Value-Based Care: Too Small To Scale?

Have small, community based systems, been sidelined by commerical payers when it comes to negotiating Value-Based contracts?

All U.S. Healthcare systems are focusing on the shift from “volume to value.” Small, integrated, community health system are positioned particularly well to be successful in this model as they maintain market dominance (largely due to geographic isolation) and can provide for the patient across the entire continuum. Typically, these systems are one of the larger entities in a community and often have strong partnerships with local employers and community-based nonprofits. These partnerships can help address the social determinants that are often relatively more difficult for tertiary or academic medical centers to address. Because Medicare/Medicaid patients typically make up >50% of patient populations, community health systems can, and typically, do perform very well in CMS’s value-based programs (MIPS/MSSP). However, like almost all of U.S. healthcare, these systems depend on their commercial payments to subsidize the below-cost reimbursement rates from public insurance companies. And this is where the problem lies: In our experience, private Managed Care organizations have limited true risk-based contracting to systems that can achieve significant scale (20,000-100,000 patients). This is nearly impossible for the smaller community-based systems, given the fact that commercial patients make up 30-40% of the payer mix, and this is typically diluted across multiple payers. It seems that we lack the necessary scale to negotiate favorable risk-based contracts and that commercial companies would prefer to continue paying on a fee-for-service model. This leaves the smaller system with two options: first, they can ride the fee-for-service train until it reaches its last stop, at which time they may not be prepared to move to a value-based model. Or they can partner with another larger system, via an ACO or CIN, and achieve the necessary scale to negotiate more favorable contracts with payers, but they are betting on that other system to care for its patient population as well, or better than they can.

My questions:

  1. Have other systems experienced similar minimum thresholds for commercial value-based contracts?
  2. How are other systems keeping one foot in the volume-based world while simultaneously preparing for the inevitable value-based world?
  3. For systems participating in ACO’s with outside systems, how have you chosen your partners? How do you ensure the partnership is complementary to the overall mission of providing better and less expensive care for the patients?


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Participant comments on Value-Based Care: Too Small To Scale?

  1. I empathize as I have a similar challenge, albeit in a different country and different ‘system’. The only strategy I have been able to come up with (which comes at a cost to my organization) is to ‘play’ in the current volume based world and invest in research/gathering evidence on how the system could better support people and funders through value-based contracting. It hasn’t yet paid off in a tender (most of my funding is tender based) but it has paid off in terms of positioning and advocacy which I hope results in changes to tendering/contracting in the future. I have been on this path for 5 years now and am only starting to see glimmers of hope – so it is a long game, not a short one

  2. On point #2.
    We have tried keeping feet in both worlds but have found that to be very difficult and sends all kinds of mixed messages to providers and departments. Currently using ACO to try to push the entire organization to VBC since it will cover so many patients.

    On point #3.

    We had a previous partnership with a clinic that was joining an ACO run by an outside company that specializes in setting up ACOs comprised of multiple systems to scale to about 100,000 covered patients. The outside company also takes some of the risk.

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