Value-Based Care: The Past, Present, and Future

55% of healthcare executives in 11TEN’s ecosystem indicated value-based care or a closely related topic (e.g., population health) as a top-5 priority over the next 1–2 years. This represents a broader trend among healthcare organizations – from life sciences companies to insurers to health systems – shifting their priorities to align to the triple aim framework of value-based care:

  1. Improve the patient care experience
  2. Improve the health of populations
  3. Reduce the per capita cost of care
 

Value-based care programs compensate providers for the quality of care they give to patients. This contrasts with fee-for-service (FFS), a model which compensates providers based on quantity of services rendered. Despite its pervasiveness today, value-based care is a relatively new healthcare payment model. To better understand the shift to value-based care, we’ll review the history of how healthcare delivery, payment, and coverage have evolved over the last century in the U.S.

the history of value-based care in the u.s.

1840s - 1900s

The American Medical Association, established in 1847 as a membership organization to protect physician interests, becomes powerful. It organizes its physician members by county and state medical societies. Health costs are modest fees paid out of pocket.

1840s - 1900s

1840s - 1900s

The American Medical Association, established in 1847 as a membership organization to protect physician interests, becomes powerful. It organizes its physician members by county and state medical societies. Health costs are modest fees paid out of pocket.

1840s - 1900s

1910s

Progressive reformers argue for federal health insurance, but opposition from physicians and other interest groups as well as U.S. entry into WWI undermine these reform efforts.

1910s

1920s

Hospitals began to offer services on a pre-paid basis. The first employer-sponsored plan started with a group of teachers in Dallas, which later becomes Blue Cross and Blue Shield.

1920s

1930s

Push for health insurance within the Roosevelt administration is blocked by internal conflicts over priorities during the Great Depression. Blue Cross and Blue Shield begins offering private coverage for hospital care in dozens of states. This is the start of fee-for-service payment rates for physicians.

1930s

1940s

Prepaid group health insurance begins and is seen as radical. To compete for workers during WWII, companies begin to offer health benefits, giving rise to the employer-based system still largely in place today.

1940s

1950s

Private insurance is in place for those who can afford it. The federal government recognizes responsibility for sick and indigent populations covered through welfare services.

1950s

1960s

Over 700 companies are selling private health insurance. Most of these companies endorse high-cost medicine. Elderly Americans outside of the workplace have difficulty affording insurance, as the price of hospital care has doubled. President Johnson signs Medicare and Medicaid into law in 1965.

1960s

1970s

President Nixon renames pre-paid group health care plans as health maintenance organizations (HMOs), with legislation that provides federal endorsement, certification, and assistance. Healthcare costs are escalating rapidly, due to unexpectedly high Medicare expenditures, expansion of hospital expenses and profits, and the greater use of technology, among others. American medicine is now seen as in crisis.

1970s

1980s

There’s a shift towards privatization and corporatization of healthcare as corporations begin to integrate the hospital system. Medicare moves to payments by diagnosis (DRG) instead of by treatment. Private plans follow suit. Insurance companies recognize that the traditional fee-for-service method of payment to physicians is being exploited. Capitated physician payments become more common.

 

1980s

1990s

Health insurance costs double the rate of inflation. The expansion to managed care helpsmoderate increases in health care costs. Despite an effort for federal healthcare reform, legislation fails to pass. By the end of the decade, 44 million Americans (16% of the nation) are without health insurance.

1990s

2000s

Health care costs continue to rise. Children’s Health Insurance Program (CHIP) is established. Changing demographics in the workplace lead many to believe an employer-based insurance system can’t last.

2000s

2010s

President Obama signs Affordable Care Act (ACA) in law in 2010, promoting new healthcare delivery models with an emphasis on payment based on the value of care provided. Individuals can purchase health insurance through the Federal Health Insurance Marketplace if an employer doesn’t offer it.

2010s

6 TRENDS SHAPING THE FUTURE OF VALUE-BASED CARE

While the history of value-based care is important to understand the current state, we’re even more intrigued by its future opportunities. We’ve identified 6 major trends that have resulted from the shift to value-based care. We’ll dive deeper into each of these trends in future posts in our value-based care blog series, along with our predictions for the future and how you can play a role in value-based care-driven innovation. 

1. Industry collaborations and ecosystems

Value-based care requires a multifaceted, patient-centric approach to healthcare delivery at every stage of a patient’s journey. This approach challenges the healthcare industry’s modus operandi, which is attempting to innovate in disjointed, misaligned, siloes. An ecosystem approach can change that. Ecosystems are catalysts for innovation, creating synergies between stakeholders that would have not otherwise existed. This is why 11TEN believes ecosystems are the future of healthcare innovation – and an imperative for value-based care.

