This is the final part of a four-part white paper series examining the life cycle of value-based care models from the provider's viewpoint, focusing on essential factors for provider organizations involved in these arrangements. All articles published in the series can be found here.
Introduction to identifying opportunities for success in value-based care
The goal of value-based care (VBC) models is to reduce healthcare costs, improve care quality, or both. To succeed in VBC arrangements, provider organizations must identify and implement effective strategies that enhance patient outcomes while maintaining financial sustainability. Consequently, these agreements frequently include incentives aimed at transforming care delivery to meet these aims. However, as a provider organization, it can be difficult to pinpoint and implement the appropriate changes that will not only elevate patient care but also ensure financial success within a given VBC framework. This paper covers strategies for succeeding in VBC arrangements and how to implement them.
Provider organizations can optimize their performance by leveraging several common mechanisms within VBC agreements, including:
- Risk adjustment
- Active care management
- Targeted patient interventions
Strategies for maximizing performance in VBC arrangements
Appropriate risk adjustment to optimize reimbursement
A fundamental component of VBC contracts is risk adjustment, which aims to ensure that providers are fairly compensated by accounting for patient morbidity variations within their attributed panels compared to the population benchmark. For instance, an elderly patient with conditions like chronic heart failure (CHF) and chronic obstructive pulmonary disease (COPD) is expected to incur higher costs than a younger, healthier individual.
Although risk adjustment is a prevalent feature in VBC arrangements and significantly affects settlements, providers often overlook the importance of identifying accurate diagnosis coding. Ensuring that comorbidities and chronic conditions are properly documented and coded within VBC agreements allows providers to receive appropriate reimbursement for high-risk patient populations.
Active care management
Reducing emergency and inpatient utilization
Most VBC models encourage a decrease in emergency room (ER) and inpatient (IP) visits through quality measures, total cost incentives, or a combination of these approaches. Emphasizing care navigation, patient education, and efforts to redirect ER visits can significantly benefit many VBC models and enhance the patient experience. Implementing these strategies not only reduces avoidable hospital visits but also improves patient satisfaction and VBC performance metrics.
Leveraging cost-effective treatment alternatives
Another approach to optimizing VBC performance is implementing targeted interventions tailored to specific diseases or treatments. For example, a healthcare provider might opt for a more economical treatment in place of a pricier alternative, provided that the clinical outcomes are equivalent. This practice is prevalent in conditions frequently managed with medications, where providers may replace brand-name drugs with cost-effective generics or biosimilars when suitable. By integrating evidence-based treatment alternatives, providers can balance financial efficiency with high-quality care.
Selecting and implementing an intervention
While there are numerous strategies for optimizing VBC performance, organizations should focus on a few high-impact initiatives at a time to achieve measurable results. Effectively implementing changes necessitates robust change management and dedicated effort; organizations attempting too many projects simultaneously often achieve only minimal results. Nevertheless, there are several methods that provider organizations can employ to successfully drive initiatives within a VBC framework.
- Leverage market intelligence to identify opportunities
- Harness the power of predictive modeling
- Limit the number of initiatives
- Identify strong champions for initiatives
Leverage market intelligence for benchmarking
Determining which VBC interventions are actionable is difficult without insight into how other market participants are performing. Without comparative market data, it’s challenging to figure out whether high utilization or costs stem from market conditions or the actions of the provider organization itself. Provider organizations aiming to pinpoint the best intervention opportunities should leverage market cost and utilization data to identify potential areas for improvement.
The most straightforward method to assess performance in comparison to a market area is by employing benchmarks. There are two primary methods for benchmarking: actuarial and empirical.
- Actuarial benchmarks, like the Milliman Health Cost Guidelines (HCGs), generally categorize services into predefined groups or episodes, and offer cost and utilization data based on historical information from across the United States or specific regions. These actuarial benchmarks can then be tailored to account for the demographics, risk factors, and specific locations of the empaneled patients.
- Empirical benchmarks rely on using observed data within a given market. The provider organization defines a service area, then third-party data is used to measure the cost and utilization within the market. Risk adjustment may also be applied here to account for differences in the provider organization morbidity compared to the market.
Another method involves matched cohorts. Here, the provider organization selects a comparable group of patients to those in their VBC panel. They then assess the cost, utilization, and quality of care for this group treated at different facilities to evaluate their own performance.
Employing these benchmarks enables a provider organization to gauge its strengths and weaknesses in comparison to other entities in the market. This understanding allows them to discern which aspects of their costs and utilization might stem from their own treatment patterns rather than external market conditions.
Harness predictive modeling for proactive decision making
As discussed in part two of this series, predictive modeling can be used to forecast financial performance in a pro forma model before entering a VBC agreement. However, predictive modelling can also serve as an effective tool for achieving success within the framework. To identify opportunities and prioritize care, provider organizations can use predictive analytics at the organizational and patient levels.
