Value-Based Care Fuels Innovation, Not Consolidation

Editor’s Note

This article is the latest in the Health Affairs Forefront series, Accountable Care for Population Health, featuring analysis and discussion of how to understand, design, support, and measure patient-centered, cost-efficient care under the umbrella of accountable care. Additional articles will be published throughout 2023. Readers are encouraged to review the Call for Submissions for this series. We are grateful to Arnold Ventures for their support of this work.

An April 2023 article in the Health Affairs Forefront series on accountable care for population health by Paul Branstad and Claude Maechling (henceforth, “the authors”) charges that value-based care (VBC), as currently conceived, is doomed to fail due to the consolidation of corporate interests around a touted “$1 trillion prize.” We agree that consolidation is an ongoing concern in health care (as in many industries), that risk scoring is an insufficient terminal goal for value-based care, and that providers need to be in the driver’s seat of this next chapter of value if it is to succeed.

Nonetheless, we believe that the authors have overstated the relationship between certain trends and mistakenly diagnose symptoms limited to parts of the health care industry as representative of the whole. Specifically, we focus here on two foundational problems integral to their argument:

1. Construing Medicare Advantage (MA) as broadly indicative of the overall value-based industry is overly simplistic and overlooks critical regulatory innovations in other programs.
2. Drawing a causal link between value-based care and conglomerates expanding into health care ignores the decades-long trend of increasing consolidation across industries (health care included). This argument mistakenly pins value-based care programs as underlying causes of much broader market forces, while also ignoring innovations in value-based care with demonstrated results that present opportunities to foster market competition, rather than promote oligopoly.

We address each of these concerns in turn.

Value Is More Than Medicare Advantage

We agree with the assertion that MA plans have historically focused their efforts on increasing budgets through risk coding and by limiting cost-containment efforts to traditional insurance tools. Going forward, if value-based models are to succeed, we will have to take on the work of reducing wasteful and unnecessary health care costs through proactive engagement and novel care delivery. However, the latest generation of value-based models has been constructed with these lessons in mind, and it is a disservice to productive discourse to ignore these advancements.

While the Centers for Medicare and Medicaid Services (CMS) manages MA plans, it also administers the Medicare Shared Savings Program (MSSP), a decades-long accountable care initiative established as a permanent program through the Affordable Care Act to manage the costs and quality outcomes of traditional Medicare (that is, not Medicare Advantage) beneficiaries. The MSSP has consistently generated savings against the CMS-set benchmark.

The MSSP is the foundation upon which the CMS Innovation Center (Innovation Center) has developed a series of successively innovative models, improving in each case upon learnings from past experiments over the past decade. While not every model has generated savings for taxpayers, they have each tested important hypotheses in the critical evolution of value-based health care structures, and several of these experiments have led to statistically meaningful savings.

The Accountable Care Organization  Realizing Equity, Access, and Community Health (ACO REACH) model, the latest evolution of the Innovation Center’s value-based care efforts, affords health care providers (especially primary care providers) tools and incentives to generate savings and improve patient outcomes through diligent, proactive care. This shifts at least part of the value primary care providers create for the health care system, by serving as both vanguard and navigator, to their own practices.

ACO REACH cannot be evaluated through the lens of MA concerns, as the approaches are materially different. Exhibit 1 outlines several of the fundamental distinctions between the rules of the respective programs.

Exhibit 1: Comparison of MA and ACO REACH patient rights

Source: Authors’ analysis.

ACOs cannot avail themselves of the tools private health insurers (including MA plans) may use to limit patient access (for example: limited networks, referral and prior authorization requirements, required step therapies, and so forth). This is a far cry from Branstad and Maechling’s assertion that those who would succeed in VBC must “control the entrance to the network, by controlling what the patient is allowed to do [...] since this is the way value-based contracting is designed to work.” Without these tools, ACOs must undertake the much more challenging work of managing costs by proactively addressing patient health prior to acute exacerbations (a major driver of unnecessary health care costs). This required innovation will be led by technological and analytical advancement to empower physicians to manage their patient panels efficiently and effectively.

