*Additional Contributors: Raj Lakhanpal, MD (CEO), and Sean Kelly (Senior VP, Growth and Business Development) of SpectraMedix. Thank you also to all other contributors, including customers and consultants, who shared their feedback and perspectives.
I hope everyone had a relaxing and enjoyable holiday season. Continuing our annual tradition, we’d like to share our value-based care (VBC) predictions for 2025, exploring some of the most relevant VBC themes for health plans and health systems in the year to come. These predictions stem from many discussions with senior executives at health plans and health systems, our clients, consultants, growth investors, private equity firms, and RFPs we were invited to participate in 2024.
A friendly reminder: meaningful change in healthcare takes many years. Predictions reflect directional trends that continue to progress and evolve and, as such, many of the predictions we discussed last year still hold true for 2025. This year, we have elaborated on several past predictions based on new findings in 2024 while also introducing fresh perspectives. As always, we welcome healthy discussion and feedback.
Note: Click for a full summary of each.
- Major healthcare reform policy changes will begin in 2026 or later as the new administration focuses on other issues.
- Government programs will continue to lead the charge in VBC. National payers will focus on Exchange and D-SNP markets for revenue growth while regional payers will turn to Medicare Advantage.
- Artificial intelligence and machine learning will see greater adoption to drive value-based initiatives.
- Health systems will continue to look to MSSPs for revenue generation.
- Health plans and health systems recognize providers as the key to value-based care success and will focus on developing innovative solutions that support provider enablement.
- The M&A market for VBC tech-enabled solutions will open.
- It’s all about the data (still).
- “Payviders” will continue to gain traction.
- Specialty value-based provider group organizations will continue to grow and scale.
1. Major healthcare reform policy changes will begin in 2026 or later as the new administration focuses on other issues.
President Trump will start the initial brainstorming stages of healthcare reform, but these policies will take a year or more to enact and become effective. In the meantime, healthcare organizations will start preparing for key initiatives that are anticipated based on historical comments and actions during his first term:
- Medicare Advantage—Both President Trump and new CMS head Dr. Mehmet Oz have historically supported Medicare Advantage and we expect it to be a large focus after 2024 struggles with utilization increases and v28 risk-adjustment calculation changes.
- Medicaid—Greater Medicaid cost management will be needed as eligibility will be tightened and Medicaid membership will decline. Plans will push for cost containment and value-based initiatives such as global capitation for better results. Block grants or per-capita grants may be initiated down the road, giving states more power to create their budgets.
- Center for Medicare and Medicaid Innovation (CMMI)—We have heard from many consultants that President Trump will continue to support CMMI—a bipartisan group that focuses on innovation for cost containment and better outcomes—and its initiatives. While the Department of Government Efficiency (DOGE) may scrutinize other aspects of healthcare (e.g., drug pricing, PBMs), we believe CMMI should be okay.
2. Government programs will continue to lead the charge in VBC. National payers will focus on Exchange and D-SNP markets for revenue growth while regional payers will turn to Medicare Advantage.
While attending the 2024 HCP-LAN’s Summit, the CY 2023 percentages of US Healthcare payments tied to quality and value (categories 3B-4 or shared risk and more advanced) were reported at ~21% for Medicaid and 43% for Medicare(1). While moving in the right direction, there is still significant progress to be made to hit the HCPLAN goal of 50% of Medicaid and 100% of MA in alternative payment models by 2030. The conference listed the top 3 barriers as:
- Provider ability to operationalize
- Interoperability
- Provider interest and readiness—which we all believe is true and will be a core focus in 2025
As mentioned, Medicare Advantage should be a big focus in 2025. We have heard from both health plans and health systems that they want to focus on doing the “blocking and tackling” of MA well, i.e., manage utilization, risk, annual wellness visits, and Star ratings. The V28 risk adjustment model will become prevalent for both MA and Medicare Shared Savings Programs (MSSPs), and organizations must be prepared. A trend to watch is the shift by national plans away from MA, opening opportunities for regional plans to launch new MA offerings. It will be interesting see how membership changes hands this year as these new plans enter the market.
