The value-based care (VBC) journey has been a long and bumpy road for many health systems, while for other health systems, the journey has yet to begin. Quoting Michael Porter, Harvard Professor and acclaimed author “Value-based health care's central tenant is that the overarching principle in redesigning health care delivery systems must be value for patients. We define value as the outcomes that matter to patients and the costs to achieve those outcomes.” Or if were looking at this in terms of an equation it would be Value= Quality Outcomes/Cost.
Contracting serves as mechanism to drive alignment of quality and cost between payers and providers (via bundled payments and accountable care organizations) and within providers (between administrators and physicians). Surprisingly, this contracting piece between providers and other industry vendor partners has been even slower to move forward.
During Becker's Hospital Review's 12th Annual Meeting, in a session sponsored by Beckman Coulter Diagnostics, a leading manufacturer of laboratory diagnostic systems, John McCarthy, vice president of Lab Network Solutions, led a roundtable discussion about VBC contracting opportunities, lessons learned, and the role that industry vendors can play including some experiences within the laboratory space.
2 key insights from the session:
1. The reasons for slower adoption of VBC within the industry are multifactorial. Mr. McCarthy shared the view that VBC is essentially about providers moving towards risk arrangements. Whereas 10 years ago the main risk takers were insurance companies, today much of that collective health risk has been offloaded to providers. Yet, with many providers having become accountable care organizations (ACOs) in their journey to VBC, they are also now insurers — thus risk is still being shared between insurers and providers. "The question is how does industry jump in and take some of that risk in an effort to drive down costs?" he asked.
Mr. McCarthy added “with the increased focus on certain hospital service lines such as the laboratory due to COVID, we are seeing interest from healthcare leadership in more transformative business relationships to drive sustainable outcomes in a fiscally responsible manner. We believe as more organizations are moving to risk arrangements with their payers in a value-based care world, that mentality will eventually shift to their industry partners who will need to demonstrate more “skin the game” by assuming more risk in their contracts with provider clients.”
Participants in the roundtable discussion suggested that some of the sticking points in initiating value-based contracts include the difficulty of collecting, analyzing, and reporting data that can support these value-based agreements. Other barriers to adoption include infrastructure challenges, lack of robust change management processes and a majority existing managed care contracts are still fee-for-service. The participants also agreed that coming up with uniform value-based care metrics such as outcome measures, cost savings, safety and patient experience indicators are essential criteria to measure the success of these value-based care agreements
Regardless of the barriers and lack of agreed upon measurement criteria, the participants agreed that VBC is coming.
2. To advance alignment with value-based care objectives, optimization in ancillary areas such as the laboratory can play a critical role. COVID has really pulled back the veil on the importance of laboratory operations, with many in the industry saying that the laboratory has “moved from the basement to boardroom overnight.” Providing real-time insights to clinicians with lab data, improving test value and optimizing turnaround time are just few avenues to drive quality patient outcomes.
The laboratory can also play a significant role in supporting other organizational initiatives that impact VBC. Advancing health equity by improving access to testing in underserved areas, administering the right test at the right time and expanding lab outreach programs are additional means to improve the health of the communities that hospitals serve.
Mark Spehar, Principal, Performance Partnership, at Beckman Coulter, said “not unlike other ancillary departments, the laboratory is also facing critical staffing shortages and increasing costs. We are seeing our health system clients lean on automaton and process improvements initiatives to remove waste from their existing laboratory processes and enable their staff to work at top of license and increase capacity. Ultimately this attempts to address affordability by maximizing staff productivity, optimizing test inventory, and reducing outside reference lab spend.”
As network resources may be limited, collaborative vendor partnerships may be needed to accelerate this transformation process and truly achieve sustainable results. Leveraging a partnership model in which a vendor partner assumes risk in the relationship can help support the goal of VBC of providing value. Mr. Spehar also added that “as the latest projections from CMS expect all Medicare payments to go through value-based models by 2030, many of the industry financial leaders are focusing on efforts surrounding the cost effectiveness of healthcare (CEoH) and the laboratory should not be exempt from these efforts.”
As the momentum for value-based care builds within the provider community, it is important to broaden these arrangements beyond just the payers to include other industry partners to help drive innovation & process improvement which positively impacts quality outcomes and reduces cost for not only the patient, but also for the providers and the communities they serve.