Abby Burns (00:13):
From Advisory Board, we're bringing you a radio advisory, your weekly download on how to untangle healthcare's most pressing challenges. I'm Abby Burns.

(00:23):
I've been having a lot of conversations about affordability lately, specifically how health system and health plan leaders are thinking about balancing industry-level affordability with enterprise-level sustainability in the long term. What has honestly surprised me in those conversations is just how frequently value-based care is coming up. Now, conceptually, that doesn't surprise me because what better way to lower cost of care on both sides than to pay to keep people healthy, eliminate the adverse incentive, right? What does surprise me though is how quickly people point to this solution that most organizations have frankly underinvested in as a key or even the key to solving one of the biggest challenges that they're facing.

(01:09):
So today I'm bringing on advisory board experts, Clare Wirth, Payton Grimes, and Rhea Jain to take stock of the state of value-based care in 2026. In our conversation, we're going to revisit the predictions that Clare and Optum Advisory's Erik Johnson made when they came on Radio Advisory last year and learned what we should anticipate in the year to come. Clare, Payton, Rhea, welcome to Radio Advisory.

Clare Wirth (01:33):
Thanks for having us.

Rhea Jain (01:34):
Abby, thanks for having us.

Abby Burns (01:39):
So last year when we brought on Clare and our colleague Erik Johnson to break down the state of value-based care in 2025 and offer some predictions on what was to come in the year ahead, Clare, you started that conversation off with perhaps a surprisingly optimistic message. If we take the more longitudinal look, value-based care has actually been growing at a pretty healthy pace. So now it's 2026. I'm going to start off this conversation with the same question. Rhea, a year later, what is the outlook on value-based care?

Rhea Jain (02:14):
The biggest headline I think is VBC isn't really going anywhere, even in a tougher operating environment for providers. More dollars are tied to value, more organizations are participating, and we're not seeing the kind of backslide that some people might've expected from more and new mounting financial pressures to the health systems.

Abby Burns (02:37):
So when you say more dollars are tied to value, last year, Clare, you said that 14% of payments are tied in some way to value. What does that number look like this year?

Rhea Jain (02:46):
Yeah, so this year the newest data that we have is actually from 2024 and that 14% is from 2023. So as of 2024, 15% of payment is now tied to population-based or delegated risk. And then another 45% of payment is linked to some form of value or quality measures. So generally delegated risk up from 2023 to 2024 and broadly consistent in terms of other forms of payment.

Abby Burns (03:18):
I am mindful that there are a lot of things sort of vying for the attention of healthcare leaders right now, and that's probably putting it lightly when we look at everything that's on the plate in 2026. Let me ask this question kind of bluntly. How much of a priority is value-based care right now?

Rhea Jain (03:35):
It really depends on where you sit. So for leaders that have been deep in VBC for a while now, I think this feels like a moment of opportunity. They see it as a time for building momentum for VBC and are looking for ways to sustain or even expand their participation in these models.

Abby Burns (03:55):
Rhea, can I put a number behind that? So we had a group of 50 VBC leaders together a few months ago. We talked all about the One Big Beautiful Bill Act, etc. All but one said that they're keeping pace with their VBC investments. So if you're in the VBC space, you're likely to be continuing.

Rhea Jain (04:14):
I will note across the broader industry, healthcare leaders, like you said, Abby, are dealing with so many competing pressures. You're seeing tighter margins, more complex and new operational challenges, policy changes. So some of them might be asking more than before, "Should we be committing to this? Is VBC worth the investment?" But even as leaders are questioning VBC internally, the policy environment is moving pretty decisively towards more emphasis on participation and even a higher bar for it. We're Seeing expectations change from CMMI for longer performance periods, broader participation, and more downside risks. So while VBC feels like one of many competing priorities in the near term, I think in the long term it's becoming harder to see it as optional.

