How Health Systems Should Evaluate Readiness for a Successful Transition
An Honest Perspective from Scott Sears, MD, MBA, Chief Physician Executive, Honest Health
Part 1 of 4 articles guiding readers through the complexities of the transition to value-based care.
Value-based care can be a frustrating term for many health systems and physicians. After all, delivering value has always been central to our work, regardless of the payment model. Physicians have consistently provided the best possible care — within the constraints of their resources and established systems.
However, the truth is that the definition of value has evolved, and the rules continue to shift. It’s understandable that this term evokes some resistance.
So, how can we help physicians — especially primary care physicians — embrace the shift to value-based care? To answer that question, we must first understand why value-based care matters and the barriers physicians face.
Why Value-Based Care Matters for Healthcare’s Future
Shifting to value-based care is not just about enhancing patient care and delivering more value; it’s essential for the long-term sustainability of the U.S. healthcare system. Nearly 20% of the U.S. gross domestic product is spent on healthcare.1 We’ve created a system that costs more and produces less when compared to other developed countries.
When implemented fully, value-based care models can improve disease diagnosis, chronic illness management, and hospital readmission rates — ultimately improving health outcomes, while containing costs. These models can also strengthen relationships between patients and physicians, leading to greater satisfaction and better experiences for both parties.
So, what are successful value-based care groups doing differently? They’ve embraced primary care models that prioritize access, preventive care, early diagnosis, and team-based chronic care management. These approaches have a larger impact on more significant portions of their populations, and they do so in a more cost-sustaining way that supports workforce stability.
Our transition to value-based care is critical to ensure high-quality healthcare for future generations.
The Hurdles to Value-Based Care: What Health Systems Need to Know
As the U.S. healthcare system faces the pressures of an aging population and evolving Medicare policies, the traditional fee-for-service model is becoming increasingly unsustainable and less desirable. In response, the transition to value-based care has emerged as a critical solution, offering benefits for both physicians and patients, especially within Traditional Medicare and Medicare Advantage programs. However, despite widespread recognition of these advantages, the path to adopting value-based care can have significant challenges for health systems, care networks, and physicians.
The Centers for Medicare & Medicaid Services (CMS) has set an ambitious goal: to have all Medicare recipients enrolled in value-based care models by 2030. This makes the need for a successful transition more urgent than ever. While these models promote proactive, preventive care, the shift demands considerable financial resources and stability to maintain the viability of medical practices. As a result, even with the best intentions to deliver high-quality care, health systems, care networks, and physicians are likely to encounter numerous barriers that complicate this crucial transition.
High upfront costs
One of the most significant challenges is the financial burden of transitioning from fee-for-service to value-based care. Larger systems, while better equipped financially, often need to absorb the costs by subsidizing their primary care practices to ensure the necessary shifts in care models, technologies, and workflows. This raises questions about the long-term return on investment. For smaller practices, the transition can be even more precarious, often requiring external financial support or sacrificing current cash flow.
Ever-evolving models
Even if upfront costs don’t deter health systems and practices, they may hesitate due to the frequent changes in value-based care programs. Many innovative programs last only three to five years before rule and reimbursement changes, making long-term planning difficult and limiting the ability to create sustainable care models.
Necessary cultural shifts
Embracing value-based care requires a cultural shift within healthcare organizations. Traditional, small teams must evolve into a more integrated, team-based model. This can be particularly challenging in resource-limited settings, where increasing administrative demands encroach on valuable time that could otherwise be spent with patients.
Social determinants of health
Now more than ever, social determinants of health (SDOH) are recognized for their significant role in influencing patient outcomes. Incorporating SDOH into patient care adds another layer of complexity. Addressing issues like food and housing access is crucial but requires new thinking and additional resources, making the shift to value-based care even more challenging.
These challenges are significant, yet they also present opportunities to create a more sustainable healthcare system. Coupled with the influence of broader industry trends and the goal set forth by CMS, these opportunities may motivate health systems and providers to move away from the more familiar fee-for-service models. However, the decision to commit to this transition is only the first step in a robust process to ensure an organization and its team are well-prepared for the journey ahead.
5 Essential Questions for Assessing Value-Based Care Readiness
A VBC-readiness assessment is crucial for identifying the strengths, weaknesses, and gaps in an organization’s infrastructure, processes, and culture. By understanding the level of preparedness, an organization can strategically plan for necessary investments, training, and partnerships, reducing potential disruptions during the transition and increasing the likelihood of a successful shift toward value-based care.
Executives and leaders should answer these questions during a value-based care assessment for a comprehensive readiness evaluation.
1. What is our understanding of available care models, programs, and arrangements?
Financial risk sharing — particularly the prospect of taking on downside risk — is a significant, resource-intensive consideration in the transition to value-based care. These models continue to evolve, and reimbursement varies between different arrangement types, most often falling into one of four categories: performance-based programs, bundled payments, capitation models, and shared savings programs. The Medicare Shared Savings Program (MSSP) and Accountable Care Organization REACH model (ACO Realizing Equity, Access, and Community Health) are examples of the many shared savings and risk-based arrangements currently active under CMS; Medicare Advantage uses a capitated payment model. A deep understanding of the nuances between programs and how each will affect your organization is imperative.
Executives and physician leaders must consider the available programs and the rules and regulations for each.
2. How are my payer relationships and how will they change?
In value-based models, the payer-provider relationship becomes more strategic than in a transactional fee-for-service model, aiming for long-term mutual success by aligning financial incentives with improved health outcomes. Strong relationships enable effective communication and data sharing, which are crucial for tracking patient outcomes, managing population health, and identifying areas for improvement. Payer partners, whether CMS for MSSP and ACO REACH or a private payer for Medicare Advantage contracts, differ between arrangements.
