limited access to capital hostile treatment in media coverage and heavy-handed treatment by health insurers.’
  • ‘Demonstrating value in healthcare remains its most important issue but implementing policies that advance a system-wide definition of value and business models that create a fair return on investment for risk-taking organizations are lacking. The value agenda must be adopted by commercial payers, employers and Medicaid and not limited to/driven by Medicare-alone.’
  • ‘The ACO REACH model is promising but hospitals are hesitant to invest in its implementation unless compelled by direct competitive threats and/or market share leakage. It involves a high level of financial risk and relationship stress with physicians if not implemented effectively.’
  • ‘Health insurers are advantaged over provider organizations in implementing value-strategies: they have data, control of provider networks and premium dollars.’
  • ‘Any and all value models must directly benefit physicians: burnout and frustration are palpable, and concern about income erosion is widespread.’
  • ‘Value in healthcare is a long-term aspirational goal: getting there will be tough.’

My take:

Hospitals, health systems, medical groups and other traditional providers are limited in their abilities to respond to opportunities in AI and value-based models by near-term operating margin pressures and uncertainty about their finances longer-term. Risk avoidance is reality in most settings, so investments in AI-solutions and value-based models must produce near-term ROI: that’s reality. Outsiders that operate in less-regulated environments with unlimited access to capital are advantaged in accessing and deploying AI and value-based model pursuits. Thus, partnerships with these may be necessary for most traditional providers.

AI is tricky for providers:

Integration of AI capabilities in hospitals and medical practices will produce added regulator and media scrutiny about data security and added concern for operational transparency. It will also prompt added tension in the workforce as new operational protocols are implemented and budgets adapted.  And cooperation with EHR platforms—EPIC, Meditech, Cerner et al—will be essential to implementation. But many think that unlikely without ‘forced’ compliance.

Value-based models:

Participation in value-based models is a strategic imperative: in the near term, it adds competencies necessary to network design and performance monitoring, care coordination, risk and data management. Longer-term, it enables contracting directly with commercial payers and employers—Medicare alone will not drive the value-imperative in US healthcare successfully. Self-insured employers, private health insurers, and consumers will intensify pressure on providers for appropriate utilization, lower costs, transparent pricing, guaranteed outcome and satisfying user experiences. They’ll force consumerism and value into the system and reward those that respond effectively.

The immediate implications for all traditional provider organizations, especially not-for-profit health systems like the 11 who participated in Chicago last week, are 4:

  • Education: Boards, managers and affiliated clinicians need ongoing insight about generative AI and value-based models as they gain traction in the industry.
  • Strategy Development: Strategic planning models must assess the impacts of AI and value-based models in future-state scenario plans.
  • Capital: Whether through strategic partnerships with solution providers or capital reserves, investing in both of these is necessary in the near-term. A wait-and-see strategy is a recipe for long-term irrelevance.
  • Stakeholder Communication: Community leaders, regulators, trading partners, health system employees and media will require better messaging that’s supported by verifiable facts (data). Playing victim is not a sustainable communications strategy.

Generative AI and value-based models are the two most compelling changes in U.S. healthcare’s future. They’re not a matter of IF, but how and how soon.

Questioning the value of the integrated delivery system

Posted on by • Posted in Business Model, Health System, Hospital, Hospital Industry, Integrated Delivery System, Value Based Care Model, Value Journey, Value Proposition, Value-Based Healthcare • Leave a comment

https://mailchi.mp/175f8e6507d2/the-weekly-gist-march-3-2023?e=d1e747d2d8

During one of our regular check-ins with a health system CEO this week, the conversation took a turn for the existential. Lamenting the difficult economic situation in the industry, the continued shift of care to ambulatory disruptors, and the mounting pressure to dial back money-losing services, he shared that he was starting to question the fundamental business model. 

“Many years ago, we set out to become an integrated delivery system. But I’m not sure we’ve succeeded at any of those things: we’re not integrated enough, we don’t act like a system, and we don’t seem to be delivering the kind of care consumers want.” A stark admission, but one that could apply to many large health systems across the industry.