2. alternative care sites

Health care services are moving beyond the hospital to alternative care sites, such as urgent care centers and retail clinics. Alternative care sites are increasingly preferred over hospital utilization for preventive healthcare and low-acuity issues, as they save costs for patients, providers, and plans. These models promote healthcare delivery that is more accessible, affordable, and patient-centric – all of which promote value-based care. However, the shift to alternative care sites means that a multitude of providers are treating any given patient. If providers can’t share patient data across care sites, this can lead to disjointed and costly care. Thus, there is a critical need for data interoperability to ensure care continuity across the patient journey, from hospital, to retail clinic, to the home. For more information and 11TEN’s perspectives on this topic, read our insight article: Alternative Care Sites are Transforming How Healthcare is Delivered. believes ecosystems are the future of healthcare innovation – and an imperative for value-based care.

3. consumerism and price transparency

Consumerism in healthcare means putting decision-making power in the hands of individuals at the center of care: patients. Put simply, patients are shopping for healthcare like they would any other product – and they expect the same level of service as other industries. Provider organizations are increasingly focused on patient experience and satisfaction. Health plans, life science companies, and health tech companies are investing in consumer-focused tools and features, like online appointment scheduling, online reviews, and smartphone applications. One key difference between shopping for healthcare versus a product on Amazon? Price transparency. The broader consumerism trend, along with notorious patient experiences with surprise bills and awareness of extreme price variation, have accelerated the shift towards price transparency. As of January 2021, CMS began requiring all hospitals in the U.S. to provide pricing information about their items and services. Still, 95% of hospitals have not complied with the new requirements, with many citing implementation costs. While cost concerns may slow the consumerism trend, we predict that patient demand and regulation will move the needle and motivate stakeholders to rapidly innovate.  

4. preventative care

In value-based care arrangements, providers are incentivized to keep patients healthy and prevent patients from getting sick in the first place. This presents a potential savings opportunity for provider organizations. In one example, the Pioneer ACO program generated $147 million in total savings in its first year after focusing on preventative care measures. A value-based care model would prioritize wellness visits, immunizations, and addressing lifestyle habits that often lead to long-term disease. Additionally, when looking at preventative health, a trend we predict will continue is the ability to diagnose, treat, and bill (ICD-10 code) for social determinants of health that contribute to an individual’s current or future disease risks. This could enable physicians to address patients’ underlying causes of diseases, potentially preventing disease from ever occurring. Collecting this data can also predict the risk of future conditions based on social risk factors.

5. personalized and precision medicine

As value-based care becomes more prevalent and technology more advanced, healthcare will increasingly focus on patient-level disease risk and progression. Providers, plans, and health systems are exploring options and developing technologies to better tailor treatment at the patient level. Studies show that more than half of older U.S. adults have 3 or more chronic diseases, while two thirds of all deaths are caused by one of five chronic diseases. Preventing these diseases through targeted genetic sequencing will allow disease prevention to become individualized and save money in the long run. Moreover, genetic sequencing will allow providers to understand the likely interactions between specific medications and patients, preventing adverse reactions or long-term damage. As technology develops and costs lower, precision medicine will be a core component of any VBC model.

6. the digital front door

A shift towards value-based care creates a ripe opportunity for innovation. Value-based care will force the diagnostic tool industry to shift towards precision medicine that will lower costs for both health systems and patients. Innovative technology, such as wearable machines or devices, will become a standard practice to catch diseases before they have a chance to express themselves, allow for continuous monitoring outside of a hospital, and lower total healthcare costs. Additionally, advanced AI and more accessible data will allow providers and health plans to identify high-risk patients who are likely to be benefit from proactive outreach and intervention. Not only will we see a shift in personal wearable devices, but we expect this technology to increase patients’ ability to interface with their providers remotely. Recent studies have shown that there may be no difference in clinical quality as telehealth becomes more common. For example, this study conducted during and after COVID-19 compared telehealth and in-person encounters. The study demonstrated that telehealth offers equal quality to in-person care, refuting concerns that telehealth compromises quality. Additionally, with the increase in telehealth encounters, ambulatory and in-person encounters decreased, saving health systems money, resources, and reducing physician workloads.

As value-based care continuously reshapes the healthcare industry, 11TEN leverages our diverse healthcare ecosystem to support our partners through the transition. Learn more about our solutions and contact us to position your organization ahead of the value-based care curve.