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1 big tip: friction points on the VBC train

Illustration: Gabriella Turrisi/Axios

The “shift to value-based care” was on everyone’s lips at HLTH – but more than a decade after its launch, entrenched vendor dynamics and unequal market power continue to slow the pay-for-value train, Erine writes.

Why is this important: The current fee-for-service system is essentially the opposite of the “apple-a-day” philosophy: it rewards expensive, high-volume procedures and discourages preventative care.

Yes and: A looming recession, skyrocketing healthcare costs and a tight market are encouraging companies to dip their toes into value-based payment (VBP) models.

Yes, but: Despite renewed executive exuberance over value-based payments at HLTH, the reality is less sunny.

By the numbers: Value-based payments accounted for just 6.7% of primary care revenue in 2021, according to a recent MGMA report.

Enlarge: The headwinds for VBC in the commercial space are formidable, according to a January article in the journal Health Affairs.

  • Powerful incumbent providers wield disproportionate market leverage when negotiating reimbursement with health plans, the authors write.
  • “[M]all providers have a significant ability to negotiate high commercial rates or achieve “must-have” status in a given market by offering differentiated services,” the authors write, “for example, as the only hospital offering bone marrow transplants. “
  • Value-based programs also “suffer from incumbent power,” they add, in which incumbents “wield enormous power to bundle services, refer patients, and compete over familiarity and reputation.”

Still, value-based payments gained traction in health insurance markets and subsequently attracted considerable investor interest.

  • Oak Street Health, a Medicare-focused operator of a network of value-based primary care centers, received a $300 million credit facility on Wednesday from Silicon Valley Bank and Hercules Capital (NYSE:HTGC) .

What they say : HLTH leaders are seeing this pull and, in the face of their own skyrocketing healthcare budgets and the lasting financial impacts of the pandemic, are beginning to experiment. For instance:

  • Carbon Health CEO Eren Bali, moved by skyrocketing healthcare costs among his own employees, is dipping a toe into VBP, he told Erin at HLTH. The company is rolling out its first risk-based contract in January 2023 with Blue Shield of Massachusetts.
  • “The goal for the next five years is to do more,” Bali said.

Meanwhile, Executives including Availity CEO Russ Thomas and Biofourmis CMO Maulik Majmudar told Erin they see near-term potential in being able to create more tactile models of care that don’t s not get bogged down in reimbursing each individual service.

  • “Value-based care is essential for us,” Majmudar said. “As we start to take risks, we’re seeing traction there.”