Payton Grimes (05:08):
We've said it on this podcast many times before, but I will say it again, the root causes that have created initial momentum for value-based care, so things like higher medical costs, sicker patients, the tighter margins that Rhea just mentioned, all these things are still here. So when we ask the question or when we hear healthcare leaders asking the question, "Why does this need to be a priority for my business right now?" Our answer to them would be now more than ever, VBC is a legitimate solution to your woes. So despite the sometimes louder narrative that VBC is hard and the industry can't make it a priority right now, history suggests that periods of disruption can make VBC more attractive. If we think back to the COVID-19 pandemic, VBC in that time offered more consistent revenue despite changes in volume.

Abby Burns (05:56):
Yes, that's exactly where my mind went. The providers that have a plan arm were able to keep collecting the PMPM or the premium revenue.

Payton Grimes (06:05):
Yeah. So although the pandemic has ended, the chaos in healthcare hasn't. So we still are having to deal with rising labor costs, persistent inflation, shifts in reimbursement pressures. With all of this, many organizations are continuing to view VBC as a strategic pathway to stabilize more long-term growth. So as Clare said earlier, what we're hearing in the market is maybe a little bit different than the more negative story that sometimes takes the limelight.

Abby Burns (06:31):
Yeah. You've brought up the policy environment, and I want to hold on this for a minute because a few months ago, Clare came on Radio Advisory to talk about the wave of models that CMMI released at the end of last year, at the end of 2025. I want to pull up a level from the models themselves and understand when we say the policy environment is supporting a shift toward value-based care, what can we read from sort of the posture of CMMI to that end?

Clare Wirth (06:58):
Thematically, CMS is in its accountability era when it comes to value-based care. And not slowly, but quickly with more risk inviting more folks in, and moving further into downside risk.

Payton Grimes (07:12):
Yeah. And, Clare, I'd even argue that there are kind of two specific flavors of accountability that we're seeing. So one is stricter accountability for the models themselves where those that aren't demonstrating clear timely ROI are being terminated. The other flavor is this increased provider accountability where providers themselves are the ones being held accountable for costs and quality through different financial incentives. So what we're seeing is more downside risk where CMMI is setting the intention even that all future alternative payment models should involve downside risk.

Clare Wirth (07:48):
Primary example of what Payton just said is LEAD, it's a 10-year fully downside risk model from day one.

Abby Burns (07:54):
10 years is a pretty long timeline.

Clare Wirth (07:56):
Longest that CMMI has ever put out.

Payton Grimes (07:58):
I mean, that's a good thing that I want to actually double-down on. So with this increased focus on accountability, CMMI has had to make adjustments to address some of the barriers that have historically limited participation. So under earlier CMMI models, there's been this perpetual moving targets problem where organizations that invest heavily in their performance only to see the model expire or those thresholds for success to change. What CMMI has done is account for this by designing models with longer performance periods and even more stable benchmarking. So, again, LEAD is another great example of this. Not only does it have that 10-year performance period, there's no rebasing that happens. Once the benchmark is set, it stays put and you can plan these longer multi-year investments knowing that you won't be penalized for succeeding.

Abby Burns (08:48):
Anything else we should be tracking as we think about what this accountability era means and maybe CMMI's posture?

Rhea Jain (08:56):
Yeah, I think we have to think about the who. Who is involved? So the VBC ecosystem is definitely expanding beyond just payers and primary care providers. We're looking more and more at specialists, at health systems, but also tech companies and digital health platforms. They're having a much bigger role to play and even directly named in some of these CMMI models. So VBC is becoming more and more interconnected and success more and more depends on coordinating across more stakeholders than before.

Abby Burns (09:32):
With that, I want to check in on how some of our 2025 predictions played out. So if I turn back the clock, last year we predicted a couple of things. One, we predicted brewing momentum in commercial risk in particular. We predicted a fork in the road sort of moment for Medicare Advantage. And perhaps most significantly, and Rhea, you already started to take us here, a shift to include more specialists in value-based care. I want to talk about how each one of these has played out and I want to start on the commercial risk or commercial shared savings side of the house.

(10:08):
Quick reminder for non-value-based care oriented folks that might be listening, public payers, Medicare, Medicaid tend to lead the way on value-based arrangements. Commercial adoption tends to lag that pretty significantly. And you all correct me if you would say it differently. How did commercial shared savings progress in the last year?

