Friday, September 22, 2023

What Do Value-Based Care Startups Need to Do to Attract Investors? – MedCity News

Investment in value-based care startups quadrupled during the pandemic, and dollars continue to flow to these companies as the healthcare industry shifts its focus away from fee-for-service care. Some examples of value-based care startups that have raised more than $50 million this year include Aledade, Strive Health, Pearl Health and Upperline Health.

As the value-based care market gets more crowded, startups in this space will have to nail down the fundamentals in order to attract capital from investors, according to Paul Campbell, the executive director of healthcare at Northwestern University’s Kellogg School of Management. Startups will have to be crystal clear about what their value proposition is for three main stakeholders — patients, providers and payers — he said Thursday during HITLAB’s virtual August Digital Health Symposium.

It’s imperative that value-based care startups demonstrate their commitment to improving care quality and the patient experience, Campbell declared. A lot of startups are hyper-focused on delivering financial value to their customers — there’s nothing wrong with that, but they need to focus on care quality just as much as they focus on cost reduction, he explained. 

Startups should be clear in explaining how their business model enables better care quality and improved patient experiences. This shows not only the company’s commitment to advancing population health, but also helps get providers on board. This is because in order to buy into new care models, providers need to know that their patients will benefit from this new way of delivering care, Campbell declared.

“Being married to a healthcare provider, I’m contractually bound to talk about how much they obviously care about good patient care. As Lincoln famously said, all men and all women act on incentives. So the question really is what’s going to drive them to change clinical care models?” he said. “Do our doctors really believe that this is going to improve patient care, or do they think this is just gonna make the hospital more money or a payer more money?”

Startups also need to be clear about the area of care they are targeting so that they can develop a strong and specific business model, Campbell said. The business model for a startup focusing on primary care could look very different from one focused on orthopedics or nursing homes, he pointed out.

Additionally, value-based care startups need to have a deep understanding of the patient populations they seek to serve, as well as the health plans covering these patients. 

“There are economics behind the commercial market versus the Medicare fee-for-service market versus the Medicare Advantage market. And if you get into Medicaid, it’s fee-for-service versus the ever growing managed care market. And I know it’s not easy for a startup to try to think about everything that goes into that, but they’ve got to be able to understand some of these fundamentals — there was a startup that recently asked me what the difference between Medicare and Medicaid was,” Campbell said, incredulously.

In other words, even early stage startups need to be able to understand basic terminology and communicate the kind of health plan it seeks to work with.

Photo: Nuthawut Somsuk, Getty Images

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