4. Value-Based Care in 2024 BY DANIELLE SLOANE & JULIA TAMULIS
Tensions created by an aging population, provider shortages and the increasing number of Medicare beneficiaries aligning with an accountable care organization (ACO) or choosing Medicare Advantage (MA) coverage (that is expected to exceed 50% of Medicare beneficiaries in 2024) are likely to encourage continued focus on value-based care in 2024, including through new entrants, consolidation and joint ventures. The industry - payors, providers and investors alike – has gained confidence and experience with negotiating and implementing value-based care models and sharing risk on patient populations throughout 2022 and 2023. Much of this growth has been facilitated by companies providing technology, data analysis and care management resources to coordinate care and address social determinants of health. Primary care continues to play an important role in this space, but there is momentum in other specialty areas, including behavioral health, palliative care, oncology and cardiology. We anticipate value-based care companies will increasingly leverage innovative technology that can help streamline operations, improve the patient experience and facilitate the business of healthcare in order to both reduce costs and allow caregivers to focus on patients. The accuracy and agility of that technology and the data inputs will be important in order to keep up with regulatory changes in 2024. For example, in 2024, CMS will begin implementing a number of changes to its Hierarchical Condition Categories (HCC) risk adjustment model as part of the shift to Version 28. Accurate coding remains critical, particularly as risk adjustment data validation audits could result in extrapolated overpayment determinations under MA for payment years 2018 and later, which could have a significant financial impact on MA plans and their downstream contractors. Moreover, with the recent growth in value-based care, we anticipate increased competition for attracting and engaging patients. The patient is central to effectuating a value-based care model, including obtaining, maintaining and motivating patients to take steps to improve their health. Those in the value-based care space will need to be careful that greater competition does not result in aggressive or misleading marketing tactics, which would be likely to garner the attention of enforcement agencies given the regulatory limitations surrounding marketing, including recent changes and proposals to strengthen those limitations. Given the above factors, we anticipate continued market consolidation in 2024 as value-based providers and investors aim to improve economies of scale by increasing the size of their risk-based populations. 5. CRO Investment: Key Due Diligence Questions BY CLINT HERMES The already enormous global clinical trial market is continuing to grow, and site management organizations (SMOs), contract research organizations (CROs), formal and informal study site networks, and other clinical research businesses are stepping up to meet this demand. As noted in our Healthcare Trends & Transactions: 2023 Year in Review, the U.S. clinical trial site market, at approximately $16 billion, is estimated to grow at a cumulative annual growth rate of 6.8% through 2025. Although investors navigating challenges in other healthcare sectors may see investment in the research space as an attractive alternative, it has its own unique considerations.
When exploring a potential investment in the research space, questions PE investors should ask include:
• Clinical Trial Agreements. Does the company enter into clinical trial agreements (CTAs) with research sponsors to perform studies as a research site would, or does the company agree to perform some or all of the research sponsor’s own responsibilities?
4 | BASS, BERRY & SIMS
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