The innovative payment models spurred by the Patient Protection and Affordable Care Act (PPACA) reward providers for delivering efficient, quality care and coordinating care. Companies with sophisticated care coordination systems are winning a unique place in the market. This presents an immense opportunity for providers who want to evolve their existing care management models into more sophisticated care coordination solutions.
Historically, payers rarely incentivized providers to coordinate care. Therefore, providers did not invest in the infrastructure required to manage the care of their patients across various healthcare silos. With the evolution of care models and pay methodologies moving toward incentivizing those that can manage high cost patients, there is an opportunity to deploy capital in those companies looking to build the care coordination infrastructure to meet the market demands. Capital is being used by portfolio companies to invest in four areas:
Care Coordination Technology Platforms
Although there are some off-the-shelf care management technology platforms currently available, many companies have found them to be insufficient and are building their own platforms. While electronic medical records and e-prescribing are obviously important solutions for care coordination companies, companies focused on caring for the chronically ill are also investing in remote patient monitoring technology to encourage daily interactions between the care manager and the patient.
Since technology platforms must also provide robust data analytics for patient selection, risk stratification and predictive modeling, we’re seeing opportunities to investment in companies with these capacities as well. The right sophisticated technology solutions will help a provider manage the necessary data analysis, reporting requirements and demographic management that are part of most innovative payment models emerging from managed care organizations, large employers and demonstration projects.
Providers with experience working with managed care organizations (MCOs) understand the challenges of patient recruitment. Many providers who are new to this area of the market mistakenly believe the payers will simply refer the patient to the company, and they will begin providing the services. For the most part, MCOs depend on the provider to engage the patient. The provider must be able to find patients who need their services, convince them that the services are right for them, ensure the patients that the service is a benefit paid by their insurance, and then perform those services given the payer’s interest in managing the patient’s care and expenses.
The typical disease management company has a patient engagement rate of between 20-30%, meaning that less than a third of the patients in need of a care coordination solution actually receive it. Most managed care organizations see the top 25% of their beneficiaries absorb 83% of their total costs. Investing in patient engagement capabilities has become an important subject between providers, MCOs and investors, and we have begun to see investments made to solve this particular problem.
Successful care coordination solutions providers have systems and staff in place to quickly identify, track and manage chronically ill patients at risk of an adverse event, emergency department visit or re-hospitalization. Many post-acute providers possess this capability to a certain degree, but not all providers leverage it appropriately to offer a truly sophisticated, coordinated solution.
We have seen many examples of organizations that use a successful mix of staff talent and technology to identify, recruit and manage at-risk patients. Management teams and investors realize investing in a risk management capability can allow them to partner more closely with payer sources and take on additional risk that can lead to higher profitability.
Being able to provide care delivery as part of a comprehensive care coordination solution seems like a given to healthcare providers. Where care management and disease management have failed – especially with high cost patients – has been their lack of ability to put hands on a patient to prevent a clinical situation from worsening. The most successful care management companies have used every care model from house call physicians to home health nurses to nursing aides.
Companies that have a care delivery component as part of their care coordination models have also increased their patient recruitment rates as high as 90%. With this level of patient recruitment and the ability to provide targeted care, the cost curve bends significantly and provides a tremendous improvement in the quality of care. There is a significant opportunity to deploy capital to acquire and build care delivery systems as part of a comprehensive care coordination infrastructure.
Innovative payment models are reshaping the healthcare marketplace in different ways, ranging from providers leveraging their unique solutions to take advantage of market opportunities to directing capital flows toward those providers who want to augment existing capabilities with new systems, capacities and talent. Investors are beginning understand the future of healthcare will value those providers with competencies for coordinating the care for high-cost patients. Smart money is being deployed in those companies who need resources to build the infrastructure to manage high-cost patients effectively..