In this session, McDermott Will & Emery Partner Joel Rush moderated a discussion exploring investors’ interests in, opinions on and strategies for entering the value-based care (VBC) market. The panel discussed factors taken into consideration when choosing if and when to invest in VBC opportunities, issues that arise when collaborating with health systems, and ways to evaluate risk models and support improved care delivery.
Session panelists included:
Lauren Brueggen, Partner, Heritage Group
Devin Carty, Chief Executive Officer, Martin Ventures
Roger Kueny, Senior Vice President of Corporate Development, Alignment
David Pontius, Partner, WindRose Health Investors
Karey Witty, Managing Director, Valtruis
Top takeaways included:
When it comes to investing in VBC, the tailwinds are just beginning to pick up after the COVID-19 pandemic reduced reimbursement volume. During that time, physician practices that were leaning on fee-for-service (FFS) reimbursements saw their volumes drop close to zero during the COVID-19 pandemic. Hospitals began to get crushed by the rates, and much of the volume has yet to return to normal. One way to solve this problem is by moving physician practices into VBC and to demonstrating that VBC is a bonus, not a penalty, and probably the only way to get back to the earnings they previously had. Also, when looking at hospital systems, investor-based hospitals performed significantly better during the pandemic. Innovative programs like the Accountable Care Organizations Realizing Equity, Access, and Community Health (ACO REACH) model are showing hospitals and physicians that the market is experiencing a technology shift, and VBC provides a framework in which multiple constituents can work together and achieve mutual success.
Key factors to look for when evaluating VBC investment opportunities include having a sustainable reimbursement mechanism that provides a “win” for both sides and can generate savings. This analysis looks at much more than just risk scoring. Other factors include whether the hospital is focusing on areas where they are losing money or simply breaking even, and whether the target companies are looking at technology solutions that can take workflow changes off the shoulders of physicians so they can focus on practicing quality care. “Innovation” and “disruptiveness,” when combined with an effective risk distribution within the entity (e.g., toward Medicare Advantage of commercial populations, and across service lines), promote the creation of better ways to provide patient care.
Challenges in partnering or collaborating with health systems in VBC include (1) changing the operation perspective from do-it-yourself to partnership, (2) selecting the right deal or deal structure (i.e., joint venture or master services agreement (MSA) model), and (3) aligning the incentives for the organization to shift to VBC.
Opportunities in partnering or collaborating with health systems in VBC are emerging due to (1) hospitals’ willingness to shift to VBC and (2) the shifting view on owning primary care infrastructure (i.e., employing versus partnering with primary care physicians).
Effective evaluation of VBC provider models requires (1) determining the right risk model for each specialty and (2) identifying the path to better quality of care.
Investors have noted the following areas of emerging interest in VBC investment: (1) Medicare, as it is the largest payor and responsible for much of the push toward VBC, (2) scaling risk-based Medicaid, (3) behavioral health risk-based models and (4) a push into southern states.