The authors also bemoan that the system is abandoning those who are most vulnerable. They claim that the “conversion to VBC plans will also undermine efforts to address the social determinants of health for disadvantaged communities.” Yet, the ACO REACH model has set out clear mechanisms by which the Innovation Center incentivizes and holds responsible ACOs for providing equitable access to care. These include:

• ACOs are incentivized to recruit primary care physicians who provide care to underserved communities through the Health Equity Benchmark Adjustment, which increases the budget ACOs are evaluated against (and therefore the opportunity for shared savings) proportional to the presence of historically underserved beneficiaries in the ACO.
• Each ACO must create a health equity plan that identifies observable disparities in health care access amongst definable patient cohorts represented in its beneficiary population and commit to concrete strategies for addressing these disparities, inclusive of detailed targets and timelines.
• ACOs must also submit demographic and social determinants of health data annually to CMS.

These features are meaningful and substantial steps in the ongoing evolution of VBC. Ignoring them does a disservice to the prospect of informed debate around this critical issue. Moreover, ACO REACH is showing the desired engagement: 824 federally qualified health centers, rural health centers, and critical access hospitals are participating in the model’s inaugural performance year, more than double the number of such institutions (which are dedicated to the care of underserved populations) than participated in the model’s predecessor a year prior.

The authors also argue that VBC burdens primary care providers with quality measures that are oriented around administrivia and processes divorced from the provision of good care. Of note, they charge, “Aligning provider incentives focused on process metrics clearly disrupts the delivery of care without improving outcomes…. Accountability must be designed into high-quality primary care delivery based on results, not process.” Again, this claim ignores that the latest iterations of Innovation Center VBC models have moved away from process-based quality measures in favor of outcomes-based measures that do not require primary care provider administration—just proactive and responsive care (see: MSSP measures compared to ACO REACH measures). CMS collects these measures automatically through claims analysis or patient surveys administered by the ACO—nothing requires burdening the primary care provider. In point of fact, in addition to being exempt from burdensome Merit-based Incentive Payment System requirements by participating in an advanced alternative payment model such as ACO REACH, providers participating in standard or new entrant ACOs in REACH are held to only four measures, all of which are oriented around keeping patients out of the hospital when unnecessary, following up with them quickly when they do end up in the hospital, and wholistically improving patient satisfaction.

By orienting quality measures to demonstrable outcomes, ACO REACH also obviates the authors’ criticism that “there is simply no convincing evidence that enforcing compliance with process-of-care standards improves patients’ care experiences or health outcomes.” Those processes are not what ACO REACH providers are rewarded for, and it seems inarguable that keeping patients satisfied with their care and preventing unnecessary hospitalizations will always indicate better, more efficient care.

Finally, the authors bemoan risk adjustment’s iron grip on MA plans’ attention and efforts, without noting the muted role it plays in other VBC models. Across MSSP and Innovation Center models (including ACO REACH and its predecessors), there are guardrails that disincentivize “aggressive coding.” These models have learned from the inflationary trends represented by risk-adjustment efforts in Medicare Advantage to date, and, while they still incorporate the notion of risk adjustment, they include two changes to avoid a similar arms race: The aggregate diagnostic risk score of beneficiaries aligned to an ACO cannot increase more than 3 percent beyond the demographic risk score adjustment, and each year, all ACOs are re-indexed to the average risk score of beneficiaries nationwide through a combination of normalization and the Coding Intensity Factor.

Conceptually, this means that risk-adjustment efforts will allow ACOs to pursue accurate coding without the same inflationary phenomenon experienced to date in Medicare Advantage. This will save Medicare money, while forcing ACOs to focus on deploying proactive, preventative care.

Value Fuels Innovation

The authors’ assertion that the rules of VBC inevitably incentivize corporate consolidation—or “reward ever-increasing scale and will evolve into a competition that only the very largest consumer companies can win” —is unfounded. Aggressive investments by incumbent entities such as CVS, Amazon, and UnitedHealth do not constitute evidence of something rotten in the state of value-based care.

The previously cited McKinsey article outlines a view of the progression of value-based care capabilities and the respective savings opportunity they estimate corresponds with each set of initiatives. Of note, McKinsey suggests that “From our experience working with value-based care providers, mature markets may be entering a transition in which the low-hanging fruit in operational and clinical performance improvement has largely been picked.” The fruit referenced amounts to coding accuracy, network leakage, and referral compliance.

