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Value-Based Purchasing: How to Succeed in the Changing Business of Health


By Andrew Olson, Enrique Martinez-Vidal

Value-based purchasing, when appropriately enabled, changes the competitive landscape for insurance purchasers, plans, and service providers, who will need to adapt to be successful.

The current healthcare system in the United States is changing by moving towards a system of value-based purchasing. That change will impact how insurance, care, and health are paid for, which will impact the business operations of those purchasing insurance and services that impact health. Those changes will alter the competitive dynamics that determine which players in the healthcare system are successful as businesses. Value-based purchasing can make good health good business, which makes the players that have a larger health impact more competitive – if they can leverage it.

Overall, organizations will face critical strategic decisions in the face of uncertainty. Technology is often heralded as the golden solution, but it may not even be a silver bullet and without fundamentally reexamining the business of health, existing organizations may fall victim to a new wave of competition. Meanwhile, new business models are bringing new opportunities and those firms best adapted to deliver health value for their consumers will have the best chance of winning the day.

Value-based purchasing, where appropriately implemented, has created a real market and business case for making long-term investments in the health of high-risk populations. Those firms that do so most cost-effectively will have the greatest ability to reinvest and drive future profitability.

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