Regarding Medicaid, the most recent RFPs (Georgia and Nevada) have placed a strong emphasis on value-based care. Many RFPs now seek evidence of historical success in VBC and strategies for tracking and monitoring effectiveness, particularly for existing provider networks and rural populations. Similarly large Medicaid plans such as Molina, Centene, and Aetna have highlighted their focus on the Exchange and Dual Eligible Special Needs Plans (D-SNPs) on their earnings calls. D-SNP legislation has undergone significant reform to improve and consolidate coordination of care, which can drive significant D-SNP membership growth for Medicaid-focused plans.
3. Artificial intelligence and machine learning will see greater adoption to drive value-based initiatives.
In 2024, our prediction was that artificial intelligence (AI) and machine learning (ML) would remain buzzwords and the serious applications would occur in 2025 and 2026. There was a lot of talk of AI/ML initiatives in 2024, and many health systems, health plans, and vendors—including SpectraMedix—have greatly enhanced their offerings. Like all other industries, AI use-cases for value-based care are still maturing, but we believe there will be significant focus on greater operational and cost containment efficiencies, coding, provider enablement, and prior authorization along with other administrative necessities such as note taking and call centers. Since many of these AI use-cases are still costly and burdensome for slim-margin health systems, cost-effective solutions are still needed.
4. Health systems will continue to look to MSSPs for revenue generation.
As health systems explore value-based revenue generation opportunities in 2025, we believe Medicare Shared Savings Programs (MSSPs) will gain momentum. Many health systems are currently renegotiating Medicare Advantage contracts with their national payer partners as their MA margins continue to decline.
The 2023 performance results CMS released in 2024 reveal a significant improvement in health outcomes and considerable savings—$5.2 billion between Medicare and ACOs(2). Over 500 ACOs participated, but work still needs to be done to ensure all Medicare beneficiaries are in accountable care arrangements by 2030. In the next year, new eCQM metrics will be introduced and ACOs must ensure they have strong technological resources to succeed. For large health systems, affiliate providers are high-margin providers. Some of the largest health systems—including Bon Secours Mercy Health, Baylor Scott, University Hospitals, and Sentara—had significant savings in 2023. We expect this trend to continue, with more health systems using MSSP for revenue diversification.
5. Health plans and health systems recognize providers as the key to value-based care success and will focus on developing innovative solutions that support provider enablement.
Particularly in government programs, health plans and health systems must partner with providers to ensure success. Within same geographies, each payer has a different set of needs and expectations from its providers. Research suggest that it would take a provider 27 hours per day to complete all the tasks that are asked of them(3). Coupling this with the demands of value-based care and potential technological mishaps results in very overworked providers. Key initiatives that can ease the strain include:
- Consolidating the breadth of value-based contracts into “standard” value-based contract templates can simplify risk-sharing arrangements, for example, standardizing quality metrics and risk adjustment around a few value-based models for certain provider types.
- Timely incentives, delivered monthly or quarterly, play a critical role in achieving objectives and keeping providers engaged and motivated.
- Provider enablement or operating committees can offer clear direction and support for providers.
While providers are ultimately responsible for delivering higher-quality care, health plans are creating teams to take on the responsibility for value-based success, ensuring information is presented in a user-friendly format, providers are supported, and all stakeholders are aligned. At SpectraMedix we believe provider enablement will be at the forefront of value-based care in 2025 and have augmented many of our products to better support payer/provider collaboration.
For commercial plans—estimated by HCPLAN as 21% of all VBC payments in 3B or more(1)—the goal is to identify providers who are willing to enter into value-based arrangements and show them the path forward with respect to support and potential earnings. Currently the big focus for these commercial plans is a balancing act of managing total cost of care, managing specialist costs, and finding provider networks that are ready for more shared-risk opportunities.
6. The M&A market for VBC tech-enabled solutions will open.
Between private equity funds reaching their hold period “limit” on certain investments and strategics looking to expand their point solutions to health plans and health systems, 2025 will be a year of consolidation and M&A particularly for VBC tech-enabled services. In recent years, VBC-focused acquisitions have either been provider group consolidation (e.g., Iora/ONEM), take-outs (e.g., Oak Street/Aetna), or platform acquisitions by private equity firms. 2025’s digital health M&A activity has already started with Transcarent/Accolade, HCAT/Upfront, and H1/Ribbon announcements.
