How could nationwide value-based payment become a reality in the next 5 to 10 years? Looking to today’s market for clues, our team envisioned several scenarios of how influential stakeholders could make that happen.

In each scenario, we describe what the future would look like, how it would unfold, and what it would mean for major stakeholders in healthcare — and what to do if this future doesn’t look rosy for your organization.

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In this scenario, one dominant national health plan would acquire a vast footprint of ambulatory care providers and become vertically integrated. The plan would focus on growth through vertical assets nationwide for better population health management and industry control. With a broad, low-cost network, it could attract more Medicare Advantage and employer customers.

With the emergence of “health solutions companies,” this scenario is imaginable. It’s where industry momentum is already headed. What is different here is that one plan would separate itself from the pack. It would control the industry. It could decide to push providers toward capitated arrangements.

As a result, this plan’s proficiency in capitated outpatient care delivery could lower costs for patients, employers, and Medicare while maintaining quality.

1. Hospitals would consolidate and seek partnership for volume. The vertically integrated entity would limit inpatient volume, squeezing already slim hospital margins. Hospitals would begin to close due to lack of demand. The remaining profitable hospital operators (namely for-profits such as Tenet Healthcare, HCA Healthcare, and Community Health Systems) would seek partnership with the dominant health plan.
2. Remaining competitor plans and ambulatory providers would lose considerable market share. With lower costs and better access, the dominant organization would outcompete health plan competitors for employers’ business. The national plan would also leave some ambulatory care providers out of its network, leaving specialists disproportionately impacted. Some specialists would agree to strict cost and quality requirements to join the network. Others would close entirely.

National health plans are already diversifying their business models through vertical integration. For example, UHG’s Optum Care focuses on acquiring practices that are well positioned to take on Medicare and commercial risk. (Note: Advisory Board is a subsidiary of Optum. All Advisory Board research, expert perspectives, and recommendations remain independent.) CVS/Aetna continues to acquire providers to fuel its growth strategy. Recent forecasts show these plans and other nontraditional players will own 30% of ambulatory physicians by 2030.

On the other hand, hospitals across the nation continue to operate in the red. Their margins are squeezed by continued outpatient shift, legislation reducing their prescription drug profits, and deferred care from the pandemic. Continued struggles leave them open to acquisition by profitable hospital operators like HCA and Tenet.

National health plans are unlikely to buy hospitals, especially since one of their main priorities is to prevent unnecessary hospitalizations and ED visits. But there will always be a need for acute care. And hospital operators need some kind of patient flow. Thus, a dominant national health plan would need to partner with a hospital operator to send members to hospitals when needed and influence the future acute care footprint.

• Robust M&A activity invites regulatory scrutiny. The DOJ actively blocks large mergers. This scenario exists only with a laissez-faire FTC and DOJ.
• Acquisitions don’t guarantee integration. This strategy would require considerable “systemness” efforts.
• A dominant national health plan may balance outright ownership with partnerships. Once it has acquired a critical mass in key markets, it can pursue partnerships instead of M&A. Over time the plan’s strategy could slow or change altogether as it learns more.

Not every stakeholder would be a winner in this future scenario. Here’s how key stakeholders would be affected and how they should respond.

Value-based care is decidedly a move away from a broken system that is often profitable toward a system that will not reward everyone the same way. That future will be better for some than others. To solve the healthcare industry’s cost problem, some players will lose out.

Today’s leaders must ask themselves: What am I willing to sacrifice to secure a place in a VBC future? What combination of wins and losses are acceptable to me (and my partners)?

As this backcasting analysis demonstrates, the stakeholders who create the future of VBC future will not only ensure it works to their advantage, but they will also influence which stakeholders get left behind. Shaping that future starts now.

In case you missed the other two scenarios

• Scenario 1: Employers at the helm
• Scenario 2: Tech disruption