This section dives into the world of value-based specialty care, its critical role in bending the cost curve, and how risk bearing entities can better engage specialists in this transition to value.

To Sub-Cap, Own, Navigate, or Partner, that is the Question

Specialty by Specialty

ACO Capitation

Specialty Vendor Fatigue

Challenges to Value-Based Specialty Care

Network Navigation

‘Headwinds’ emerged as perhaps the key theme of the healthcare sector in early 2024, describing the storm of increased utilization, flattened reimbursement, and demographic changes that have converged to push risk-bearing entities toward financial instability.

• High Utilization: Patients are utilizing healthcare services post-COVID at a higher-than-forecasted rate, specifically outpatient surgery, Part B drugs, supplemental benefits, and associated downstream services.
• Reimbursement Stagnation: This year’s final MA rate notice is less favorable to MA plans, even with high utilization trends (an impact immediately visible in managed care stock prices).
• Risk Adjustment: As the transition from V24 to V28 coding takes effect, a significant number of diagnosis codes that previously mapped to HCCs no longer do so, which is likely to decrease overall risk scores. Additionally, the Risk Adjustment Data Validation (RADV) Final Rule is expected to enable CMS to recoup $3.7B over the next 10 years.
• Demographic Changes: The number of people turning 65 is now going to be flat or down for the next two decades, shifting recent Medicare-risk focus to other lines of business, like Commercial and Medicaid.
• IRA changes to the part D: beneficiary cost sharing will be capped at $2,000 for prescription drugs which is great for seniors but will squeeze plans and likely make premiums more expensive
• Inflated provider price: high inflation, rising wages, energy, etc.

Collectively, these pressures are pushing the industry to ‘value-based care 2.0’. To recap VBC 1.0, primary care access and utilization were prioritized to control costs, and this strategy has proven successful. PCPs are the front door to the healthcare system, not only promoting early disease detection and prevention, but also controlling downstream referrals for specialty services. However, primary care only [targets a small sliver](https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2765245#:~:text=Specialty care was the third,the study period (Figure).) of spend, which leaves a lot of opportunity untapped.

In VBC 2.0, risk-bearing entities must have a laser focus on reducing unnecessary medical expenses (as opposed to risk-adjusting) to generate revenue by adopting disease-tailored, evidenced-based care models that target the highest-cost specialties.

Risk-bearing entities (payers, medical groups, enablers, and health systems) have several options in targeting these high-cost specialties (whether cardio, MSK, oncology, behavioral health, and/or kidney disease).

• Sub-Capitate: Pass off the capitated rate to risk-bearing specialist group
• Own: Directly employ the specialist group
• Network Navigation: Ensure that patients are going to high-quality, low-cost specialists
• Partner: Engage with another risk bearing entity to build a specialist network and manage the condition with focused support capabilities

This decision isn’t as simple as ‘buy vs. build,’ and each organization is faced with its own set of considerations.