Value-Based Care Monthly Insights: May 2024

InHealth Advisors is pleased to bring you a monthly summary of the latest thought leadership, news, and transaction activity in value-based care (VBC).  To assist busy healthcare executives in following VBC developments in a time-efficient fashion, we have assembled brief descriptions of and links to a curated list of the most insightful developments in VBC and provider alignment.

Summary of May 2024 VBC Trends

This edition of VBC Monthly Insights tracks the slow but steady advance of value-based care within the wider healthcare industry.  Our Thought Leadership section is dense this month, with numerous stories touching on the latest developments in VBC, the recent bad news surrounding digital health, and (of course) innovations through AI.  Our Provider Initiatives look at how health systems are responding to payor claims denials using AI, technology, and VBC reimbursement.  Payor Updates include innovative virtual care driven health plans along with new “payvider” ventures in primary care and the ACO REACH program.  We conclude with VBC-focused Transaction Activity, noting Kaiser Permanente’s plan for Risant Health and Kaiser’s participation in capitated senior care through a joint venture with private equity.

Thought Leadership

The Latest Developments in VBC

VBC continues to evolve.  For example, Medicare’s Innovation Center has announced a new mandatory bundled payment model for certain inpatient surgical episodes.  This comes on the heels of another new Innovation Center model focused on expanding accountable care organizations to practices with limited resources to fund the necessary infrastructure for value-based primary care.  These continued changes present an opportunity to take stock of where VBC is currently and where it will go in the future, as summarized in the three articles below:

• Future Bundled Payment Models Need To Engage Physician Group Practices (Health Affairs).  Value-based care reimbursement models developed for surgical episodes have historically focused on the hospital site of care.  This piece lays out the case for expanding physician group participation in bundled payment models.  It details many of the changes in the healthcare industry that increase the relative contribution of physicians to success in managing surgical episodes.  For example, an increasing proportion of surgeries is shifting to outpatient settings owned and managed by physicians (e.g., ambulatory surgery centers).  The article explores a variety of ideas for enhancing physician participation, some of which have made their way to Medicare’s new mandatory bundled payment innovation model—the transforming episode accountability model (TEAM).  These suggestions including reducing the episode period length from 90 days to 30 days (to hasten transition from surgical to primary care providers).  Also recommended are robust gainsharing programs for surgeons, with an eye to managing post-acute care utilization and quality.
• Half of medical groups tie physician compensation to quality measures in 2024 (MGMA).  Following the path of reimbursement downstream to provider compensation, recent data from MGMA shows that adoption of quality measures in pay plans continues a slow and steady trend upwards.  Provider compensation plans with quality measures increased from 26% in 2016 to 38% in 2019 to 47%, as of the most recent survey in 2023.  Of the practices which do not factor quality measures into compensation, many private practices excluded the measures in their plans as the group’s overall contribution to quality improvement is captured in profit distributions.  Total physician practice revenue attributable to VBC contracts remained in the low single digits as a percent of total revenue, with primary care practices leading as the specialty with the greatest exposure to value-based reimbursement.
• Why Hasn’t Value-Based Care Delivered on Its Promise at Scale? (American Journal of Managed Care).  The commentary from this item centers on the major headwinds against wider success in VBC across the healthcare industry.  The four major stumbling blocks to scaling effective VBC models include: (1) the need for improving patient participation and education in the treatment plan, (2) shifting from process to outcome measures, (3) incentivizing the adoption of care team models and supporting technology to address physician workforce shortages that drive up costs, and (4) significant investments in data capabilities to manage risk and coordinate care.

