American healthcare is highly inefficient. Across a variety of long-term health and treatment outcomes and patient safety metrics, the U.S. has lower performance compared with countries of similar economic status, despite spending more money per capita than its peers. In 2022, the U.S. spent an estimated $12,555 per person on healthcare — the highest among Organization for Economic Co-operation and Development’s (OECD) countries and nearly double the average for wealthy OECD countries (excluding the U.S.). With U.S. national health expenditures expected to outpace average GDP growth between 2022 and 2031, there is an urgent need for new approaches to reduce healthcare costs, while improving health outcomes. In other words, American healthcare must become much more efficient without compromising the quality of care.
One of the biggest challenges to achieving these two critical goals in the United States is the deep-rooted reliance on healthcare’s existing fragmented, fee-for-service (FFS) model, and the business model it created and sustains. Everything from the clinical model to the tech stack utilized by providers was developed with FFS incentives in mind. The FFS system incentivizes greater utilization of expensive resources leading to ever-increasing escalating costs. These high costs do not necessarily translate into better patient outcomes. The system generates high volumes of tests, procedures, hospital admissions, etc., yet the focus is not always on prevention and incentivizing stakeholders closest to the patient to generate “value”, the balance of good patient outcomes at lower total cost of care.
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Value-based care (VBC) models are intended to reduce healthcare costs while improving outcomes by offering financial incentives to healthcare providers (HCPs) and facilities that achieve defined quality metrics. The Centers for Medicare & Medicaid Services (CMS) have launched a variety of VBC programs (examples include: the End-Stage Renal Disease Quality Incentive Program, the Hospital Value-Based Purchasing Program, and the Hospital Readmission Reduction Program) with the goal of paying for value (outcomes) rather than volume. While these programs are important steps toward better aligning financial reward and health outcomes, they do not address infrastructure and support constraints that may be barriers to HCPs and facilities providing quality care more efficiently or cost-effectively. They also do not incentivize the adoption of novel technologies (which may require higher upfront costs even if they provide longer-term improvements in patient outcomes or costs) or enable individuals to engage in managing their own health. Moreover, while these programs can drive value-based care for patients who receive health benefits through Medicare and Medicaid, they may have less direct impacts on patients who receive benefits through employer-provided or private insurance or HCPs who do not participate in either of these Federal programs.
After spending 11 years as a Medicaid Director for the State of New York and the State of Wisconsin, I believe that VBC models are the foundation on which we can build a more efficient healthcare system. However, truly delivering value in healthcare requires novel VBC approaches focused on enhanced consumer engagement that enable greater ownership of one’s own health, utilize advanced data capture to better inform care pathways, and enable earlier interventions that can improve outcomes. Attaining better or similar care outcomes at lower overall cost requires the coordination of disparate and disconnected resources that today create incredibly cumbersome barriers for individuals, providers, and facilities alike. The bottom line is that value-based care must drive both integration and innovation. It’s that simple.
The radical improvements in cost and outcomes that the U.S. health system urgently needs can be achieved through both continuous innovation and by moving health care delivery from high-cost settings into lower-cost settings, which lend well to provider-focused VBC models. Additionally, the expansion of the VBC concepts beyond the walls of the higher-cost acute care towers and into the physician’s office or home would benefit many more patients at an earlier stage in diagnosis and treatment. Fostering greater patient engagement is also crucial since it’s the patients themselves who have the most impact on their overall health. Toward this end, we need to invest in innovative approaches to target four key aspects of healthcare delivery:
- Addressing complete patient needs (medical, behavioral, and social) in traditional VBC models
- Moving VBC outside the hospital or clinic walls
- Enabling earlier detection and treatment of disease
- Expanding the pool of quality HCPs
- Greater patient engagement
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Each of these areas offers a variety of challenges and opportunities. For example, traditional VBC models are largely focused on economic incentives to HCPs, with little focus on factors that impact patient health preferences and goals or how patients interact with the healthcare system, engage with care providers, adhere to treatment recommendations, manage their own health, or experience health inequity.
CMS’ Enhancing Oncology Model, which was launched in June 2023, addresses some of these challenges by taking into consideration patients’ preferences and goals for treatment, health-related social needs, such as housing and transportation assistance, as well as psychosocial health needs. The program also provides additional support to participants who treat underserved or lower-income patients, specifically those who are dually eligible for Medicare and Medicaid. Companies in the private sector, such as Clever Care, also are innovating new ways to foster patient engagement in their own health by providing Medicare beneficiaries with high-quality, culturally sensitive Medicare options built on the cultural values, religious practices, and linguistic needs of the patient. The programs demonstrate the evolving trend toward removing barriers that prevent patients from being active participants in their own care journeys and empowering them to be part of achieving their health goals.
With respect to the siloing of VBC models within physicians’ offices and healthcare facilities, innovative technologies now make it possible to provide patients with services and resources where they are. The U.K. National Health Service’s Virtual Wards program demonstrates how to meet patients where they are, while companies such as Upward Health and Valera Health provide a variety of in-home and virtual services, respectively that can drive improved health outcomes.
We also must recognize late diagnosis is a key driver of increased healthcare spending and suboptimal patient outcomes. Investing in new technologies that enable earlier diagnosis before an acute crisis is essential for achieving VBC goals. Effective VBC models should incentivize the use of cutting-edge diagnostics and provide support that helps patients remain on treatment and prevent disease progression.
Finally, we must acknowledge that VBC goals cannot be achieved without skilled HCPs who understand how to deploy healthcare resources effectively and efficiently. The worsening global HCP shortage makes it difficult for healthcare networks to recruit, credential, and retain the HCPs they need to meet patient demand and achieve VBC goals. Technology is enabling innovative approaches to solving these challenges by reducing the administrative burden that leads to HCP burnout, increasing healthcare workers’ access to behavioral and mental health services, aiding clinical decision-making, and utilizing nurse-practitioners more effectively.
Despite the significant challenges to improving U.S. health outcomes while reducing healthcare spending, I am heartened by the exciting ways in which government organizations and the private sector are innovating and deploying new technologies that can achieve these goals. I look forward to delving into these technologies and how they can transform the five key aspects of healthcare delivery noted above in an upcoming series of articles.
Photo: kieferpix, Getty Images
Jason is the Founder and Chief Solutions Officer for Helgerson Solutions Group, a health care consultancy firm focused on helping organizations successfully transition to a value based world. HSG works with private companies, governments and non-profit organizations that need assistance in implementing value-based payment approaches and new care models that will lead to improved patient outcomes and lower overall costs. HSG is also a trusted advisor for private equity and venture capital firms as they look for new investment opportunities and work with companies to drive growth and profitability. Jason is a senior advisor to Windham Venture Partners. Prior to founding HSG, Jason was New York’s Medicaid Director. Jason ran the $70 billion program for over 7 years and was recognized as one of the nation’s most effective healthcare leaders. Prior to New York, Jason was Wisconsin’s Medicaid Director where he led the state’s nationally recognized Badgercare Plus program. When Jason left public service to found HSG, he was the nation’s longest standing Medicaid Director.
