Abby Burns (00:02): From Advisory Board, we are bringing you a radio advisory, your weekly download on how to entangle health care's most pressing challenges. I'm Abby Burns. In a few weeks, Advisory Board will be convening leaders from across the industry in New Orleans, Louisiana to talk about the meaning of value in healthcare. I know, it is one of the busiest buzzwords in the industry, which is why in the run-up to our Value Summit, Radio Advisory is going to get the conversation started. We're going to spend the next three weeks taking a closer look at trends in value-based care specifically, and who better to help us kick off this miniseries than our own resident value-based care experts, Clare Wirth, and Daniel Kuzmanovich. If you want to sign up for the summit, there's still time to register. I've added the link to the show notes, but for today's conversation, I want to get a sense from Clare and Daniel about what the industry's progress toward value-based care actually looks like and how individual leaders should be thinking about their organization's path forward. Clare, Daniel, welcome back to Radio Advisory. Clare Wirth (01:02): Thanks for having us. I've been looking forward to this conversation for weeks. Daniel Kuzmanovich (01:09): So glad to be here. Abby Burns (01:10): I'm going to tell you guys right off the bat, I have an ambitious ask for you today, but I think you're both up to it. You've both been on podcasts before. Most recently, Daniel, you were on last summer talking about what folks are still getting wrong when it comes to value-based care. What we didn't cover in those past conversations is something you all have dug a lot deeper into over the past several months, and that's actually trying to paint the landscape of health system adoption of value-based care. I feel like this is a question we've been getting for a long time and it's one that's actually pretty hard to answer, but start from the very top. Why did you feel like the industry needed to answer this question right now? Clare Wirth (01:51): Yeah. When Daniel and I talk to healthcare organizations about value-based care, there's a lot of different challenges that we hear, but they do tend to boil down to three main ones. The first is that there are too many stakeholders to engage and they're not all on the same page, especially a leadership team. The second is that they have a limited sense of benchmarks. It's really hard to know what good looks like in value-based care, and then third, they're facing an undefined end state. I've heard folks say, "I am building the plane as I fly it, and also I don't know where I'm landing this plane," at the same time. Daniel Kuzmanovich (02:26): It's a big question of what does good look like. There are a ton of interesting organizations out there. I'm thinking Blue Premiere of North Carolina, the Blue Cross Blue Shields, Massachusetts value-based care program, Cigna. There are a lot of innovative value-based care programs that exist, but even when you double click into those, a lot of people still ask, what does good look like in value-based care, especially at the health system level? Abby Burns (02:50): So how do you go about actually trying to answer that question? Clare Wirth (02:55): So Daniel and I created a new tool with our team that's built on 20 plus years of Advisory Board research that is painting that landscape, and the idea of that tool is that a health system team can take it, understand where we are in this journey of value-based care, and have a conversation about where they want to be. Abby Burns (03:14): You said health systems, is this specifically for health systems? Daniel Kuzmanovich (03:18): The short answer is yes, and I think it's really important that we articulate why. Independent physician groups have been in many ways actually leading the charge when it comes to adopting value-based care. Health systems is where this gets a lot more complicated, and it's also a lot harder to tell what good looks like for health systems because they take so many different shapes and forms. Abby Burns (03:40): So essentially you created this tool for health systems that allows leaders to diagnose where their progress is in value-based care. Tell me a little bit more about the tool outputs. Where might a health system fall out? Daniel Kuzmanovich (03:58): You want us to explain something two-dimensional in an audio-only format, that sounds fun. Abby Burns (04:03): Yes, I told you we were ambitious today. Daniel Kuzmanovich (04:05): Let's give that a try. Imagine kind of four buckets. Four buckets if you will, along a horizontal spectrum. Abby Burns (04:13): Yep. Daniel Kuzmanovich (04:14): All right. The far left of this is a group we would call the producers. These are the health systems that, for lack of better expression, they're squarely in the fee-for-service business model, and they are probably staying there. But when we go to the right, we've got a different group. Clare Wirth (04:31): A different group would be the