We’ve all witnessed the ongoing power struggle between health systems and payors regarding how to implement Value-Based Care (VBC) initiatives effectively in a way that benefits everyone, including patients. VBC has the potential to improve quality, reduce costs, and enhance the stability of the entire health system. However, to date, health systems and payors have struggled to agree on contracts that protect both sides from downside risk while providing sufficient financial upside to lure them away from traditional fee-for-service (FFS) medicine.

This frustration has grown so significant that some health systems are pausing new VBC contracts and even withdrawing from existing ones to mitigate further financial losses. This is happening despite a record number of patients enrolling in Medicare Advantage plans.

The consensus in the industry is that VBC has become too big and popular among patients to disappear entirely. However, as hospitals attempt to reduce their financial risk by cutting the number of VBC patients they accept, they must be careful not to create even more risk by falling prey to the age-old idioms: “out of sight, out of mind” and “absent from view, absent from thought.”

What does this mean?

We all know that the more revenue a department generates, the more attention it receives from decision-makers. This approach makes sense under fee-for-service structures where there's no significant risk associated with focusing less on smaller service lines. However, VBC contracts can carry tremendous downside risk if not given the appropriate attention and diligence. This could ultimately lead to a disproportionate amount of financial risk relative to the volume of patients it represents.

If healthcare leaders shift their focus towards the larger population of upside-only FFS patients while reducing their VBC patient population, they could inadvertently make a costly mistake to their bottom line without even realizing it.

Even the most efficient health systems typically have operating margins of just 3-5%. With even a small proportion of VBC patients, if not managed appropriately, it doesn’t take much for those patients to have a significant negative impact on the operating margins that health systems work so hard to achieve.

The bottom line: If your health system is decreasing its VBC contracts or has yet to take on a large volume of these patients, be cautious not to create additional risk to your bottom line by neglecting this crucial patient population. Now, more than ever, tools and strategies for effectively managing your VBC patients are essential. Out of sight cannot be out of mind if you don’t want your Value-Based Care patients chipping away at the margins created by Fee-For-Service patients.