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Value-Based Care Monthly Insights: March 2024

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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 March 2024 VBC Trends


This month’s VBC news span a wide range of topics from AI to a blossoming of cancer care startups. Our Thought Leadership section explores a few recent developments on the application of AI to healthcare and Walmart’s bundled payment program.  Our discussion of Provider Initiatives covers health systems’ plans to adopt two-sided risk VBC reimbursement, as well as new VBC delivery models spanning GLP-1 drugs, endocrinology, and post-acute care centers.  The Payor Updates touch on further development of “payvider” models and the impact of Medicare Advantage rate cuts on benefits.  We conclude with a summary of Transaction Activity by private equity and venture capital firms, as well as the growing startup scene around cancer treatment through digital health.


Thought Leadership


AI, AI, and More AI (Various Articles Linked Below)

As the adoption of generative AI increases, there is no shortage of news on the emerging applications to healthcare.  Generative AI tools have taken center stage in long-term strategy and forums discussing the future of the industry.  Below are a few key recent stories:

  • Providence allocating 5% of budget to AI (Becker’s Healthcare).  The title says it all—this significant level of investment is intended to capitalize on innovation in AI solutions.  Given concerns around privacy, the system rolled out its own closed version of ChatGPT; most queries to that tool currently surround information technology and coding.  The Washington-based system maintains a close partnership with Microsoft (itself the largest owner of OpenAI), so it will be interesting to see how AI evolves within the organization.

  • AI in LA: VIVE gives the starring role to workflow tech (healthleaders).  Should health systems invest in AI?  “You have to.  There’s really no choice.”  So says Microsoft Health’s CTO, Harjinder Sandhu.  This well-written article highlights the big generative AI use cases that health systems are working on deploying, including capturing conversations to convert into standardized notes to the EHR.  According to Mr. Sandhu, DAX Copilot, created by Microsoft and Nuance is one such tool that “…is starting to make an enormous difference in how physicians view their work and their work-life balance.”  New tools notwithstanding, the article also discusses steps systems are taking to mitigate the risk of such technology, including ensuring that human review is involved with any AI-generated materials.

  • Harnessing AI to Detect Hypoglycemia: A Leap Towards Safer Driving for Diabetics (Medriva).  On the more cutting edge of AI solutions, a research team from Ludwig Maximilian University of Munich developed a machine learning model able to preemptively detect signs of hypoglycemia in diabetic patients while they are driving.  The model relied solely on head/gaze motion data to make its predictions.  This application of machine learning highlights the exceptional pattern detection capabilities of AI and potential for early detection of more serious medical issues.  Given the ubiquity of smart devices tracking an ever-expanding list of data points, expect more solutions of this type to emerge.


The 18 health systems Walmart sends its employees to for care in 2024 (Becker’s Healthcare)

In an interesting demonstration of value-based care driven by an employer, this article lists the 18 health systems / provider groups with which Walmart maintains bundled payment contracts for specialty care.  Walmart covers the cost for travel, lodging, and treatment for patients in need of select services, such as bariatric surgery, cardiovascular surgery, orthopedic surgery, cancer treatment, organ/tissue transplants, or fertility care.  The program is called Walmart’s Centers of Excellence (COE) and participating providers are located throughout the country.  The COE program has been in operation since 2012 and started with bundled payments related to organ transplants (given the associated costs and impact on patient well-being).  While recent results are scarce, a 2019 report in the Harvard Business Review documented how the COE program improved outcomes through reduced readmissions, length of stay, and discharges to skilled nursing facilities.          



Provider Initiatives


Most healthcare organizations will embrace two-sided value-based care models in 2024, but many do not have clearly defined protocols to assess new opportunities (HFMA)

As stated in the headline, a recent survey by HFMA-FORVIS found that “…59% of healthcare organizations plan to participate in additional two-sided risk value-based care (VBC) models.”   The survey provides a counterpoint to recent skepticism about the adoption of VBC models.  The article provides helpful vignettes of organizations advancing their VBC efforts through (1) building a disciplined process around risk coding, annual wellness visits, and quality data reporting, and (2) investing in diagnosis coding, patient engagement, and gap closure efforts.  It also raises some key questions for organizations seeking to undertake VBC, such as: (1) do you have the right physician leaders in place, (2) what are the financial thresholds of profit/loss associated with VBC reimbursement, and (3) is your workforce properly managed and trained to deliver VBC?   Read the rest to explore the many more useful insights from practitioners on VBC.