dabblers. So the dabblers are participating in some risks. They're taking on largely upside-risk contracts, and that makes up the bulk of health systems today. Abby Burns (04:44): So we've got producers, we've got dabblers, who comes next? Daniel Kuzmanovich (04:48): Well, I did say there are four. So number three as we move across the spectrum would be a group we would think of as the balancers. These are the types of health systems that are balancing and incentives in a business model in both a fee-for-service landscape and a value-based landscape. If the dabblers are kind of sticking their toe in the water, the balancers are actually balancing themselves across these two business models. Clare Wirth (05:12): And that leaves us with demand destroyers. They have the greatest amount of risk adoption. They are heavily participating in downside risk and delegated risk, and so they're incentivized to reduce downstream demand. Abby Burns (05:26): So you've segmented health systems across these four different groups. How do health systems fall out across them? Clare Wirth (05:35): So we did a survey of about a hundred health system leaders, so frontline physicians and executives, and what we learned is that the majority of health systems are in the middle. About 40% of health systems considered themselves dabbler organizations and another 25% put themselves in the balancer category. Now, I want to be clear that we did not ask them, Hey, are you a dabbler? Hey, are you a demand destroyer? In fact, we had them take the self-assessment and say within these subcategories, where does your organization fall out? And then we did the work of putting them into these categories. So the majority of organizations of health systems are in the middle, and that leaves about 13% in that producer category, very fee-for-service focuses. Abby Burns (06:19): Squarely in fee-for-service? Clare Wirth (06:20): Yes. And then we have about 9% in the most sophisticated value-based care category, the demand destroyers. Abby Burns (06:28): Clare, I'm doing pretty quick mental math here admittedly, but I don't think that adds up to a hundred. Clare Wirth (06:33): You are good. It does not add to a hundred. There were a group of folks who said they did not know, so about 14% of our respondents did not know their answers. Abby Burns (06:41): So for folks that did answer, they're falling out more or less into a bell curve, a little bit of a warped bell curve, but still a bell curve. Daniel Kuzmanovich (06:49): Yep. Clare Wirth (06:50): Mm-hmm. Abby Burns (06:50): Does that surprise you? Daniel Kuzmanovich (06:54): Not really. I think that if you look at the healthcare landscape, there are certainly going to be some folks in certain markets that have by far and away gotten to that demand destroyer state, and it makes sense for them to be there. And there are going to be some organizations that it is right for them based on their market and the work that they're doing to be focusing on that producer space. But the majority of folks, it probably makes sense to either be saying, oh, I'm going to be doing some form of value-based care, or I'm going to be balancing value-based care and fee-for-service both at the same time. At least it doesn't surprise me. Clare, what do you think? Clare Wirth (07:27): No, it doesn't surprise me in the slightest. I think that that is what I would consider a status quo health system to be. Abby Burns (07:33): So we have these four stages of value-based care adoption. As systems become more sophisticated, take on more risk, build out their different capabilities, they move from left to right. Is the goal for everyone to ultimately become a demand destroyer? Do we want that fourth category to get to 100% of health systems? Daniel Kuzmanovich (07:55): I am so glad you asked that question because I was getting ready to challenge the idea of the word sophisticated. Abby Burns (08:01): Okay. Daniel Kuzmanovich (08:02): I think that it is a mistake, and this is something we talk a lot about with the members that we work with. It is a mistake to think that greater value-based care adoption means a more sophisticated health system. Not every health system should be trying to be a demand destroyer. Full stop. You'll not change my mind. Clare Wirth (08:20): It's also why we called this a self-assessment and not a maturity model. I think a maturity model implies you got to get from the left to the right-hand side to be a high-performing organization. And also back to our original question, the idea is to see what good looks like across different stages of value-based care adoption, and those rightly so look very different. Abby Burns (08:38): So the end state could be to stay in the stage that you initially ranked out at and become the most sophisticated to go back to that word example of a dabbler, of a producer, of a balancer. Daniel Kuzmanovich (08:52): Exactly. You all know I love sports you, I love movies and I especially love sports movies. I get to bust out one of my