Value-Based Healthcare was the cover story in HFM’s October and November 2019 magazines. The authors cited experts with different perspectives, but FRG sees common threads in their advice. This article makes the connections.
In the November issue of HFMA magazine, Jennifer Carney of Beth Israel Lahey Health Performance Network was cited as saying resources, revenue and clear explanations are the three prerequisites for successful accountable care organization (ACO) planning. Interestingly, in the October HFMA magazine, Sheila Fusé of Navvis Healthcare suggested a similar triad. Her phrasing was more direct: having a team-based approach, HCC coding and data to support population health. We see these two voices as providing parallel advice.
Human and Technical Resources
We see the reference to resources and a team-based approach to engagement in Value-Based Care as linked and similar structural components. The complexity of delivering value means reviewing the population and providing service efficiently. Building a team is expensive, and those resources scan, prioritize, and engage. Providers are best deployed for the latter. Analytical and managerial types do the first two by partnering with clinical mid-level clinicians and quality protocols. The people, process and technology are linked into the structure and require resources.
Fee for Service medicine, in which efforts are focused on demand-side scheduling and post-service payment capture, is in direct contrast to the focus on value. Value-based healthcare contracts are fundamentally designed to bring costs down. The target medical loss ratio, when it becomes the responsibility of a provider organization through a transfer of substantial financial risk, pushes individual primary care doctors to think like insurers and manage the unit cost and utilization of acute need by substituting lower cost preventive care and emphasizing efficient use of the provider network.
In the target medical loss ratio framework that is central to value-based care, revenue is the denominator. In Managed Medicare, now called Medicare Advantage, and version of fee for service Medicare managed by ACOs, managing revenue is fundamentally about coding acuity so that future revenue follows cost. Even State-sponsored managed Medicaid programs are known to adjust revenue allocations per plan to balance the available revenue. CMS’s Report to Congress on Medicare Advantage helps to explain the link between the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) and how payments to plans and downstream providers are risk adjusted in the first of the three frameworks. The Shared Savings and Losses and Assignment Methodology Specifications explains similar elements for Accountable Care Organizations. Many states follow similar methodologies for risk adjustment in managed care payment models. In short, coding and revenue are very much linked. The industry experts cited in both articles were aligned in this second part of their triads although Carney was less targeted, albeit equally pointed, as Fusé.
Analyze, Report and Engage
Finally, we see data to support population health and having a clear picture of care delivery dynamics as synonymous. Carney actually pointed to understanding the “complexity of the risk model” as the third element, but added the concept of tailoring reporting to help physicians understand how what they do impacts the overall performance of the pool, ergo Carney and Fuse are saying the same thing. Data organized efficiently and presented concisely to support understanding is something FRG understands. Managers and providers need to quickly identify, understand and act of the opportunities that the data about the performance of their risk contract conveys.
Drill and Repeat
The data sources are financial, operational and clinical, but perspective is important. If a savings is not created, there is no windfall to share. That’s why FRG’s focus has been on presenting the medical economics trends and reconciliation detail in a drillable format to speed analysis and executive decision-making. While aligning revenue to cost has had some focus, it important to remember that the purpose of these value-based programs is to lower the cost of medical care. Revenue, even if properly aligned to cost, will ultimately shrink, so understanding unit cost and utilization metrics, high cost members and primary care providers with resource intensive panels is vital. Effective managers will use comprehensive financial analysis tools to develop medical cost improvement plans and achieve financial results at the same time they are exploring ways to boost quality and preventive care.
Disclosure: neither of the individuals cited participated in writing this article. Their comments in the public media of Healthcare Financial Management (HFM) magazine are cited for context. Visit https://www.hfma.org/membership/overview.html to subscribe.