A perspective on the tradeoffs of value-based care

Sachin Jain penned a rather provocative piece this week in Forbes, calling into question the reality of value-based care and the negative impact it can have on patients, particularly when implemented by companies with the wrong motives.

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It is well worth reading and seems to be resonating with folks, for good reason - it raises an important question that we’ve collectively glossed over for far too long: how do we evaluate the trade-offs implicit within value-based care models?

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Good Actors vs Bad Actors

The thrust of Jain’s argument centers around his friend - who happens to be a professor that extolls the virtues of value-based care - whose mom received questionable care from a value-based medical group. Jain does a good job highlighting the tensions in balancing cost and quality, and how patients can sometimes be left in the lurch as companies seek to manage that tension. For instance, Jain highlights how the desire to manage hospital stays inevitably will lead to some cases where individual patients feel rushed and uncared for. It’s a good read that highlights those tensions well across a number of different aspects of care delivery - e.g. avoiding hospitals, avoiding specialists, narrowing patient choice, and leveraging non-clinical interventions.

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But on the whole, the article leaves us wanting for more, particularly around how we can collectively evaluate whether companies are “good” actors or “bad” actors. This seems like the real challenge here. There are always going to be competing incentives at play when we’re talk about implementing value-based care by balancing cost and quality on a population level. And given those competing incentives, there are always going to be some that get it right and some that don't. Jain starts to distinguish between “good” and “bad” leveraging some rhetorical questions in the article:

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When a doctor denies a patient a test or new drug or referral to a specialist, is it because we are truly optimizing the care of the patient?
Or is it because we are optimizing the economics of the value-based group?
In an era when many “value-based groups” are backed by venture capital, owned by private equity firms, or publicly traded, is the decision to deny a specialist referral or the latest new pharmaceutical being made to optimize care or to protect quarterly earnings?

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Jain then goes on to suggest that it is culture that really matters - urging that companies need to have good cultures that place the patient first, not the financial incentives of the company. Jain leaves us with a concluding thought that:

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For value-based care to succeed, groups must have a robust clinical (and financial) culture in place to ensure that aggressive practices to manage costs are pursued through the lens of true benefit to the patient, not the financial interests of the group. The actions to which we subject patients must be guided by the “radical common sense” that every one of us would want to see in play for ourselves and our parents.

How do we evaluate good vs bad?

The challenge this concept raises is how we actually evaluate any companies on this cultural metric of putting the patient first. Take as an example the companies Jain mentioned in the article: Aledade, Iora, Landmark, Oak Street, and VillageMD. Unless you have insider knowledge of any of these companies, how do you actually know if their culture is aligned to succeed in value-based care as Jain suggests? Good luck differentiating any of them on quality data they are sharing - everyone reports the same massive reductions in ER visits and inpatient admits versus Medicare FFS benchmarks.

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In some ways, the value-based care space seems like a popularity contest in this regard. If a company’s leadership team has a lot of friends who are venture capitalists, regulators, and payor executives, that company is probably viewed as doing “good” in terms of putting the patient first. These are the companies we hear about at conferences and are lauded publicly in the echo chamber we all operate in. But can we objectively say that one company has the right culture, or doing “good”, while another doesn’t? I don’t think so. That's not to question whether many of them are doing good work, it's just to say that the only way we actually know that they're doing good work is by knowing the people who work for those companies.

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Here’s a thought experiment: lets say a large payor acquires a leading value-based primary care org. That payor is widely thought to be putting profits over patients. The value-based primary care org is led by well-known, mission-driven leaders who have always been known for putting patients first. How do we, as outsiders, know whether or not that value-based primary care company is continuing to put patients first under its new profit-minded bosses?

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To really understand that, it’s not going to be enough to know how their ED visits per 1000 members metric is trending over time. Still beating Medicare FFS benchmarks? K that's great. We’d need to get into the weeds of their organizational design, pre- and post- acquisition. What parts of org culture were key to success? Did they properly utilize team-based care? Were there team huddles every day? Were physician voices on the leadership team? What did incentive structure look like for clinical roles? What kind of talent was being hired for various roles? How did the tech infrastructure integrate into workflow?

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Without getting into these sorts of details, I’m not sure how you actually understand whether an organization is actually consistently putting patients first. It’s a really hard thing to evaluate, made even more problematic by the fact that it changes over time. If we’re uncomfortable with the state of value-based care now, just wait until all our favorite VC backed startups are acquired by public companies looking to manage quarterly profits. Many of those care models are consistently generating massive losses that are only justifiable because they’re funded by VC investment to subsidize those losses in order to generate an exit. Once that exit happens, and companies inevitably seek to move towards profitability, then what?

Including the patient perspective:

One of the things this article reminded us of is how little we still hear the perspective of the patient in many conversations about value-based care (or any healthcare topic, really). Jain starts the article focusing on the story of an academic who now seems to be questioning the reality of value-based care after experiencing it with his mother. And that’s what really matters here, isn’t it? It’s a reminder that we get distracted from that in healthcare innovation circles, talking about the newest cool value-based model. At the end of the day, what really matters is the impact of these models on patients. Getting to a better future state will necessarily include more of the patient voice to provide better context about what is happening in the real world.

Our takeaway:

Jain’s article is making the rounds as it touches on one of the unspoken underlying issues with value-based care: that balancing cost and quality on a population level isn’t always aligned to the best patient outcome. It’s hard for us to disagree with his argument there. Yet it also seems nearly impossible to evaluate objectively which companies are managing those tradeoffs well versus which aren’t. Eventually, it seems like this will result in a scenario where the baby gets thrown out with the bathwater - we can't separate good from bad, and particularly in todays political climate, that opens the door for everything to be questioned, good or bad.

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The result is it seems inevitable that in the future we’ll look back on this phase of “value-based care” mania in the same way we now look back on the managed care era of the 1990s - a good idea with inconsistent implementation that ultimately stalled broader progress beyond a few pockets where it had enough staying power to remain.

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The underlying challenge here is that every value-based care org ultimately does better if it makes more money - regardless of whether its a public company optimizing for quarterly earnings, a PE/VC-backed company optimizing for exit, or a not-for-profit optimizing for its providers. More profits drives the flywheel of care delivery. There is always going to be a tension between financial returns and patient outcomes. To solve this issue, it would seem to require us breaking this flywheel of more profits = bigger and better organization, which frankly doesn’t seem possible in American healthcare.

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Ultimately, the biggest takeaway here is a call to refocus on “putting patients first,” as Jain says. We are very much in agreement with that. In order to do so, it seems imperative to do a better job understanding and measuring what is happening to patients in the real world - getting out of theoretical debates and into the lived experiences of people across this country. Figuring out a way to objectively, consistently, and accurately evaluate whether companies are “putting patients first” seems critical to the advancement of the space. In lieu of that, companies in the value-based care space (and really, any care delivery company whether FFS or VBC) should be looking inwards at their organizational design, evaluating their cultures and whether they are consistently putting patients first. Right now, we’re not sure how any outsider can effectively evaluate that without inside knowledge of an organization. But it seems pretty clear those organizations that do so are best positioned to succeed over the long run.

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