Is value-based care still the right strategy to reduce U.S. healthcare costs? Or is it time to move to what comes next in the generation-long battle to constrain total medical spending?
The question is being increasingly asked and with good reason. For 2024 medical costs are projected to rise 7.0% year over year for Individual and Group markets. That is greater than the medical cost trend in 2022 and 2023, which was 5.5% and 6.0%, respectively, and adds to a decade-plus of at least 5.5% per year increases..
No matter how compelling the theory of value-based care is, in practice, it has not changed cost trend lines (yet). That disconnect has led industry voices and policymakers to ask whether value-based care is the right strategy poorly executed, or the wrong approach no matter how well done.
Recent Congressional hearings have criticized the CMS Innovation Center for failing to generate significant savings in healthcare costs. While these concerns are valid, they highlight the need for improved execution rather than abandoning the value-based care model altogether. We must refocus our efforts on supporting healthcare providers and systems in this transition, rather than reverting to outdated fee-for-service models that have consistently failed to control costs.
I believe that value-based care remains the right strategy to make care affordable. But we must rethink how we activate the strategy to succeed.
Defining Value-Based Care
Simply put, value-based care is a healthcare delivery model where providers are paid based on patient health outcomes. In this model, providers are incentivized and rewarded for improving the health of patients and reducing the severity of chronic disease, enabling patients to live healthier and longer lives.
When implemented correctly, value-based care can deliver remarkable results. Our own experience demonstrates this:
– 4.5 – 5.0 Star quality ratings consistently achieved over the past six years
– Patient satisfaction scores (CG-CAHPS) ranking in the top 20% nationally
– Average Medicare spend per capita 25-30% below the national average for six consecutive years
– Physician satisfaction, as measured by the AMGI Survey, ranked above the 95th percentile in professional fulfillment
These results prove that value-based care, when properly executed, can simultaneously improve quality, patient satisfaction, cost-effectiveness, and physician well-being.
With this definition and results, one could argue, that there really shouldn’t be a question as to whether or not value-based care is the right strategy. Instead, the question is: How can we execute more effectively to achieve the promise of higher quality at lower healthcare costs?
Right Strategy
One way to answer that is to think about the alternatives. There are three big strategy levers we can work to slow the rise in medical spending:
1. Shift costs to families and employers (price people out of the market)
2. Ration care by paying providers less (artificially cap spending)
3. Accelerate the shift to value-based care (do better with less).
There is little political appetite to price people out of the market or ration care. Our policy goals are affordability and access. From an economic perspective, McKinsey estimates the cost of poor health is about 15% of annual GDP, reflecting employee absenteeism and presenteeism. Rationing or pricing people out of the market in ways that degrade employee health and productivity only shifts costs to other economic and social accounts. The alternative is to rethink how we organize and operate to make better use of our limited healthcare resources. These are the underpinnings of value-based care.
It is estimated that up to 30% of U.S. healthcare spending is wasted on low-value care—a definition that includes administrative complexity, duplication of services, wrong sites of care, and overutilization. Low-value care offers little or no patient benefit and has the potential to cause harm. It wastes limited healthcare resources. It is toxic to the success of value-based care. And, it has proven stubbornly difficult to eliminate, often because it is viewed as demand-destruction for billable events that drive health system top-line revenue and margins.
The failure to structurally address low-value care is the reason, in my opinion, why value-based care has not yet generated the expected results in cost reduction.
Different Activation
There are a multitude of value-based care strategies to change medical cost trends. None will succeed until we transform the primary care business model. That transformation requires that we activate critical value-oriented strategies including:
1. Standardizing and automating administrative and clinical tasks
Removing variation, defined as the over-, under-, or unnecessary utilization of healthcare resources, improves quality, efficiency, and outcomes across episodes of care. To transform the business model, we must standardize analog clinical and administrative processes and apply technology to automate predictable, repeatable tasks. The current state is that many healthcare executives view value-based care as another administrative burden placed on the backs of physicians, and this is true when value-based care is not supported with standardization and automation. With the appropriate processes, technologies, and support to standardize and automate key tasks, we can take the burden off primary care physicians, reduce burnout, restore the joy of practice, and significantly improve quality outcomes.
