Sponsored Content | Brand Spotlight Partner What's This?
How Value-Based Care Will Increase Emphasis on Patient Outcomes Value-based care aims to change how providers are compensated, improve patient satisfaction, and reduce costs and inefficiencies.
By Raysa Bousleiman and Julie Ebert
The U.S. healthcare system has long struggled with steadily rising healthcare costs, overburdened providers, and poorer relative outcomes. Even though the U.S. spends much more of its GDP on healthcare than other countries, it has worse results. Compared with other high-income countries, the U.S. has the highest rate of preventable deaths and infant deaths. The U.S. also has a history of inequality in access to care, with people of color and low-income individuals more likely to experience adverse health outcomes than the rest of the population, the Silicon Valley Bank report says.
These issues stem in part from an inefficient fee-for-service (FFS) reimbursement model, which dictates how providers are paid. Under FFS, providers are paid for each service they provide and are rewarded for volume – they're paid more if they deliver more care, even if they don't achieve desired health outcomes. Because the FFS model focuses on volume rather than quality of care, it creates misaligned incentives for providers.
Value-based care (VBC) aims to change this dynamic by tying the reimbursement providers receive to the results they deliver to patients, rather than care volume. Providers are rewarded for hitting certain healthcare outcomes, quality, and cost measures.
The spectrum of value-based care.
The definition of VBC is subject to debate, but in the broadest sense, we consider it to include risk-taking entities, the companies caring for specific, high-cost populations (even if they do not take financial risk), as well as the technologies, products, and services that enable the shift to VBC. As such, the business models of VBC companies vary widely: Some derive 100% of their revenues from shared savings, some receive a combination of FFS revenue and shared savings, and others contract with risk-taking entities and are paid on a per-member-per-month (PMPM) basis.
Full or global risk models involve two-sided risk, whereby providers share in both the upside of savings and the downside if care costs more than estimated. If costs come in lower than the benchmark, providers retain a predefined portion of the savings dollars. On the flip side, costs that are higher than the benchmark result in loss. Moderate risk models can involve one-sided risk or a capitated amount. Others take on no direct risk but offer tech powered solutions to enable providers and payers to adopt VBC models. As these tools evolve, we anticipate more payers and providers to dive deeper into VBC risk.
Many companies have a combination of these various revenue models and risk levels, allowing providers and payers to dip their toes into VBC. We have also seen a recent burgeoning in specialty care VBC companies, which focus on patient populations that are both complex and high cost, such as kidney care, oncology, and cardiology. Payers and primary care VBC companies are reducing risk by sub-contracting care to specialty care companies like Thyme Care and Strive Health.
Value-based care market map.
Note: List is not exhaustive, select healthtech companies represented
Source: SVB's Future of Healthtech report, Oct. 2023.
Undeniable pressure and momentum.
Though VBC adoption is still a work in progress, there is impressive recent momentum that is guiding the transformation. The U.S. Centers for Medicare & Medicaid Services (CMS) is leaning further into VBC models, and in 2022 announced its aim to have all Medicare beneficiaries cared for by providers in VBC models by 2030.
Payers, who are feeling the squeeze of rising medical costs, are doubling down on VBC models and growing partnerships with primary and specialty care VBC companies. VBC enablers, which offer technology-driven solutions to help providers and payers adopt VBC models, are seeing substantial growth and VC investment. Providers are realizing that while VBC comes with risk, it also allows for better outcomes, less administrative burden, and more predictable revenue, with freedom to use those dollars more flexibly to meet patient needs. They can spend more time on preventive, holistic, equitable care that FFS models didn't adequately support.
Several recent strategic acquisitions by large payers and retailers in the VBC space have contributed to the positive momentum. This momentum is likely to accelerate as we see more incentives and government initiatives, better outcomes measurement data from early adopters and new innovative technology solutions. With the current strains on our system growing to unsustainable levels, the pressure has never been higher for VBC adoption and innovation in this space.
Silicon Valley Bank's Future of Healthtech 2023 report goes into more detail on the trends in value-based care. Click here to view the full report.
About the authors:
Raysa Bousleiman is Vice President, Venture Capital Relationship Management, Life Science and Healthcare at Silicon Valley Bank. She partners with venture capital firms focused on healthcare and life science innovation, and drives global research exploring venture healthcare trends.
Julie Ebert is Managing Director, Life Science and Healthcare at Silicon Valley Bank. She partners with life science companies across all sectors and life stages in the Mid-Atlantic and Southeast markets to facilitate their strategic growth.
This material, including without limitation to the statistical information herein, is provided for informational purposes only. The material is based in part on information from third-party sources that we believe to be reliable but which has not been independently verified by us, and, as such, we do not represent the information is accurate or complete. The information should not be viewed as tax, accounting, investment, legal or other advice, nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation, offer or recommendation to acquire or dispose of any investment, or to engage in any other transaction.
All non-SVB named companies listed throughout this document, as represented with the various statistical, thoughts, analysis and insights shared in this document, are independent third parties and are not affiliated with Silicon Valley Bank or First Citizens Bank & Trust Company. All third-party trademarks, logos, and brand names are the property of their respective owners and are herein used for informational purposes only. Any predictions are based on subjective assessments and assumptions. Accordingly, any predictions, projections or analysis should not be viewed as factual and should not be relied upon as an accurate prediction of future results.
©2023 First-Citizens Bank & Trust Company. All Rights Reserved. Silicon Valley Bank, a division of First-Citizens Bank & Trust Company. Member FDIC. 3003 Tasman Drive, Santa Clara, CA 95054