Evolving Markets, Innovative Solutions: The Rise of Specialty VBC

Ninety million people are forecasted to be treated in value-based care (VBC) models by 2027, an increase of nearly 110% compared to just two years ago. 

This steep increase is largely due to the proliferation of value-based primary care models participating in delegated risk transfer. However, changes to the health plan landscape – including recent policy changes to Medicare Advantage such as risk-adjustment methodologies, STAR ratings, and rate headwinds – have forced payors and providers to look beyond value-based primary care models to drive incremental value.

The good news? Specialty VBC has emerged as a natural evolution of the VBC boom, holding tremendous potential. This new approach is helping payors and providers unlock new value from their VBC initiatives while offering more effective and condition-specific treatment for patients. 

Value-based primary care has reached maturity — what’s next?

Up to this point, value-based primary care models have largely been a success. In these VBC models, providers account for all the factors that influence patient health outcomes and, in many cases, take financial risk for outcomes. VBC provides proactive care and prevents unnecessary healthcare utilization or other health issues from arising. 

This model has led to remarkable results. For example, in 2021, Oak Street Health reported a 51% reduction rate in hospital admissions compared to their fee-for-service (FFS) Medicare benchmarks. They also saw significant reductions in 30-day readmission rates and emergency room visits.

Primary care alone may not be able to create the savings required to continue the success of VBC. For one, many of the revenue levers that payors have typically used to drive value in Medicare Advantage plans have changed and the revenue levers are less impactful than they once were due to changes in risk adjustment methodologies and CMS STAR ratings. On the medical expense side, a disproportionate share of spend is driven by patients with specialized conditions, even though the volume of these patients is relatively low. These patient populations are often unreached and unaddressed through primary care alone. 

The Centers for Medicare & Medicaid Services (CMS) is already supplementing value-based primary care with specialty VBC to achieve its target of 100% of Medicare beneficiaries in accountable care models by 2030. This shift aims to address more complex and specialized care needs that primary value-based care has not been fully equipped or able to manage. For example, according to internal claims data, over 50% of beneficiaries in CMS’ Comprehensive Kidney Care Contracting (CKCC) model have not had a primary care visit in the last 12 months, which means that these patients would not have proper access to value-based care if not for a specialty VBC model like CKCC. 

Taking steps toward specialty VBC 

Payors must look beyond primary care toward specialty VBC, an industry that’s ripe with potential. For some specialty populations, conventional payment models such as bundled payments for episodes and preferred specialist networks can add value. Whereas for certain populations, payors can maximize value by fully delegating total cost of care risk into specialty VBC models. These four key characteristics signal a specialty population that is well-suited for a total cost of care model:

1. Disproportionately high per-patient costs – The ideal healthcare specialty is one in which per-patient costs are disproportionately high. In other words, it should constitute a small portion of the overall patient base but account for a significantly higher portion of overall medical expenses. 
2. The condition is the patient’s principal medical need –  Consider whether a specialty is the main focus of the patient’s care plan. Managing these types of conditions often requires specialized treatment plans, frequent monitoring and an emphasis on care coordination. 
3. The condition is largely unaddressed by primary care –  Several specialty populations, such as oncology and nephrology, are largely unreached by primary care. VBC providers can work alongside PCPs to ensure their patients get the specialized care they need. 
4. Health outcomes are driven by condition-specific interventions –  Effective treatment of certain specialties demands tailored interventions that go beyond the call of general care. Specialized knowledge and condition-specific treatment become essential for ensuring positive patient outcomes. It’s these targeted interventions that present tremendous opportunities for a VBC model. 

The specialty VBC sea change

In recent years, value-based primary care models have made tremendous strides toward more equitable patient care, but now it’s time for payors and providers to turn their attention toward specialty spend. However, this is easier said than done.

The challenge for health plan leaders now is to evaluate their VBC portfolio and identify opportunities to capture value in specialty care. Organizations that can move decisively are primed to capitalize on a continuously growing market — and provide their patients with more personalized care and an elevated experience. 

Photo: Nuthawut Somsuk, Getty Images

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