Embracing Value Based Care: How Value-Based Primary Care Enables Employers to Prioritize Employee Experience and Cost Efficiency

Aligned Marketplace Founding Team
March 6, 2024

The Healthcare Paradigm Shift

Healthcare costs are out of control – one major contributing factor is that traditional fee-for-service models reward quantity over quality. However, self-insured employers have at least one efficient and effective lever to pull that can simultaneously decrease costs and improve employee experience and health outcomes. Value-based care (VBC) is a healthcare payment model paradigm shift that prioritizes patient outcomes and cost efficiency. This is a necessary evolution in a landscape marked by rising costs and uneven quality and access. VBC is being heavily adopted in the Medicare space since Medicare & Medicaid have invested billions to identify the best models to drive quality and cost savings, with the best results coming from comprehensive primary care-centric models paid for total-cost-of-care savings through high-access, high-experience, and quality care. VBC is also picking up momentum in other market segments like commercial payers. The Health Care Payment Learning and Action Network (HCP-LAN) aims to double the adoption of two-sided risk alternative payment models, targeting 50% for Medicaid and commercial sectors and 100% for Medicare Advantage and traditional Medicare by 2030, a significant increase from the projections for 20241. In this blog post, we will provide an overview of VBC models, explain why primary care providers should be at the helm, why VBC primary care appeals to self-insured employers, and how Aligned Marketplace removes barriers to adoption and realization of cost savings and improved quality, access, and experience for employees.

Understanding Value-Based Care

At its core, VBC represents a healthcare delivery model where compensation is tied directly to the quality of care provided and patient health outcomes. Unlike traditional models, where providers are reimbursed for the number of services they deliver, VBC mandates that providers meet certain performance metrics and then reward them for efficiency and effectiveness.

The Spectrum of Value-Based Care Models

The landscape of VBC is diverse and multifaceted, with structures that realign incentives across the healthcare continuum to promote high-quality and cost-efficient patient care:

  • Pay-for-Performance (P4P) Models: P4P models are designed to improve healthcare quality and patient outcomes by providing financial rewards to providers who meet or exceed specific performance metrics. These models often focus on quality of care and efficiency and can complement other VBC arrangements such as Patient-Centered Medical Homes (PCMHs) and bundled payment structures, incentivizing a comprehensive approach to patient health.
  • Shared Savings Models: These models create financial incentives for payers and providers to collaborate in cost reduction efforts. Providers, such as those in Accountable Care Organizations (ACOs) within the Medicare Shared Savings Program (MSSP), hospitals, and physician groups, are rewarded for reducing healthcare costs while maintaining or improving quality of care. They achieve savings for payers by staying below predetermined cost benchmarks and are rewarded with a share of realized savings.  These models can be either ‘upside’ only or provide ‘upside and downside’ economics to the providers responsible for outcomes
  • Capitation Models: Under capitation, providers receive a fixed payment per patient over a certain period, covering all needed services. Medicare Advantage plans operate on a similar capitation basis, where private insurers receive a monthly set fee from Medicare to provide enrolled beneficiaries with all their healthcare services, encouraging a focus on preventive care.
  • Bundled Payments: This model attempts to simplify the payment system by using a single bundled payment to cover all services provided for a particular treatment or condition within a specified timeframe. Providers are incentivized to collaborate and coordinate care, leading to more cost-effective treatment options and potentially higher quality patient care.

Current Adoption in the Commercial Insurance Space

VBC is expanding within the commercial insurance industry. HCP-LAN forecasts a steady increase in VBC payments from commercial payers to providers to 25% in 2024 and 30% in 20251, up from 12.7% in 2021, reflecting a notable rise and indicating escalating adoption by employers. Large employers like JP Morgan Chase have invested heavily in innovation around value-based care, care navigation, and the use of advanced analytics – something that requires significant scale but is helping pave the way for employer sponsored healthcare.

Primary Care: At the Helm of Value-Based Care

In a NEJM Catalyst article called Changing How We Pay for Primary Care2, the authors describe how appropriately incentivizing primary care providers (PCPs) will contribute to the health of Americans given they direct up to 90% of total health care costs through referrals, tests, procedures, and hospital admissions, yet primary care spend represents only a small fraction of total cost of care. The article also describes a dual role of primary care within the healthcare ecosystem being (1) establish trust between patients and providers that enable delivery of accessible and high-quality person centered care and (2) serve as effective stewards of health care resources.

PCPs are essential to the success of improving the quality and efficiency of care through VBC because they are well-positioned to partner with payers in the following capacities:

  • Coordinating patient care: One of the most important roles of PCPs in VBC is to coordinate patient care across all levels of the healthcare system. This includes working with specialists, hospitals, and other providers to ensure that patients receive the right care at the right time. This helps to avoid unnecessary services and duplication of care.
  • Managing chronic diseases: PCPs also play a vital role in managing chronic diseases. Chronic diseases, such as heart disease, diabetes, and cancer, account for a sizable portion of healthcare spending. PCPs have the skills and experience to manage these diseases effectively, and they can help patients to develop and follow treatment plans that keep them healthy and out of the hospital.
  • Providing preventive care: In addition to coordinating care and managing chronic diseases, PCPs also play a critical role in providing preventive care. Preventive care is essential for maintaining good health and avoiding costly medical complications. PCPs provide various preventive services, such as vaccinations, screenings, and counseling.
  • Educating patients about their health: PCPs are also responsible for educating patients about their health and empowering them to make informed decisions. This is essential for promoting patient engagement and adherence to treatment plans. PCPs build relationships of trust with their patients, which helps to create a supportive environment for health and healing.

