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 January 2024 VBC Trends
The New Year brings many new developments in the world of value-based care. Our Thought Leadership section opens with a discussion of the past, present, and future of specialty VBC models; it also spotlights a case for significant undervaluing of the potential for AI in healthcare. Our section on Provider Initiatives is focused on nontraditional healthcare providers and their growing impact on healthcare and VBC, in particular. In the Payor Updates section, we discuss how AI can foster more adoption of VBC, as well as research on utilization trends in Medicare Advantage. Finally, our Transaction Activity section ends with a video from Axios journalists diving deep into the strategy behind General Catalyst’s intended acquisition of a health system (which turned out to be Summa Health).
Thought Leadership
Engaging Specialists In Accountable Care: Tailoring Payment Models Based On Specialties And Practice Contexts (Health Affairs)
A large team of experts from the Duke-Margolis Center for Health Policy at Duke University authored this piece describing how payors may tackle the challenge of involving specialists in value-based reimbursement models. It summarizes the significant body of research identifying the gaps between the key role specialists play in population health and their engagement with VBC models. The article establishes a useful taxonomy for classifying specialists based on their involvement in the care of patients depending on the condition/ailment being treated. The article shines in discussing “longitudinal and chronic specialty care,” which covers treatment of chronic diseases (e.g., heart failure, diabetes, and chronic lower back pain) through co-management with primary care teams. It discusses an opportunity for sub-capitation payments based on patient diagnosis to compensate specialists for encouraging prevention. We anticipate that the Center for Medicare and Medicaid Innovation will synthesize these insights and lessons learned from their nephrology, oncology, and bundled payment models into payment models for specialists involved in longitudinal and chronic specialty care. This will present an excellent opportunity for health systems that operate highly integrated primary care and specialist teams.
Underestimating AI in Healthcare (Andreessen Horowitz)
Authors from the venture capital firm, Andreessen Horowitz, make a compelling case for massive disruption in healthcare though AI-driven innovations. In particular, they take the strong position that the market is undervaluing the opportunity for AI in healthcare. They argue that AI technology can sidestep the costly investment needed to train staff on new software. They predict the increase to the bottom line of healthcare organizations will be attributable to an underlying improvement in staff efficiency (effectively, more output per hour). While an interesting thesis, the article does not explore how AI solutions overcome the traditional hurdles for efficiency in healthcare, including significant regulatory compliance needs, long-term patient engagement challenges, and unique incentives that arise from a third-party payment system. We will keep an eye out to see if these topics are addressed!
Provider Initiatives
How Corporate Healthcare is Leading on Value-Based Care (MedCity News)
In the early 2010s, the center of gravity for employment of physicians has gradually shifted from independent practices to hospitals/health systems. By contrast, the 2020s have seen a further shift in employment to corporate entities like Amazon, Optum, and Walmart. This article examines the trend, primarily examining how corporate healthcare entities can meaningfully advance adoption of VBC models. It further predicts that the significant investment in healthcare data capabilities and tools by corporate entities will have knock-on effects to hospitals and health systems. While the author expects a shift to more patient-centered care given the consumer focus of many corporate healthcare entities, progress in this domain remains to be seen.
2024 Outlook: 'Blurring of the lines' as providers, retailers and payers plotting primary care plays (Fierce Healthcare)
Continuing the theme of the prior article, Heather Landi from Fierce Healthcare walks through efforts by nontraditional providers (like Amazon, Kroger, and Costco) to expand their healthcare footprint. The piece details how the focus of these firms has been on primary care, with an eye to improving convenience and access to patients. Payors too have targeted physicians for employment as a model of aligning providers with their push to reduce costs through value-based reimbursement models. Ms. Landi also discusses the outlook for mergers and acquisitions in 2024, with many analysts predicting greater activity as providers and health tech companies react to the massive moves made by payors in 2022-2023.
Google unveils MedLM generative AI models for healthcare with HCA, Augmedix and BenchSci as early testers (Fierce Healthcare)
Google’s work in generative AI for healthcare has the potential to impact the process of medical diagnostics. This article explores the latest developments in its Med-PaLM large language model, which provides answers to medical questions based on training data fine-tuned for healthcare. According to Google, its Med-PaLM 2 iteration has achieved “human expert level on answering US Medical Licensing Examination-style questions.” The model has drawn the attention of HCA Healthcare, which has been using the technology in a pilot program to automate medical documentation for its physicians. The article mentions other examples of deployment of the model, including in accelerating clinical research & development and furthering VBC goals, such as enhancing patient access, experience, and outcomes.
Payor Updates
Payment integrity in the age of AI and value-based care (McKinsey & Company)
This fascinating article from McKinsey & Company spotlights the impact of AI on the payment integrity (PI) industry—the many different revenue cycle businesses involved in generating, submitting, and adjudicating claims for reimbursement filed to health insurers. The $9 billion dollar PI industry is a major component of the very high administrative costs associated with healthcare in the United States. The growth of machine learning and generative AI has the potential to disrupt this industry by automating key components of PI, including detection of fraud/waste/abuse, review of coding accuracy, and faster dispute resolution processes. Given the significant data needs associated with VBC, AI can also help facilitate value-based reimbursement models through better patient attribution and more timely reporting for actionable changes in medical practice.
MA plans have lower overall utilization than FFS, says Harvard-Inovalon study (HFMA)
HFMA highlights a recent study from Harvard and Inovalon comparing utilization patterns in Medicare Advantage (MA) as compared to traditional fee-for-service Medicare. The study noted that overall utilization was lower in MA, driven primarily by fewer hospital readmissions and avoidance of preventable inpatient admissions. This finding is interesting in light of the recent pushback against the MA program driven by provider frustrations with prior authorization practices and government scrutiny of payor risk adjustment practices. The HFMA article linked here also contains a great discussion of health-related social needs and social determinants of health. It cites a McKinsey & Company study that found that nearly half (45%) of consumers reported experiencing at least one health-related social need, such as food insecurity or childcare access.
Transaction Activity
Ask the newsroom: General Catalyst’s hospital ambitions (Axios)
As has been recently announced, General Catalyst’s HATCo intends to purchase Summa Health. This news comes relatively quickly after General Catalyst expressed its intent to buy a hospital. While we will discuss more about the Summa Health transaction in the future, this video from journalists at Axios provided an in-depth look at General Catalyst’s strategy PRIOR to the announcement of the sale. While the discussion predates the transaction announcement, the video does a very deep dive into the thinking behind the strategy to further illuminate what HATCo intends to do post-acquisition. Of note, the purchase of a hospital represents a key step in General Catalyst’s ambitions to meaningfully integrate many of its health tech businesses into a wide range of provider entities. The investment thesis contemplates successful participation in value-based reimbursement models through leveraging the health tech to manage patient outcomes and overall costs.
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