As detailed in an earlier blog post, Optum’s acquisition of Surgical Care Affiliates (SCA) has the potential to transform the way ambulatory surgery is reimbursed. The deal also signals a doubling down on an ambulatory strategy to succeed under value-based care arrangements. This ambulatory strategy is being led, in large part, by new entrants in the medical group game, such as Optum and DaVita HealthCare Partners, both of which have been purchasing medical groups and other outpatient service providers over the past several years.
New Players, New Thinking
There are many in the healthcare industry questioning what strategic benefit organizations such as Optum and DaVita, which have historically operated in adjacent but not overlapping arenas in the medical space, are seeking by purchasing medical groups. However, others are coming to understand the potential benefit of vertically integrating in the ambulatory setting as a way to:
- Improve care management and population health
- Reduce utilization and costly inpatient encounters
- Ultimately reduce overall healthcare spending
Betting on Value
In the historically fee-for-service reimbursement environment, reducing utilization simply meant less revenue being generated. However, as providers take on more value-based contracts, such as shared savings or capitated arrangements, reduced utilization and lower costs mean greater reimbursement rates for the same amount of work, once you factor in incentive/bonus payments.
As fee-for-service rate increases will continue to be minimal, the opportunity to generate greater reimbursement by taking on more value-based contracts is exactly what organizations such as Optum and DaVita are betting on. By gaining access to much-needed capital and expertise, the newly acquired groups can improve their efficiency, expand care management and population health capabilities, manage the financial risk inherent in value-based contracts, and change referral patterns to ensure patients are getting the right treatment at the right time in the most appropriate, cost-effective setting.
Optum, with its wealth of data, can provide insights on how to improve risk coding, enhance payor contracts, and proactively identify the highest-risk patients who may need greater levels of care management. The addition of SCA will increase Optum’s ability to work with its medical groups to move the estimated 52% of surgical cases that could be performed in an ASC that are currently performed in the hospital, saving more than 50% per case. These activities are particularly beneficial when dealing with value-based contracts for Medicare Advantage patients, where even modest improvements in outcomes and reduced utilization can translate into significant cost savings.
DaVita, beginning with its 2012 acquisition of HealthCare Partners and its 2015 acquisition of The Everett Clinic, is similarly looking to use its data and care management expertise to drive down healthcare spending, while maintaining high-quality performance, to reap larger value-based care incentives.
Leading the Way
In the coming years, we are likely to see more payors offering new, innovative contracting arrangements that can provide significant reimbursement opportunity for organizations that are able to successfully manage healthcare cost and utilization. Medicare is already moving in this direction with MACRA, which offers increased reimbursement rates for high-quality, low-cost providers. As the number of value-based contracting opportunities expands, and organizations realize the potential for higher reimbursement, don’t be surprised to see Optum and DaVita continue—and new entities begin—their ambulatory strategy.