Investing in Value-Based Care - Cover

Investing in Value-Based Care

Each year, KLAS brings together some of healthcare’s most innovative thinkers at the Digital Health Investment Symposium (DHIS). In doing so, we hope to provide key insights into market trends and to pave the way for radical change in healthcare technology. Ahead of the symposium, I interviewed Ryan Engle, a partner at TT Capital Partners, to hear his views from the investment community on the healthcare industry’s shift to value-based care.

Jared: What challenges does value-based care present for providers?

Ryan: One of the biggest challenges for providers moving to value-based care involves change management. Any innovation causes a certain amount of disruption to traditional methods. Whereas certain health plans may be supportive and are following the lead of CMS regarding innovation and payment models, it is the people on the floor that actually deliver care in particular that are looking at a world of significant disruption. Health systems are trying to figure out how to adapt while still protecting the legacy of how they have done things in the past—not to mention the dollars they have historically earned.

Jared: What are some key elements that could help move the needle forward?

Ryan: In my view, there are at least five steps to participating in value-based care, all of which are enabled primarily by technology solutions:

  1. Population Risk Stratification: Understanding high-risk patients versus those that could become higher risk over time; also, keeping healthy people healthy.


  2. Post–acute Care: Establishing post–acute care networks and properly serving patients in the appropriate setting of care.


  3. Transitions of Care: Obtaining a solution to ensure that proper patient handoffs are occurring and that the right information is shared at the right time.


  4. Care Management: Establishing alignment among physicians, other clinicians, the patient, and external family members.


  5. External Reporting: Providing the documentation for payment in either a commercial or value-based arrangement or under one of the alternative payment models through government payers.

Jared: Why is post–acute care an important piece?

Ryan: In the past, one would have a surgery and then immediately be discharged to a certain post–acute care setting for follow-up treatment based on the norms of the practice. Today, the industry has a much greater focus on cost in addition to the clinical outcomes, so providers attempt to direct a patient’s post-recovery care into the most appropriate setting. For example, most communities now have a strong home health infrastructure capable of administering care in a patient’s home. If the same clinical outcomes can be met, that represents a more cost-effective setting compared to skilled nursing facilities or other alternatives.

Jared: What advice would you give to providers getting started with population health management?

Ryan: Anywhere between 30% and 50% of provider organizations feel that they are not appropriately and adequately prepared to move to value-based care on their own. This reality necessitates a trusted partnership with companies equipped to help them move into a value-based care environment.

We are intimately familiar with companies that work with health systems making that journey from fee-for-service to value-based care. For example, we are investors in a company with a unique model in the marketplace, applying an assess, design, build, and manage framework to meet health systems and provider groups wherever they are on the journey to value-based care. The company can perform anything from a basic, front-end assessment to a complete internal change management. With an agile, capable model, supported by a robust technology toolkit, this company sets itself up as a true partner to health systems and provider organizations as they work toward increasing participation in value-based care.

Jared: What is the role of the investment community in pushing for value-based care?

Ryan: Investors are helping fuel innovation that is occurring by supporting attractive solutions to disrupt the incumbent, still primarily fee-for-service industry. We believe the train has left the station. Value-based care is occurring, and the question now is how fast adoption will ultimately take.

At TT Capital Partners, we pay close attention to regulatory announcements and do not just react to the broader headlines. We see many companies continuing to disrupt the status quo— both in services and software—coming through our investment pipeline that relate in some way to value-based care.

Jared: What are some key factors to consider when evaluating a value-based care company for investment?

Ryan: Generally speaking, we consider the same factors for all potential investments. Specifically for value-based care, we want to understand the current and future regulatory tailwinds. With that as a backdrop, the characteristics we evaluate include the following:

  1. What is the pain point the company is pursuing? How big of a pain point do we feel it represents to the constituents in the industry?

  2. What is the quality of the management team that is assembled? What do we think are the team members’ unique capabilities to address the pain point? How much are we aligned with the team on the pace of market adoption?

  3. What is the competitive differentiation? How is the solution able to withstand other incumbents or other new market entrants?

As a final note, companies that can show multiple capabilities across various aspects of what is needed—as opposed to just a single-point solution—are generally more attractive investments for us. These companies can interact with their customers more broadly, offering platform-like capabilities.

     Photo cred: Shutterstock, ITTIGallery