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Outcomes-based healthcare models reduce costs and drive results

Outcomes-based healthcare models reduce costs and drive results

Abstract illustration of doctors on a bright beige and blue background
Outcomes-based care models align incentives for better patient outcomes, cost savings, and accountability in healthcare. Unsplash+

Rapidly rising healthcare costs are a daunting reality for businesses. The recent study by research firm Mercer shows that the total health benefit cost per employee will increase by 5.8 percent in 2025. Despite an influx of digital health and wellness providers promising to add value and reduce costs, employers are facing rising expenses and expecting more accountability from their partners. In response, many providers are rethinking their pricing models, moving away from traditional pay-per-employee models that create a revolving door of dollars in and out, and exploring risk-free, results-based frameworks. With this approach, companies only make money when they deliver on the promise of their solution, whether that’s engagement, a better experience, improved results, cost savings, or ideally all of the above.

Sixty percent of employers surveyed in the Business Group on Health’s Annual Survey plan to reassess their current health and wellness providers in 2025, either by switching providers or by initiating RFPs. This signals an increased demand for evidence of value, particularly from digital health providers, who have often maintained partnerships without clear evidence of cost savings or health impact. As a result, many point solution business models have shifted over the past decade from “pay for all employees” to “pay for who hires” and now to “pay for value actually created.” Employers are challenging the model of supplier partnerships to improve the value of their investments and generate significant returns.

Companies that are purpose-built to drive health outcomes and lower the total cost of care are now offering risk models to align incentives with better patient outcomes, experience and cost efficiency. This approach encourages healthcare providers to focus on what they do best: providing high-quality patient care and managing costs, while ensuring it’s a clear “win-win” for the organization. Although the objective remains the same, there are a variety of ways in which this model can be implemented:

  • Performance-based contracts: Providers are paid based on specific milestones and clinical outcomes, such as reduced emergency room visits or pharmacy use. Providers can earn more if they meet or exceed these goals.
  • Performance guarantees with risk fees or return on investment guarantees: Providers may initially collect full fees, which are then risked based on their performance against defined key metrics or against delivering an ROI.
  • Risk sharing in bundled payments: With bundled payments, providers receive a set payment for a bundle of services, but if the cost of care exceeds the payment, the provider may be responsible for covering the overage, putting their charges at risk.
  • Patterns with letters: Typically implemented in a single-payer setting, providers are paid a fixed amount per patient per month to cover all of their care needs. Providers who effectively manage care and keep patients healthy can profit, but they can also take downside risks and risk losses if care costs exceed the capitalized amount.

These pricing structures position both the healthcare company and the enterprise to have mutual skin in the game, shifting healthcare from volume-based to value-based healthcare and ultimately aligning incentives to achieve better outcomes, patient satisfaction and cost efficiency. By promoting the tangible impact of their programs, companies are able to put their money where their mouth is with this save-or-no-pay pricing model.

A growing number of providers are adopting these performance-based models. The most recent is The health of the Swordwhich revealed its resulting pricefollowing closely Spring healthhis leader in offering a performance guarantee net ROI for their customers. When Well, Theory launched its enterprise solution earlier this year, chose to risk fees based on ROI and cost savings based on high-cost interventions that occur when dealing with an autoimmune disease – the platform’s focus . Unlike other providers in the market, they look at claims data to compare patient spending before and after their program. As a result, it saw an average of $7,200 in savings per patient due to reduced emergency room visits, medical procedures and outpatient care, in addition to other savings due to reduced reliance on high-cost drugs.

Health Oshi significantly reduces the total cost of care for patients with gastrointestinal conditions. Its payment model is inherently responsible for helping patients suffering from gastrointestinal problems better and faster, with payment tied to progress in its virtual clinic and achieving symptom control. Oshi Health has invested in proving its model works through a clinical trial with a national health plan, which showed 92% of patients achieve symptom control within 4 months, while generating total cost savings of $10,292 per patient over six months through reductions in avoidable imaging and testing, ED visits, and high-cost drug use.

For companies implementing these models, there are considerations to help set your partnerships up for success. Use of clinical trials on your program. helps gain buy-in to these risk-sharing arrangements because it allows employers to see proof that your program not only improves employee health, but also effectively reduces healthcare costs. There are even creative opportunities for companies to offer a significant portion of at-risk fees, including ROI guarantees, in exchange for marketing commitment from benefit partners to further align incentives and lead employees on a journey of more empowered and effective care.

The shift to risk-free and value-based care models is transforming the healthcare landscape, aligning incentives between health and wellness solutions and employers to prioritize patient outcomes and cost savings. As healthcare spending continues to rise, these innovative models not only improve the quality of healthcare, but also empower employers to make informed decisions that benefit both the workforce and the bottom line.

Pay only if it works: growing risk-free models in healthcare