Value-Based Care: Opportunities for DME

Published in Member Communities on September 04, 2024

By Alan Morris, SVP, Strategy, VGM & Associates and Craig Douglas, VP, Payer Relations, VGM & Associates

In the ever-evolving landscape of healthcare, value-based care (VBC) is a concept that has emerged over the past decade and continues to become increasingly prevalent across the healthcare ecosystem. This paradigm shift challenges traditional fee-for-service models and places quality, outcomes, and patient experience at the forefront. But a lot of questions continue to be raised surrounding what VBC is and how it intersects with DME. In this article, we’ll bring some clarity to what VBC is and shed some light on the opportunities it creates for DME suppliers.

Value-based care represents a fundamental departure from the transactional approach of traditional fee-for-service models. At a high level, true VBC arrangements contain provisions that set out to achieve the four elements of the Quadruple Aim:

1. Patient Experience: How do patients feel about their care? Are their needs met, and do they have a voice in decision-making? True value-based care arrangements strive to ensure that a patient’s healthcare experience isn’t compromised in the chase to save dollars.
2. Population Health: VBC considers the health of entire communities. Preventive measures, early interventions, and addressing social determinants all play a role. While treating illness at an individual patient level will always be an element of healthcare, these arrangements place incentives in front of physicians and other providers to incorporate ways to improve the health and wellbeing of broad populations into their standard practice.
3. Reducing Costs: All VBC arrangements, regardless of their structure, aim to reduce the overall cost of healthcare. Payers place incentives in front of providers to save money, leaving it to the providers to find ways to achieve this goal. Through a combination of preventative care, elimination of unnecessary or redundant services, movement of patients to lower-cost care settings, and any other creative means, providers collaborate to reduce spend without compromising quality and satisfaction.
4. Care Team Wellbeing: Fueled by the nationwide shortage of physicians and nurses along with increased incidence of burnout among the provider community, VBC initiatives seek to alleviate stress placed on care teams.

In 2023, nearly 60% of all healthcare dollars in the United States were tied to value in some form. While this may come as a surprise to many DME suppliers given how little of the DME spend is connected to value over volume, the reality is that most referral sources have a significant portion of their revenue tied to the health and well-being of their patient population.

There are four fundamental types of payment models in healthcare, ranging from fee-for-service to fully capitated.

1. Fee-for-Service: This classic model, which DME is most familiar with, involves payment for each individual service rendered regardless of quality or outcomes. In DME, nearly all contracts are constructed as fee-for-service arrangements. Across the broader healthcare ecosystem, 40% of all dollars are paid under the fee-for-service construct.
2. Fee-for-Service with Quality Adjustments: This model retains fee-for-service but introduces payment adjustments linked to quality or value. Payers typically pay claims under the traditional fee-for-service model, but later adjust based on pre-defined measure of quality and/or cost containment. Some common examples of this type of model include:
   1. Hospital Value-Based Purchasing
   2. SNF Value-Based Purchasing
   3. Home Health Value-Based Purchasing
   4. End-Stage Renal Disease Quality Incentives Program
3. Advanced Payment Models (APMs): This type of model is built on a fee-for-service architecture, but layers in risk-sharing mechanisms are designed to incentivize providers across the ecosystem to achieve all four pillars of the Quadruple Aim. The most common example of APMs is the Accountable Care Organization (ACO). ACOs are comprised of physicians, hospitals, SNFs, home health, and any other providers who work to collaborate on the care of a population. The ACO shares financial risk with the payer, meaning if Quadruple Aim measures are achieved, the ACO receives a portion of the dollars saved for their efforts.
4. Population-Based Payment: These arrangements, commonly referred to as capitated arrangements, pay a provider group (physicians, hospitals, SNFs, etc.) a pre-determined amount of money to care for a defined population. In essence, if the group can care for a population at a lower cost than the capitated payment amount, they get to keep the change. To ensure appropriate care is delivered, these arrangements come with quality and satisfaction measures, thus creating an incentive program for providers to implement preventative care measures as well as move patients to the lowest-cost care setting. Common examples of this type of arrangement include:
   1. Condition-Specific Population-Based Payment: A plan to care for a specific population such as hip/knee replacement patients, for a pre-determined bundled payment amount covering an entire episode of care, encouraging coordination.
   2. Comprehensive Population-Based Payment: This is a traditional capitated model, giving a provider group a pre-determined amount to care for a broad population, placing all financial risk and reward on the provider group.
   3. Fully Integrated System: These are entities where the health system and payer are one and the same, and the premium dollar is the payment for services. 

