Healthcare Utilization Trends in 2025 How Health Plans Use Value-Based Care to Manage Costs

Rising healthcare costs, increased utilization, and mounting regulatory pressures are driving health plans to think strategically about innovative technology, partnerships, and program models that can help them navigate the market’s strong headwinds.

What’s driving these unprecedented challenges?

• Increased healthcare spending: After a deceleration post-COVID, healthcare spending rebounded to the highest growth rate in more than two decades in 2023.¹ In 2025, spending is projected to increase 7.1 percent and the Centers for Medicare & Medicaid Services (CMS) expects it to continue to outpace national inflation levels for the next decade, with healthcare on track to reach more than 20 percent of gross domestic product (GDP) by the year 2033.² Health insurers have been hit hard; prices for hospital care covered by private insurance increased at more than twice the rate of stays covered by Medicare and Medicaid from 2014 to 2024.³

• Rising healthcare utilization: The increase in healthcare spending was largely driven by an upsurge in treatments and procedures that were delayed by the pandemic; following a sharp dip in 2020, health services use increased 7.3 percent in 2021.⁴ Hospitalizations have also increased, with emergency visits and inpatient stays nearly doubling in 2024.⁵

• Growing burden of chronic conditions: The majority of Americans live with at least one chronic disease ⁶ and more than 10 percent of adults in the U.S. live with three or more chronic health conditions, including chronic kidney disease (CKD), cardiovascular disease, depression, and diabetes.⁷ Chronic diseases require complex, multi-specialty care, and the burden will only intensify as the demographic shifts toward an aging population. Today, 90 percent of U.S. healthcare spend goes toward chronic and mental health conditions,⁸ with CKD alone accounting for more than a quarter of Medicare spending.

• Policy changes: Risk adjustment updates and changes to Part D Star Ratings are also increasing pressure on Medicare Advantage (MA) plans.⁹ In addition, in 2023 CMS issued a final rule clarifying that MA plans are required to follow the Two-Midnight Rule and admit patients as inpatient—rather than holding them in observation—when they are expected to stay more than “two midnights.” ¹⁰ Intended to improve patient access to care, the rule has been associated with an increase in inpatient stays, which are reimbursed at a higher level than outpatient stays.¹¹

All of this is against the backdrop of a volatile regulatory landscape, with sweeping legislative changes on the horizon. “These mounting pressures are straining profitability and creating uncertainty across the market,” explained Stephanie Gutendorf, Interwell Health chief growth officer. “The first half of 2025 indicates these headwinds will only continue to grow stronger in the second half of the year and as health plans begin strategic planning for 2026 and beyond.” 

Growing payer interest in value-based care models

To counteract intensifying industry challenges, health plans are implementing strategies to contain costs while enhancing member care quality, including adopting value-based care models. Unlike the traditional fee-for-service model, value-based care incentivizes better patient outcomes rather than reimbursing for the volume of services delivered. Value-based care improves population health management in a way that benefits both payers and patients by focusing on preventive care and early intervention, chronic disease management, and holistic member support.

Experts expect the number of patients aligned with value-based care models will more than double from 43 million in 2022 to 90 million in 2027, with substantial growth expected in specialty areas such as orthopedics and nephrology.¹² This shift is largely driven by commercial adoption and is also strongly supported by the government, with the Centers for Medicare and Medicaid Innovation (CMMI) setting an ambitious goal of transitioning 100 percent of Medicare beneficiaries to value-based arrangements by 2030.

With growing payer and government interest in value-based care, provider participation is also on the rise. A recent report found two-thirds of provider organizations have increased participation in value-based care programs and the majority expect a positive revenue shift toward value-based care in 2025.¹³

Physician involvement varies by specialty, with strongest participation in specialties with mature value-based models, such as kidney care.¹⁴ In just one year, more than 75 nephrology practices joined the largest national value-based kidney care network, the Interwell Provider Network, and more than 2,200 nephrologists across the U.S. and Puerto Rico are now aligned with the network.