In theory, those three “legs of the stool” should create a virtuous flywheel: greater integration across the care continuum (perhaps in a risk-bearing model, but not necessarily) ought to allow systems to deliver quality care at the right place, right time. And a system-oriented approach ought to allow for efficiencies and cost-savings that enable care to be delivered at lower cost to patients.

Instead, the three components often create a vicious spiral: care that’s not coordinated across an integrated continuum, with little success at leveraging system-level efficiencies, resulting in unnecessary, duplicative, and variable-quality care delivery at excessive cost.

Capturing the value of integrated delivery systems will ultimately require hard work, and not just lip service, on all three pieces. Meanwhile, scaling a broken model will only exacerbate the problems of organizations that are neither integrated, nor systemic, nor delivering care that is high value.

Be Ready for the Reorganized Healthcare Landscape

Posted on by • Posted in Board, Business Model, CEO, Change, Change Management, Change Mindset, Leadership, Medicare Advantage, Mindset, Physician Compensation, Physician Employment, Physician Leadership, Physician Network, Physician Practice Acquisition, Physician Practice Management, Private Equity, Strategic Issue, Strategic Leadership, Strategy, Value Based Care Model, Value-Based Care Functions, Value-Based Contracting, Value-Based Healthcare • Leave a comment

Click to access Industry_Insights_1.25.23.pdf

Running a health system recently has proven to be a very hard job. Mounting losses in the face of higher operating expenses, softer than expected volumes, deferred capex, and strained C-suite succession planning are just a few of the immediate issues with which CEOs and boards must deal.


But frankly, none of those are the biggest strategic issue facing health systems. The biggest
strategic issue is the reorganization of the American healthcare landscape into an ambulatory care
business that emphasizes competing for covered lives at scale in lower cost and convenient settings
of care. This shift in business model has significant ramifications, if you own and operate acute care
hospitals.


Village MD and Optum are two of the organizations driving the business model shift. They are
owned by large publicly traded companies (Walgreens and UnitedHealth Group, respectively). Both
Optum and Village MD have had a string of announced major patient care acquisitions over the past
few years, none of which is in the acute care space.


The future of American healthcare will likely be dominated by large well-organized and well-run
multi-specialty physician groups with a very strong primary care component. These physician
service companies will be payer agnostic and focused on value-based care, though will still be
prepared to operate in markets where fee-for-service dominates. They will deliver highly
coordinated care in lower cost settings than hospital outpatient departments. And these companies
will be armed with tools and analytics that permit them to manage the care for populations of
patients, in order to deliver both better health outcomes and lower costs.


At the same time this is happening, we are experiencing steady growth in Medicare Advantage.
And along with it, a stream of primary care groups who operate purpose-built clinics to take full risk
on Medicare Advantage populations. These companies include ChenMed, Cano Health and Oak
Street, among others. These organizations use strong culture, training, and analytics to better
manage care, significantly reduce utilization, and produce better health outcomes and lower costs.


Public and private equity capital are pouring into the non-acute care sectors, fueling this growth. As
of the start of 2022, nearly three quarters of all physicians in the US were employed by either
corporate entities (such as private equity, insurance companies, and pharmacy companies), or
employed by health systems. And this employment trend has accelerated since the start of the
pandemic. The corporate entities, rather than health systems, are driving this increasing trend.
Corporate purchases of physician practices increased by 86% from 2019 to 2021.


What can health systems do? To succeed in the future, you must be the nexus of care for the
covered lives in your community. But that does not mean the health system must own all the
healthcare assets or employ all of the physicians. The health system can be the platform to convene these assets and services in the community. In some respects, it is similar to an Apple iPhone. They are the platform that convenes the apps. Some of those apps are developed and owned by Apple. But many more apps are developed by people outside of Apple, and the iPhone is simply the platform to provide access.


Creating this platform requires a change in mindset. And it requires capital. There are many opportunities for health systems to partner with outside capital providers, such as private equity, to position for the future – from both a capital and a mindset point of view.


The change in mindset, and the access to flexible capital, is necessary as the future becomes more and more about reorganizing into an ambulatory care business that emphasizes competing for covered lives at scale in lower cost and convenient settings of care.

