Heard on the Street: Healthcare in the U.S. is starting to shift away from the inefficient fee-for-service model and toward one that rewards keeping patients healthy—creating opportunity for a host of companies.
The trend started with the country’s largest insurer—the government. Due to provisions in the Affordable Care Act, Medicaid has been pushing providers to adopt the approach, which seeks to reward the doctor for keeping a patient healthy, instead of just encouraging more volume, known as a fee-for-service model. Commercial insurers such asWe are still in the early stages, with more than 70% of provider revenue tied to fee-for-service arrangements, according to Gist Healthcare.
“We believe a movement of financial and quality risk to providers is the best means to address the cost and quality issues that are present in healthcare today,” analysts led by Mr. Daniels wrote in a recent report. The changes might gradually help turn the tide on healthcare costs, but for medical providers they are a big headache. Realigning a large medical practice to a new business model can be cumbersome. Doctors go to school to treat patients, not to deal with revamping their actuarial models or upgrading their IT systems. Some groups wind up partnering, or selling themselves to a larger business like UnitedHealth Group Inc.’s Optum, which can help move providers to value-based care.
Most of Privia’s providers are still using a fee-for-service model, but the company aims to convert a growing portion of them to value-based care over time. Analysts expect Privia’s practice collections, a measure of revenue, to grow from $1.6 billion in 2021 to $2.7 billion in 2023, according to data compiled byThere are risks to that growth, of course.
Industry watchers have been talking about the shift to value-based care for years and the pace has been slow but undeniable. Instead of just hoping to cash in on the next high-price drug or device, investors can also make money from wringing the excess out of America’s pricey healthcare complex.Sponsored Offers
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