Specialty value-based care: The next phase of VBC

If your go-to mental model for risk/VBC revolves around primary care management of chronic conditions, it's time for a conceptual expansion. Here are some keys to tracking with risk/VBC's ongoing expansion into specialty areas of practice.

Last week, we covered risk/value-based care (VBC) in our Strategy Bootcamp series. The purpose of this series is to help make sure all healthcare leaders, even those who may have been focusing on something else for a bit or may be coming from some other domain, can be conversant in evolving strategy areas. As it happened, the “How to speak risk/value-based payment” Strategy Bootcamp skewed hard to understanding what's currently happening in healthcare policy (more on that in an upcoming blog post--make sure you're subscribed below!) but for today, we want to zero in on another aspect of risk/VBC that everyone needs to be familiar with. That is: the way that risk/VBC in general has slowly morphed over time from a primary-care-oriented model to one that all specialists need to be ready to grapple with in their areas of practice.

Major drivers of the increasing specialty focus in risk/VBC

For multiple decades, primary care was where all the action was in risk/VBC. PCPs/care teams were the quarterbacks, viewed as best positioned to target avoidable utilization, such as preventable ED visits/admissions for poorly managed chronic conditions.

But that focus has expanded with time, with more risk entering specialty care and more stakeholders seeing the value in engaging specialists. This change really started in the mid-2010s, as the industry came to terms with the fact that:

1. Primary-care-exclusive VBC alone isn't as effective at avoiding downstream care as many thought.

2. There's plenty of running room to reduce costs within (unavoidable) downstream specialty episodes.

3. Costs began to skyrocket within key specialties (e.g., due to expensive specialty medications).

4. For demographic reasons, specialty visits are becoming a bigger part of patients’ care. As patients are getting older, with more chronic conditions, their care is getting ever more complex (and pulling in more specialty episodes). The average Medicare patient has five specialty visits for every two primary visits..  

Specialty VBC is more complex/variable compared to the conventional primary care version

Primary VBC isn’t simple by any means, but it’s highly consistent within itself in terms of the major levers for attaining cost/quality goals. In contrast, within specialty care, each specialty has a unique set of cost types that are viewed as (avoidably) driving high overall costs.

The success of specialty-focused risk/VBC hinges on successfully identifying and targeting those cost drivers within EACH of the relevant episodes across a wide variety of specialties (keeping in mind that levers may differ even among different episodes within a given specialty).

Here's where new technology comes into the picture: We have new tools these days to understand and solve complex problems in niche areas. The ongoing explosion in clinical data availability combined with fast-evolving AI tools can unlock new opportunities to identify and act on specific avoidable costs across specialties.

What does specialty VBC look like in practice?

Episode-based payments/bundles continue to be the main form of specialty VBC. As we're familiar with from the Bundled Payment Care Improvement Advanced (BPCI-A) era forward, a fixed cost covers all services in one episode of care. Prime targets continue to be the specialties that are high-cost, high-impact: oncology, orthopedics, cardiology, and nephrology.

Quick reminder: Specialty episodes will always differ across government and commercial payers, specifically in targeting different kinds of costs.

• Government payers (Medicare and Medicaid): Target post-acute utilization, chronic disease exacerbations, and high-cost facility care.

  • Medicaid in particular will target maternal and pediatric episodes that are obviously less relevant in Medicare.

• Commercial payers: Target price variation across providers and care fragmentation across specialties. But mostly price variation, which is where the avoidable spend is from a commercial payer viewpoint.

CMMI has led the charge on trying out bundles, with many models launched in recent years. One notable model to call out is the Transforming Episode Accountability Model (TEAM), a 5-year mandatory program that will launch in January 2026, In this model, select hospitals will coordinate care for five designated surgical episodes, including joint replacement and spinal fusion. This model builds off BPCI-A and Medicare's Comprehensive Care for Joint Replacment (CJR) program to continue CMS' strategy of shifting toward specialty care.

For those wondering "has the Trump 47 administration made any changes to this model?" the answer is, "to date, no." So far, looks like the TEAM model is steaming ahead as planned.

Commercial payers have also long been interested in specialty bundles/episodic risk. But the goal tends to be tackling price variation: finding ways to redirect patients to less-expensive specialists/sites for a given episode. This makes sense because there is comparatively little avoidable downstream utilization in commercial world in general compared to Medicare world. Also, employers are demanding options to address rising specialty care costs that increasingly take up more of their budget. In response, commercial payers are turning to bundles and, more commonly, narrow networks commonly referred to as centers of excellence (COEs), to deliver on quality and cost-of-care expectations. In 2023, 34% of large firms (a thousand or more employees) reported sponsoring COE programs.

What’s next for specialty VBC?

Here are a few items we're watching in the development of specialty VBC:

• The design of new specialty VBC models: Specialty care is messy. There are a lot of unknowns: Who “owns” the patient’s care? Patients will likely see multiple specialists for one care episode. Who is responsible for those outcomes? And for that matter, what constitutes a “good” outcome?

• Hearts and minds campaign for specialists into VBC: Specialists tend to be a bit more skeptical of VBC arrangements than primary care clinicians. After all, primary-care-based VBC was designed to reduce spending on specialists. There will need to be some experimentation to engage specialists in VBC contracts.

• Regulatory moves: The whole world has learned to be on the alert for major policy shifts from the Trump 47 administration, so of course we all have to stay on the alert there in every domain of healthcare. In an upcoming post we will be exploring more specifically the areas of risk/VBC that are least and most likely to be affected by partisan politics and the change of political party in federal leadership. For the moment, let's just observe that of the four CMMI models that have been cut/sunsetted early so far, there is nothing so far to suggest major changes ahead for specialty risk. Again, the most relevant program here is the TEAM model, which as of today, is going ahead as planned.

Over time, providers have become very familiar and comfortable with the general idea of managing episodes of care. But as the risk spotlight continues to expand to include more specialties, new challenges will crop up and new solutions will need to be found. Specifically, specialty risk is now well-established in procedural episodes with well-defined pathways and outcomes that are simpler to measure, such as high-volume procedures in orthopedics and cardiology. It's more difficult in specialties that are more complex, episodes that are more interdisciplinary, and those that commonly have longer periods of care, such as oncology.

Specialty VBC is a huge area of interest and investment, so we’ve only just scratched the surface in this post. If you want to learn more about our VBC research or how we can support your organization’s journey, reach out to us at info@unionhealthcareinsight.com