Systemic Healthcare Change: Value-Based Care & Digital Transformation

by Camille Super, on Aug 24, 2021 7:15:00 AM

Read Time: 6 minutes

Doesn’t it make sense to pay for a service based on our experience and its value, rather than paying based on the type of transaction, regardless of the experience? Let me explain…

It’s a question many consumers and patients have been asking as healthcare costs continue to rise, yet the patient experience and their health outcomes haven’t necessarily improved. Spurred by the pandemic and an increasing consumer demand for more value from their healthcare providers, the industry faces a paradigm shift. Healthcare is transitioning from a fee-for-service model to a value-based care model. While value-based care, or VBC, has seemed to gain momentum only recently, this model has been in conversation since 2008 as part of the Health Information Technology for Economic or Clinical Health Act, or HITECH Act. As reported by Forbes, 48% of the key payer and providers have started to or have already implemented a value-based reimbursement model, with a forecasted 75% of providers moving to VBC in the near future.

So, what does this mean, and how do these models differ? Under the traditional fee-for-service model, payers reimburse providers based on the number of patients they see and services they perform. While a fee-for-service rewards volume, the value-based care model is based on the quality, not quantity, of patient care. This shift in incentivizing value over volume places the patient experience and their health outcomes at the forefront. Providers are encouraged to pursue preventative care instead of responsive care, with performance metrics that includes waste reduction. This comes in all forms: lessening expensive and sometimes unnecessary testing, increasing the level of immunizations that positively contribute to population health, and evaluating patient experience feedback for service improvements are several examples.

Why Does the Shift to a Value-based Care Model Matter?

The healthcare industry has faced several significant disruptions in recent years that have only been exacerbated by the pandemic. These include new market entrants including concierge medicine, which offers a more personal patient/doctor relationship, and major retailers like CVS Health and Amazon; new needs for interoperability with the goal of increasing patient’s accessibility to their own medical data and improved care coordination; and a rising influence of patient consumers demanding more from their providers. As consumers become empowered with more and more choices, providers must redesign their value proposition with a patient-first focus if they want to stay competitive.

Now you may be wondering, what exactly is concierge medicine? How does this play into the value-based care model, and why are consumers drawn to them in the first place? Within traditional models, providers must operate within a high-volume, patient-heavy model. As patients this has us feeling frustrated with limited appointment availability and feeling like we are “just a number”. Providers themselves also struggle with burnout trying to juggle all their patient’s appointments on top of the subsequent administrative and billing load.

In efforts to provide value to both patients and providers, concierge medicine is introduced as the “alternative”, primary care model. Concierge medicine practices require a monthly or annual membership fee, with smaller patient panels and more direct, personalized care. By paying a monthly fee in addition to insurance premiums, patients receive 24/7, on-call direct access to your doctor, with next or even same-day appointments, longer appointments with your doctor, and personalized, holistic wellness plans that include nutrition, emotional health, and fitness.

For providers, this means a smaller patient load, alleviating a lot of the stressors that contribute to burnout. With less time spent on paperwork, deeper and more fulfilling relationships surface, allowing the provider and patient to focus on health and wellness. Not only is there value for providers, but most importantly, patients receive high quality, personalized care, resulting in better outcomes.

Going back to the fee-for-service vs. value-based care discussion... In the traditional, fee-for-service model, payers and providers were each other’s primary collaborators, influencing patient-to-provider volume, the cost of treatments, and even the delivery of care. With the growing consumer empowerment in healthcare, as a recent study by IBM shows, patients are predicted to become the primary stakeholder and influencers in the value-based care model. While providers and payers did see value in providing care to the largest volume in patients within their time constraints, patients seek value in the quality of care received, regardless of how much time it takes providers to deliver. With this shift, the business model must effectively deliver, communicate, and measure the quality and value of care given, which is influenced by their patients' experience. Fueled by the era of digital transformation, tech and digital companies are also gaining momentum with a larger stake in the provider and payer decision making process as medical innovations are the key drivers and enablers of the future healthcare ecosystem.

The Emergence of Value-based Health IBM for Business Value

Figure 1: “The Emergence of Value-Based Health”, IBM Institute for Business Value

How has the Covid-19 Pandemic Accelerated the Shift from Fee-for-Service to Value-Based Care?

During the pandemic, elective surgeries dropped significantly as providers shut down to reserve critical care supplies and mitigate unnecessary exposure risks to the virus. Hospitals reportedly lost more than $20 billion in revenue from March to May of 2020 alone. Private practices similarly suffered revenue loss, with the Medical Group Management Association (MGMA) reporting a 55% decrease in revenue and a 60% decrease in patient volume since the pandemic’s onset. With many providers still operating in a fee-for-service model, the decrease in patient volume significantly impacted their revenue streams, as patient utilization and revenue are directly correlated. However, providers who had already established value-based contracts saw a consistent revenue stream regardless of the drop in patient visits.

While private practices were struggling, concierge medicine experienced an influx of patients as consumers sought out alternative healthcare providers who offered advanced telemedicine and convenient access to care during the pandemic. Barron’s reported an increase of 21% in concierge medicine’s new patient volumes nationally during 2020, particularly in two groups: senior patients seeking safer alternatives to in-person care, and younger, tech-driven patients drawn to personalized care across digital platforms offering compatibility with health tech-wearables. While concierge medicine has its cons (like their monthly membership fees not typically covered by insurance), their personalized care model emphasizes the patient’s holistic care. Value-based care experiences and health outcomes have proven successful, with value created for both patients and their providers.

Opportunities and Challenges with the Value-Based Care Model

So why haven’t more providers made the switch to value-based care models yet? According to Forbes, one of the biggest hindrances within the healthcare industry is the lack of “design thinking”. Although the benefits of digital innovations like AI-assisted clinical support and advanced analytical tools have been documented, providers are hesitant. Their concerns range from disruptions of existing workflows to complex integrations with their legacy systems.

These concerns are not entirely unfounded, but this transformation doesn’t live solely in IT or administrative support, which presents another challenge. So how should healthcare organizations approach this shift to value-based care and the patient experience prioritization within the era of digital transformation? Read on with our next blog as we explore solutions in "Systemic Healthcare Change: Value-Based Care & Digital Transformation (Part 2)".

For more on ‘design thinking’ in the context of digital and platform transformation to deliver a differentiated experience, learn about our Platform-based Design Engineering approach. Industry innovation leveraging technology isn’t born from deeper vertical expertise, but from horizontal thinking. Consider holistically how your people and processes can be transformed – not automated. Showcase the art of the possible in the healthcare industry by maximizing your investments and resource utilization with Platform-based Design Engineering.

Topics:Strategy to ExecutionDigital TransformationCOVID-19Healthcare Transformation

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