PCPs and their practices benefit from implementing value-based care in a couple of ways: (1) they receive financial rewards for improving patient outcomes and reducing costs, which can lead to more stable revenues and (2) provider burnout decreases when their practice’s financial investment in VBC exceeds 75%; this is according to a recent study by Elation Health and the American Academy of Family Physicians3 which also noted that larger practices or those with network ties found VBC management easier. These incentives encourage a shift from volume to value, promoting a proactive, patient-centered approach to healthcare that aligns with PCPs’ foundational role in the health of the communities they serve.

The Appeal of Value-Based Care for Self-Insured Employers

Adopting a value-based care model for primary care consistently improves employee satisfaction, health outcomes, and reduces costs. Here are four examples:

  • “99% of employees reporting being ‘satisfied’ or ‘very satisfied’” – CHG Healthcare and Marathon Health
  • “Employees with diabetes, for example, saw a 24% reduction on average in HbA1c levels.” And “patients saw an 11% reduction in total cost of care” – Walmart and Included Health
  • “Preliminary data over a nine-month period indicates that per member-per-month spending for participants has decreased by 14%, ER utilization has decreased by 11%” – Boeing
  • “Employers save an average of 25% on their employees’ total cost of care” – Milliman and Premise Health

Self-insured employers can play an influential role in the value-based care (VBC) landscape and stand to gain through several strategic actions:

  • Designing VBC-Focused Health Plans: Employers can supplement traditional insurance models by incorporating VBC principles into their health plans, emphasizing wellness and disease management programs that can improve overall employee well-being and productivity.
  • Negotiating Direct, Value-Based Arrangements: They can negotiate directly with healthcare providers to establish VBC agreements, leveraging their scale to create contracts that focus on quality and cost-effectiveness, which benefits both the employers in managing healthcare spend and employees in receiving high-quality care.
  • Encouraging Wellness and Prevention: By offering incentives for healthy behaviors and the use of preventive health services, employers can foster a healthier workforce, which can translate to reduced healthcare costs and increased employee engagement.
  • Utilizing Claims Data: Self-insured employers can analyze trends in aggregated healthcare claims data to guide wellness initiatives and benefits design, respecting privacy while promoting a healthier work environment.

Through these approaches, self-insured employers can actively participate in VBC, helping to manage costs effectively while enhancing the health outcomes and satisfaction of their employees.

Barriers to Adoption for Self-Insured Employers

The transition to VBC is not without its challenges:

  • Provider Distribution: Access to VBC providers can be limited, especially in certain geographic areas. Employers could contract with multiple VBC providers on their own or partner with groups like Aligned Marketplace to bring a national network of value-based advanced primary care to their plan members.
  • Contract Complexity: VBC contracts can be complex, and employers need to have a good understanding of healthcare economics and outcomes-based payment models to negotiate effectively with their insurers.
  • Economic and Incentive Models: Establishing shared savings, capitation rates, and other incentive models requires a delicate balance to ensure alignment between payers and providers.
  • Measuring Quality and Performance: Employers need to invest in robust data analytics to effectively monitor provider performance and ensure that they meet the agreed-upon care standards.
  • Provider Risk Aversion: Some providers may be hesitant to adopt VBC models due to the financial risks involved. For example, providers may be concerned about having to repay Medicare for excessive costs if they fail to meet certain performance metrics.
  • Lack of Data and Analytics: Employers may need to invest in new data analytics capabilities to effectively measure and monitor provider performance under VBC models.
  • Cultural Change: The transition to VBC requires a cultural shift from traditional fee-for-service models to a focus on value and collaboration. Employers need to work with their employees and providers to create a culture of shared accountability for healthcare outcomes.

Aligned Marketplace: Streamlining Adoption of Value-Based Care for Self-Insured Employers

Aligned Marketplace provides employees of self-insured employers with a membership to a curated national network of the best performing, value-based, independent advanced primary care providers. Advanced primary care is aligned and accountable primary care where member experience is affordable, accessible, and proactive. Aligned Marketplace manages aligned economic incentives across all providers on behalf of and under one contract with an employer which keeps administrative burden low. The result is significantly improved quality of care, enhanced patient experience, and lower employer healthcare costs. While the journey toward adopting VBC is complex, the potential rewards for self-insured employers are substantial. Significant cost savings are just the beginning – in a healthcare environment increasingly focused on value, the strategic shift toward VBC in partnership with Aligned Marketplace can position employers not only as stewards of their resources but as champions of employee health and experience.

  1. https://hcp-lan.org/about-us/
  2. https://catalyst.nejm.org/doi/full/10.1056/CAT.17.0326
  3. https://www.prnewswire.com/news-releases/family-physicians-with-value-based-payment-models-relieve-burnout-according-to-study-from-aafp-on-elation-health-301967163.html
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