Omada GLP-1 program to prioritize muscle mass restoration through expanded care track (Fierce Healthcare)

We have previously covered the significant impact GLP-1 drugs are making in the healthcare industry.  Omada Health (also previously highlighted for its participation in Amazon’s Health Conditions Program) is seeking to address one key concern around widespread utilization of this medication: restoring muscle mass during GLP-1 administration to avoid adverse and costly events down the road.  Since up to 40% of weight loss from GLP-1s can be attributed to the loss of muscle mass, patient engagement in physical exercise is essential to maintain weight loss in the long run.  Since hyperphagia (the strong desire to eat) is a frequent occurrence after termination of the medication, patients must develop habits around exercise to maintain their weight should food intake increase.  Omada’s solution involves real-time remote patient monitoring of key indicators of medication tolerance and physical activity.    



VBC enabler Valendo Health launches for endocrinologists to provide 'across the board' diabetes care (Fierce Healthcare)

A gap for assisting diabetic patients is access to endocrinology professional services.  We have heard from many of our clients that wait times for an appointment with an endocrinologist extend into multiple months.  Valendo Health seeks to address this shortcoming by serving as a value-based care enabler for endocrinologists.  Their model focuses on generating shared savings for endocrinologists based on their successful track record in reducing the cost of care for people with diabetes.  Eventually, their goal is to partner with organizations taking on global risk for care costs and consistently generating savings through mastery of diabetes management.   



ACOs want increased participation of long-term and post-acute care providers (Fierce Healthcare)

Medicare has identified utilization of post-acute care services as a key area of improvement in VBC programs, including the Medicare Shared Services Program.  In response, the National Association of Accountable Care Organizations has issued recommendations tailored to address this need.  This article summarizes the recommendations, which include: (1) removing long-term nursing facility patients from VBC programs, (2) applying risk adjustment to the short-stay nursing facility population, (3) funding to support the quality data reporting infrastructure of nursing facilities, and (4) episode-based payment models for skilled nursing facilities.  We anticipate that some of these suggestions will likely find their way Medicare VBC programs and will provide an update if so.      



Payor Updates


Florida Blue partners with Sanitas to run a value-based primary care center in Jacksonville (Fierce Healthcare)

In “keeping with a healthcare system that’s evolving from one based on volume to one based on value,” Florida Blue is partnering with Sanitas Medical Center to develop preventative and primary care clinics catering to patients aged 50 and older.  The reimbursement model for services will be based on value, though providers will not be taking on downside risk, at least initially.  The care model involves specialized nursing staff catering to specific chronic conditions, such as diabetes and high blood pressure.  The targeting of the age group raises the interesting possibility of a long-term strategy of managing patients from age 50 to 64 to transition them into profitable Medicare Advantage contracts given the ability to leverage existing patient data (e.g., for risk adjustment purposes) and offer tailored benefits based on existing relationships with physicians.  



Will insurers cut back on Medicare Advantage extras?  (Becker’s Healthcare)

CMS recently released its proposed guidance for Medicare Advantage reimbursement for calendar year 2025.  The proposal reduces benchmark payments, largely in response to increasing utilization and risk adjustment behavior on the part of participating payors.   This article details the reaction among payors—a shift from member growth to profitability among existing covered lives.  Strategies to accomplish this goal will likely include a reduction in extra benefits, such as dental, vision, and fitness memberships.  Of note, neither the Becker’s article nor the associated piece from the Wall Street Journal reference expansion of VBC reimbursement contracts as a tactic in seeking to improve margins.     



Transaction Activity


Q4 Healthcare Services Report: A frosty winter for private equity in healthcare services (PitchBook)

Despite the sub-headline for the latest report on healthcare private equity and venture capital from PitchBook, healthcare specialist capital among these entities increased from 2022 to 2023, buoyed by healthcare’s reputation for acyclic performance relative to the economy.  Nevertheless, investments in healthcare services firms (excluding life sciences) have underperformed relative to other industries.  Capital in healthcare has shifted from smaller, emerging PE/VC firms to larger, more established PE/VC firms.  The report predicts that dealmaking will decrease as firms seek to exercise greater discretion in deploying their dry powder.


Biden’s cancer moonshot boosts startups (Modern Healthcare – Subscription Required)

One area of guaranteed increased investment is in startup firms seeking to support cancer treatment, particular those focusing on digital health solutions.  The Biden administration’s cancer moonshot initiative was boosted by CMS’s adoption of new CPT codes (for principal illness navigation and community health navigation), which opens the door for digital health companies to promptly shepherd patients to key clinical resources and supports for health-related social needs.  These services address key gaps in care, especially for patients receiving cancer treatment.  Nevertheless, the article does cite that the reimbursement is just one step in the larger process of changing patient and provider behavior to enhance outcomes.


VBC Monthly Insights - March 2024
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