favorites, Moneyball. There's this great scene in the movie Moneyball where Jonah Hill's character says that, "People who own professional baseball teams think in terms of buying players, but your goal shouldn't be to buy players. Your goal should be to buy wins." And that challenging the idea of what we think of success, success is not buying players success is buying wins, the same thing applies here. Success is not moving from one to the other necessarily. It is finding yourself in the right position for your strategy and your business as a health system on this spectrum. Abby Burns (09:34): Let's talk about what right means in a little bit, but first I want to channel the VBC skeptic. Is it okay for systems to stay in upside risk forever? Clare Wirth (09:45): Well, I was going to push on. Daniel said his moment of success. Well, success is also in the eye of the beholder. So if every organization, if every single health system in the US stays only in upside risk, CMS may not consider that a success. Payers in certain markets may also not consider that a success, and so is it okay? Yeah, maybe for a health system it is the right answer, but there are different perspectives here. Whenever we're talking about value-based care and health systems can have an offensive strategy to this or a defensive strategy to this. Offensive, this may be a differentiator for them in their market context. Defensive, it may be that their health plan is really pushing this in terms of their agenda or another market force where they want to be a partner to a new entrant into their market. There are both offensive and defensive ways to think about it. Daniel Kuzmanovich (10:32): The importance of what Clare just said, the market context has a profound implication for where an organization should either be finding themselves or wanting to be. Abby Burns (10:43): Can you give a couple examples here? We can pick a sample market and how does the market context actually translate to strategic decision-making? Daniel Kuzmanovich (10:50): I am a North Carolinian by birth, so I will always come back to my home state, and I think that might be an interesting example here. Blue Cross Blue Shield of North Carolina is the dominant local health plan in the state, and if they are in a position where they are pushing value-based care from a health plan perspective as the dominant payer at the state level, it would be strategically advantageous for a health system to at least be keeping up with them in some way, shape or form to take advantage of that change for those organizations. And there was one health system that said, you know what? The plan is pushing a value-based care agenda and we don't want to do it, so we're going to go out of network with them. (11:32): That health system no longer is an independent health system because they went out of network with the dominant plan in their market for a year-long period, and they could not see seven out of every 10 covered patients. So only three out of 10 patients were they getting paid to see by the health plan. Strategically, it makes a lot of sense to be, oh, if this plan is pushing in that direction, then I might need to move that way as well. The market context makes a big difference. Abby Burns (13:38): Okay, so I first channeled the VBC skeptic. Let me channel now the VBC advocate. Daniel, before you mentioned, no one's going to get to 100% capitation. We don't want everyone to become a demand destroyer. Why don't we want that? Clare Wirth (13:56): I would say nationwide capitation. What many value-based care promoters advocates have perhaps set is the goal. Nationwide capitation is a myth. We have talked about this foot in two boats as a temporary period between moving from fee-for-service to value-based care when the reality of what we're going to be operating in is a world of hybrid incentives for the foreseeable future. Daniel and I talk a lot about the rest of our careers, we will be operating on the world of hybrid fee-for-service and value-based care incentives. Daniel Kuzmanovich (14:32): And this is soapbox moment. I've said it once, I'll say it here again. Anybody who thinks that someday I'm going to wake up in the world of fee-for-service, go to bed in the next morning, wake up in the world of capitation, that is not reality. That is not what any form of market condition suggests is likely to happen. There certainly is the possibility for change, but we're not going to see that switch and that level of speed as Clare just said, right? We're going to spend the rest of our careers working in a world where it's not a foot in two boats, it's the two boats are the two boats, and that's just what business is. Clare Wirth (15:06): It's one catamaran. Daniel Kuzmanovich (15:09): One catamaran. I love it. Clare Wirth (15:10): One catamaran Daniel Kuzmanovich (15:11): A pontoon boat or if you're from the Midwest or the South. Clare Wirth (15:14): Well, and one other thing to what Daniel just said is that the percentage of payments that