Value-based care: what exactly is it and how much money is being invested into VBC?

Exec Summary:

Value-based care (VBC) is a healthcare payment and delivery model that rewards providers for delivering high-quality, efficient care that improves patient outcomes. VBC is based on the idea that the best way to reduce healthcare costs is to improve the quality of care and keep people healthier.

In traditional fee-for-service (FFS) healthcare, providers are paid for each service they provide, regardless of the quality of care or the patient's outcome. This can lead to providers providing unnecessary or low-quality care in order to maximize their profits.

VBC, on the other hand, ties payments to the quality of care and the patient's outcome. This means that providers are rewarded for keeping patients healthy and preventing them from getting sick in the first place.

According to a report by Rock Health, venture capital investment in value-based care (VBC) companies in the United States reached $10.7 billion in the 12 months ending March 2023, up from $7.7 billion in the previous 12 months. This represents a 39% increase in investment.

Venture capitalists are increasingly investing in VBC companies that are developing new models of care, technologies, and solutions that can help to make this vision a reality.

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Introduction to Value-based care (VBC)

There are many different types of VBC models, but they all share some common features.

These features include:

• A focus on quality and outcomes: VBC models measure the quality of care and the patient's outcome, and providers are rewarded for meeting or exceeding these measures.

• A shared risk approach: VBC models typically involve a shared risk approach, in which providers and payers share the financial risk for the patient's care. This incentivizes providers to keep patients healthy and prevent them from getting sick.

• A focus on prevention: VBC models emphasize prevention, as this is the best way to keep people healthy and reduce healthcare costs.

• A focus on coordination of care: VBC models require providers to coordinate care across different settings, such as hospitals, clinics, and home health agencies. This ensures that patients receive the care they need, when they need it.

VBC is still a relatively new approach to healthcare, but it has the potential to improve the quality of care, reduce healthcare costs, and improve the patient experience.

Here are some of the benefits of value-based care:

• Improved quality of care: VBC models incentivize providers to focus on quality and outcomes, which can lead to improved patient health.

• Reduced healthcare costs: VBC models can help to reduce healthcare costs by preventing illness and keeping people healthy.

• Improved patient experience: VBC models can improve the patient experience by providing more coordinated and patient-centered care.

However, there are also some challenges to implementing VBC, such as:

• The need for data and measurement: VBC models require a lot of data and measurement in order to track quality and outcomes.

• The need for collaboration: VBC models require collaboration between providers, payers, and patients.

• The need for a change in culture: VBC requires a change in culture from a focus on volume to a focus on quality and outcomes.

Despite these challenges, value-based care is a promising approach to healthcare that has the potential to improve the quality of care, reduce healthcare costs, and improve the patient experience.

Value-based care (VBC) investment:

Venture capital investment into value-based care (VBC) has been growing rapidly in recent years. According to McKinsey, private capital inflows to value-based care companies increased more than fourfold from 2019 to 2021, while new hospital construction—a proxy for investment in legacy-care delivery models—held flat.

There are a few reasons for this investment boom. First, there is a growing recognition that the traditional fee-for-service (FFS) healthcare model is not sustainable. FFS incentivizes providers to provide more care, regardless of the quality or the patient's outcome. This can lead to higher healthcare costs and poorer patient outcomes.

Second, there is increasing pressure from payers, such as insurers and employers, to move to value-based care models. Payers are looking for ways to reduce healthcare costs and improve the quality of care. VBC models offer a potential solution to these challenges.

Third, there are a number of innovative technologies and solutions that can support VBC. These technologies can help to improve the coordination of care, track patient outcomes, and provide preventive care.

As a result of these factors, venture capitalists are increasingly investing in VBC companies.

These companies are developing new models of care, technologies, and solutions that can help to improve the quality of care, reduce healthcare costs, and improve the patient experience.

Some of the key areas of venture capital investment in VBC include:

• Population health management: This involves using data and analytics to track the health of populations and identify people who are at risk for developing chronic diseases.

• Care coordination: This involves connecting patients with the care they need, when they need it, across different settings.

• Preventive care: This involves providing services that can help to prevent illness and keep people healthy.

