Four value-based care strategies to drive success

Market forces are driving investments in value-based care, which incentivizes improving health outcomes while controlling costs.

In brief

• To succeed in value-based care, health care organizations need to rapidly acquire and scale a mix of organizational, care management and technology capabilities.
• The lines are blurring between health care insurers and providers, as payers acquire primary care provider networks, home health and virtual care organizations.
• To take the lead, health care executives should pursue both organic and inorganic investment methods that prioritize the value-based care capabilities they need. 

Figure 1: EY research identified an estimated $25b+ in VBC-focused deals in 2021, among individual deals valued at >$100m transaction value 

Through this research, the EY team identified several trends that defined value-based care investing in 2021:

• Investment by payers is outpacing that of providers.
• Payers are investing more broadly across the value chain to build capabilities traditionally held by providers.
• Providers are investing in capabilities that are more closely aligned to their core operations.
• Health care organizations are integrating customer experience and digital capabilities into their overall strategy.
• Purpose-built, value-based care startups backed by private equity and venture capital are on the rise.

Payers and providers are increasingly deploying inorganic strategies — including M&A, joint ventures (JVs) and partnerships — to rapidly acquire and scale capabilities. Digital, home-health and population-health acquisitions are increasing as payers and providers accelerate development of whole-patient data ecosystems that enable new value-based payment models.

Buy or build? Organic and inorganic strategies for value-based care

EY research identified four strategic archetypes that characterize how organizations are expanding value-based care capabilities. Investment strategies vary significantly between payers and providers, given their different expertise and core strengths. Health care executives can build momentum by focusing on specific priorities across the VBC value chain that align to their chosen strategy.

Figure 2: Payers and providers can pursue organic and inorganic strategies to acquire adjacent capabilities across the VBC value chain.

Figure 3: EY research identified four archetypes that characterize how organizations are investing to expand value-based care capabilities.

Innovator: vertical integration

Payers are actively using M&A to add capabilities traditionally held by providers as they expand participation in value-based care models. By acquiring organizations in adjacent industries such as primary care provider networks, home health delivery and virtual care, they are using vertical integration to improve managed care coordination, increase transparency and align incentives in value-based care networks.

Strong operational capabilities and established playbooks for integrating adjacent M&A transactions are core elements for vertical innovators, who are continuously working to expand and deepen their capabilities along the value chain. These moves by payers are increasing the industry disruption already putting pressure on health care systems and practice networks, making it an important strategy for providers to consider as well. According to a recent EY survey, health care CEOs have increased their M&A appetite, with 70% planning to pursue an acquisition in 2022.

Value-based care capabilities targeted:

• Payers: primary care, population health management, physician groups, home health, digital health, telehealth, outpatient services
• Providers: population health management, RCM, telehealth, digital capabilities

Collaborator: partnering and joint ventures

Collaboration through health care partnerships and joint ventures (JVs) is trending up, as these inorganic strategies offer an alternative path when organizational or regulatory issues make traditional M&A less attractive. Health care enterprises often use partnerships as an incremental step prior to a full combination.

Strategic health care partnerships can streamline care management, improve patient experience and potentially reduce costs through increased coordination between insurers and those delivering care. For example, several payers and providers have formed partnerships to provide value-based services to Medicare and Medicare Advantage members in specific geographies. In addition, both payers and providers are embracing innovative partnerships with technology companies to build digital and population health capabilities related to delivering value-based care.

Depending on the degree of integration needed, health care partnerships can require many of the same steps as traditional M&A. Partnerships also require a strong and transparent governance structure tailored to the uniqueness of the collaboration. Health care organizations tend to be less experienced with executing and managing partnerships compared to traditional M&A, which can add another level of risk and challenge.

Targeted value-based care capabilities (both payers and providers):

• Payer/provider health plans
• Specialty and disease management programs
• Technology to enable population health, risk management and care models
• Data sharing and interoperability 

Scaling disruptor: achieving value at scale

Some payers and providers are deploying a mix of organic and inorganic growth strategies to acquire, create and build scaled capabilities to deliver value-based care more effectively and profitably. Insurers are acquiring other payer networks to target expansion in key geographic markets and concentrated value-based market opportunities such as Medicare Advantage. Organic investments focus on building and scaling internal technology capabilities such as clinical workflow automation, EHR/analytics and interoperability required to manage value-based care efficiently.

Value-based care capabilities targeted:

• Payers: network management, revenue cycle management and billing, claims management, and plan expansion to build scale
• Providers: core clinical workflow management, process automation, population health, network management, provider acquisitions

Conclusion

As market and regulatory forces keep pushing the health care industry to adopt value-based care models, many health care organizations are accelerating their M&A and other investment activity to help make the transition. Payers and providers that are slow to act risk having their business models disrupted.

To keep pace and succeed in this new way of operating, health care executives can move forward by:

• Defining their value-based care strategy
• Identify the required capabilities, which may include financial risk management, care coordination, telehealth and digital communications, population health, advanced analytics to model savings opportunities and revenue cycle management
• Choosing the right mix of investment vehicles to fill the gaps
• Managing careful execution on their strategy

Joon-Woo Song, Matt Kraay, Shashi Shrimali, Rob Morgan, Ariana Engles and Shivam Jaitly contributed to this article.