2. Managing the unseen panel member
In the traditional fee-for-service payment model, the patient in the primary care physician’s office drives how primary care is paid and how clinicians are compensated. Yet the engagement of the “unseen” patient is what drives quality and efficiency incentive performance in value-based contracts. Managing this “unseen” cohort requires that PCPs have access to solutions that show an integrated record of all physical and behavioral care consumed by the patient, as well as resources to coordinate and manage care outside the office. Typically, the highest costs aren’t incurred during primary care visits. Instead, they arise from care received between appointments and outside the physician’s office. While doctors are often familiar with their frequent visitors who have high healthcare needs, they may be unaware of attributed patients who repeatedly use emergency services for conditions treatable in a primary care setting. Identifying and managing these patients is crucial for improving outcomes and controlling costs in value-based models.
3. Shifting to asynchronous and virtual platforms
The traditional primary care model relies heavily on in-person, synchronous, clinician-led encounters. This approach assumes that every patient interaction requires the same level of clinical complexity and direct physician involvement. However, data shows that many common, low-acuity conditions don’t necessitate this resource-intensive approach. To truly transform primary care, we need payment models that incentivize the use of standardized processes and enable non-physician team members to provide timely, safe, and appropriate care for less complex issues. This shift allows physicians to focus on more challenging cases that truly require their expertise. By adopting asynchronous communication methods and virtual care platforms, we can extend the reach of the care team, improve access for patients, and use our clinical resources more efficiently.
4. Aligning volume and value strategies
To achieve lasting success in value-based care, we must develop a complementary strategy that aligns both volume-based and value-based approaches, particularly in acute and inpatient settings. This dual strategy ensures that we’re providing the right care to the right patients at the right time and in the right setting. By carefully managing patient flow and care delivery, we can create financial stability for health systems while simultaneously improving overall cost-effectiveness. The goal is not to artificially inflate volume but rather to ensure that medical spending is optimized – directing resources to the patients who truly need higher levels of care and avoiding unnecessary utilization.
Conclusion
It’s crucial to recognize that transforming a system as complex as healthcare takes time. We’re still in the early stages of this shift, and it’s unrealistic to expect immediate, system-wide results. Historical precedents, such as the adoption of electronic health records or the implementation of safety protocols, show that major healthcare transformations often take a decade or more to fully realize their benefits. We must remain patient and committed to this process while continuously refining our approach.
Addressing physician and provider concerns is paramount to the success of value-based care. When we move to a value-based model and provide clinical teams with the right support, we can ease the administrative burden on physicians. This is not about adding more tasks to already overworked healthcare providers; it’s about reimagining workflows, leveraging technology, and providing comprehensive support systems that allow physicians to focus on what matters most: patient care.
Additionally, this transition is not a part-time endeavor. We must be intentional and committed in our efforts to surround physicians with the right resources and support. If we fail to do this, we will never achieve the desired results. Many health systems recognize that partnering with organizations specializing in managing this change and delivering operational excellence can be a game-changer. These partnerships can provide the expertise, resources, scale, and focused attention necessary to successfully navigate the complexities of value-based care implementation.
As long as medical cost trend lines are rising, there will be skepticism about whether value-based care is the right strategy to impact the affordability of care. The fallback options to lower total spending may be to price people out of the market or ration care in ways without winners.
When we, as an industry, get serious about business model transformation, we will likely start to realize the downward cost trajectory necessary to answer the skeptics. The opportunity in front of value-based care advocates, like me, is to take the lessons we have learned to date on small- and medium-scale successes and apply them to entire markets – giving us the strong industry tailwinds that will significantly positively impact cost, affordability, and quality across our healthcare system.
The path to value-based care may be challenging, but it remains our best strategy for improving healthcare quality while controlling costs. By focusing on improved execution, leveraging successful models, supporting our healthcare providers, and partnering with experts in the field, we can overcome the current obstacles and realize the full potential of value-based care. It’s time for all stakeholders – policymakers, payers, providers, and patients – to recommit to this vision and work collaboratively to build a healthcare system that truly delivers value for all.
About Courtney Fortner
Courtney Fortner, a forward-thinking healthcare innovator, has consistently developed and implemented groundbreaking solutions that drive healthcare transformation and improve operational performance for health systems, physician enterprises, and health plans. As Navvis’ President and Chief Executive Officer, she is dedicated to revolutionizing the healthcare industry by ensuring that physician-led and patient-centric care remains the foundation of care delivery nationwide. Her innovative approach has been key to building strong partnerships with clients, physicians, and other healthcare stakeholders, setting the stage for a new era of care delivery and advancement.