How value-based care reduces healthcare costs

One cross-sectional study found MA members in value-based care arrangements had a 20 percent lower risk of acute hospitalizations and nearly 40 percent lower risk of 30-day readmissions compared to members with traditional MA coverage.¹⁵ By preventing costly hospitalizations and emergency interventions, value-based care programs can significantly reduce the costs of managing member care.

As just one example, one national health insurance provider reported that its value-based arrangements saved an average of 3–6 percent per person per year (PPPY) across commercial, Medicare, and Medicaid plans by focusing on prevention, with results such as increased well visits, screening rates, and immunizations. Members in value-based care arrangements also demonstrated notable improvements in controlling blood pressure and blood sugar. ¹⁶

By using risk stratification tools to identify high-cost, high-utilization members, payers can allocate resources more effectively and improve outcomes for at-risk populations in value-based arrangements. Being able to identify high-risk patients is particularly crucial when it comes to managing chronic conditions such as kidney disease, diabetes, and cardiovascular disease—especially as many patients with these conditions have multiple, interrelated comorbidities.

Additionally, the enhanced collaboration between specialists and primary care providers within value-based networks also promotes more efficient use of healthcare resources while driving better outcomes for high-risk patients.

How value-based care improves member engagement and satisfaction

Value-based care doesn’t just improve cost metrics; it also contributes to improved member experience, retention, referrals, and ratings. Many value-based care programs use interdisciplinary care teams that include social workers, nurses, and dietitians as part of a holistic patient care model. This patient-centered approach and focus on addressing individual needs can result in improved satisfaction and trust.

In a highly competitive market serving increasingly empowered healthcare consumers, health plans are implementing consumer-centric business models and tracking member satisfaction as an important metric. Improved member experience directly contributes to higher Net Promoter Scores (NPS), which many health plans have adopted as a tool for gauging member engagement and loyalty.

Additionally, programs emphasizing preventive care, regular check-ins, and multidisciplinary collaboration can help health plans close gaps in care, leading to higher HEDIS scores and Star Ratings. For instance, value-based care models can help health plans improve scores for measures aimed at reducing preventable hospitalizations and ensuring appropriate follow-up care. Higher Star Ratings can lead to higher enrollment, reimbursement, and market share, especially in the MA market.

How value-based care improves population health management for chronic conditions

Improving overall population health—by providing personalized care at the individual patient level—is essentially the ultimate goal of value-based care models. Value-based specialty care takes this principle a step further by addressing complex chronic conditions that require specialized expertise, such as oncology, cardiology, or orthopedics.

By integrating cost-effective care coordination, evidence-based treatment pathways, and outcome tracking, value-based specialty care ensures that members receive high-quality, targeted treatments while reducing unnecessary procedures and expenses. This approach not only enhances patient satisfaction but also drives better clinical outcomes for challenging health conditions at population scale.

Benefits of value-based nephrology care for health plans

Both private payers and CMS have recognized nephrology as one of the strongest opportunities to implement specialty value-based care models. In 2019, CMS demonstrated its commitment to value-based kidney care with the launch of the Advancing American Kidney Health (AAKH) initiative. Many national and regional payers have followed suit by launching their own dedicated value-based care programs in nephrology.¹⁷ Forward-looking plans are already scaling value-based kidney care, with one national plan recently extending its program to cover members in 39 states and one large managed healthcare company expanding to reach patients upstream earlier in the disease.

Why are health plans putting such a strong emphasis on value-based kidney care? Late-stage CKD and end-stage kidney disease (ESKD) are notoriously expensive to manage.

Costs of managing CKD and ESKD:

• Managing care for individuals with CKD historically costs twice that of managing care for those without the disease, regardless of insurer.¹⁸
• Spending on older adults with stage 4–5 CKD is more than $36,000 PPPY.¹⁹
• Once patients progress to ESKD—at which point many initiate costly dialysis treatments—the cost of managing their care skyrockets to upward of $100,000 PPPY.²⁰

A value-based approach to kidney care that emphasizes early detection and intervention, risk management, and care coordination can mitigate these costs by keeping members out of the hospital and slowing disease progression—which, in turn, delays the need for costly late-stage treatments.

