The challenges to VBC adoption are:

• Complexity of implementation: Transitioning from fee-for-service to value-based care involves significant changes in clinical workflows, administrative operations and analytics requirements. Many providers find the process complex, resource-intensive and at odds with their traditional value chain built to capture acute care volume. Similarly, current models may not appropriately adjust payment and measurement thresholds to meet the needs of safety net and rural providers with limited resources.
  
  
• Financial constraints: Providers are hesitant to assume the investment requirements and financial risk associated with VBC models, particularly if they lack experience with risk management or do not have the necessary infrastructure to support these models. For new adopters, there are upfront investments required to build population health analytics, achieve sufficient primary care scale and coordinate care effectively. All players must traverse a financial J-curve as their performance matures, but even those with significant experience are still subject to patient churn, population variation in utilization and underlying pressures on cost to deliver care.¹⁷
  
  
•  Integration and interoperability: Historically adversarial relationships between payers and providers, and a lack of robust data sharing and integration, has limited VBC. Many organizations struggle to define risk-sharing terms with appropriate protections, develop joint-operating models that meaningfully improve patient management and execute data sharing agreements that support coordinated care. 

Solutions to expand VBC adoption:

• Standardization: The government, payers and providers, must align on common models and metrics across lines of business to facilitate widespread adoption of VBC. Only through standardization can players reduce the burden of managing multiple alternative payment arrangements and mitigate the complexity of the administrative and clinical implementation. Similarly, by scaling standard models with proven methods of success, the system can proactively minimize performance risk for cautious organizations.
  
  
• Collaboration: Payers and providers must develop innovative partnerships to share capabilities and capitalize on the unique advantages of verticalization. Payers can play a key role in reducing upfront investment by sharing responsibility for administrative tasks and analytics while providers focus on the monumental task of transforming legacy practice patterns and engaging directly with patients to manage health. Shared accountability through partnerships and joint ventures presents opportunities for organizations once at odds to find financial success competing on value through shared operations.
  
  
• Patient continuity: While VBC has penetrated furthest in the Medicare markets, commercial and Medicaid adoption have remained low given the limitations of preventive care in driving in-year savings. Improving customer experience, deepening trusted relationships with managing clinicians and maintaining longitudinal responsibility for patients’ medical costs can improve the return on investment (ROI) in VBC capabilities. These goals can be mutually reinforcing as success in VBC can enable superior product pricing and therefore greater market share growth and retention.

Example: The EY-Parthenon team helped a large regional health system redesign existing payer-provider risk sharing agreements and align its operations to improve the partnership’s financial performance. By re-evaluating existing data sharing agreements, the partnership enhanced its ability to identify and manage high-risk patients as well as affiliated providers. The EY-Parthenon team helped design a risk-bearing clinical model and charted the course for implementation to redirect profitability and performance.