Predictive analytics at the organizational level can reveal patterns that are often missed by conventional benchmarking methods. For example, automated algorithms can more easily identify cost correlations across different service lines or disease states compared to traditional utilization-based benchmarks. By comprehending these interactions, provider organizations can pinpoint inefficiencies either within specific treatment areas or related to patient journeys and handoffs.
While generating patient-level predictions can be more challenging, they offer substantial value in numerous ways. By understanding the expected cost and utilization at the patient level, healthcare providers can better allocate resources, identifying which patients might need navigation or care coordination services. While both claims and electronic medical records (EMR) data can be used to build these predictions, EMR data often offers richer insight into patient needs and helps gain clinical buy-in to use results. Ultimately, combining claims and EMR data provides the most powerful predictive value.
Additionally, these predictions can estimate which patients are likely to require hospitalization, emergency care, or out-of-network services, influencing the provider organization's performance and its ability to manage care effectively. Predictive modeling can also enhance risk adjustment by identifying discrepancies in risk coding that may not accurately reflect a patient's morbidity. Patient-level predictions enable healthcare providers to target specific areas for improvement and efficiently align their resources with patient needs.
Furthermore, as provider organizations shift toward VBC, they must still manage and optimize their performance within traditional fee-for-service contracts while exploring new VBC opportunities. Utilizing predictive modelling and optimization techniques can assist in pinpointing initiatives that will enhance overall performance across the organization’s array of agreements.
Limit the number of initiatives for greater impact
When a provider organization thoroughly examines its performance in a VBC arrangement, it often uncovers numerous strategies to enhance cost efficiency and quality. Nevertheless, attempting to seize multiple opportunities simultaneously can result in initiatives that either fail or fall short of expectations. The challenge typically lies in implementing changes to treatment protocols and daily operations, particularly within organizations that have entrenched processes. Hence, it is crucial to prioritize effective change management when modifying established procedures.
Provider organizations should aim to undertake a manageable number of initiatives within each performance period to ensure successful implementation. As these initiatives often become routine over time, concentrating on just two or three at once and introducing new ones as the previous ones get established can effectively promote continuous improvement within the VBC arrangement. In addition, it allows for better evaluation of the effectiveness of initiatives by limiting the interaction effects between initiatives, enabling better strategic decision making. Furthermore, prioritizing initiatives that are relevant to multiple VBC arrangements and patient populations can maximize return on investment, leading to significant savings with relatively few active initiatives.
Additionally, taking steps to minimize friction can help entrench initiatives in the organization’s day-to-day operations. Keeping communications focused and limited to what is necessary can help reduce initiative and notification fatigue that may cause resistance to new initiatives. One of the most effective ways to do this is providing reminders and actionable information directly through the EMR at the point of care. Minimizing the number of systems that staff, especially clinicians, need to interact with can greatly increase the chances of success when changing or adding to workflows.
Identify strong champions for change management initiatives
An essential strategy for successful change management involves leveraging champions within the organization. These key individuals, who may be physicians, nurses, or administrators depending on the specific initiative, play a crucial role in driving implementation efforts. Provider organizations should identify one or two champions per pertinent department at the commencement of an initiative, allowing them to contribute insights on implementation and communication strategies.
We observe that organizations benefit significantly from this approach for several reasons:
- Involving a representative from the department responsible for daily implementation fosters greater staff buy-in by ensuring that essential viewpoints are considered without needing to survey all members within the function. For instance, clinicians are more receptive to an initiative if someone with clinical expertise contributed to its development.
- Having a champion with an understanding of existing workflows and employee sentiments can help circumvent potential challenges that aren't immediately obvious.
- A dedicated champion within the department can identify early signs of an initiative's difficulties and make necessary adjustments.
Other considerations: Managing internal cost structures
Beyond external cost reductions, provider organizations can evaluate their internal cost structures and strive to reduce administrative expenses to deliver care within VBC arrangements. Although this may not decrease the costs for payers or the overall healthcare system, it enables provider organizations to thrive even with agreements that reduce their total reimbursement for care. For instance, these organizations can ensure that clinical staff operate at the top of their licenses, thereby diminishing the reliance on higher-cost physicians compared to other clinical support staff. Measures in this area can help secure the financial stability of an organization regardless of contractual reimbursement constraints they have with payer partners.
Conclusion: Strategic execution for long-term VBC success
Achieving success in VBC models depends on a provider organization's capability to implement changes through targeted initiatives. These organizations can utilize benchmarks and predictive models to pinpoint the most promising opportunities for initiatives and then engage key advocates within the organization to ensure their execution. It is crucial for provider organizations to balance their efforts by prioritizing initiatives that are both quantitatively impactful and qualitatively feasible within their specific organizational structure and culture, thereby avoiding the pitfalls of overextending.
Related insight
Read the other papers in this series at the following links: