Investing in Value-Based Health Care

Investing in Value-Based Health Care

As an epidemiologist, my life’s work is focused on ways to reduce the disparities in health for women and children. As an investor, I focus on finding businesses that create an above-market return for everyone- founders, investors, and the community.?

The September purchase of Signify Health by pharmacy giant CVS for $8 billion brought increased attention to value-based care. The purchase provided the pharmacy giant (and now budding healthcare platform) with a network of 10,000 clinicians and a platform designed to lower costs and improve patient outcomes. The need to control health care costs has increased focus on value-based care platforms, where costs are aligned with the quality of the service instead of the quantity of services provided.

CVS isn’t the only one getting into the value-based care game. Walmart announced a 10-year partnership with UnitedHealth Group to collaborate on value-based care at Walmart Health locations, as well as a partnership with the state of Georgia’s new Medicaid system.??

Shifting the Focus from Quantity of Care to Quality of Care

According to the Health Care Payment Learning & Action Network’s (LAN) annual measurement of participation in alternative payment models, only 60% of healthcare payments included some form of quality and value component. As a result, it’s estimated that U.S. healthcare costs will increase by $370 billion in the next five years. Our current model of care, where health care providers are paid based on the number of procedures they perform rather than the outcomes of those procedures, means that incentives can be skewed toward procedures that are higher cost but not necessarily connected to better health. For example, the cost of providing a preventive intervention like six months of nutrition counseling is roughly $950.00 (depending on your location and insurance coverage), whereas the lifetime cost of diabetes (if diagnosed by age 40) is $211,400 according to a 2014 study, roughly $268,000 in today’s dollars.

?The Benefits of Value-Based Care are Clear…

• Lower costs: Seniors enrolled in Medicare Advantage, a value-based option, saved nearly $2,000 a year on average compared to those using the fee-for-service model, according to a study published last April. And this savings had impacts across racial groups: Black Medicare Advantage beneficiaries reported $1,104 less in total health spending compared to fee-for-service Medicare beneficiaries, and Latino Medicare Advantage beneficiaries saw an average savings of $1,421. The cost savings can be seen on the provider side as well; Blue Cross North Carolina reported in September that their value-based health plan saved $130 million in 2021 and about $500 million overall in the first three years of the program.
• More preventive screenings: Highmark, a Pittsburgh-based nonprofit healthcare company, reported last month that providers using a value-based care program had 164,000 more annual visits with patients than non-VBC providers over three years. During the same period, VBC providers performed 154,000 more cancer screenings and closed nearly 83,000 more diabetes care gaps than traditional providers.
• Enhanced equity: While experts caution that value-based care alone cannot be a panacea for the inequities of the healthcare system, it is still a valuable tool for improving equity as part of a comprehensive approach to healthcare. Studies have shown that value-based payment models are associated with lower rates of hospitalization and ER visits. Providers are betting that such care can also improve chronic disease management and lower maternal care costs. Given that racism is a driving factor in both of these areas—with Black, Latinx, and American Indian/Alaskan Natives being much more likely to have chronic conditions and Black women facing triple the maternal mortality rates of white women and much higher pregnancy costs due to lack of insurance—value-based care can be a potential way to narrow the racial healthcare gap.

Here at Genius Guild, we invest in diverse founders leading companies that are building healthy communities. If you know of a high-growth startup that is bringing innovation to the health, clean/green tech, caregiving, or other industries that impact the health of our communities, please pitch us!