Clare Wirth (10:28):
Abby, you used the word brewing and that's the same state we're in in 2026. There is still an appetite here, but it is hard to execute. We've got very complicated contracting, long implementation timelines, and so it's just frankly too early to tell or judge real progress from last year in commercial risk. That said, when you poll payers, most are expecting to see more here. Employers are certainly looking for palatable solutions for their cost trends that are going up year over year over year. And so I'd say this is a prediction from last year that we would hold steady and we're going to continue to watch.

Abby Burns (11:10):
The other line of business that had our attention, and everyone else's for that matter, was Medicare Advantage. And given the turbulence, the prediction was essentially because it will continue to be harder and harder to succeed under MA, which we actually talked about a few weeks ago on Radio Advisory, still true, we will see both payers and providers essentially decide to go all in or scale back or opt out of risk in this space entirely. How's this playing out?

Payton Grimes (11:37):
I'd say we are right on the money with this one. The tone of MA really has shifted. So what used to be growth at all costs is now much more cautious and calculated. So the turbulence that you referenced did ultimately result in several major exits from the MA space, both on the provider side with major systems terminating their contracts, and on the plan side with, like you said, health plans really scaling back their offerings.

Abby Burns (12:00):
Yeah. And I mean at the nexus between those two, provider-sponsored health plans also getting out of the MA game.

Payton Grimes (12:06):
Yeah. Those who have stayed in the MA game have really had to and are continuing to have to tighten their playbooks to protect their margins. So the focus is shifting from rapid enrollment growth to higher margin numbers and stronger management of existing populations to really signal this push towards more predictable risk and just a tighter network.

Abby Burns (12:27):
Yeah. Predictability on the whole I think is becoming more and more important at the same time that it's maybe getting harder and harder.

Clare Wirth (12:34):
And that's why we're seeing more things like special needs plans, especially community special needs plans and a growing enrollment in HMOs over PPOs. So together these are signaling that push towards more predictable risk and a tighter network.

Abby Burns (12:48):
Yeah, more control essentially, right?

Clare Wirth (12:50):
Exactly.

Abby Burns (12:52):
Perhaps the biggest prediction from last year was around growing specialist involvement in value-based care. I want to actually go straight to the source to see what we predicted last year. Here's a clip from our conversation with Clare and Erik.

Clare Wirth (13:07):
More specialists said that they wanted to increase their total comp tied to VBC than PCPs although you could argue PCPs have more than specialists to start with. But that's a pretty dramatic shift, even if it's more directional that specialist attitudes towards risk are evolving. I think we have this tendency to assume physicians don't want to engage in this and there might be more an opportunity now than ever before.

Abby Burns (13:32):
First, from the framing of the message here, we can intuit that specialists have historically been less involved in VBC. Oversimplified, why is that the case and how do we know?

Rhea Jain (13:45):
That's right, Abby. So most early VBC models were built around primary care, and that's where the infrastructure and the incentives were really developed. Primary care is, relatively speaking, more simple or at least less fragmented than specialty care, which makes it a lot easier to define populations, to track outcomes and build that supporting infrastructure. Secondly, I'd say there hasn't been a clear standardized way to define value for most specialties. It's much harder to measure outcomes or attribute costs in, let's say, oncology or orthopedics than it is to do in primary care. And lastly, I would say that specialists have historically been paid very well in fee-for-service, so the urgency to make this shift just wasn't there.

Abby Burns (14:35):
So that's the sort of historical look. What does this look like this year?

Rhea Jain (14:41):
So this is probably one of the biggest shifts that we've seen. I think leaders are finally realizing that we won't see meaningful cost and quality savings from VBC at scale without involving specialists.

Abby Burns (14:56):
That makes sense, right? Because the medical costs are not in primary care. The medical costs are in specialty.

Clare Wirth (15:03):
It's like we're trying to play a sport without a full team.

