As the cost of healthcare continues to rise, many payers are exploring value-based care models that lower costs by putting a greater emphasis on improving outcomes. Value-based care provides payers with stronger controls so that they can encourage services that focus on preventative care and not just treatment of a presenting illness. This leads to a healthier population who would require fewer services and thus reduce the overall cost of care. In value-based care payment models, reimbursement is based on the total cost of care and quality performance measures.
To achieve this, payers need to leverage data to identify opportunities for improvement, collaborate with providers, and support investments in medical technology. To get started, payers should break down their approach into phases.
Evaluating the Current State of Value-Based Care
The first phase is understanding the current state of value-based care in their market, which will help them decide what programs to pursue. Some of these statistics might already be reported by their Medical Economics or Actuarial teams: metrics such as emergency room usage, readmission rates, “frequent flyer” percentages, PMPM, etc. These can be useful for identifying some quick wins. The payer also needs to recognize what the current market dynamics are. Are providers in their market already in value-based care programs? If so, what types of programs are they participating in? How much of the design is being dictated by CMS, other payers, or the providers themselves? Are there direct-to-employer program(s) in the payer’s market? If so, what are those programs? The better payers understand their current market programs, the more likely it will be that they can ramp up complimentary programs quickly.
How Will Value-Based Care Fit with Existing Models?
Second, payers must understand how value-based programs relate to their overall network contracting strategy. Do they outsource their pharmacy, mental health, or any other programs? Do they lack contracts for telehealth or ambulatory surgery centers, which, if present, could accelerate their value-based contracting implementation and savings? Do they have any so-called “Favored Nation” contracts (i.e., lowest price guarantees with providers) that might impact value-based care programs with incentives for those not outside the contract? The answers to these questions must be determined to better analyze what type or types of value-based programs will be successful for the payer’s business.
Knowing Your Patient Population
Third, payers must understand their membership. How much of their business is fully funded versus self-funded? Are they on the exchange? Do they have Medicare Advantage and/or Medicaid patients? Since the Center for Medicare and Medicaid Innovation (CMMI) drives a lot of the value-based programs for Medicare and greatly influences Medicaid, having large populations in those areas might highlight program designs that would work best based on CMS’s existing programs.
Gathering this data may seem onerous but having it readily available gives payers the ability to move into the next phase better situated. Payers can task their internal analytics resources to gather this information for them. If they choose to assign this project internally, they may want to choose a resource who already is interested in value-based care, as whoever is gathering the data to consolidate and analyze will be developing a level of expertise that will be valuable for the company on many fronts, not just in value-based care. Another approach would be to bring in a company that already specializes in the value-based care space. Whether payers choose to perform this data-gathering exercise internally or externally, they will want to make sure education and knowledge transfer to their larger internal team is a part of the project plan. The findings from value-based care initiatives can improve quality and cost savings across other segments of their business, as well.
Once the data is compiled, payers can move onto the fourth phase, which is evaluating what it all means. This part of the process can be challenging. If their team has little to no expertise with value-based care per se but did the initial analysis, it may be beneficial to use knowledgeable outside resources to help with a review of the data. While it’s not necessary, it may accelerate actionable insights, with the goal being to ascertain which programs would work best within the payer’s existing business. Is the market relatively advanced when it comes to value-based initiatives, and ready for full capitation? Or perhaps a stepped approach is more realistic, with a shared savings model that phases in downside risk over time. Are there existing relationships with systems or providers that could be leveraged as partners for new programs? Is there a concern that any self-funded business would not want to participate in retrospective shared savings programs, but would want to participate in prospective programs? If so, educating these entities on the benefits of participating in both types of programs will be necessary, as it is important to include as many books of business as possible.
There are a lot of variables to analyze, and it can feel overwhelming – it’s important to acknowledge that it’s okay if the initial program design doesn’t get it exactly right. The best approach is for the payer to build a roadmap that is flexible enough to adjust based on the results of the program. Otherwise, payers risk being stuck in “analysis paralysis” and stalling or failing to make entries into the value-based care space can be even more dangerous than standing still. At stake is the ability to mold the space to be advantageous for both the payer’s business and their partnered systems and providers. It is unquestionably better to be moving in the right direction than to not be moving at all.
Designing Value-Based Programs
Finally, once the payer’s programs of interest have been determined, the next phase is program design. There are a few options, with payers often preferring to handle the design internally. However, there are several potential pitfalls with this approach. First, technology likely already exists to operationalize the programs envisioned. While it will cost money to purchase an external solution, it will likely increase speed-to-market with a swift ROI when working with the right external partners. Second, any custom-built internal program, when there are already industry-accepted definitions available, will be harder to implement in the market. Providers are already managing a multitude of different quality metrics and goals for various programs; if a new program doesn’t align with an existing program’s components, providers may not want to participate. Third, and maybe most importantly, the payer must ask if their claims system can operationalize their long-term strategy. Manual or semi-manual solutions that work well in a pilot program can quickly become unscalable and stand in the way of the longer-term roadmap. Lastly, when considering whether to build internally, the payer must consider how it will handle provider monitoring and reconciliation reporting. The provider needs to receive actionable data from the payer in a consistent and timely manner in order to be successful. If the provider doesn’t succeed, the program won’t either. As such, supporting this partnership with the provider is of critical importance.
If payers choose to outsource during any part of this process, they should be sure to request vendor bids with criteria based on earlier decisions and check references. Enlace also highly recommends asking about the flexibility and adaptability of the solution, to ensure that it can grow and pivot as needed throughout the payer’s value-based care journey.