Understanding who your organization will partner with to deliver value-based care for your patients and your relationship with that payer is an important factor when examining your readiness. Does your organization have the right relationship with payer partners? Or, will you need some help?
3. What is the size and risk profile of our patient population?
The health outcomes, needs, and risk profiles of your patient population directly influence a healthcare organization’s ability to succeed in value-based care payment models, making it essential to understand the characteristics of that population. Factors such as age, chronic conditions, socioeconomic status, and healthcare utilization patterns impact the design and execution of care strategies, as well as the allocation of resources for managing care.
A viable value-based care model requires a patient volume that’s large enough to ensure a positive return on your business investments and to diffuse risk. Having an accurate understanding of the size and risk profile of your patient population is critical; ask yourself if your patient volume is large enough — and how you plan to grow it — to succeed in this type of arrangement. If you do not know the answer, it’s important to find someone who can evaluate and analyze your risks and rewards.
4. Is our current technology capable of delivering critical insights?
Advanced health information technology is critical to effectively manage risk from the onset. The right tools can effectively track quality metrics, monitor patient health trends, and identify gaps in care. These real-time, actionable insights and predictive capabilities guide decision-making and allow organizations and providers to proactively manage their patient populations.
Consider if your tools and technology allow you to understand what’s happening today throughout your practices and predict performance in six to 12 months. Are you able to do it?
5. Is our leadership structure ready to drive change?
The transition to value-based care involves significant changes in clinical practices, financial management, and care delivery approaches. Strong and effective leadership drives the strategic direction, cultural change, and organizational alignment and ensures that these changes are well-coordinated, with clear communication and support across the organization. This includes delivering performance reporting at the provider level so providers can make real-time adjustments. It’s necessary to reflect on your current leadership structure: are you willing and able to provide transparent, comparative performance reporting and deliver a playbook to drive behavioral change? Is your organization prepared to manage this transformative shift?
Start with the End in Mind: Foundational Steps for Success
With your assessment complete, you now have a simple understanding of your organization’s readiness to make the transition to value-based care. At Honest Health, we find the most successful transformational organizations take these actions after committing to the shift:
- A VBC-ready organization must ensure their patient population is large enough to diffuse risk and make the model viable.
- A VBC-ready organization must clearly define their meaning of success.
- A VBC-ready organization must identify the most affordable avenues for care delivery and management.
Motivating Physicians with Vision, Not Just Value
Value-based care is a team sport where collaboration and communication are vital to a winning strategy. We find teams are often incentivized by three powerful change management levers — and only one is financial.
Emphasize the patient benefits
Physicians and healthcare providers are deeply motivated by the opportunity to improve patient lives. Value-based care is designed to empower them to do just that. This model prioritizes greater access to care, including preventive services and chronic disease management, and fosters more personalized care plans. Enhanced care coordination under value-based care leads to stronger patient engagement, better experiences, and, most importantly, improved health outcomes. When physicians can deliver this level of patient-centered care, both patients and providers benefit, creating a more meaningful and effective healthcare experience.
Provide reliable performance data
Medical school trains physicians to strive for and achieve excellence. They are accustomed to striving for best-in-class performance and delivering the highest quality results for patients relative to standards of excellence. By providing this familiar type of comparative reporting in a straightforward, transparent, and actionable manner, leaders can help drive the success of physicians and their organizations – while benefiting their patients.
Align compensation and results
Success in value-based care is rooted in collaborative, trusted relationships. The reimbursement foundation of a value-driven payment model is aligning incentives with performance. Outcomes should be clear in your comparative data; ensure financial alignment between these outcomes and physician payments.
How the Right Partner Can Support Your Transition to Value-Based Care
The transition to value-based care is not just a shift in payment models but an evolution in how healthcare is delivered and experienced. A complementary enablement partner, like Honest Health, can provide the expertise, resources, and support needed to navigate the complexities of this transformation.
Financial stability is crucial during this transition. The right partner will focus on delivering shared risk solutions and diverse revenue streams that secure and advance financial performance. And, at the same time being clear that a transition of this scale is not without its financial delays.
A collaborative care model that seamlessly integrates with physicians and their teams reduces operational burdens and improves patient outcomes. This is an integral component in the shift – you cannot and should not be without the clinical support you and your patients need. The right outcome-driven capabilities can help you achieve measurable improvements in both quality and financial performance.
The journey to risk sharing is one of shared purpose and collective effort. As healthcare continues to evolve, adopting value-driven care models is no longer just an option—it is essential for the future success of both patients and providers. Working with the right partner, health systems, physician networks, and providers can confidently accelerate their shift toward value-based care, knowing they have the support necessary to overcome obstacles and succeed in delivering high-quality, patient-centered care.
Behavioral change is one of the most significant hurdles in the transition to value-based care. Don’t miss the next installment in Dr. Sears’s four-part series, ‘Empowering Change: Strategies to Drive Behavioral Shifts in Value-Based Care,’ where we’ll delve into proven methods for shifting long-established practices, explore how leaders can support collaboration, and address the common obstacles and change resistance in adopting new models of care.
[1] “U.S. Health Expenditure as Percent of GDP 1960-2023.” Statista, Statista Inc., https://www.statista.com/statistics/184968/us-health-expenditure-as-percent-of-gdp-since-1960/. Accessed 23 Aug. 2024.