Value-based payments: How well do you know your members?

November 13th, 2017 / By Gina Perna

New York is one of many states in the process of reforming the way it pays providers through a Delivery System Reform Incentive Payment (DSRIP) program. The goal is to achieve a 25 percent reduction in potentially avoidable hospital use over 5 years. Medicaid Managed Care Plans and providers are developing shared savings programs that will transition fee-for-service reimbursement into value-based payment (VBP) arrangements by 2020. Patient illness burden, utilization patterns and costs must be fully understood by both payers and providers before VBP contracts are signed.  Focusing efforts on patients with the greatest illness burden, utilization and costs can be an effective foundation of a value-based payment program, since a small portion of the population can utilize a substantial proportion of healthcare expenses.

Healthcare plans and providers may already have specific disease and case management programs in place to manage member populations with chronic conditions. Often the goal is to minimize the cost associated with more intensive services such as hospitalizations and emergency room visits. Since a small proportion of patients usually account for the majority of utilization and costs, it is critical to identify, manage and track this population, particularly those that will continue to utilize a larger proportion of resources in the future. A recent study of a selected Medicaid cohort revealed the conditions of members in this population do not necessarily align with traditional methods such as disease-based care management strategies.  These patients may either not be present in some specific care management target lists, or the full range of their health status may not be evident. Those patients with more complex conditions, often multiple chronic conditions can require a more intense level of care and coordination. Utilization and cost can quickly escalate for this population when traditional management strategies fall short. This means identifying members that are not only utilizing a higher rate of services because they have chronic or multiple chronic conditions, but specifically those that use more services in relation to their peers who have a similar illness burden. Furthermore, identifying members who are using an excessive amount of resources year over year can help prioritize care management efforts and mange future costs.

Understanding the cost associated with these members can assist a plan or provider in managing these conditions appropriately. Total cost of care analytics can provide guidance to uncover specific patient cohorts and their associated expected utilization patterns and spend against patients with the same condition and illness burden. Often, we see variation in the utilization patterns and costs associated with these complex members. Using a benchmark to compare patients within the same complex risk cohort allows providers and managed care plans to understand the potential costs they undertake in value-based payment programs.

As payers and providers continue to refine value-based contracts, the complex members of the population can present quite a “surprise” in contract valuation if left untapped. Understanding ACOs or network expected cost targets and utilization performance for patients identified with higher utilization and costs compared to their peers, can drive relationships within healthcare systems. Those that have already started to address the issue are experiencing better performance. Setting targets based on healthcare data across service sites and providers for those with the same illness burden could allow for the best assessment of a target patient population.   

Gina Perna is a consultant with 3M Health Information Systems.