Transition to VBC in healthcare roll-ups

July 25, 2023

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Does anyone have experience transition a healthcare roll-up from FFS to a value-based payment model?

I'm curious to better understand how transitions to VBC can happen with different capital structures. There have been a number of VC-backed enablement platforms transitioning primary care practices to VBC. Has anyone successfully done this with a search fund?

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Reply by a searcher
from University of Maryland at College Park in Havre De Grace, MD 21078, USA

^redacted‌, (EMS/NEMT/specialist background) While the government is outwardly supportive of VBC models, CMS & state programs are headbutting with commercial carriers. An example is the Medicare Advantage programs. These really seem like a wonky hybrid that is FFS model that leverages lower FFS payments to providers to fund additional perks that some in that demographic find helpful and are not typically included in traditional Medicare (limited vision/dental/hearing, some prescription copays, etc.). There is a ton of red tape and compliance involved with these programs. Are you looking in a specific segment? I see some PCPs that charge an annual fee rather than accept insurance and have 24/7/365 coverage with basically unlimited access. I wonder if some of the insurers would allow the PCP (in their in-network contract) to charge an annual subscription fee per patient over and above contracted rates, copays, coinsurance, etc... in exchange for the larger access model (allow for walk-ins, 24/7/365 phone a MD or NP, and other similar "concierge" services.

Reply by a searcher
from University of Pennsylvania in Dubai - United Arab Emirates

Thanks^redacted‌ I have some familiarity with VBC through a company called Heal (VC backed). I dont see there is relevance to the capital structure from the transition. The critical matter is whether you have the capital to support the transition because as you move from FFS to VBC the timing of payment shifts whereas the timing of costs remains the same, Your working capital balloons during that time period and you need cash whether it comes from equity or debt until such point as your VBC payments exceed your outflows with the additional risk that you may not earn the VBC if patient outcomes dont go the right way. Get either of these wrong and you run out of money regardless of source.

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