The Pitfalls Of Healthcare Startups In Their Pursuit Of 'Value-Based' Arrangements

US healthcare executive, keynote speaker, and advocate. Value-based care expert. CEO - Carenodes.

Business professionals planning while sitting in board room during meeting

As a healthcare industry leader, I have overseen major legislative and structural changes in the industry. I have administrated Medicare's payment program across many hospitals and post-acute providers, and I have negotiated and implemented various value-based contracts.

In 2023, my observation is that healthcare startups often embark on a relentless pursuit of value-based agreements without realizing the significance of volume and patient acquisition.

Let's delve into the reasons behind this flawed strategy, the misconceptions surrounding value-based care and the potential pitfalls these startups face. Additionally, we'll explore why even startups with substantial investments often fail to follow this logic. This logic is not only unsound in terms of business strategy, but it also concerning to any prospective health plan partner because it impacts quality outcomes, plan network stability and continuity.

Attracting Patients: Focused On Volume

I've noticed healthcare startups often make the mistake of disregarding how important volume and patient acquisition are. They become fixated on the concept of value-based care, mistakenly assuming that being cost-effective alone guarantees success with health plans. However, without a substantial patient base, startups are limited in their ability to deliver meaningful outcomes and generate sustainable value.

Some startups assume that payers will automatically direct patients their way once a value-based agreement is established. However, to attract patients, startups must proactively engage with communities, employ targeted marketing strategies and build trust, even though tech-based startups often resist these suggestions.

• Establish partnerships. Collaborate with local community organizations, schools and businesses. This may involve sponsoring local events, participating in health fairs, hosting educational seminars or offering free health screenings. By actively participating in community initiatives, startups can demonstrate their commitment to improving community health and gain exposure to potential patients.

• Develop referral networks. Building relationships with primary care physicians, specialists and other healthcare providers is crucial for patient acquisition. Startups can offer referral programs or incentives to encourage healthcare professionals to refer patients to their services. By fostering strong referral networks, startups can tap into existing patient bases and expand their reach.

Building trust and establishing a strong presence within the community takes time and consistent effort.

Lack Of Knowledge Around Minimum Volume Thresholds

Another issue among startups is ignorance of minimum volume thresholds associated with value-based contracts. Payers require sufficient patient volume for meaningful data collection, accurate risk assessment and statistical significance. Startups with inadequate patient volumes will struggle to meet these thresholds, hampering their ability to demonstrate value and succeed in value-based care initiatives.

While value-based care contracts have gained prominence in recent years, it is essential for startup leaders to focus on volume acquisition as well. In addition to developing strategic partnerships, as mentioned above, here are a few steps that can help improve patient volume and strike a balance between value-based care and volume acquisition:

• Obtain fee-for-service network participation by contracting with health plans in your service area. This should be a six- to eight-month process.

• Streamline access and convenience. Simplifying the process for patients to access care is crucial for boosting patient volume. Focus on providing convenient appointment scheduling, shorter wait times and easy access to medical records.

Startups that focus on volume acquisition rather than solely chasing value-based care contracts can have a competitive advantage. By prioritizing patient acquisition and engagement, they establish themselves as trusted providers, laying a solid foundation for success. This strategy aligns with the realities of the healthcare business, helping ensure sustainable growth and positive outcomes for patients and plan partners.

Preparing For The Challenges

When focusing on volume acquisition, startup leaders may encounter challenges, such as:

• Balancing quality and quantity: One challenge is to strike a balance between acquiring a high volume of patients while maintaining quality care. It is important not to compromise patient outcomes or satisfaction in the pursuit of increased volume. Make sure that adequate resources and systems are in place to support the growing patient base without sacrificing quality of care.

• Financial sustainability: Expanding patient volume may require additional investment in infrastructure, staff and technology. I suggest startup leaders carefully manage their financial resources to support the growth in patient volume while maintaining a sustainable business model. This may involve securing additional funding, optimizing revenue cycle management and exploring cost-effective operational strategies.

It's important for healthcare startups to reassess their strategies and acknowledge the critical role of volume and patient acquisition before pursuing value-based agreements. Understanding the limitations of a value-based approach without a substantial patient base can help startups to avoid pitfalls related to quality outcomes, plan network stability and patient continuity. And embracing a strategy centered on volume acquisition can position startups for long-term success, enabling them to deliver value-driven, patient-centric care in the evolving healthcare landscape.


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