Healthcare’s yearslong experiment with value-based care has generated mixed results. While primary care-based models have long been the focus, there is a dearth of models for specialty care. If the industry wants to get a hold of soaring costs, payers have an opportunity to be more proactive and creative about partnering with specialists on new payment arrangements where possible.
Specialists influence more than 50% of healthcare spending for commercially insured patients, inclusive of such things as facility fees at various sites of care, diagnostics, and radiology. Estimates suggest that specialty care trailed only inpatient care and drug costs as the largest contributor to spending increases over 14 years.
Since traditional health plan programs like care management and utilization management may not be sufficient to fully bend the cost curve on their own and can create significant abrasion when applied too aggressively, we think insurers have an opportunity to cultivate a portfolio of approaches to bring value-based care models and partnerships to specialty care. This can apply across all lines of business but may be particularly interesting where primary care-based full and partial risk models have been slower to take hold – for example, in commercial lines of business.
The Center for Medicare and Medicaid Innovation has been experimenting with this for a few years. Expanding specialty value-based care on the commercial side could have a ripple effect across the industry, not just in terms of supporting improved cost and quality of care but also engaging independent physician practices in a way that opens new financial opportunities for them. In some cases, these models can offer the financial leverage physician practices need to avoid being acquired. Insurers that get ahead of the curve may be able to strengthen the independent provider market and solidify relationships with larger groups or health systems.
Building a value-based care portfolio
On paper, it may sound simple: take an existing value-based model that’s working in primary care and apply it to specialties like cardiology, oncology, orthopedics, or women’s health. It’s not that easy. Given the complexity of care and variability across specialties, insurers need to develop targeted models with each, building value levers specific to different specialties and aligning on actions to evolve the patient experience to drive to better outcomes and more efficient care; what is needed to improve orthopedic care will look very different than what is needed for a nephrology model. They also need to create a range of approaches that can serve independent practices as well as enable deeper relationships with physicians who are employed by larger groups or health systems.
To identify which specialties to prioritize for a new value-based approach, insurers should start by assessing the markets they serve to understand the appetite for value-based care and physicians' ability to move into one of these arrangements with as little friction as possible. Additionally, it's important to understand where the key value levers are in each specialty and the impact these can have on cost of care — for instance, can some specialty care be shifted to lower-cost sites of care like an ambulatory surgery center or the home? Are there proven clinical interventions that have an outsized impact on reducing readmissions or complications? Evaluating existing clinical models in a market should also be a priority and will help determine if those fit with an insurer’s approach or if new models are needed.
Different approaches for reaching specialists
There are three main ways that insurers can approach building a value-based care model for specialists:
- Team with provider organizations — Payers and providers, both health systems and physician practices, join forces to design and implement value-based care and payment models that align incentives across patient outcomes and costs
- Partner with aggregators — Payers work directly with a management services organization to scale value-based care initiatives that are working in other markets in partnership with local providers
- Engage innovative vendors — Insurers work with a third-party that has expertise in a specific specialty such as oncology or women’s health to change the payment model for care in that particular specialty
Regardless of the approach, the incentive for providers to join a value-based care model must be strong. Beyond the financial draw and having a strong referral network, insurers need to ease the administrative burden on participating physicians. This could include offering added enablement services like population health analytics and member outreach, or increased insurer-provider interconnectivity that reduces paperwork and administrative burden associated with functions like utilization management.
Finally, it is crucial that programs for specialists are streamlined and straightforward with clear objectives, not dispersed across many programs and incentive models. This means that value-based care models should address not only the cost of care, but also other objectives that insurers have with specialists such as quality, patient experience, and risk coding accuracy.
The time to act is now
The imperative to control healthcare costs has never been greater. Annual US healthcare costs are nearly $5 trillion and will soar to $9 trillion by 2035. If left unchecked, we predict that healthcare could comprise nearly 30% of household income for people with health insurance over the same period.
Scaling value-based care to specialists is one of the many strategies that the industry should embrace to help control costs and improve experience. These models will not replace such traditional approaches as utilization management but can be a valuable part of a broader portfolio. Building these capabilities now will be a competitive advantage for insurers as these types of arrangements grow.
Editor’s note: For more insights on improving cost and quality across healthcare, visit Oliver Wyman Affordability and Quality Impact.