Value-based care has long been healthcare’s white whale. Since the Affordable Care Act in 2010 mandated outcomes-based payment models to cut down on costs and improve care quality, the US healthcare system has struggled to make substantial progress in moving away from the traditional fee-for-service business model. A value-based care model involves providers and health systems getting reimbursement based on the quality of patient outcomes rather than for each individual service provided. It may sound simple on the surface, but in practice, it requires the entire administrative structure of healthcare to change. “Every aspect of the administrative side of healthcare is focused on what to do after an event occurs,” Zahy Abou-Atme, a partner in consulting firm McKinsey’s healthcare systems and services practice, told Healthcare Brew. “The shift toward value-based care is really focused on everything leading up to an event: —How do you identify your sickest patients? How do you focus on intensive care management, intensive outpatient care, so that you prevent or reduce emergency room exacerbations?”
Improved technology may be the key to moving healthcare away from a fee-for-service payment model.
Where health tech comes into play
Many of the biggest roadblocks to converting to a more value-based system—such as the lack of data and insights into patient behavior and needs—can be addressed with improved technology, according to Sari Kaganoff, chief commercial officer at digital health strategy group and venture fund Rock Health’s advisory arm. A number of health tech companies emerged in recent years to take on such challenges, she said. Some, such as Pearl Health, Aledade, and Wellvana, are designed to support whole primary care systems in their move to a value-based model, according to Kaganoff. Then there are health techs focused on treating patients with specific conditions. A couple popular areas are kidney and cardiovascular care, she said, with companies including Somatus, Interwell, and Strive Health all focused on the conditions. Companies focused on specific conditions have devised “pretty effective predictive algorithms” that look at claims data to identify patients at risk of chronic disease who haven’t yet been diagnosed, according to Eric Mayeda, managing partner and leader of the strategic transformation division at healthcare advisory firm Chartis. “I think that’s really promising because you’re able to identify those needs earlier, then it creates an opportunity for intervention,” he said.
Amelia Kinsinger
Baking value-based care into the business model
Beyond health techs centered around supporting health systems’, providers’, and payers’ moving into value-based care, there are also health tech companies that have integrated value-based care into their own business models, Kaganoff said. When the health tech field first came into fruition, many startups had a “per-member-per-month” payment model, meaning they were reimbursed based on the number of patients subscribed to their tools and/or services, according to Kaganoff. But now, more startups are taking a “per-engaged-member-per-month” model, which essentially means they’re reimbursed not just for the number of patients served, but the number of patients actually engaging with their products and/or services. That’s essentially an outcomes-based payment, which is the crux of value-based care, according to Kaganoff. Then there are companies that are taking on more financial risk for the health outcomes of the patients they serve, she added. For example, Omada Health, founded in 2011, has a business model centered around improving outcomes for patients with chronic conditions including diabetes, hypertension, and musculoskeletal conditions. When it comes to how health tech companies integrate value-based care into their business models, there’s been an “evolution,” Kaganoff said. And she’s seeing more and more health tech companies move toward a value-based model. “A lot of it actually ties to the competitiveness and the number of solutions in the market, and being able to say, ‘Look, I’m going to stand behind my product and actually take a risk on it, whether it’s an engagement risk or it’s an outcomes risk, or it’s more of a full value-based care risk,’” she said.
“In the early days, there was a lot of excitement about value-based care, but it’s quite hard to do it successfully. With data and technology, you can say, ‘Okay, what are the challenges? What are the gaps in care?’”
—Sari Kaganoff, chief commercial officer at digital health strategy group and venture fund Rock Health
By Maia Anderson
NOVEMBER 27, 2024
How health tech companies are influencing value-based care
The bottom line
Technology is an integral piece of the puzzle the healthcare system needs to be able to move to a value-based system, according to Kaganoff. “In the early days, there was a lot of excitement about value-based care, but it’s quite hard to do it successfully. With data and technology, you can say, ‘Okay, what are the challenges? What are the gaps in care?’” she said. “I think we’re much better positioned now to be able to do this successfully because of the technology that we have.”
“In the early days, there was a lot of excitement about value-based care, but it’s quite hard to do it successfully. With data and technology, you can say, ‘Okay, what are the challenges? What are the gaps in care?’”
—Sari Kaganoff, chief commercial officer at digital health strategy group and venture fund Rock Health
Baking value-based care into the business model
Beyond health techs centered around supporting health systems’, providers’, and payers’ moving into value-based care, there are also health tech companies that have integrated value-based care into their own business models, Kaganoff said. When the health tech field first came into fruition, many startups had a “per-member-per-month” payment model, meaning they were reimbursed based on the number of patients subscribed to their tools and/or services, according to Kaganoff. But now, more startups are taking a “per-engaged-member-per-month” model, which essentially means they’re reimbursed not just for the number of patients served, but the number of patients actually engaging with their products and/or services. That’s essentially an outcomes-based payment, which is the crux of value-based care, according to Kaganoff. Then there are companies that are taking on more financial risk for the health outcomes of the patients they serve, she added. For example, Omada Health, founded in 2011, has a business model centered around improving outcomes for patients with chronic conditions including diabetes, hypertension, and musculoskeletal conditions. When it comes to how health tech companies integrate value-based care into their business models, there’s been an “evolution,” Kaganoff said. And she’s seeing more and more health tech companies move toward a value-based model. “A lot of it actually ties to the competitiveness and the number of solutions in the market, and being able to say, ‘Look, I’m going to stand behind my product and actually take a risk on it, whether it’s an engagement risk or it’s an outcomes risk, or it’s more of a full value-based care risk,’” she said.
Improved technology may be the key to moving healthcare away from a fee-for-service payment model.
How health tech companies are influencing value-based care