have been tied to fee-per-service have been relatively constant for the last 10 years. It has stayed steady at about 40%. Abby Burns (15:26): And we don't necessarily see that changing, right? Daniel Kuzmanovich (15:30): Right. Abby Burns (15:30): Is that why so many folks that are in those middle two categories, the bell curve, the dabblers and the balancers are maybe content to stay there? Clare Wirth (15:42): Yeah, 65% of health systems are in one of those two categories. Daniel Kuzmanovich (15:47): And it makes sense. If 40% of reimbursement is still tied to fee-for-service, it makes sense to still have that be a predominant portion of my business, which is what that dabbler and balancer category are doing. They're still keeping fee-for-service very much at the fore of that business. Abby Burns (16:06): I am assuming though, that there are some systems that want to progress, that want to jump from one category to the next. If you go along the left to right spectrum, so acknowledging it is not the right call for every health system to become a demand destroyer. For those that are looking to take on more risk, I'm wondering where maybe the most difficult transition points are. Which jump is it hardest to make? Clare Wirth (16:31): I think the hardest transition to make is from dabbler to balancer, and in part of that is because there's a few key differences between dabbler and balancer. One of the main ones is the difference in governance and vision. In a dabbler organization, value-based care is adjacent to the everyday work that's being done. Abby Burns (16:53): Okay. Clare Wirth (16:53): When we move into the balancer category, it is core to the work that you're doing day in and day out, and the leadership team all has to be on the same page about that work, and that is a considerable change. And I'll also add that the balancer category is a really challenging spot to be in because again, you're taking on considerable risk. You're managing these two very different business models. Daniel Kuzmanovich (17:17): Clare, I'm glad you added that because my original answer to Abby's question was, the hardest jump would be from a balancer to a demand destroyer state. I think what you just called out is really important. There's that expression about life is not about the destination, it's all about the journey. What I would say is when it comes to the balancer category, that is not true. The balancer category is the hardest state to be in, and so I would've thought, or the way I originally was thinking about answering Abby's question was it's balancer to demand destroyer. Abby Burns (17:47): Okay, so Daniel, you're getting us to this idea of going from balancer to demand destroyer, but given 65% of health systems are in those two middle categories. I want to stay there for just another minute. Clare, you talked about governance and vision being one differentiator or one place where you see differentiation between dabblers and balancers. What are some others? Daniel Kuzmanovich (18:08): Well, I would like to re-underline governance and vision. I think this is so important that if an organization does not have this solidified at the highest levels of the organization, then anything else doesn't matter. Quite frankly, if you don't have the leadership alignment, governance and vision, the rest doesn't matter. But if you're putting me on the spot, I think that on the financial transformation, a big one that you see for dabblers making that move from dabbling to balancing is moving from more of a adversarial or transactional relationship with health plans to a more deeply collaborative partnership. And I think that's a big challenge in and of itself. Clare, what would you add? Clare Wirth (18:52): I think it's also the populations with which you're taking risk on. So for dabblers, it's often Medicare and Medicare Advantage. The balancers, we're seeing them move beyond that into more commercial, which transitions us into thinking about the clinical transformation piece too. So the dabblers are focused on primary care, often on the senior population in particular. The balancers are starting to expand beyond that and thinking about outside of primary care, more specialty care as well as what commercial risk requires. Abby Burns (19:25): Which I should note we're going to be talking about for the next two weeks on Radio Advisory talking about VBC and seniors and VBC and specialty care. Daniel Kuzmanovich (19:33): It is a really powerful point because I think a lot of specialists in a dabbler camp would say that value-based care is a primary care challenge, but once you actually move as an organization into that balancer camp value-based care becomes an every one challenge and opportunity. Abby Burns (19:50): What are the benefits of building those muscles and those capabilities? What does doing that allow you to do? I know you said it's about the journey, not the destination, but to what end? Clare Wirth (20:02): Well, our data showed that the balancers and demand