McKinsey & Company point to value-based nephrology as a model for other specialties to follow, with programs reporting “substantial reductions in hospital admissions, readmissions, and dialysis crashes, as well as widespread adoption of in-home dialysis, both improving outcomes and reducing the cost of care delivery.”²¹ As one example, by engaging 90 percent of eligible members with CKD and ESKD in value-based care programs, one national health plan was able to reduce related hospital admissions by 15 percent.²²

Mini case study: Value-based kidney care saved one national health plan $36.2 million

Recognizing the opportunity to improve healthcare cost management, one national health plan partnered with Interwell Health in 2020 to improve care for its commercial plan members living with ESKD. In the first four years of the value-based care program, the health plan generated $11.3 million in savings compared to the market cost trend for members in the same disease state not aligned with the Interwell program. The savings were largely driven by reduced hospitalizations and readmissions, and the program also consistently meets or exceeds quality measures, including ESKD dialysis accuracy, vascular fistula vascular access, clinical depression screening, and advanced care planning targets.

ESKD commercial program results at a glance:

• 7 percent reduction in hospitalizations
• 5.6 percent reduction in 30-day readmissions
• $11.3 million in savings in four years

In addition to improving results for ESKD commercial members, the health plan has also piloted value-based kidney care programs among its MA members with ESKD and CKD stages 3–5. These programs have delivered results including:

• 32 percent reduction in CKD admissions
• 4 percent reduction in ESKD admissions
• Increase in home dialysis rates

In total, the plan’s value-based kidney care programs in partnership with Interwell have resulted in $36.2 million in savings over four years.

How to implement a successful value-based care model

Many health plans view value-based care as a strategic growth priority and are working to scale and expand value-based care initiatives. Yet there are challenges to overcome, including the need for government support, physician buy-in, and access to data. Here are three key health plan strategies for implementing a successful value-based care model:

• Prioritize high-impact specialty services: Some payers start small by launching value-based care in high-cost areas like specialty care. Programs focusing on kidney care or oncology often act as pilots for broader adoption once cost and quality metrics improve. Payers may give autonomy to local markets to launch controlled trials regionally and, once these smaller pilots demonstrate positive initial results, they often continue to expand state by state nationwide.

As one health plan executive pointed out at a recent industry conference, one year is not enough to evaluate results from value-based care pilot programs. He encouraged thinking about what outcomes will look like after three years to justify an investment in value-based care. From his experience, the longer patients are engaged, the better the results.

• Get smart with data and technology: AI, predictive analytics, and machine learning play crucial roles identifying cost-saving opportunities. Predictive models can help health plans both reduce near-term risks—such as preventing readmissions post-discharge—and also bring down long-term utilization rates.

Using advanced analytics, Interwell helped one regional health plan identify and engage eligible members with CKD and ESKD at risk for adverse outcomes and develop a more proactive approach to patient care. The value-based kidney care program ultimately reduced member hospitalizations by 30 percent and delivered $3.6 million in savings.

• Build effective payer-provider partnerships: Payers that establish strong partnerships with providers see more consistency and success in achieving cost and quality goals. Effective provider enablement strategies focus on enhancing, rather than interrupting, existing physician-patient relationships and empowering providers to drive sustainable change in how they deliver care. This can include offering clinical decision support tools and embedding data-driven insights into clinical workflows to support risk stratification and personalized care.²³

On a recent episode of the Kidney Health Connections podcast, former Health and Human Services Secretary Alex Azar explained the importance of finding the right partner to drive physician engagement and deliver results. “I honestly don't know how as a private payer you could effectively go it alone,” said Azar. “That toolkit of knowing your patients, best practices, centers of excellence, electronic medical records, the right physicians, core concentration of nephrologists, practice extenders—those are all things that don't happen by accident, and I think would be very hard to develop just at a payer level.”

A new era for managing costs and care

Health plans in 2025 face significant pressures, but value-based care offers a path forward. By adopting member-centric, data-driven frameworks, payers can reduce costs while improving outcomes and engagement.

Learn how Interwell Health can help improve chronic kidney disease management and drive operational efficiency through tailored value-based healthcare solutions for payers.

 

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