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Value-Based Payments Are Coming—And All Need to Pay Attention

The Honorable Mike Leavitt Shares His Insights at 2016 NIC Fall Conference

After being sworn in as Health and Human Services Secretary under President George W. Bush, three-time Utah Governor Mike Leavitt was taken to an undisclosed location by “very serious men in black cars” to learn his duties of being in the line of succession to the presidency. One of those duties was attending periodic intelligence briefings for situational awareness of what was happening in the world.

“I began to learn about the vital role that intelligence gathering plays,” said Leavitt in his keynote at the 2016 NIC Fall Conference in Washington, DC, last week. By making sense of “weak signals” from different sources in different ways, “it would give us the opportunity to anticipate.”


Seniors housing and care needs to be listening for the weak signals about the transition from fee-for-service payments to value payments, Leavitt told attendees. And the signals are not very weak anymore. “They are in fact screaming, ‘Pay attention to me,’” he said.

The Outlook on Value Payments: Very Likely

“The transition to value-based payment is the most significant change that’s occurred in U.S. healthcare history since the widespread adoption of health insurance,” Leavitt told attendees, “and you cannot afford not to be paying attention to it.”

The push for value payments, Leavitt explained, has nothing to do with the Affordable Care Act but is the result of economic realities: the U.S.’s high debt and the cost of care that will be needed for the burgeoning baby boomer population are driving a need for lower healthcare costs. The question, then, is twofold: how fast will the transition happen, and what will the impact be?

As for speed to market, Leavitt said the transition to value payments is not occurring at the same speed in marketplaces across the country. The number of accountable care organizations (ACOs) is on the rise and expected to keep increasing; over 28 million individuals are covered by ACOs now, and Leavitt Partners predicts this number will grow to anywhere from 41 million to 177 million by 2020.

These ACOs and other entities will bear the financial responsibility for the populations within their care. Since many ACO patients are also residents in seniors housing and care properties, Leavitt explained, the ACOs “are going to have substantial interest in…how they’re living their lives. Is it safe? Is there good care there?”

Where does seniors housing and care fit in? Leavitt sees the industry as offering a social model and age-in-place lifestyle that complements care coordination. In fact, medical groups are beginning to contract with different operators to provide services that give their members care in an effective, efficient manner. Previously, discharging a patient primarily meant ensuring that patient was well enough to be discharged; it had no bearing on the provider’s bottom line. “It’s a different situation when you begin to realize that people who transition from one setting over another have a different and more positive result.”

Starting the Conversation

Who is the most qualified to be at-risk and bear financial responsibility for a care population? Leavitt walked attendees through a scenario of picking the financial risk-bearer based on seven criteria and discussed who among the stakeholders would be most able to meet these criteria. The stakeholder entities included doctors and clinicians, hospitals, insurance companies, and “strategic aggregators.” Strategic aggregators could be drug companies, private equity groups, medical device companies, pharmacies, or a yet-unknown combination of these groups. The criteria they need to meet include: 

  • The capacity to change patient behavior.
  • A sense of brand.
  • Capital (because they will bear financial responsibility).
  • The capacity to aggregate lives into a population that they will manage.
  • The ability to manage risk.
  • A clinical footprint that allows for efficient caregiving.
  • The collaborative IQ to coordinate care.

Since few entities, if any, meet all seven criteria, Leavitt predicts that there will be conversations about mergers and joint ventures between physicians, hospitals, insurers, and the rest. “Where are you in that conversation,” he asked attendees, “and what assets do you have that you can bring to the discussion?”

For now, he advised the industry to look to the clinical footprint. “You have a place where people live or spend a considerable about of time…and [they] need to interact with healthcare.” Seniors housing and post-acute care providers alike will need to consider their options to position themselves correctly. “You have a serious equity in this discussion.”

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