While CMS has often been the catalyst for implementation of various value-based care arrangements, these types of models have been adopted and implemented across virtually every major payer. We have reviewed VBC models for several of the largest health plans. If you look at the website of any major payer in the U.S., you will see that every one of them has a section of their website dedicated to VBC; their general approach to it, their stated goals of it, and even what it has accomplished for them thus far. While continued refinement of models will happen, experts predict that adoption will continue to grow, with CMS even having a stated goal of having 100% of traditional Medicare beneficiaries covered under an accountable care arrangement by 2030. While that goal may be lofty, it speaks to the buy-in to value-based arrangements from both the payer and provider community.

We often hear that value-based care doesn’t impact DME because DME lives in a fee-for-service world. While it’s true that DME is paid almost exclusively under fee-for-service arrangements, DMEs are far from excluded from being impacted by VBC. DMEs play a pivotal role in the success of VBC for physicians, hospitals, SNFs, and payers.

DMEs have long championed home-based care, touting the cost savings and patient preference that goes with keeping people in their homes and out of hospitals and other expensive care settings. Value-based care arrangements incentivize physicians, hospitals, SNFs, etc., all key referral sources for DME suppliers, to find ways to keep more people in their homes as often as possible, creating alignment with the fundamental goal of durable medical equipment in the home. So, again while it’s true that DME is generally reimbursed under fee-for-service, DMEs should look at value-based care arrangements that their referral sources participate in as massive opportunities to grow their business and strengthen their relationships with those referral sources. We aren’t suggesting that VBC arrangements between payers and DME providers can’t or don’t exist. We are simply stating that right now, the vast majority of VBC arrangements exist between payers and provider types other than DME.

Because of the opportunity created for DMEs by VBC, DMEs should seek to strengthen their relationships with referral sources by tailoring their marketing and services to the dynamics of VBC. Understanding that providers have incentive to see their population stay in the home, DMEs should seek to demonstrate their value. High-quality DME providers have a competitive advantage because they have a compelling story. They can articulate that they:

• Reduce hospital admissions and readmissions, avoiding costly inpatient stays
• Reduce emergency department visits
• Reduce SNF stays by enabling care in the home
• Reduce SNF length of stay by delivering products and services that allow patients out of facilities and into their home earlier, avoiding costly SNF days
• Enable aging in place, prolonging patients’ time in the home and avoiding costly moves to more expensive care settings

While data that supports these talking points may not be easy to come by in today’s environment, savvy DMEs will gather data that tells a compelling story, giving referral sources reason to steer patients in their direction. Data might come from your own operating software, manufacturers or even the devices (think compliance), or through a collaboration with the health system(s) you work alongside. And if it’s not available today, push your vendors, tech partners, and business allies to make data more readily available. Emphasize the bigger picture, suggesting that data fuels value-based care and a stronger case can be made together.

DMEs really do play an integral role in VBC, and leading DMEs absolutely do see it as a catalyst for growing their relationships. By telling compelling stories, leveraging data, and collaborating strategically, they can differentiate themselves effectively. They are and will continue to do so in three ways:

1. Be proactive: DMEs should proactively approach health systems, ACOs, and other healthcare providers. Don’t wait for an invitation – seek that critical seat at the table in the discussions surrounding collaborative care across the healthcare ecosystem.
2. Be prepared: Be ready when those same providers come knocking on your door. Have ongoing initiatives in place to gather data on outcomes, utilization, and even cost savings. There are so many variables around VBC, and there isn’t a roadmap that dictates exactly what it should look like for everyone. You may have an opportunity to have input and help define what your role should be in a VBC world. If someone asks you about it, be ready to tell them what you think it should look like and where you think you can have the most impact, as well as what you would need to get there.
3. Differentiate: Make your story about your company and not the products supplied. Let your referral sources and other strategic partners know how your company helps solve their problems and makes their lives better compared to your competitors.

In the end, DMEs should not be bystanders in the VBC world even if their direct revenue isn’t tied to these initiatives. By actively connecting referral efforts to VBC goals, DMEs can drive meaningful change. There’s opportunity to drive home the fact that your company is an essential partner in improving lives and shaping a more efficient healthcare system. 

For more information or more in-depth discussion, please contact Alan Morris or Craig Douglas.

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This article was originally featured in the VGM Playbook: Boosting Results in Patient-Centered Homecare. To read the full article and more like this, download your copy of the playbook today! 

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