During this session, Samarth Chandra, Kunal Kain, John Smith and Partners Jeremy Earl and Kate McDonald moderated a panel that examined the current market for value-based care companies and how investors can identify value-based care companies that will succeed over the long term. The panel also discussed how value-based care is evolving as the market becomes increasingly sophisticated and more companies adopt risk-based and other value-based payment models.

Session panelists included:

• Samarth Chandra, General Partner, Enhanced Healthcare Partners
• Kunal Kain, Managing Partner, Kain Capital
• John Smith, Principal, Leavitt Equity Partners
• Jeremy Earl, Partner, McDermott Will & Emery (Moderator)
• Kate McDonald, Partner, McDermott Will & Emery (Moderator)

IN DEPTH

Key takeaways included:

1. The conversation highlighted the value of technology in controlling costs and improving patient outcomes as the market shifts toward a value-based care model. Building systems that invoke technology and data can enable physicians to spend more time with patients, thereby improving patient health outcomes and preventing informational asymmetries between primary care doctors and specialist groups. Furthermore, adding point of care solutions within physicians’ workflows allows them to make better clinical decisions for their patients and acts as a cost-curbing mechanism. As technology adoption increases over time, it can be leveraged to prevent leakage because doctors will have more tools to be proactive and preventative in administering treatment.
2. Value-based care models may also be better equipped to handle a rapidly growing senior population. With more than 65 million seniors in the United States today, the federal government will need to be sophisticated when deciding how to shape the system to promote beneficial health outcomes. Given that the Medicare Part A fund is anticipated to be insolvent by 2028, creative Medicare programs (e.g., the ACO Realizing Equity, Access, and Community Health (REACH) model) provide the opportunity to spur innovation and address the overall change in patient demographics. However, there is also a risk associated with chasing the economic opportunity associated with shifting care populations and these nascent delivery models.
3. One hurdle blocking the implementation of value-based care models is whether payors are prepared for the shift from a fee-for-service-based model. Collaboration will be necessary to address the social issues (i.e., improving healthcare outcomes for an aging and generally unhealthier care population) underlying the shift to value-based care. This includes partnering with cost-effective, nonclinical resources to address social determinants of health (e.g., not having a meal or transportation to appointments), which will in turn create leverage for clinical resources to triage cases in a more appropriate way.
4. Investors will also need to be mindful of the capital requirements represented by different models of care (e.g., clinical ownership, wraparound/affiliate). The wraparound model does not require intensive capital expenditures; however, it can take longer to implement with respect to certain services and does not offer the benefit of acting as a full cultural change within the practice group. In the current market where cost of capital is higher, this may not be as important. The clinical ownership model is far more capital-intensive but also provides the requisite level of control necessary to manage practice innovation and eventual cost savings. While value-based care investments are currently targeted toward primary care providers, there are specialties, such as oncology, cardiology, orthopedic, kidney care and ophthalmology, that represent well-positioned investment opportunities.