The transition towards value-based care (VBC) is rapidly reshaping the healthcare landscape. While this shift holds immense promise for improving patient outcomes and reducing costs, it also presents a unique set of challenges that demand careful consideration for successful contract negotiations and management. In this blog post Milliman MedInsight product manager, Umang Gupta, explains the intricacies of various VBC models and explores how healthcare organizations can leverage analytics to optimize financial performance and unlock the full potential of value-based care.
What are the implications of entering value-based care arrangements?
The shift from fee-for-service (FFS) models to alternative payment models (APMs) brings both opportunities and challenges. Value-based care aims to enhance patient outcomes and care quality, yet it introduces considerable financial risks. One of the key drivers of these increased financial risks is the diverse agreements between providers (such as ACOs) and payers, which link compensation to the cost and quality of care delivered to populations at risk. Each payment model has distinct features, benefits, and challenges, complicating management for organizations.
For example, with pay for performance (P4P) models, healthcare providers are rewarded for achieving specific quality metrics or performance targets. P4P aims to incentivize providers to deliver high-quality care and improve patient outcomes. However, it can be difficult to determine the appropriate metrics and performance targets.
With risk-sharing arrangements, there is shared financial risk between the healthcare provider and the payer. In these arrangements, providers are given targets for the expected costs of the population for which they are at risk. Providers can share in any savings that are produced if the population’s total spend is lower than the target. Risk-sharing arrangements can incentivize providers to improve efficiency and reduce costs, but they also carry the risk of financial losses if targets are not achieved.
“As with many VBC contracts, the major challenges are situations where the transfer of risk and/or other financial incentives between payer and provider are misaligned or do not reflect each party’s ability to manage and control the risk being transferred.” 1
How can analytics support a successful VBC strategy?
To succeed in VBC, data analytic tools are an indispensable resource for organizations aiming to facilitate informed decision-making, drive continuous improvement and empower healthcare providers to deliver exceptional patient care. Unlike traditional FFS models, managing various APMs presents significant challenges due to issues related to standardization, detail, timeliness, and audit requirements.
Common data challenges senior leaders at healthcare providers and payers often express:
- “We don’t know how we are performing until it is too late in the year to do anything about it.”
Tracking and monitoring performance is complex and requires both sound actuarial methodologies and timely data. Oftentimes, when a clearer picture of performance emerges, it may be too late in the year to right the ship if projected performance is negative. - “We receive data from different sources, which causes significant issues.”
Providers involved in multiple contracts must manage data from various sources, leading to inconsistencies and complexities in data integration and analysis. - “We don’t get the detailed insights we need to understand performance drivers.”
Standard reports typically offer a broad, top-level view—such as at the ACO level—without delivering the granular insights providers need to continually enhance performance throughout the year. Organizations need the ability to drill down to specific members and providers to track performance and distribute savings and losses equitably. Being unable to track VBC performance at a detailed level can prevent implementation of the right clinical interventions to achieve maximum savings. - “Data comes at different times, disrupting our processes.”
Although organizations may routinely receive claims and membership data, the infrequent updates on target information can hinder their ability to precisely monitor their performance in VBC arrangements. Monitoring performance regularly allows organizations to budget for future years and understand their financial risk exposure. - “The audit process is complex and time-consuming.”
The auditing process becomes laborious when validating final settlement calculations with partners. The need to precisely model complex and unique contract parameters adds to the difficulty of managing multiple VBC contracts, making the entire process intricate and time-consuming. - “We have limited resources, and the complexity of these tasks is daunting.”
Teams are often lean and prefer to focus on delivering quality care rather than diving deep into data reports. Additionally, they may lack the specialized expertise needed to generate the precise reports required to access actionable insights and drive informed decision-making.
Data analytics empowers organizations to reveal crucial insights that drive cost savings and highlight areas needing improvement. Investing in teams or solutions to unveil these insights is essential for organizations aiming to identify savings within their VBC contracts. The ability to quickly pinpoint these opportunities enables the design of targeted interventions and programs to reduce costs year-round, turning identified savings into realized ones.
“While tracking direct impact is important, organizations will also need to know how all lives are performing.” 2
What are some resources to help payers and providers with VBC contracts?
Healthcare organizations can improve contract management and financial outcomes with the Milliman MedInsight VBC Contracts application. As part of the VBC Platform, it provides insight into current contract dynamics and financial performance. By leveraging Milliman’s actuarial expertise, the application helps organizations make informed decisions, offering clear projections for the current year at the ACO and individual provider level.
VBC Contracts empowers organizations to:
- Identify and model factors that enhance VBC contract performance.
- Efficiently manage risk-based contracts, like MSSP and ACO REACH with actuarial oversight.
- Maximize ROI from VBC contracts by quickly identifying opportunities to decrease costs and drive revenue growth.
How does MedInsight VBC Contracts stand apart from other applications?
MedInsight consolidates detailed claims and membership data from major national payers and CMS into a unified data model. It then models contract parameters based on the latest specifications along with monthly data refreshes. Savings and losses can be equitably distributed across the network by setting targets at the member level. The application’s robust auditing features ensure accuracy in projections and settlements, providing users with confidence during negotiations for future terms and payments with payer partners.
How can I learn more about MedInsight VBC Contracts?
Schedule a Call: Connect with one of our VBC Contracts experts.
Our Website: Read more about our VBC Contracts application or explore a use case.
VBC Contracts Webinar: Learn how to overcome obstacles and succeed in VBC Contracts in this webinar “Contract Management Mastery: What you need to succeed in value-based care contracting”
2 Value-Based Care Contract Management | Milliman MedInsight