The Business of Making Value-Based Healthcare Possible
The healthcare industry is in the midst of changing how it does business. Those who remain attached to the status quo are at risk of being left behind. Forward-thinking healthcare organizations are those embracing the industry-wide shift from the fee-for-service model to the value-based payment model. In recent months, various major players in healthcare — and even in tech, retail and finance — have signaled that they belong to the forward-thinking camp by announcing cross-sector partnerships to develop new tools, models and structures that align with the healthcare industry transformation that has begun.
The traditional fee-for-service model prioritizes volume over value and, therefore, seeks to treat as many patients as possible. By contrast, the value-based care model measures success over the longer term — and bases it on patient health outcomes. Some common characteristics of the value-based model include measuring outcomes and costs for each patient, integrating patient care across providers and grouping practitioners according to the conditions they’re treating, and expanding access to high-quality healthcare in the places where it’s most needed.
As beneficial as this change is for patients, the main drivers of the transformation are structural. Providers have always earned more profit from patients with commercial insurance than from those with government-provided insurance, such as Medicare and Medicaid. But today, the number of patients with government-issued healthcare is increasing by around 1.5 percent per year, according to the Harvard Business Review, which is forcing providers to find new ways to keep their businesses healthy. Most notably, they need to find ways to grow their market share across all payer and patient populations. Value-based care is helping them do that.
Still, it’s not always an easy transition. The shift to value-based care requires new, innovative ways of thinking about healthcare, how institutions are organized and the technology that makes it possible. Read on to learn more about some big names who have announced themselves as pioneers helping to define this change — and what it could all mean for the future of healthcare.
Morgan Stanley Names Its First Chief Medical Officer
In October 2018, financial services company Morgan Stanley announced that it had hired Dr. David Stark, formerly with Mount Sinai Hospital, to fill a newly created position: chief medical officer and head of HR data and analytics. With the announcement of the new job, Stark told Business Insider that one of his responsibilities would be “[unlocking] value-based care” for Morgan Stanley employees. Morgan Stanley has said Stark will be charged with leveraging HR data and analytics to “foster innovation in employee wellness and healthcare coverage” and — key to the endeavor — to “address rising healthcare costs.”
Stark created Lab100, a hybrid clinic and research lab offering biometric health assessments and biometric screenings. One of the main goals of Lab100 involves helping patients track their health over the long term and connecting their behavior to their health outcomes.
By enlisting Stark in the effort to ensure Morgan Stanley employees receive value-based care, the bank could stand to save funds on healthcare payments over the long term. It’s also taking part in the rapid development of medical technology that’s springing up to make the transition to value-based care possible — given that it could present a massive investment opportunity.
Amazon, Berkshire Hathaway and JP Morgan Chase Team Up on New Healthcare Venture
In January 2018, Amazon, Berkshire Hathaway and JP Morgan Chase announced a joint venture with a lofty goal that surprised many: creating a new healthcare delivery model.
The announcement was surprising both because of its ambition and also because none of the companies involved are part of the healthcare industry. But they insist they are invested in the project because together they pay for the healthcare of their collective one million employees, and they say they want their new company to do a better job of providing that healthcare. They also hope their new company’s healthcare model can spread to various other companies.
Though the companies haven’t shared details of their plan, the high-level goals are clear: cutting intermediaries from the healthcare delivery system, thereby cutting costs. The company’s CEO, Atul Gawunde, a surgeon and author, has said the company will be structured to excise three types of costs rampant in healthcare: administrative costs, high prices for consumers, and expensive improper healthcare usage. By aiming to improve healthcare experiences and affordability for consumers, they’ve aligned their goals with those of the value-based care model.
CVS Health and Aetna Merger — Healthcare’s Biggest Ever
Health insurer Aetna is soon to be taken over by CVS Health in a massive $69 billion merger — the health insurance industry’s largest ever merger.
Partnerships like these — between a pharmacy benefits manager and a health insurance company — didn’t have much precedent before a few years ago. (CVS operates the country’s largest retail pharmacy chain and owns a large pharmacy benefit manager called Caremark, which provides prescription plans to 94 million customers. Aetna’s health plans cover 22 million people.) Now, the industry is seeing a smattering of them — though no other has matched the scale of this one.
Leaders from both companies promise that the merger will mean better coordinated care and lower costs for consumers. The acquisition will mean that CVS’ thousands of pharmacies and retail clinic locations can become places to deliver healthcare to Aetna customers and others. Care provided in these clinics, company leaders say, would be far less expensive than what can be provided in hospitals or doctors’ offices.
Veritas Capital Snaps Up GE Healthcare’s Value-Based Care Division
GE Healthcare sold its value-based care division to private equity firm Veritas Capital for $1 billion in June — suggesting that the private equity firm sees a major investment opportunity in value-based care reimbursement.
GE Healthcare’s Value-Based Solutions Group (recently renamed Virence Health Technologies) is a software provider that offers technology and analytics to healthcare providers. The division includes three businesses: revenue cycle management, ambulatory care management and workforce management. In other words, it offers the types of tools providers need as they seek to restructure their operations around value-based care.
With major changes set to reshape healthcare, those interested in having a role in the transition to value-based care can benefit from an advanced education and experience in the healthcare industry. A master’s degree program like the one in Healthcare Systems Engineering from the University of Central Florida is a good start. This web-based program fills a need by training students to approach changes in the healthcare field from the perspective of systems engineers — currently an under-considered perspective in the industry. UCF’s master’s in healthcare systems engineering is ready to meet the changes that the value-based care model is bringing to healthcare — and make it work as well as it possibly can for students.
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