Rhea Jain (15:06):
Yeah. And to put that into perspective, in 2023, 68%, so more than two-thirds of commercial and Medicare spending, was driven by just six high cost specialties. Orthopedics, oncology, cardiology, women's health, behavioral health, and nephrology. But overall, specialist engagement is crucial. And according to CMMI, it's no longer optional. We're seeing a lot more deliberate efforts to bring specialists into risk and align incentives and design care pathways around specialty episodes and conditions.

Abby Burns (15:42):
When you say we're seeing a lot more interest or forcing functions around that, what do you mean by that?

Rhea Jain (15:46):
Well, I would say it's what we're seeing in a couple of these different CMMI models looking at team, ASM, access, just to name a few.

Clare Wirth (15:56):
I'll also make a plug for our 2026 research, which is entirely about how to engage specialists in value-based care. And so we've got case studies showing exactly how to do it. So I think there is forcing mechanisms, and then there are organizations out there that are making it happen and we've historically said cannot be possible.

Abby Burns (16:14):
And that's probably a whole separate conversation, but what are some of the highlights of what it actually looks like to engage specialists effectively?

Rhea Jain (16:21):
All right. Well, I want to start with naming one of the biggest challenges, which is you can't hold specialists to a standard that doesn't exist. There's really a lack of widely accepted specialty-specific quality metrics across most of specialty care. So leading organizations are sort of doing two things in parallel. First, they're working on defining a standardized what good looks like within a specialty, whether that's around outcomes, utilization, or cost. And then the second thing is they're aligning incentives in ways that actually reflect those measures.

(16:59):
And if I can, I would love to talk a little bit about a specific example, which is from Optum Health. What they've done is define and develop a set of eight to 10 evidence-based metrics per specialty to define quality consistently. Then they pair those quality metrics with a cost efficiency measure to tier specialists based on overall performance and then direct referrals toward higher value care. And then they're also reinforcing that tiering structure with targeted performance improvement initiatives that generate shared savings from reducing lower value care and unwarranted variation in care. So overall, these efforts, including this Optum Health example, is less about forcing specialists into primary care models and more about building models that fit how specialty care is delivered.

Clare Wirth (17:53):
But they're not forgetting about primary care entirely. So they're giving these performance metrics to PCPs and saying, "Hey, who do you want to refer to of who will give your patients the best care at the best cost?"

Abby Burns (18:07):
I think one of the things that jumps out at me is Optum Health is I think the largest employer of physicians in the country. So when you're saying they're defining a standard set of quality measures for, let's take nephrology, that applies incredibly widely on a national scale. The concern I guess that comes up for me as we're talking about this, you mentioned that organizations are defining what does good look like for different specialties. How concerned are you if the way that I define high quality in nephrology looks different from the way your system defines it?

Clare Wirth (18:44):
Abby, I think we need a bar first and then we can worry about how varied the bar is. So the good news is Optum Health for these sets of metrics made sure they were clinically robust, peer-reviewed literature out the wazoo for each and every one of them, they're highly actionable for what physicians can control, and they're specialty-specific. And I'll also say for the advisory board members listening to this, they let us publish them for a set of five specialties. So if you want to go and look at them, we'll have the link for you in the show notes.

Abby Burns (20:06):
Okay, so if looking at what's happening with commercial risk with Medicare Advantage and with specialists are the forces order defining 2026 in value-based care. I want to spend the rest of our conversation looking toward the future. Given the activity that you've spelled out across our conversation so far, what comes next for VBC? What predictions will we be grading ourselves on at this time next year?

Clare Wirth (20:29):
We are at a tough time in healthcare to make predictions and if anybody says they have a crystal ball, do not believe them. So what we focus on were really the two existential questions about the future of value-based care. The first one has entirely to do with the One Big Beautiful Bill Act. How will that impact the future of value-based care? Will it accelerate momentum? Will it decelerate momentum? Will it just continue to keep pace just like we saw from 2025 to 2026? Especially when you've got so much impact on the Medicaid space and with healthcare relying on a cross subsidy, how will that have ripple effects elsewhere?

Abby Burns (21:06):
Yeah, especially when the cross subsidy relies then on mostly employer-based commercial insurance and we see that medical trend is increasing what, around 10% for commercial insurance? I think that's the right question. You said there are two existential questions. What's the other one?

