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Value-based care shift hits inflection point with tech and policy advancements

June 18, 2021
Business Affairs

Regulations are changing to support value-based care
In recent history, little progress has been made toward properly managing the CKD patient population from a cost and quality standpoint. This issue was further complicated by most CKD patients, including end-stage renal disease (ESRD) patients, belonging to Medicare’s fee-for-service plan; a payment program that is notoriously difficult to innovate and adapt quickly.

According to the Kaiser Family Foundation, in 2020, nearly four in 10 (39%) of all Medicare beneficiaries – 24.1 million people out of 62 million Medicare beneficiaries overall – are enrolled in Medicare Advantage plans; this rate has steadily increased over time since the early 2000s. The Congressional Budget Office projects that the share of all Medicare beneficiaries enrolled in Medicare Advantage plans will rise to about 51 percent by 2030.

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Until recently, ESRD patients were forbidden to select coverage under a Medicare Advantage plan. Therefore, these patients missed out on the enormous shift of Medicare beneficiaries from fee-for-service to managed health plans over the last 20 years. Further, non-Medicare commercially insured patients with ESRD, by law, were required to shift to Medicare fee for service 30-33 months following their ESRD diagnosis, regardless of their age and without the option of choosing Medicare Advantage coverage. As a result, few incentives have existed for insurers to bring any innovation to treating ESRD patients: because of these regulatory barriers, they didn’t have many of them and most of the ones they were responsible for would be moved out of their health plans soon enough.

That has changed. Recent shifts in government regulations now allow ESRD patients, like any other Medicare beneficiary, to choose Medicare Advantage as a coverage option. This dramatically changes the incentives for commercial health plans to innovate and experiment with new payment models. Partly because of this, ESRD and CKD Medicare Advantage enrollment has been growing dramatically and in turn we see rising interest in making investments to innovate in the management of these complex patients.

Intersection of changing forces yields opportunity
These policy amendments have changed incentives and at the same time, tech capabilities are improving population management, multiplying caregiver skills and facilitating care coordination. We are now seeing the emergence of several innovators focused only on this space. Without other demands on their capital and talent, these innovators can be nimble and drive change more rapidly than large-scale incumbents.

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