Implications of value-based care for the life sciences industry

Out of the many conversations surrounding rising healthcare costs and billing of excessive or medically unnecessary services and procedures, value-based-care has emerged as an approach that mitigates current costs and, when implemented appropriately, can lower future costs. With the reach of value-based care impacting all parties directly and indirectly involved in the healthcare system, life sciences companies should consider the impact this ‘new normal’ will have on their relationships with hospitals and payers.

The shift towards value-based care is a signal the healthcare industry is becoming more aligned with the core values on which many life sciences organizations were founded. Additionally, these values represent a key component of the value-based care system, providing the tools and devices necessary for providers to deliver high-quality medical care to patients, as well as potentially help hospitals receive increased incentives and payers reduce their spend. [1]

With the advent of value-based care, selection and administration of the correct medical device is now more connected to the economic health of the organizations purchasing them.

Value-based care strategies

Life sciences companies should consider new and creative strategies to ensure they can continuously assess and respond to the unique payer and hospital concerns in a value-based care market.

Outcomes-based contracts: Watershed moments for any life sciences company include obtaining coverage from a large, nationwide payer and reaching high levels of product utilization among hospitals. During this era of value-based care, there has been a shift in the pathways through which these goals are achieved. More companies are choosing to restructure their hospital and payer agreements to become outcomes-based rather than a traditional fixed-price/unit-based contract. With the amount of contract fees received often tied directly to patient outcomes, these types of contracts place considerable risk on all parties, especially life sciences companies whose products’ effectiveness may influence their future relationships with other payers and providers.

Value-based payer contracts are often structured around the following three agreements:

1. Payer grants the product coverage