Models for navigating financial complexities in specialty value-based care
There are several approaches to offering innovative financial models that can help move specialty value-based care forward.
Specialty value-based care has become a critical area of focus, as the healthcare system continues to evolve from traditional fee-for-service models that pay for individual clinical services to payment structures that reward outcomes rather than volume.
There is a need for innovative financial models that can accommodate the variability and high costs inherent in treating severe and chronic conditions. Fee-for-service (FFS) models fall short in this regard, often leading to inefficiencies and escalating costs. There are various alternative payment structures that can be explored to better align incentives and manage financial risk of specialty populations.
Navigating the complexities of the financial models within specialty value-based care (VBC) requires an understanding of various approaches such as sub-capitation, shadow bundles and carve-outs. These aim to align incentives while managing the costs associated with specialty services.
Sub-capitation
Sub-capitation is a financial arrangement in which a provider or group is paid a fixed predetermined amount per patient for delivering a defined set of services. It is commonly used within larger global capitation arrangements, where primary care physicians (PCPs) are incentivized to manage patient care efficiently across the continuum.
Sub-capitation extends this concept into specialty care, focusing on more complex conditions, such as those in the musculoskeletal or oncology space, where significant variability in costs and outcomes exists.
The primary benefit of sub-capitation is cost predictability. By paying specialists a flat rate for certain services over a defined period, providers are encouraged to focus on delivering high-value care, avoiding unnecessary interventions and ensuring that the most efficient treatment pathways are followed. For example, in musculoskeletal care, sub-capitation might cover a defined set of orthopedic procedures and rehabilitation services. Providers then must manage this care within the payment scope, promoting the use of evidence-based protocols that reduce waste and optimize patient outcomes.
However, sub-capitation also presents challenges, particularly around risk stratification and ensuring the financial viability of the model. Specialty services often involve patients with varying levels of complexity, and setting appropriate payment rates that account for these variations is critical. Providers must accurately assess patient risk, using advanced data analytics to forecast utilization and costs, while ensuring that patients with high complexity do not lead to financial losses. Moreover, specialists may face challenges in negotiating fair sub-capitation rates, especially in emerging value-based arrangements for which historical cost data may be limited.
Shadow bundles
Shadow bundles are a form of episode-based payment designed to track the costs of care across a specific episode. In essence, they are “shadow” models running parallel to payments to simulate what an alternative payment model might look like in practice.
Shadow bundles enable providers and payers to assess the financial and operational impacts of bundling care for specific episodes, such as surgical interventions.
In specialties like oncology and cardiology, for which treatment pathways and costs can vary widely, shadow bundles serve as a method to test new reimbursement strategies. They help highlight inefficiencies in care delivery and identify opportunities for cost reductions, such as reducing unnecessary imaging or avoiding prolonged hospital stays post-surgery.
Providers also can use shadow bundles to model the impact of care coordination and patient management strategies, which are essential in improving outcomes and controlling costs in complex specialty areas.
While shadow bundles offer a valuable learning tool, they also bring the challenge of managing multiple alternative payment models for various providers for one population.
Carve-outs
Carve-outs are financial models in which certain high-cost services, often in specialties like oncology, are excluded from broader value-based payment arrangements and managed separately.
This approach acknowledges that certain specialties may have unpredictable costs and unique treatment pathways that do not fit neatly into broader capitation or bundled payment structures. In a carve-out model, services such as cancer treatments or dialysis care are removed from the global budget and reimbursed through separate risk-sharing arrangements.
One of the key benefits of carve-outs is the ability to tailor payment models specifically to the complexities of high-cost, high-variation specialties. For example, in oncology, where treatment protocols and costs can vary dramatically depending on cancer type and stage, a carve-out enables more specific financial management. Payers and providers can negotiate targeted reimbursement models, such as chemotherapy cost-sharing or outcomes-based contracts for specific cancer drugs, without the risk of overspending in a broader capitation model.
However, carve-outs can complicate care coordination, because they may create separations between primary care and specialty care management. When services are carved out, more challenges may be created in aligning incentives between generalists and specialists, potentially leading to fragmented care and missed opportunities for integration. As a result, it is critical that carve-out models include mechanisms for communication and coordination across providers to ensure that patient care remains seamless, especially when the patient transitions between primary and specialty services.
A path forward for specialty value-based care
Sub-capitation, shadow bundles and carve-outs each offer distinct advantages for managing the costs and complexities of specialty care within value-based frameworks.
While sub-capitation promotes efficient care within a fixed budget, shadow bundles provide an environment for exploring episode-based payments, and carve-outs enable focused financial management of high-cost services.
To successfully implement these models, providers and payers must rely on advanced data analytics, robust care coordination and ongoing collaboration to ensure that financial incentives are aligned with patient outcomes, ultimately leading to sustainable specialty care within a value-based system.
Crystal Crider, DHA, MHA, FACHE, eFACHDM, is a vice president of product at Enlace Health and holds adjunct instructor positions at both UCF and AUM.