Unlocking the Power of Global Capitation Within Value-Based Care

By Loren Anthes, Head of External Affairs for Yuvo Health

Back in June, I wrote a piece about how policy dialogue on how value-based care often disguises its meaning and purpose. It’s almost as if our ever-present challenge of escalating costs and worsening outcomes in the US will somehow be magically solved by simply uttering the phrase “value-based” as though it’s a spell or incantation that will erode decades-long practices of artificially inflating price for no rational reason.

Related: Read more on misconceptions around value-based care in our guide.

Beyond the economics of the industry, however, there are the very real non-medical factors that influence issues of costs and poor outcomes. Of late, these larger structural forces — often referred to as the social determinants of health or health related social needs (HRSN) — have garnered attention in health policy, becoming embedded in federal regulatory thinking and in state Medicaid programs. And this makes sense. Once we start to understand that social risks are insurance risks, it reframes where our dollars should go and for what.

Now the obvious answer is that we need to address people’s basic needs like housing, food, education, etc., directly. And, to be sure, the US is an anomaly compared to other industrialized nations when it comes to basic supports like these, falling far short of every other country.

Given the recent evidence highlighting how Covid relief enabled this sort of stabilization for many, that should be a focus of policymakers outside of healthcare and will undoubtedly, positively impact healthcare spending.

However, this does not mean that healthcare does not have a role. When it comes to health policy, the federal government and states have looked at ways to finance the social needs of Medicaid beneficiaries, leveraging waiver authorities to do so. But in a state like Ohio, where waivers are more challenging to achieve, politically, value-based care can provide an avenue to meet the same ends.

Most value-based care in Ohio and beyond is built around achieving benchmarks. In other words, it’s only about incentivizing processes or procedures that we know help bend the cost-curve long-term. In other words, most of what’s been implemented in “upside.”

Functionally, then, this system is still grounded in fee for service, meaning volume is still the primary source of revenue development and there is no natural incentive to mitigate risk and prevent illness. However, when providers take on risk, themselves, and have full responsibility over the resources associated with care, the incentives change.

In this way, it becomes an imperative of providers to manage the full continuum of risk for their patients and, ultimately, receive the highest benefit when illness is avoided. This is what it means to take on “downside” risk. But downside risk is also often limited or mitigated, putting only a marginal sum “at risk”, muting the potential benefit and maintaining the primary scope of risk management within the realm of medicine, alone. This does not have to be where these tools stop, however.

When a provider is at full risk for the care of individuals, otherwise known as “global capitation” it means that they must manage the comprehensive needs of those individuals. It also means if they are not efficient with those resources, they could bear the cost of that inefficiency. That is why it’s called risk.

But what global capitation unlocks is the ability to be innovative in delivery design. It means that providers who have these resources can help create systems of support with non-traditional collaborators in ways that augment value and enable case management and coordination strategies that address HRSN – all without a waiver.

Why aren’t more health centers participating in value-based care?

1: They Don’t Know What Value-Based Care Is

This was the point of my article defining value-based care. People hear value-based care and they often accept the ambiguity, or see it as some function of branding — frankly, not an unfair thing to do.

2: They Don’t Want To (Or Can’t) Take on Risk

Once you become responsible for your patients’ needs, in total, what happens if you fail? Do you have the option to fail at a time when healthcare is changing too quickly and there are significant financial threats through the retailing of medicine? Beyond that, if you are a smaller provider, or represent them, how can you possibly get to the same scale as large systems who are getting bigger through acquisition and mergers? And while trade associations and some national risk-adjustment companies are seeking solutions, there is often too high a price tag for local solutions to meaningfully develop the administrative infrastructure needed to be effective or, conversely, you can often lose that “local approach” by partnering with a faceless vendor, disabling your ability to meaningfully respond to community needs, defined by the community.

In the end, Ohio’s new Next Gen Managed Care program provides a pathway to make HRSN management possible through global capitation. While advocates and some policy thinkers continue to spend time and resources on health-specific regulatory fixes and solutions to these fundamental problems, it’s the wrong focus.

That advocacy energy is better spent directly addressing HRSN by investing in supports that promote housing security, food insecurity, and so on, without turning it into another cost center for the Medicaid program from which providers can make more money in the same fee for service format. When it comes to healthcare, providers should be taking advantage of what already exists and find the courage and will to be innovative.

If providers are serious about addressing their patients’ needs, and if community-based organizations want to be able to meaningfully collaborate with providers to coordinate services, they should be doing so through a contract. Otherwise, why do we have managed care in the first place?

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