VBC basics: Understand the 5 key players in value-based care
May 22
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Daniel Kuzmanovich, Clare Wirth and Eileen Fennell
Value-based care (VBC) is changing the healthcare landscape, and understanding the roles of different stakeholders is an important place to start. Discover how payers, providers, purchasers, patients, and industry partners contribute to the success of VBC — and why their collaboration is essential for improving healthcare outcomes.
VBC has become a term heard across the entire healthcare ecosystem. But the relationship different healthcare stakeholder groups have with it varies. Learn the roles and motivations of each major industry stakeholder in shaping the future of VBC.
- There are five key groups who are either directly involved in VBC or are impacted by the industry's shift toward it:
- Payers, who determine patient prices and provider reimbursement rates for healthcare delivery.
- Providers, who deliver healthcare, including hospitals, health systems, physician groups, and post-acute care facilities.
- Purchasers, who supply funds to payers to secure health insurance.
- Patients, who are on the receiving end of healthcare delivery and insurance coverage.
Various partners to these groups, who offer products and services that can maximize value, increase care quality, and reduce care costs. These partners include digital health, medical device, and pharmaceutical companies.
VBC is made possible by the interactions between these groups. Below, we unpack the roles each one has in shaping VBC.
As the entities who finance healthcare, payers are integral to the payment transformation aspect of VBC. Both public and private health plans are highly motivated to embrace VBC to keep costs low for themselves and their members while keeping care quality high.
Consequently, we can think of most payers as drivers of VBC. They drive the industry's shift to VBC by creating value-based payment arrangements for providers to participate in, sometimes willingly, sometimes not.
While most provider reimbursements come from public and private health plans, some patients self-pay, or pay for their care out-of-pocket, especially if they don't have insurance. These individual patients don't have the power to drive VBC forward like health plans do.
Providers of care are integral to the care transformation aspect of VBC. If payers are drivers of VBC, providers can be thought of as implementers of it.
As providers accept different ways of getting paid, they must implement new care delivery models that focus on providing high-quality care at the lowest possible cost. Only then can they succeed in the face of payment transformation.
However, VBC isn't just about adapting clinically to succeed under new payment models for providers. By focusing on care value, providers deliver more patient-centered care, which results in greater patient satisfaction. Physician satisfaction also often improves under VBC models because they can focus on the quality of service they provide each patient rather than on the quantity.
As the drivers and implementers of VBC, payers and providers execute most value-based payment arrangements. These arrangements are the engines that drive progress toward VBC. Payers set the cost and quality targets that providers are expected to meet, while providers transform care delivery to gain financial rewards or avoid financial penalties.
Purchasers fund private health plans — often in the form of premiums — to acquire health insurance. They can do this for themselves, but they often do it for their members.
Essentially, most purchasers are customers of health plans. Like any customer, purchasers want to save money. Specifically, government agencies and employers want to cut down on spending for their members' healthcare coverage, and individual patients want to pay less in premiums.
There are three main types of purchasers in the United States, each with different levels of VBC adoption:
1. Federal and state government agencies: These agencies use tax dollars to pay private health plans to administer healthcare coverage for Medicare Advantage (MA) and Medicaid managed care health plan beneficiaries.
VBC adoption: As an advocate for VBC, government agencies tend to push commercial health plans to participate in VBC by creating value-based payment arrangements with providers, most notably with MA plans.
2. Employers: After government agencies, employers are the next largest group of purchasers in American healthcare. They purchase health insurance for their employees from private health plans.
VBC adoption: VBC adoption is more variable among employers. Almost all employers are in favor of cost savings. However, some may be hesitant to embrace VBC given the potential it has to restrict the benefits they offer to employees. Not to mention, they need to make high-cost investments in staff and capabilities if they want to benefit from VBC. Only the most progressive employers, whose top priority is reducing employee healthcare costs, spend time intensely advocating for VBC.
3. Individual patients who purchase their own health insurance: These patients often purchase their own health insurance on public exchanges established by the Affordable Care Act.
VBC adoption: Similar to individual patients who are payers of their own healthcare, individual patients who are purchasers of their own health insurance hold less power to advocate for VBC than government agencies and employers.
Purchasers can be thought of as advocates. Value-based payment arrangements between payers and providers offer the potential to lower the cost of healthcare, offering savings for purchasers. Still, it's not always a one-way street with purchasers pushing for cost savings from payers. In VBC, payers are also trying to make health insurance more affordable for purchasers.
In addition to sometimes being payers and purchasers, patients play another important role in VBC as receivers. VBC is ultimately an attempt to improve healthcare for patients. Rather than exerting influence over VBC's fate, patients are more on its receiving end, experiencing positive impacts such as lower premiums and more coordinated, individualized care.
In particular, VBC is meant to guarantee patients receive appropriate care when they need it. That could translate to a patient with a chronic condition seeing a specialist more often or a relatively healthy patient staying out of the hospital. This leads to better health outcomes and more cost-effective care for these patients.
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Finally, there are industry-wide partners trying to support all the stakeholder groups as they engage in VBC. This includes digital health and life sciences companies, like pharmaceutical and medical device companies. These groups can be thought of as the suppliers in the VBC ecosystem.
VBC offers a new avenue for these companies to engage in conversations about how their products can increase quality and lower costs, namely for payers, providers, and purchasers. For example, digital health apps can support medication adherence by sending reminders, which can prevent the need for high-cost care in the hospital or ED.
Collectively, the interactions between these stakeholder groups make VBC a reality. As the drivers of VBC, payers respond to pressure from purchasers (the advocates) by creating value-based payment arrangements with providers. As the implementers of VBC, providers try to lower the cost of care and improve care quality by transforming care delivery models. Patients, the receivers of VBC, feel the impact of all of this. And these efforts are broadly supported by the various partners who supply innovative solutions that aid in both the financial and clinical transformations required to bring VBC to life.
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