New business models for senior care

Posted on by • Posted in Home Care, Home-Based Care, Medicare Advantage, Value Based Care Model, Value-Based Healthcare, Value-Based Senior Care • Leave a comment
https://www.axios.com/newsletters/axios-vitals-cffa35a1-d689-40da-b9a8-3392ea1a832b.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

Driven in large part by the growth of Medicare Advantage, a number of startups are vying to create the next value-based care model for senior care in patients’ homes, Axios’ Sarah Pringle reports.

Why it matters: As we recently reported in our Elder Care Crisis Deep Dive, there is a shortfall of enough cash and caregivers to handle the massive amount of aging baby boomers reaching their senior years.

State of play: Senior care-related startups commanding fresh rounds of investor funding this year include Upward Health, Biofourmis, ConcertoCare, and Vytalize Health.

  • “The cool thing about value-based care?” General Atlantic managing director Robb Vorhoff said. “There’s hundreds of business models.”

Reality check: Scaling remains a challenge for new models looking to shake up the senior care market.

  • “There are a lot of options out there that you don’t know about,” Town Hall Venture’s Andy Slavitt says. “Some are the best-kept secrets; some are not worth knowing about.”

Be smart: While most elderly adults would prefer to age in place, there is still a need for institutional care settings like nursing homes, which presents its own major challenges, Sarah writes.

An overhaul for Medicare’s pay transformation program

Posted on by • Posted in ACA, Accountable Care Organization (ACO), Alternative Payment Model, American Medical Association (AMA), Health Policy, Medicare Shared Savings Program (MSSP), Population Health, Value Based Care Model, Value-Based Healthcare • Leave a comment
https://www.axios.com/2022/11/02/overhaul-medicares-pay-transformation-program?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

The Biden administration is trying to jump start a Medicare program that pays health providers based on patient outcomes rather than by how many services they perform.

Why it matters: The alternative payment effort was created through the Affordable Care Act, but participation has plateaued since 2018 amid waning interest from providers.

Driving the news: The Biden administration finalized an overhaul of the initiative, known as the Medicare Shared Savings Program, on Tuesday. Changes include offering groups of providers in rural and other underserved areas upfront payments to help them start out in the program.

  • The rule includes other provisions to make it less financial risky for provider groups to join, and makes it easier for participants to earn money back from the government year after year — a central perk of joining the program.

Zoom out: Medicare traditionally pays on a “fee-for-service” basis pegged to the number of patients seen and volume of procedures performed.

  • But one of the main funding sources for Medicare is set to run dry in 2028 if the federal government doesn’t make changes. Advocates say the solution at least partially lies in value-based care programs, like the Shared Savings Program.
  • Under the program, doctors, hospitals and other providers join form groups known as accountable care organizations. ACOs take responsibility for the care of a set of traditional Medicare patients.
  • If ACOs reduce total care costs for their members, they can get back a portion of that savings from the government. ACOs at more advanced stages of the program must pay the government back if total patient spending crosses a threshold.

By the numbers: ACOs have saved the federal government more than $17 billion since 2012, according to the National Association of Accountable Care Organizations.

  • In 2022, 483 ACOs participated in the program and took care of more than 11 million Medicare enrollees. But that’s down from 517 ACOs participating in 2020.
  • CMS set a goal last year to bring all 63 million-plus Medicare beneficiaries into a value-based care model by 2030. ACOs are a key player in achieving the goal.

Go deeper: Providers and value-based care advocates are also pushing Congress to extend a 5% pay bump for providers that participate in advanced alternative payment models, including some tracks of the Medicare Shared Savings Program. The bonus expires Dec. 31.

  • “If the bonus is not continued, it will soften or dampen the momentum toward alternative payment models, because it would create this mentality, or the view, that we’re not serious about that transformation,” said Mara McDermott, vice president at McDermott+Consulting and executive director of the Value Based Care Coalition.
  • Losing the bonus would also make it harder to recruit new providers into alternative payment models, she added.
  • The American Medical Association and five other health care groups launched a separate coalition Tuesday to rally around an extension of the 5% bonus.
  • “Patients and the healthcare system in the United States quite literally cannot afford to return to the days before Medicare incentivized healthcare providers for generating good results,” Clif Gaus, CEO of the National Association of ACOs, said in a news release about the coalition.

