3 days ago
Value-based care: How good ideas get crushed
Remember when value-based care was going to revolutionize American healthcare? A decade later, we're still waiting while costs keep climbing. What happened? Simple—the healthcare industrial complex did what it always does: absorbed innovative ideas and neutralized them.
Healthcare innovation follows a predictable pattern. A promising new model emerges, gains traction, then gets swallowed by the system, transforming from disruptor to just another profit center for middlemen.
THE TRAP
Value-based care has an elegant premise: pay providers for patient outcomes, not service volume. Better care, at a price aligned with value—what's not to love?
Yet, instead of replacing fee-for-service arrangements, value-based programs were simply added alongside existing arrangements. Since the majority of patients remained under fee-for-service arrangements, value-based protocols resulted in creating even more administrative complexity, not less.
In fact, after years of value-based experiments, health spending continues to rise faster than inflation. In 2023, the average annual premium for employer-sponsored family health coverage reached $23,968, according to the Kaiser Family Foundation. In 2024, it climbed to $25,572. That's a year-over-year increase of 7%. Meanwhile, the share that members are responsible for paying through deductibles, co-pays, and other out-of-pocket costs has grown at a similar pace.
WHY MODELS THAT BYPASS THE SYSTEM SUCCEED
This country is home to some amazing doctors and nurses, but they are trapped in a broken system that forces them to spend time checking boxes for 'quality metrics' rather than caring for patients. And here's the fascinating part—healthcare innovations that completely circumvent traditional payment models are thriving.
Take direct primary care, which is booming because it eliminates the middleman entirely. Providers charge transparent monthly subscription fees directly to patients or employers, cutting out insurance companies altogether. In 2023, 9% of doctors surveyed by the American Academy of Family Physicians reported using a direct primary care model, with an additional 2% reporting they were in the process of transitioning. This represents a staggering increase from the 2% of physicians who reported they operated a DPC model the prior year.
According to a 2023 study published in Health Affairs, administrative waste comprises between 7.5% and 15% of total U.S. healthcare spending, equivalent to $285 billion to $570 billion annually. Research shows the U.S. spends $1,055 per capita on healthcare administrative costs, more than triple what the next highest nation (Germany) spends. This money isn't going to better care; it's being absorbed by middlemen. If you're writing massive monthly checks to insurance companies, here are three actions to take right now:
1. Demand complete data transparency. Your company's healthcare data belongs to you. Period. Make raw claims data non-negotiable in your next carrier contract. Perform a healthcare spending audit—you'll be shocked at how little reaches actual care providers.
2. Build direct provider relationships. Identify high-volume providers used by your employees and reach out about direct contracting. Start with a pilot for specific services like imaging, lab work, or primary care.
3. Consider alternative payment models. Look into alternatives like employer–direct contracting, payment clearing platforms, HSAs with smart routing, point-of-sale payments, or direct primary care. Even partial implementation of these models can save 15%-20% while improving care access.
BREAKING THE CYCLE
The healthcare industry is brilliant at absorbing potentially disruptive innovations. It's why hospital systems now own 'disruptive' urgent care centers, and insurance giants have purchased 'innovative' telehealth platforms.
But direct payment models succeed by operating outside this absorption cycle entirely. They're structurally resistant to being co-opted because they fundamentally change how money flows.
As employers, we need to stop waiting for the system to fix itself. By demanding transparency, building direct provider relationships, and implementing streamlined payment models, we can create the healthcare system our employees deserve—one that delivers better care at lower costs without the bloated bureaucracy.
