Why such confidence?
Far beyond the walls of Congress, one of the biggest shifts happening in health is the payment model transition from fee-for-service care to value-based care. Value-based care eliminates “fee-for-service” payments, which incentivize health organizations to rely on the volume of patients served. It replaces fee-for-service with one of four alternatives — shared savings, shared risks, bundled payments, and global capitation — all of which incorporate quality as a means to revenue, rather than quantity.
While the fate of the GOP efforts remains unclear, value-based care is unlikely to disappear. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was passed with bipartisan support in 2015 and reinforces the federal government’s commitment to alternative payment models. Although the proportion of value-based payments to providers by commercial insurers is small today, the number is expected to grow rapidly. By 2020, value-based care is estimated to represent 80% of all payments to physicians.
What does value based care have to do with startups?
So much of what ails low-income patients has nothing to do with what happens within the clinic.
Twenty percent of an individual’s total health outcome can be ascribed to all things clinical, like which doctor treated the patient or which clinic the patient visited. But, forty percent of an individual’s total health outcome is attributed to the so-called “social determinants of health”, like an individual’s income, education level, and the type of neighborhood they can afford to live in. The link is easy to see: if an individual lives in a neighborhood that is too dangerous to walk in, one of the seemingly easiest methods of maintaining a physically active lifestyle, walking, is actually quite difficult. Similarly, if an individual lives in a food desert, it will be harder to maintain a nutritious diet, even if the money for food is available.
With the rise of value-based care, and spiraling healthcare costs overall, there is a large market opportunity for businesses that are working to address these social determinants of health.
Startups are uniquely positioned to innovate around the social determinants of health in the current ambiguous regulatory environment. Incumbents — big EHR companies, health systems, and insurers — frequently have a swath of staff and complex processes that make adapting to new situations difficult, while startups are nimble and can change courses easier as the tide turns.
Entrepreneurs, motivated by the market opportunity and potential for impact, recognize the existing pain points within the current systems, often through their own experiences, and are developing solutions to help mitigate problems related to the social determinants of health.
Take, for instance, Mindi Knebel, CEO of Kaizen Health, who developed a platform to connect health systems and transportation fleets of all varieties, beyond Uber and Lyft. Through family members’ experiences, Mindi honed in on transportation to the clinic as one of the main obstacles impeding better health outcomes. Alex Go started LivWell Health, which uses technology to help provider organizations match patients with home and community-based resources, after his mother fell ill. Go encountered firsthand how disparate and difficult to navigate the existing resource referral experience was for both patients and clinicians.
To be sure, there are challenges facing any early-stage entrepreneur hoping to leverage the transition to value-based care. Electronic health record (EHR) systems are often siloed, which creates an onerous burden for entrepreneurs looking to scale nationally. And regulation in health is largely regional — for instance, not all states have parity laws that reimburse telemedicine encounters the same as in-person visits. There is no silver bullet for solving these twin challenges, and it will take collaboration across all stakeholders to redesign a system that not just works for entrepreneurs, but also for patients.
Despite these challenges and the uncertainty in the healthcare market, investors should remain optimistic. Value-based care will not likely disappear from the American health care landscape, and neither will the entrepreneurs working to transform patient lives beyond the clinic.
Photo Credit: Protecting Investment from Big Stock Photo