As health plans and health systems continue to evolve on their VBC journey, they will look for how vendor solutions can drive the most value while managing operating expenses. Vendors will look to get stickier with customers to prevent churn and look for inorganic growth opportunities. That said, many companies were raised at high valuations back in the SaaS boom in 2021, mostly based on ARR multiples. It will be interesting to see how investors assess M&A opportunities given that valuations for many of these tech-enabled companies have shifted to a blended EBITDA and ARR multiple.
7. It’s all about the data (still).
A reoccurring theme from 2024, both health plans and health systems will continue to enhance data infrastructure to ensure value-based success in 2025. Significant investments are expected to enable the integration of diverse, siloed data sources—sometimes originating from more than 10 systems encompassing quality, utilization, risk adjustment, financial performance, behavioral health, SDoH, and health equity—to ensure substantial data quality and completeness.
From a value-based lens, successful data aggregation and tech stack optimization lead to significant return on investment by improving quality, optimizing risk-adjustment, and enabling faster refresh times for guided insights and incentives to prevent provider burnout. This approach also strengthens data solutions by facilitating seamless communication between multiple point solutions and ensuring effective member attribution in value-based arrangements.
8. “Payviders” will continue to gain traction.
As large integrated systems grow to combat the size and scale of national payers, the lines between payers and providers will begin to blur. Full-risk deals will become more prevalent as payers expect more from their large integrated provider partners and look to share the risk and reward of cost containment measures. Fully integrated payer-provider organizations like Risant/Geisinger and Kaiser Permanente will have an impact at a local level, provided their insurance products and narrower networks are locally broad enough to meet member access needs and their integrated model delivers cost trends below the market average. Newer entrants to the payvider space, such as Jefferson Health Plan in eastern Pennsylvania, will grow their scale in the individual Exchange and Medicare Advantage space before competing for members in the more geographically dispersed employer-sponsored market.
Similarly, we saw payer/provider collaboration agreements last year such as Elevance/Carelon/CD&R and expect these partnerships between health plans, provider groups, and even financial sponsors to expand in 2025.
9. Specialty value-based provider group organizations will continue to grow and scale.
All risk-bearing entities—payers, providers, and payviders—have and are continuing to optimize VBC programs for primary care providers. However, without the participation of specialists, their efforts to lower the total cost of care and improve quality will not succeed. A growing number of specialty value-based provider group organizations such as oncology, nephrology, orthopedics and gastrointestinal have emerged and are creating significant value, with many more now forming. Many of these groups focus on MA and other high-cost members and have done an effective job of cost containment and increased outcomes.
Health plans will continue to focus on specialist referral efficiency, and there will be a larger focus on bundled payments in 2025. Moving forward, health systems will need to prepare for CMMI initiatives like TEAMs (Transforming Episode Accountability Model), pushing the value-based paradigm forward.
Other Interesting Topics to Track.
- Walgreens potential take-private by a consumer-focused private equity shop—what happens to the VillageMD(4)?
- Telehealth rules within CMS
- Inflation Reduction Act (IRA) effect on drug utilization
- United/Optum public scrutiny and anti-trust potential
- Medical waste and fraud detection
Takeaways
In conclusion, the VBC landscape in 2025 is dynamic and promising, building on previous momentum. Government programs remain pivotal, setting ambitious adoption targets for Medicare and Medicaid, although commercial plans are poised to have a significant role in VBC as they further define their strategies. Data integration, provider enablement, AI/ML, and the growing roles of specialty care are key focuses, reflecting the industry's commitment to successful VBC implementation.
SpectraMedix is driving innovation to help health plans and health systems effectively plan for each of these predictions and drive financial success through 2025 and beyond. We welcome and encourage your feedback, additional predictions, and insights, and look forward to connecting with you to explore key actions your organization can take as these value-based care trends unfold.
Feel free to email me at rahul.lakhanpal@SpectraMedix.com to share your thoughts.
References:
- https://youtu.be/C60YJzTdFME
- https://www.fiercehealthcare.com/payers/mssp-acos-saves-medicare-21-billion-2023-largest-savings-program-history
- https://qualitysafety.bmj.com/content/early/2024/10/16/bmjqs-2024-017591
- https://www.healthleadersmedia.com/ceo/why-walgreens-private-equity-firm-sycamore-partners-are-talks-sale
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