• Digital health: This involves using technology to improve the delivery of care, such as through telehealth and remote patient monitoring.

• Value-based care enablement: This involves providing services to help providers transition to value-based care, such as risk management and data analytics.

The venture capital investment boom in VBC is a sign of the growing momentum behind this approach to healthcare. VBC has the potential to improve the quality of care, reduce healthcare costs, and improve the patient experience.

As a result, venture capitalists are increasingly investing in VBC companies that are developing new models of care, technologies, and solutions that can help to make this vision a reality.

Venture capital investment in value-based care (VBC) companies

According to a report by Rock Health, venture capital investment in value-based care (VBC) companies in the United States reached $10.7 billion in the 12 months ending March 2023, up from $7.7 billion in the previous 12 months. This represents a 39% increase in investment.

The report also found that the number of VBC deals also increased, from 175 in the previous 12 months to 210 in the most recent 12 months.

The report attributed the increase in investment to a number of factors, including:

• The growing recognition that the traditional fee-for-service (FFS) healthcare model is not sustainable.

• Increasing pressure from payers, such as insurers and employers, to move to value-based care models.

• The availability of new technologies and solutions that can support VBC.

The report also found that the most active areas of investment in VBC were:

• Population health management: This involves using data and analytics to track the health of populations and identify people who are at risk for developing chronic diseases.

• Care coordination: This involves connecting patients with the care they need, when they need it, across different settings.

• Preventive care: This involves providing services that can help to prevent illness and keep people healthy.

• Digital health: This involves using technology to improve the delivery of care, such as through telehealth and remote patient monitoring.

• Value-based care enablement: This involves providing services to help providers transition to value-based care, such as risk management and data analytics.

The report concluded that the investment boom in VBC is a sign of the growing momentum behind this approach to healthcare. VBC has the potential to improve the quality of care, reduce healthcare costs, and improve the patient experience. As a result, venture capitalists are increasingly investing in VBC companies that are developing new models of care, technologies, and solutions that can help to make this vision a reality.

Final thoughts:

The future of value-based care (VBC) is bright. VBC is gaining momentum as a way to improve the quality of care, reduce healthcare costs, and improve the patient experience.

Here are some of the key trends that are expected to drive the future of VBC in the next few years:

• Increased investment in VBC: Venture capital investment in VBC is expected to continue to grow in the coming years. This investment will be used to develop new models of care, technologies, and solutions that can help to improve the quality of care, reduce healthcare costs, and improve the patient experience.

• Broader adoption of VBC: VBC is still a relatively new approach to healthcare, but it is gaining traction. More and more providers, payers, and patients are adopting VBC models. This trend is expected to continue in the coming years.

• Development of new technologies: New technologies, such as artificial intelligence, machine learning, and big data analytics, are being developed to support VBC. These technologies can help to improve the coordination of care, track patient outcomes, and provide preventive care.

• Focus on population health: VBC is increasingly focused on population health. This means that providers are working to improve the health of entire populations, rather than just individual patients. This approach can help to reduce healthcare costs and improve the overall health of the population.

• Alignment of incentives: One of the biggest challenges to VBC is aligning the incentives of providers, payers, and patients. This is being addressed through new payment models that reward providers for improving the quality of care and reducing healthcare costs.

Overall, the future of VBC is bright. VBC has the potential to improve the quality of care, reduce healthcare costs, and improve the patient experience. As VBC continues to gain momentum, we can expect to see even more innovation and progress in the coming years.

Here are some specific examples of how VBC is being implemented in the real world:

• The Centers for Medicare & Medicaid Services (CMS) has launched a number of VBC initiatives, such as the Medicare Shared Savings Program and the Accountable Care Organization (ACO) program.

• Private payers, such as insurers and employers, are also adopting VBC models. For example, UnitedHealthcare has a number of VBC programs, such as its OptumHealth program.

• Some providers are also taking the lead on VBC. For example, Kaiser Permanente has a number of VBC programs, such as its Permanente Medical Group.

These are just a few examples of how VBC is being implemented in the real world. As VBC continues to gain momentum, we can expect to see even more innovation and progress in the coming years.

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