Bad News in Telemedicine and Digital Health

A number of recent headlines regarding the telemedicine and digital health industries signal a wider pivot away from the COVID-era aggressive entry into virtual health services.  The expectation that enhanced access to care would yield widespread progress in VBC goals has not yet been proven at scale.  Two headlines crystalize the latest bad news:  

• Optum shutting down telehealth business (Becker’s Healthcare).  This article discusses the shuttering of Optum Virtual Care—a platform offering access to physicians and nurse practitioners through telemedicine.  It cites an existing abundance of fragmented point solutions for telemedicine, which may be overwhelming providers and patients.  In addition, patient utilization of telemedicine has decreased markedly since the pandemic, resulting in hits to the value of publicly traded digital health firms.
• Walmart Health to close all clinics, end virtual care (Modern Healthcare – Subscription Required).  Given its physical presence in rural, underserved communities, Walmart embarked on a strategy of placing primary care clinics in its stores, while further enhancing access through a virtual care arm.  In April, Walmart announced it was shutting down its clinics and virtual care arm.  Factors contributing to this move include: (1) continued anemic reimbursement for primary care services, and (2) significantly rising operating costs.  This news provides further proof of the significant challenge in operating financially viable primary care businesses, especially in rural and underserved areas.

Stories on New AI Innovations in Healthcare

The use cases for AI in medicine continue to increase—the stories below detail some of the latest noteworthy developments:

• Epic plans to launch AI validation software for healthcare organizations to test, monitor models (Fierce Healthcare).  Juicy pieces of low-hanging fruit regarding AI applications to healthcare surround the recording and reporting capabilities of electronic health records.  Epic has seized on this opportunity by creating a tool for evaluating the performance of AI solutions.  This “AI trust and assurance software suite” is intended to enable testing and validation at the site of care, with the opportunity for ongoing monitoring.  The ultimate goal is to provide a pathway for enabling trust in AI solutions through establishing standards tailored to local patient populations.
• Google, Bayer team up to develop new AI products for radiologists (Fierce Healthcare).  Bayer is partnering with Google to collaborate on the development of AI-driven tools for radiologists.  Bayer will bring their expertise with radiology, clinical data and healthcare regulatory compliance, while Google will contribute its vast array of tech resources.  The partnership will aim to develop products that reduce time associated with repetitive tasks involved in radiology, while building capabilities in the use of multi-modal (e.g., imaging and electronic health record) data to buttress clinical decision making.  

Provider Initiatives

Battle of the Bots: As payers use AI to drive denials higher, providers fight back (HFMA)

Innovation doesn’t necessarily lead to positive change, as many providers battling claims denials from insurers can attest.  This article details an arms-race between insurers and providers centering around using AI to overcome revenue cycle challenges.  In recent years, payers have increased their volume of denials and increased the time to pay out claims.  In response, providers have leaned on AI to expedite claims processing.  The piece highlights the experience of health systems with their use of AI to ameliorate the pain associated with claims denials.  Effective solutions center around document preparation, reporting of key performance indicators, automating notifications for key events (e.g., patient admission), and predictive management of denials and appeals.  

Read More from HFMA

Intermountain's quest upstream for value (Becker’s Healthcare)

Can value-based reimbursement represent an effective strategic response to increased claims denials and growing accounts receivable balances?  According to Rob Allen, president and CEO of Intermountain Health, the answer is yes.  By shifting into upfront payment for care (e.g., capitation and episode-based reimbursement), Intermountain has evaded challenges with denials and lagging payment timetables.  Furthermore, given limited opportunities for further growth in health spending (e.g., by the government and employers), future financial success will be driven by “going upstream” to address preventable illnesses and waste in the industry.  Interesting initiatives include addressing the social drivers that lead to greater healthcare spending down the line.  For example, Intermountain has invested in affordable housing to tackle the significant healthcare costs that accrue to individuals experiencing housing instability.  The article links to a YouTube video of the interview with Mr. Allen, which we highly recommend.  

Read More from Becker’s Healthcare

Payor Updates

A look at the first year of Blue Shield of California's Virtual Blue plan (Fierce Healthcare)

One of the key premises of the value of digital health is the ability to improve access to care so as to proactively address preventable conditions.  With this in mind, Blue Shield of California developed an insurance plan tailored to virtual care—Virtual Blue.  The plan involves $0 copayments for virtual primary care visits and enhanced flexibility in scheduling visits with providers.  So far, the plan has led to increased utilization of primary care providers, resulting in reduced emergency department utilizations and greater screening rates for behavioral health conditions.  The net result has been lower costs for Virtual Blue members compared to other covered lives without access to virtual care.  As a bonus, the plan has proven popular with unexpected populations including unionized employers and gas stations.