Payton Grimes (21:22):
There's been a question about where do drugs fit into this whole conversation. Drug spend is often carved out of VBC contracts because the truth is tracking the impact of drugs on total cost of care is really hard to do. So we're missing a lot of things that would be needed to do that and do that effectively. So first of all, there's not an agreed upon outcomes metrics. At an operational level, providers don't have the infrastructure that's needed to collect the data, thinking even specifically real-world evidence that's needed to prove that drugs are doing what they're meant to do. But with the rise of AI and digital health tools, these are kind of being looked at as an operational unlock that earlier waves of VBC kind of lacked. Where there has been progress is we're now seeing investment into things like the deployment of pharmacists, greater management of medication, medication adherence, really just making sure that providers are using the lowest cost drugs possible to still get patients the necessary benefit.

Abby Burns (22:25):
Yeah. One of the things that I think is interesting when we're talking about pharmacy is there's multiple ways to think about value-based care in pharmacy. One is from a health system perspective, but then we can also look at what's happening in the manufacturing space. What are you seeing there, Payton?

Payton Grimes (22:40):
We see them operating with something called outcomes-based agreements. So these are contracts between the drug manufacturer and the payer where the manufacturer themselves are the ones held responsible for how the drug is performing. How we're seeing this play out now is for example, CMS's cell and gene therapy access model, which launched in 2025. And at the beginning of this year, the balance model, which is for GLP-1s and weight management. So this is the first time that outcomes-based arrangements have been operating at a population scale rather than on individual contract basis.

Abby Burns (23:14):
Yeah, which goes back to actually where you all started us, which is CMMI pushing toward more value-based care and casting a wider net. Rhea, you said we have to think about the who involving more stakeholders in their models. The thesis of the research that you all published is essentially where you started our conversation. Value-based care is in its accountability era. To close out our conversation today, what advice would you offer listeners on how they should prepare for the accountability era?

Rhea Jain (23:45):
I would say bring specialists into the value equation. For so long, we've been focusing mostly on primary care, mostly on medical groups, and specialists have largely been left out of these efforts, or at least been slow to progress in VBC. And I think the difference today is we know we can't make meaningful progress in value-based care. We can't have meaningful quality and cost savings without engaging specialists and bringing them into risk.

Payton Grimes (24:16):
I'd say that industry leaders need to lean into the playing field that CMMI has kind of set up for them. CMMI has made the conscious trade-off to trade short-term volatility and administrative complexity for more long-term stability and predictability that is going to create an environment where providers can make longer-term investments and have rules that are stable enough to actually long-term success.

Clare Wirth (24:43):
Stop waiting for value-based care to go away. Every few years, someone, some headline declares VBC is dead. Yet we are continuing to see participation grow or stabilize. New models emerge, more stakeholders are being pulled into the journey. The question is not whether VBC survives. It is whether your organization is prepared for this environment where accountability for cost and quality is the expectation.

Abby Burns (25:16):
Well, Rhea, Payton, Clare, thank you for coming on Radio Advisory.

Payton Grimes (25:20):
Thanks for having us.

Rhea Jain (25:21):
Thanks for having us.

Abby Burns (25:23):
Thank you. If there's one message I'm walking away with from our conversation today, it's that value-based care is in its accountability era. We've got an active CMMI that wants to see financial returns. We see folks widening the tent and inviting more players in to participate, particularly when it comes to specialists. The big open $1 trillion question though is how do we extend this activity to drugs? If your organization is focused on operationalizing value-based care, Advisory Board is convening a small group of executives for an in-person round table discussion in Washington, D.C. in September. We'll include a link to the registration in the show notes so you can learn more because remember, as always, we're here to help.

(26:10):
Next week on Radio Advisory. We've invited Advisory Board's specialty care expert Gabby Marmolejos to help us break down the biggest trends influencing oncology today, spanning cancer care innovation, screening, coverage, and treatment.

(26:25):
New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts, and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by Rae Woods, Chloe Bakst, Atticus Raasch, and me, Abby Burns. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Dominique Del Gaudio. We'll see you next week.