This belies the charge that aggressive risk coding and network control are essential tools to value-based entities. Whether because the proverbial low-hanging fruit has already been harvested or because the models have become more sophisticated over time, the first chapter of VBC the authors describe is coming to a close.

The next chapter involves more nuanced innovations that are already being deployed. To work efficiently in this dynamic environment, advanced analytics, collaborative and interlaced risk-bearing networks, automated workflows to reduce administrative burden, and virtual care delivery sufficiently advanced to solve for the “last mile problem” (that is, that patients actually receive a recommended intervention, regardless of potential individual access issues) are all critical. These necessary capabilities do not necessarily favor large, incumbent players, but, rather, nimble upstarts that can facilely adapt to an evolving care delivery landscape.

In point of fact, the current generation of value-based programs has birthed a period of intense innovation that may well serve as a counterforce to consolidation. For instance, ChenMed and OakStreet have demonstrated how rethinking the operating models of clinics can create positive impacts on access, efficiency, outcomes, and satisfaction. Aledade, Privia, and agilon health have indicated that such successes can be forged through partnership with independent provider groups. Newer entrants such as Vytalize, Upstream, and Wellvana show the vertical of companies focused on enabling providers in value-based models remains vibrant. Oscar and Devoted, next-generation health plans, have developed advanced tech stacks to modernize health insurance. Companies such as Memora and PicassoMD are leveraging technology to navigate care intelligently and support primary care in real time. Monogram, Story, Vori, Vesta, Kaia, Thyme, Dispatch, MedArrive, and Omada are only a few of the countless examples of startups oriented toward supporting primary care in value-based constructs by developing novel approaches to treating specific patient cohorts based on distinct specialty capabilities. As we have previously argued, broader integration of specialists into value-based care is quickly accelerating. Our own company, Pearl Health, empowers independent primary care providers to participate in value-based models through cutting-edge technological enablement and judicious risk sharing.

Of course, the concern of consolidation may still loom. Inevitably, some of those novel enterprises that succeed will be acquired by corporate incumbents (although, to date, of the entities named above, only one—OakStreet—has done so). As Elliott Fisher and George Isham argued in a recent Health Affairs Forefront article, the moral hazard represented by “a system that increasingly prioritizes financial interests—some would say greed—over the public good” is ever-present and degrades the public trust in our health care institutions. When enormous and increasing budgets are present in an industry that demands consumption (sick people require health care) and necessitates substantial balance sheets or complex financial mechanisms, healthy market forces can break down and consolidation may become more prevalent.

We share this concern but caution that it is appropriately discussed in the arena of regulatory advancements that encourage competition and more aggressive antitrust oversight, or ongoing program rule revisions that will continue to encourage disruption. Moreover, we have yet to encounter plausible evidence that value-based care is a driving force behind health care consolidation, rather than a separate enterprise happening during a preexisting trend of increased consolidation across industries. These challenges are not inherent to value-based care programs, but insofar as they threaten the next chapter of health care’s necessary evolution, government can mitigate them. Indeed, we applaud the Innovation Center for continuing to invest in models that counter certain dangers of consolidation, such as minimizing the control entities such as ACOs have on patients’ care: ACO REACH, unlike Medicare Advantage, is a carrot-based system and not laden with sticks, which eschews much of the David and Goliath dynamic.

A Brighter Horizon

We share the authors’ concerns around consolidation but believe the root cause of this recent acceleration is a recognition that meaningful change is rapidly occurring—and large incumbent health care organizations’ recent acquisition frenzy instead evinces a fear that they may otherwise fall behind. We also agree that healthy regulation of value-based care is necessary to propel innovation toward the more difficult work that must be done in this next era of value. But we see in the Innovation Center a regulatory body that recognizes the perils it must address through purposefully designed rules and has proven it is willing to do so.

This decade will bring a new chapter in US health care: one that is responsive to the suffering of beleaguered patients and providers, and leverages sophisticated, nuanced, and human technology to address the pains with which we have had to cope for too long.

Authors’ Note

Gabriel Drapos and Michael Kopko are both employees of and shareholders in Pearl Health, Inc. The authors are also both shareholders in Oscar Health, Inc., which is referenced in the piece in passing.