Read More from Fierce Healthcare

Elevance Health's new $4B primary care venture: 5 things to know (Becker’s Healthcare)

Elevance has announced a joint venture with private equity firm, Clayton, to develop a $4 billion primary care partnership.  The joint venture will seek to increase the adoption of downside risk-sharing agreements through value-based care delivery models and physician enablement tools.  It will seek to serve 1 million members across Medicare, Medicaid, and commercial markets.  The venture will be built around a platform combining Apree Health (a digital health firm) and Millenium Physician Group (a Florida-based primary care practice).  This move represents a further expansion of the “payvider” delivery model within primary care.  The joint venture plans to eventually move into specialty care enablement.

Read More from Becker’s Healthcare

CVS creating new ACO in South Carolina through REACH program (Fierce Healthcare)

CVS and inVio Health Network (representing 5,600+ providers in South Carolina) announced the development of a new accountable care organization under Medicare’s ACO REACH model.  The new ACO will serve 60,000 Medicare beneficiaries, and target efforts at addressing health equity and social determinants of health among populations with chronic conditions and comorbidities.  With the unique reimbursement structure, the ACO REACH program will help fund programs targeted at facilitating patient transportation and home health.  The article notes CVS’s expressed interest in full-risk reimbursement models for Medicare populations, such as ACO REACH.  Given expertise in risk management, “payviders” have a competitive advantage in full-risk reimbursement models—it remains to be seen if this results in scalable success with Medicare’s innovation models.          

Read More from Fierce Healthcare

Transaction Activity

Kaiser Permanente's Risant Health completes Geisinger Health acquisition (Fierce Healthcare)

In early April 2024, Risant Health closed its acquisition of Geisinger Health, in a long-term effort to build a “multisystem, multiregional value-based care organization.”  Risant will be a nonprofit subsidiary of Kaiser, though it will operate with an open network, unlike Kaiser’s closed model.  Its goal is to bring in four to five regional health systems and used tech-enabled care to pursue success in value-based reimbursement contracts.  An initial commitment of up to $5 billion from Kaiser will fund these aims.   While additional acquisition targets have yet to be publicly identified, Risant represents a strategic initiative by Kaiser to develop a large-scale delivery organization capable of exerting negotiating leverage with major payors and defending against competitive market entry from “payviders” and megacorporations.

Read More from Fierce Healthcare

Kaiser Permanente-backed Habitat Health to offer PACE services in 2025 (Fierce Healthcare)

Kaiser has formed a joint venture, along with healthcare investment firm Town Hall Ventures and venture capital firm New Enterprise Associates, to operate Habitat Health, a senior care organization serving low-income communities.  The venture will participate in the Program of All-inclusive Care for the Elderly (PACE), a Medicare innovation model with capitated financing that supports senior care connected to community health and social resources.  The goal of the PACE program is to keep older patients in the home, while providing the supporting infrastructure of primary care, nursing, and transportation essential to health maintenance.  Habitat will initially serve communities in Los Angeles and Sacramento, California.

Read More from Fierce Healthcare

New Aegis Ventures consortium joins 9 health systems to co-develop digital solutions (Fierce Healthcare)

Venture capital has identified tech-enabled healthcare as an area of significant opportunity.  This story from Fierce Health outlines a digital health collaborative between the venture capital firm, Aegis Ventures, and nine major health systems across the country.  The goal of the collaborative is to create tighter alignment between the entrepreneurs developing healthcare technology and the health systems that represent their ultimate users.  This partnership will lead to faster development and support timeline, along with a pipeline for expanding the solution to facilities nationwide.   Initial solutions have covered a wide range of uses, including: “patient engagement, women’s health, AI-enabled diagnostics, workflow automation and emotion analytics.”    

Read More from Fierce Healthcare