Value-Based Care: How CFOs can mitigate financial risk with analytics

By Milliman MedInsight

29 February 2024

The imperative for value-based care (VBC) is undeniable. Having access to robust analytics is no longer just a benefit, but an absolute necessity. Escalating U.S. healthcare costs persist as a significant concern for organizations, placing a substantial burden on chief financial officers (CFOs) to address and manage this challenge effectively. To effectively navigate the path to risk and ensure the success of their organizations, CFOs must possess a deep understanding of benchmarks, member attributes, and the dynamics of provider unit costs within the Total Cost of Care (TCOC). Additionally, they must confront economic challenges such as high inflation rates and supply chain issues, all while striving to achieve affordability goals.

Because risk management is paramount to an organization’s success with value-based care, CFOs must safeguard their organizations from financial losses and ensure long-term sustainability. One way to do this is by adopting a robust data analytics infrastructure that allows for the seamless integration of data needed to not only analyze patient outcomes, costs, and utilization but also monitor contract terms and performance. Armed with these insights, CFOs can collaborate with other key stakeholders to make informed decisions that reinforce the organization’s commitment to delivering high-quality, cost-effective care.

Advanced analytics: Making sense of performance and opportunities

According to recent findings of the BDO Healthcare CFO Outlook Survey, which surveyed 100 healthcare chief financial officers (CFOs), approximately 80% of respondents anticipate enhanced profitability in 2024. Despite this optimism, the ever-changing road to value-based care requires CFOs to remain vigilant about regulatory pressures and the complexities of their organizations taking on more risk.

Healthcare CFOs can strategically prepare their organizations for potential transactions and seize valuable opportunities by investing in advanced analytics capabilities. These capabilities enable a better understanding of the landscape and potential outcomes. Furthermore, automation plays a crucial role in addressing labor challenges and rethinking workforce solutions. By automating certain tasks, resources are freed up to focus on strategic initiatives, such as enhancing the patient experience. This allows organizations to allocate their resources more efficiently and effectively, ultimately driving better outcomes.

Centralizing data with an advanced analytics platform offers several benefits, including the ability to:

  • Identify and target high-risk patients: who are at high risk of developing chronic diseases or experiencing other adverse health events and can benefit from preventive care and early intervention programs, which can improve their health outcomes and reduce costs.
  • Monitor and track performance metrics: such as quality of care and total cost of care to identify areas where improvements are needed and where adjustments can be made.
  • Project and maximize ROI from value-based contracts: with increased visibility into how each of these contracts contribute to the overall revenue stream.
  • Use predictive analytics to identify potential risks and opportunities: to identify potential risks and opportunities associated with value-based care and develop strategies to mitigate risks and capitalize on opportunities.

By maintaining a clear focus on these key areas, healthcare organizations can proactively address potential disruptions and ensure the seamless delivery of essential services. This strategic approach provides a clear focus on these key areas and contributes to the overall stability and resilience of the organization.

Contract management: Ensuring compliance and maximizing revenue

Contract management is a critical component of value-based care success as value-based contracts can come with financial risks, even in the case of upside or shared savings arrangements.

To mitigate these risks and drive positive patient outcomes and cost management, CFOs should consider:

  1. Centralizing all contracts in a single repository: This will make it easier to track and manage contracts and ensure that all relevant stakeholders have access to the latest information.
  2. Establishing a process for reviewing and approving contracts: This process should involve input from legal, finance, and clinical teams to ensure that all aspects of the contract are considered.
  3. Monitoring compliance with contract terms: This can be done through regular audits and reporting.
  4. Renegotiating contracts as needed: The healthcare industry is constantly changing, so it’s important to renegotiate contracts as needed and monitor their progress over time.
  5. Using data analytics to identify trends and opportunities: Data analytics can be used to identify trends in patient care and utilization and provide a full view of an organization’s financial performance across different types of VBC agreements.

With these additional insights, CFOs can help their organizations ensure uninterrupted care for their patient communities while prioritizing cash flow management, cost optimization, and risk mitigation.

Milliman MedInsight: Your trusted partner for VBC analytics and actuarial consulting

With the Milliman MedInsight VBC Platform, you can access a wide range of tools and resources that will assist your organization in gaining valuable insights into your current position and successfully navigating the VBC trajectory. Our platform is equipped with a robust set of features that allow for flexibility in adapting to unpredictable economic conditions, including the ability to better monitor and manage VBC agreements.

We stand out in the industry for providing:

  • Unparalleled expertise in patient attribution: No one understands the importance of patient attribution better than Milliman MedInsight. We have deep experience in efficiently attributing costs to specific patients or episodes while enabling risk adjustment. This approach provides the information organizations need to navigate VBC arrangements with confidence and better support the expenses associated with the patients they serve.
  • Advanced contract modeling: Our sophisticated algorithms analyze a contract’s financial target and apply it to individual patients, offering precise and prescriptive data insights. We also provide organizations with the ability to evaluate how modifying approaches can affect revenue from various contracts (e.g., commercial, Medicare Advantage, Medicare fee-for-service [FFS] and Medicaid). This unique capability empowers your organization to take targeted action for optimizing your financial performance.
  • Tailored risk modeling for optimal results: We recognize that risk modeling is crucial and must be tailored to your specific lines of business and demographics. For example, you cannot apply hierarchical condition categories (HCCs) to Commercial or Medicaid lives. We work with each organization to ensure the accuracy and relevance of our risk assessments, enabling them to effectively manage and mitigate risks.
  • Access to Milliman consultants and comprehensive analytic support: Milliman MedInsight offers your organization access to Milliman consultants who offer a wide range of expertise to meet your reporting and program needs. Our team is committed to conducting assessments, creating roadmaps, and helping maximize your analytic capabilities. Furthermore, we have a dedicated training and certification program to ensure users of Milliman MedInsight solutions receive formal education and certification.

In summary

By providing access to industry-leading benchmarks and groupers, as well as a customizable ecosystem of software and solutions, we empower you with the necessary tools to maximize your potential in the VBC landscape. Additionally, we offer advisory services various areas, including augmenting your analytic capabilities, conducting on-demand analysis for complex data requests, and developing your analytic maturity. Our expert guidance ensures that you receive the support needed to achieve success in value-based care.

To delve deeper into the power of analytics in optimizing value-based contracts and more, we invite you to explore our 2024 webinar schedule. Join us and industry experts as they share valuable insights and strategies for leveraging analytics in contract management and more.

Our executives will be joining The Health Management Academy CFO Forum next week. Be sure to look out for and connect with our leadership at the event.

Contact us to learn more about healthcare data analytics for value-based care