Also notable: The rule finalized Tuesday outlines physician payment rates for 2023. Interventional radiologists and vascular surgeons will see the largest Medicare cuts among physician specialties next year, though the final cuts are slightly lower than what CMS proposed in July.

  • Congress could stave off the cuts when they come back to Washington later this month.
  • “The Medicare payment schedule released today puts Congress on notice that a nearly 4.5 percent across-the-board reduction in payment rates is an ominous reality unless lawmakers act before Jan. 1,” American Medical Association President Jack Resneck said in a statement.
  • CMS finalized a slew of other policy proposals Tuesday, including provisions to reduce barriers to behavioral health care.

Still a long way away from real “value” 

Posted on by • Posted in ACA, Accountable Care Organization (ACO), Health Insurance Industry, Health Policy, Health System, Hospital, Hospital Industry, Medicare Shared Savings Program (MSSP), Population Health, Risk, Risk Tolerance, Risk-Based Compensation, Risk-Based Contracting, Strategy, Value Based Care Model, Value-Based Healthcare • Leave a comment

https://mailchi.mp/cd392de550e2/the-weekly-gist-october-21-2022?e=d1e747d2d8

The belief that healthcare should, and would, transition from “volume to value” was a key pillar of the Affordable Care Act (ACA). However, with more than a decade of experience and data to consider, there is little indication that either Medicare or the healthcare industry at large has meaningfully shifted away from fee-for-service payment. Using data from the National Association of Accountable Care Organizations, the graphic below shows that the Medicare Shared Savings Program (MSSP)—the largest of the ACA’s payment innovations, with over 500 accountable care organizations (ACOs) reaching 11M assigned beneficiaries—has led to minimal savings for Medicare. In its first eight years, MSSP saved Medicare only $3.4B, or a paltry 0.06 percent, of the $5.6T that it spent over that time.  
 
Policymakers had hoped that a Medicare-led move to value would prompt commercial payers to follow suit, but that also hasn’t happened. The proportion of payment to health systems in capitated or other risk-based arrangements barely budged from 2013 to 2020—remaining negligible for most organizations, and rarely amounting to enough to influence strategy. The proportion of risk-based payment for doctors is slightly higher, but still far below what is needed to enable wholesale change in care across a practice.

While Medicare has other options if it wants to increase value-based payment, like making ACOs mandatory, it’s harder to see how the trend in commercial payment will improve, as large payers, who are buying up scores of care delivery assets themselves, seem to have little motivation to deal providers in on risk. 

While financial upside of moving to risk hasn’t been significant enough to move the market to date, we aren’t suggesting health systems throw out their population management playbook—to meet mounting cost labor pressures, systems must deliver lower cost care, in lower cost settings, with lower cost staff, just to maintain economic viability moving forward.

Babylon Health announces planned sale of California physician group

Posted on by • Posted in Digital Health, Disruption, Disruptive Technology, Divestitures, Initial Public Offering (IPO), Innovation, Value Based Care Model, Value-Based Healthcare • Leave a comment

https://mailchi.mp/cd392de550e2/the-weekly-gist-october-21-2022?e=d1e747d2d8

In a press release, London-based telemedicine provider Babylon Health said it intends to divest Meritage Medical Network, its 1,800-physician independent practice association located in Northern and Central California. Babylon claims the sale will allow it to better focus on its core business model of digital-first, value-based care contracts. After going public last year at $4.2B, Babylon’s valuation has fallen over 95 percent.

The Gist: Yet another highly touted healthcare startup with digital-first “solutions” has announced a massive pullback in its care footprint. As we wrote about Bright Health last week, these companies have failed to meet investor demands, and must now shutter services or sell assets to buy time to prove their core business model can actually turn a profit.

In Babylon’s case, integrating established physician practices into a digital-first, value-based care model was always going to be costly, challenging and time-consuming—too slow to deliver the returns demanded by an increasingly difficult investor market.