Washington, D.C., November 16, 2023 — Today, Berkeley Research Group (BRG) published a new report, “Transitioning to Value-Based Care: Financial Implications for Providers and Policymakers,” in partnership with Accountable for Health (A4H). The paper highlights the significant investment in clinical staff, community partnerships, and care management solutions that are necessary to transition from fee-for-service to accountable care. While research shows that accountable care improves health outcomes and reduces fragmentation, these upfront and ongoing investments can serve as a barrier to entry.
A4H CEO Mara McDermott issued the following statement on the paper and its findings:
“For too long our health care delivery system has been stuck in a fee-for-service (FFS) cycle that rewards volume over quality of care delivered. We are making progress in the transition away from FFS to accountable care, but inertia is a powerful force and health providers need incentives to smooth the risk associated with adopting these new accountable care models.
“This paper is designed to serve as a resource for policymakers that helps illustrate those challenges and it underscores the need for incentives to help providers make the transition so we can ultimately lower costs and improve health outcomes for patients across America. A4H Members are proud to be leading this work and delivering results for millions of patients through accountable care models—showing that, when you tackle these challenges, patients will benefit.
“Congress faces an important decision in the coming months as the 3.5% alternative payment model (APM) incentive is set to expire. This policy cliff creates uncertainty, which elevates risk among providers and threatens to undercut the important progress we have made so far. Lawmakers can send an important signal by maintaining—or improving on—this 3.5% incentive to demonstrate momentum and long-term support for accountable care models.”
The paper’s executive summary can be found below:
Executive Summary: Transitioning to Value-Based Care: Financial Implications for Providers and Policymakers
Successful value-based care initiatives have proven they can deliver better care for patients at lower costs and can be attractive to individual physicians, clinicians, and delivery systems. As a result, policymakers have set goals to expand provider participation in these initiatives.
Participating in value-based care initiatives requires an investment on the part of providers due to transition costs. Fixed start-up costs, a multi-year lag between start-up and earnings, and the possibility of failure make investing in a transition to value-based care a risk-reward proposition for providers. Providers have successfully adopted “build,” “buy,” and “partner” strategies to navigate the transition, realize better outcomes, and produce overall savings.
Understanding the size and nature of transition costs is a key question for policymakers aiming to promote value-based care. While previous analyses have estimated the cost of transitioning to value-based care, this white paper provides a qualitative description of the three main types of transition costs: care delivery costs, start-up administrative costs, and financial costs.
- Care delivery costs include clinical solutions that improve care for patients most likely to incur the highest avoidable costs, and the technology solutions that help providers identify who those patients are and what types of interventions should be introduced.
- Start-up administrative costs consist of financial modeling to justify a move to value-based care, organizing to take on value-based contracts, and other operational preparations required for success once a value-based arrangement begins.
- Financial costs are like those of other investments: a lag between starting and realizing profits, the risk of not realizing financial return, and upfront capital requirements that may include working capital, collateral, and financing costs.
The analysis highlights how implementation and investment risk are as big a barrier as cost is to provider participation in value-based care. It also underscores a primary point made by interviewees: a value-based care transition is an investment that will not be pursued unless providers believe they and their patients will be better off. Value-based care transitions are technically challenging and financially risky for any provider to accomplish on their own, especially those with less value-based care experience or access to capital. Providers will stay in fee-for-service reimbursement programs for as long as they believe it is in their best interest. Policymakers striving to promote value-based care as a tool to lower costs and improve patients’ experience with the health care system must find the right mix of incentives to encourage greater value-based care participation.
About Accountable for Health
Accountable for Health (A4H) is a 501(c)(4) national advocacy and policy analysis organization accelerating the adoption of sustainable, effective accountable care that improves health care quality and outcomes and lower costs. We represent a broad, diverse group of accountable care stakeholders working to improve the way health care is delivered to people across the county, across various payers, programs, and delivery models. A4H provides advocacy, research, and education to improve outcomes and patient experiences while lowering costs.
For more information, visit https://accountableforhealth.org/. Follow us on LinkedIn and Twitter (@acct4health). ###
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