Value-based care arrangements have been around for more than 20 years, but risk-based contracts haven't scaled as rapidly as the industry expected.
Providers and payers are finding there is no "easy button" to shift to VBC. These risk-based arrangements require resources, capital and alignment, with the latter often being the biggest challenge.
Brian Overstreet and Travis May, executives and entrepreneurs with experience in data and analytics, are both bullish on the future of VBC and founded Arbital Health in November 2023 to provide what they saw as a critical missing piece—an infrastructure layer for value-based contracting.
A neutral infrastructure layer is needed to help payers, providers and other organizations participating in risk-based contracting better manage, measure and ultimately adjudicate their contracts, Overstreet, Arbital's president and CEO, told Fierce Healthcare.
"There's a huge data asymmetry where payers really know what's going on. Providers don't, but providers are the ones taking on risk. They enter into these arrangements. They never seem to go to plan, but nobody can really see how they're progressing during the timing of the contracts. And then you end up at the end of a cycle with a provider who is expecting to receive a check, but, in fact, ends up having to write a check, and it just puts everything into disarray and causes a lot of conflict. We think this is a major blocker for value-based care taking off at scale," Overstreet said in an interview.
Arbital, which combines an artificial-intelligence-powered platform with actuarial expertise to help providers and payers better manage risk-based contracts, secured $31 million in series B funding to enhance its payer-facing capabilities.
Valtruis led the series B round, with participation from existing investors Transformation Capital, Healthy Ventures and Shaper Capital.
The company will also use the funding to build out its actuarial team and expand its AI and automation capabilities, Overstreet said.
Arbital rolled out an AI chat application in beta that enables customers to query their data, with plans to fully launch the tool in the third or fourth quarter, he said. "I think that’s going to be a real game changer as clients are going to be able to better interact with their data to do analytics on-demand. It's not going to take the place of having an actuary or an actuarial team, but it's going to be a real copilot for those actuaries, both our actuaries internally, as well as our clients' actuaries. I think it’s going to help to speed up a lot of the day-to-day processes that bog down how value-based care works today,” Overstreet said.
Overstreet and May built Arbital's platform to improve contract performance monitoring and decision-making by centralizing fragmented data and automating contract reconciliation. Prior to Arbital, Overstreet founded and built data analytics companies Sagient Research and Advera Health Analytics, which were acquired by Informa and TriNetX, respectively. May founded Datavant and led it through its $7 billion merger with Ciox Health in 2021.
"We have a two-pronged solution. The first is the data analytics part. How do we level the playing field of that data asymmetry that exists between payers and providers? It's a relatively complex process of being able to ingest the data, clean the data, track and measure how those data match up to the right contract terms within these value-based care contracts, which themselves are pretty complex," Overstreet said. "The second part is having the right analytics component to it, which is all driven by actuaries. You need to have the actuarial lens to understand: How is a contract supposed to be performing? How is it doing relative to benchmark? How is it doing relative to expectation?
"By combining those two capabilities, the data and analytics part with building a best-in-class actuarial team has really helped Arbitral come to the market strongly and start to solve that problem more fundamentally," he added. Overstreet contends that the company has "one of the largest collections of value-based care specialty actuaries" to better monitor and improve contract performance.
Arbital currently works with 40 payers, providers, digital point solutions, VBC enablers and integrated delivery networks. The company has launched and onboarded more than 600,000 patient lives to its platform. Over the last year, the company expanded strategic partnerships with organizations including HarmonyCares, Aligned Marketplace, Arkos Health and Complete Health.
"Our general thesis is that if we can create better transparency, create a better vehicle and framework for contracting, it opens up the lens for those who are already taking risk-based contracting deals, but maybe also opens it up further and creates an on-ramp for other organizations who have either dipped their toe in the water but not really been ready or been a bit afraid because of the data asymmetry and lack of visibility and risk-taking to enable them to get more involved as well," Overstreet said.
The company claims its technology can result in significant financial and efficiency gains for organizations. For a medium-sized payer-provider network managing $100 million in annual VBC contracts across multiple payers, Arbital projects cost savings of $5 million to $10 million in reduced administrative and operational costs. The company also projects increased revenue of $20 million in additional shared savings through higher performance and 100% faster contract performance cycle insights.
These performance improvements can also lead to a 15% reduction in total cost of care, driving more than $5 million in savings, the company claims.
Investors see the value in Arbital’s approach that combines AI-driven analytics with a specialized actuary team. In fact, many of the company’s customer leads come from investors, Overstreet said.
“They are seeing the problems at their portfolio level. These investors have made investments into value-based care provider groups or the risk-bearing entities, and they're seeing how those companies are struggling to shore up their contracts, to predict revenues, to actually deliver on the promise of better care for patients because of the limitations that exist in this market,” he said. “When we came to market, there was a lot of excitement about, ‘Wow, are these going to be the guys who can crack the code?’ We probably get the majority of our inbound referral-based pipeline deals from venture investors.”
There continue to be tailwinds in the market driving providers and payers toward VBC arrangements. Payment models are expected to transition to VBC at even faster rates, with projected growth in the sector from $500 billion currently to a potential $1 trillion, according to Holland & Knight.
Overstreet sees the current federal policy environment as a “net positive” for VBC.
“If you look at the top line of what the current administration is really pushing for, it's ‘How do we reduce administrative burden? How do we reduce costs? How do we make the healthcare system much more sustainable?’ I believe that value-based care ends up playing a really big role in all of that,” he said. “I think most folks who are working in the healthcare realm and the administration view value-based care positively so long as we can help to solve for the problems that have been limiting for value-based care today.”
"Arbital Health has built something the healthcare industry desperately needs: the critical infrastructure that empowers payers and providers to reconcile their risk-based contracts with accelerated performance insights,” said Mike Spadafore, managing director at Valtruis, in a statement. “By combining healthcare’s top actuaries with an advanced, AI-powered platform that automates complex actuarial workflows, Arbital Health is transforming how financial and performance risk is understood and managed across the system. We're proud to support their team as they drive growth, value, and better outcomes in healthcare.
Last year, Arbital acquired actuarial firm Santa Barbara Actuaries and picked up $10 million in series A funding led by Transformation Capital. The company has raised $46 million to date.
"We still believe that value-based care in its purest form is fundamentally the solution to unlocking all the problems we have in healthcare to better align financial incentives and patient outcomes. But there's a lot of work to be done, and we're hoping to build that infrastructure layer that enables that for the future," Overstreet said.