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The Burden of Getting Healthy
Looking at the challenges of Value Based Care
Ahmed Saeed
February 18, 2024
It’s Sunday bites folks,
We’re the plop-plop fizz fizz… of everything you need to know about breaking down complicated business concepts.
We’re into the final part of our subscriber-led healthcare issues. Today is about the double edged sword of Value Based Care (VBC).
Listen, this is a big issue. We got information from a ton of people, but we took the best bits and compiled them.
We want to shout out the following people:
Healthcare Strategy/AI Startup Guy
Healthcare Chief of Staff Guy
PharmaBro
Healthcare Finance Director Guy
Healthcare Finance Sr. Management Guy
Healthcare Consultancy Director/Harvard Guy
Let’s get into it
TL;DR INDEX CARD
1. Value Based Care (or VBC) is a care model that emphasizes less procedures and invasive care and better overall patient outcomes
2. It’s been pushed by the government to help curtail healthcare costs (the U.S. is at the top/near the top for healthcare spending in the world)
3. While the concept of VBC sounds great, there’s a lot of incentive mismatch in the current system, which makes it harder to measure better outcomes and implement systemic changes
Value Based Care (VBC): An Explainer
Basically, Value Based Care is a system of care that healthcare providers employ that keeps people healthy and out of the hospital. Think less hospital procedures and better patient outcomes
It’s a small but fast growing facet of healthcare (~10% of healthcare)* driven by multiple forces. And it’s an area where tech companies have seized a lot of the opportunity, since optimizing customer experience and driving down costs are things that VBC is all about.
It’s in strong contrast to the current system of Fee For Service, where doctor’s are incentivized to perform procedures or provide services such as tests, regular office visits, etc.
Example of what better patient outcomes might look like, brought to you by PharmaBro:
Let’s say a pharmacy installs a robot to pack medications automatically. That means less human error and decreased waiting time at the pharmacy. This causes people to pick up their medicines more regularly. People take their doses regularly without breaking continuity. They stay out of the hospital, and have to visit the doctor sparingly.
Boom. Better patient outcomes.
*Thanks, Healthcare Finance Director Guy
Why is Value Based Care becoming a thing?
TL;DR: The government, particularly the Centers for Medicare and Medicaid Services (CMS). CMS is driving the incentive because it usually has a big chunk of a hospital’s patients (people on medicaid and medicare), and it doesn’t really have to negotiate with anyone.
Health economists a good length of time ago identified the problem with the healthcare incentive structure: health operators get paid more to take care of sick patients…Population health* pays doctors doctors and health companies to keep people out of healthcare… So the government starting pushing population health with Medicare and Medicare a pretty generous time ago.
*an office in a health system typically looking at trends in hospitals
It’s really being driven by Medicare, they are the only entity in healthcare big enough (…40+% of a hospital’s patients), and hospitals can’t negotiate with Medicare.
…if you’re looking to the top [of who is driving the incentive] it’s CMS/state regulators. Every Medicaid contract requires a certain % of contracts in VBC agreements…and CMS (Centers for Medicaid and Medicare) has specific VBC programs for all Medicare payers and providers.
Okay, so getting people healthy. That sounds good, right?
Oh boy. It sounds good. But there are a few caveats…
TL;DR: Outcomes are long term and hard to measure. Cost and investment to set up VBC might not be worth it for medical practices.
1. Outcomes are usually long term, members switch insurance carriers all the time so payers don’t end up realizing the cost savings
2. Data isn’t clean. Both sides need to trust the shared data and that doesn’t always happen
3. Many Payers/Providers don’t manage these things throughout the year because they’re a tiny % of revenue. In those cases there’s no meaningful change and you’re just checking a box
1. Complexity in assessing what the measurements are. Not everyone can equally get the same metrics completed without understanding the context for each practice.”
2. The cost and investment to set this up might not be worth it for practices.
3. Equitable care metrics or ensuring the best care is given based on the metrics can be hard to ascertain
4. Small practices and high risk populations have it harder in this system
Ahh, so it’s about incentive?
We had a long conversation with Healthcare Strategy/AI Startup Guy, and he basically gave us all the answers to the test.
Yeah, it’s basically around incentive. Particularly on the doctor’s side. It was phrased to us like this:
TL;DR: If I’m a doctor with a practice, it gets really tough to try and put practices in today that will have a benefit 10-20-30 years from now. Doctors have student loans, they have expenses, and most of all, they’re trying to get paid TODAY.
Value-based care requires a shift in perspective towards long-term healthcare outcomes and investing in holistic patient well-being. The impacts of such initiatives aren't immediately visible like in a few weeks or months; they unfold over decades. This poses a challenge for doctors, who are often incentivized for short-term gains rather than lifetime patient health. Additionally, the current healthcare system, tied to employer-based insurance, prioritizes short-term benefits over long-term preventive measures like diet and exercise. It's tough to prioritize long-term goals when immediate financial pressures and workload overwhelm healthcare professionals.
What AI Made This Week
Sick Fits by Ahmed
Nick Sullivan - The creative director of Esquire.
A good chunk of our readers’ aesthetic choices were shaped by this guy, whether we like it or not.
Have a great week!
Ahmed and Peter
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