destroyers performed better in risk contracts than the dabblers did. So in our data, the balancers and the domain destroyers did better in downside risk and capitation. They were far more likely to generate savings or have shared savings in those contracts compared to those dabblers. Daniel Kuzmanovich (20:24): That's a financial result. I think one of the other thing that's worth calling out is these programs have clinical ramifications, quality ramifications, care continuity ramifications, and we would point those out as being benefits of making that jump. Abby Burns (20:40): That feels like a really important point in light of the fact that you told me 40% of health systems are in the dabbler category, which means it sounds like 40% of health systems are doing some sort of value-based care, but are not achieving the same financial clinical quality outcomes as those that are further along the pathway. Daniel Kuzmanovich (20:59): Yes. Clare Wirth (21:00): Yes. And a lot of dabblers don't want to move much further. Dabblers are doing well in upside risk, and by and large when we've surveyed them, they want to stay in upside risk. Abby Burns (21:10): But are they doing well? Didn't we just say that the balancers and demand destroyers are doing better? Clare Wirth (21:16): They're doing better in downside risk and capitation, pretty much everybody is reporting they're doing well in upside risk. Abby Burns (21:21): Okay. Daniel Kuzmanovich (21:22): So the takeaway I would have there, and I think it's pretty cool to see, is if you are actually committing to value-based care, if you are looking at what Clare just said, if you are further right along this spectrum, the more far along right you are, the more likely you are to see financial returns when it comes to your value-based care initiatives. This reminds me of the concept of the center for Medicare and Medicaid Services Glide Path and the idea that as you get onto this Glide Path and the further along you go, the more likely you are to be successful. Abby Burns (21:59): All right. We've covered a lot in this conversation. Our listeners are healthcare strategists. They are healthcare operational leaders. How do people pick their destination? How do people pick whether they want to stay in the category that they are in, whether they want to move further toward value? How do they make this decision? Daniel Kuzmanovich (22:21): It's a great question. I'd say use our tool, right? Where Clare actually began this is there is a shortage of knowledge about what does good look like. Using our tool might actually be the one way to say, Hey, I actually can see, am I consistently aligned to one state when it comes to this journey of value-based care adoption? Clare Wirth (22:44): The other way that I would use this tool is to make sure your leadership team is on the same page. Value-based care fails without alignment and organizations need to have that agreed upon objective with a strong leadership team that is reading from the same song sheet, particularly the CEO and the CFO. This is a tool to use to make sure your leadership team, I would say, everybody print it out, figure out where you are, circle which elements resonate with where your organization is today, and have a conversation. Where are we on the same page? Where are we not? And even starting from a place of we all know where we are today is a really important conversation to have first. Daniel Kuzmanovich (23:26): And remember, the point I think Clare has repeatedly called out for us is you don't have to move. You don't have to leave the state where you are today. It's just about knowing where you are and are you sure that's where you want to be? Abby Burns (23:38): And I believe what your research is trying to do next is help answer the question, fill in the blanks of what does good like for some of these specific stages. Is that right? Clare Wirth (23:47): Yes. Abby Burns (23:49): Well, Clare, Daniel, thanks for coming on Radio Advisory. Clare Wirth (23:52): Thanks for having us. Daniel Kuzmanovich (23:53): Always great to be here. Abby Burns (23:59): This conversation might've been a little bit surprising for those of you who expected us to say that the right answer for every health system is to move further and further into downside risk. The point that Clare and Daniel are making is the right amount of risk actually looks different for every system. For the next two weeks, we're going to leave health systems where they are and we're going to shift our focus to talk with organizations that are placing their bets on creating care and payment models centered around specific populations and conditions like seniors and specialty care, because there are lots of ways to pursue value. And remember, as always, we're here to help. (24:53): If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Abby Burns, as well as Ray Woods, Kristin Myers, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Carson Sisk, Leanne Elston, and Erin Collins. We'll see you next week.