Why health care providers and facilities need to transition to value-based care

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Over the past decade, the health care industry has shifted to value-based care, albeit on an incremental basis. These efforts deserve praise and are the result of intentional, hard work. Based on observations from the consulting team at FORVIS, we found that this shift is variable in maturity across key value-based areas. That is, organizations may be further along in patient engagement and care coordination than other areas like data analytics and provider alignment.

The cross-sectional nature of value-based care means that an organization’s transition to value, overall, is only as strong as its weakest link. We believe there is urgency to fully transition to value-based care to seize the financial sustainability opportunity that a value-based operating model presents. Those opportunities are at the reimbursement level (payer incentives) and in driving efficiency within the care delivery model (cost of care).

The benefits of value-based care are well documented and easy to appreciate from a patient perspective. What is less understood is that when value-based care is executed at a high-performing standard across an organization, value-based care models allow for increased levels of financial performance.

Why now

Michael Wolford
_{© FORVIS}

Randy Biernat, CPA, ABV
_{© FORVIS}

Tara Anderson, RN, BSN
_{© FORVIS}

Margin pressures of a health system continue to grow, along with higher labor costs following the so-called great resignation of 2021. In fact, more than half of U.S. hospitals ended 2022 with negative operating margins. Financial sustainability, a depleted workforce and soaring inflation are the most common concerns of health care executives looking for alternative solutions.

Payers experimented with mandatory and voluntary models while providers developed integrated networks, and the industry inched toward universally applicable parameters for value-driven care prior to 2020.

However, the transition to value-based reimbursement slowed during COVID-19 and the corresponding shift in focus to a massive public health response. Four years later, care delivery and related payment systems can resume the march away from traditional fee-for-service payments to better align cost and value for patients.

With that resumed focus on value by payers comes the necessity to revisit the transformational endeavor of providers to drive value-based care.

The consequences of sitting out the transition to value-based operations are clear: lack of preparedness for mandatory value-based reimbursement programs, limited value proposition to employers, and market positioning with patients lagging behind best practices.

How to achieve a more value-centric model

Ultimately, a high-functioning value-based care model will have the characteristics necessary to measure, monitor and drive value as defined by patients and payers. Standards, measures, benchmarks and expectations have evolved and will continue to do so. A functional definition of value-based care readiness is simply whether or not the organization’s care model is value-based enough to be able to manage payment risk related to payer programs and meets regulatory requirements for value-based arrangements with providers.

The twin capabilities of managing payer incentives and driving physician alignment in a value-based context is, we believe, the key to economic sustainability. This does not mean every organization needs to be in advanced payment models such as Medicare’s Shared Savings Program. The ability to manage and drive performance in payer value incentives in an organization’s market is the target and may or may not include taking significant amounts of risk.

To achieve the capabilities discussed above, health systems should start by analyzing their value-based capabilities and organize their system’s priorities to meet a level of value-based care performance that puts the organization in control of where and how to successfully engage in the pursuit of value. Further, organizations can develop a culture around their commitment to value-based care. For example, boards can work on a balanced scorecard for executive compensation that rewards the development of value-based capabilities and related outcomes.

Potential challenges to adopting change

The three main challenges for organizations desiring the transformation to a value-based care operational approach are a lack of strategic focus, a near-term focus on current challenges (i.e., financial), and limitations in the management team (both in capacity and expertise).

In addition, as value-based care lacks a standard definition, organizations must engage in an effort to know themselves and how they can be a value-based care organization for the communities they serve. Value can be defined in various ways: a patient-centered approach, outcome measurements, population health management, provider incentives, technology integration and utilization, and more.

Organizationally, health system boards and their management teams must commit to the model. This culture-based commitment will open pathways to high levels of performance, both financially and nonfinancially, that lead to long-term organizational success.

As such, these challenges pale in comparison to remaining stationary. Value-based care is a framework we need now more than ever. Change is possible and has great potential. The value-based approach not only benefits patients but can also help organizations improve their financial performance. The transformation will take work, but it has mutual outcomes to both patients and providers.

Michael Wolford is a principal with FORVIS’ Healthcare Consulting practice focusing on alternative payment models, episodes of care and health system strategic planning. During his tenure with FORVIS, Michael has advised more than 100 organizations and served as the director of bundled payments for a multistate health system.

Randy Biernat, CPA, ABV, is partner with FORVIS’ Healthcare Consulting practice. His experience includes transactional and compliance consulting, the development of hospital/physician alignment strategies and assisting healthcare entities with reform issues related to physician relationships.

Tara Anderson, RN, BSN, is a manager within the Healthcare Strategy and Finance team at FORVIS. With 25 years of nursing experience, she has proven success leading nursing teams through transformation and creating value in health care. Her experience includes strategic planning, innovation, and driving measurable and sustainable results.