Key Insights

• While 83 percent of healthcare executives believe population health is important to the future of healthcare, roughly one in five are intimidated by the financial risk. 
• Approximately half of executives polled by Numerof & Associates reported that 10 percent or less of their revenue was generated from risk-based contracts in 2019. 
• Only 76 percent of the polled executives in value-based contracts were involved in “downside-risk” arrangements. 

Financial Risk Main Barrier to Value-Based Care

Recent data from Numerof & Associates indicates that financial risk is the primary barrier to value-based models of care. However, among the more than 500 healthcare executives polled, 99 percent believed their company will generate revenue through alternative payment models within the next two years. 

In addition to the possibility of financial loss, other intimidating factors included IT, tracking and management, and concerns about transitioning from fee-for-service models. 

“One of the greatest ironies in all this is that because of COVID-19, people are realizing that there’s just as much – if not more – risk in staying in an antiquated, fee-for-service model than there is in embracing an alternative,” Rita Numerof, Ph.D., President of Numerof & Associates, noted. “We expect to see the sentiments surrounding risk shift significantly next year, especially as awareness of providers’ success with capitated payments during the pandemic becomes even more mainstream.”

Additional Factors Limiting Value-Based Adoption

The Numerof report also found that 96 percent of hospitals/health systems were involved in value-based contracts compared with 69 percent of smaller organizations. However, not all of the larger organizations felt prepared to handle the costs and quality measures associated with value-based care. 

“It’s quite shocking to see that as hospitals and health systems continue to acquire independent physicians, they’re doing so without the processes in place to effectively manage physician cost and quality,” said Michael Abrams, Managing Partner of Numerof & Associates. “There’s been very little movement on creating care paths, flagging variation using order entry systems, equipping physicians with data, and tying physician payment to outcomes … which points to a hugely overlooked opportunity to add value.”

Despite these barriers, Sam Starbuck, Vice President of Privia Quality Network, suggests four steps for practices to start the volume-to-value transition: 

1. Ensure your practice is built on a solid foundation 
2. Find a partner 
3. Assess your patient base
4. Don’t “boil the ocean” 

Study: Value-Based Contracts Increase Preventive Care

Notwithstanding the risks, many healthcare organizations are finding great success in risk-based contracts. Recent research by UnitedHealth Group found that primary care physicians “paid under global capitation achieve key quality metrics at higher rates than those paid under traditional fee-for-service,” according to Healthcare Finance. When compared with patients in fee-for-service contracts, patients received more critical preventive care procedures from providers participating in risk-based arrangements. 

“The findings indicate that capitation provides the right incentives for value-based care, including delivery of the right care, at the right time, and in the right setting,” according to a press release from UnitedHealth Group. 

Richard Migliori, MD, Chief Medical Officer at UnitedHealth Group, noted: “Patients benefit because their doctors prioritize preventive care to keep them healthy and out of the hospital. Meanwhile, providers can offer valuable services that may not be paid for under fee-for-service. These findings underscore the importance of value-based care as a key element in building a better performing healthcare system for everyone.”