Solutions for the Health Industry

The transition to value-based care continues to accelerate, and Centers for Medicare and Medicaid Services (CMS) policy updates ensure that this trend will continue. At the end of 2014, .1 By 2018, CMS will more than double that number, linking at least half of Medicare payments to value-based models.

CMS isn't alone in this push towards provider-borne risk. Blue Cross Blue Shield's new Blue Distinction Total Care has created a network of 450 local value-based plans, which are estimated to be generating more than $840 million annual savings.2 Aetna announced to investors that it planned to increase its value-based contracting from 30% of Aetna's medical spend in 2015 to 75% by the end of the decade.3

That means there's at least one thing healthcare providers can count on right now: constant change.

Predicting Costs in an Uncertain Environment

Providers can expect to be operating with an ever-changing mix of payment models for many years to come. In an October 2015 HealthLeaders Media survey of hospital, health system and physician organization leaders, respondents said they expected their organization to be using the following payment models over the next three years:

  • 55% planned for bundled payments
  • 61% planned for shared savings programs with payers
  • 41% planned for fee for service
  • 23% planned for full risk

Some provider organizations also have plans to look at new ways of working with payers to manage changes in reimbursement models:

  • 18% planned for shared profit and loss arrangements with payers
  • 16% planned to invest in their own insurance companies
  • 12% considered a joint venture with a health insurance company

Understanding how to make these new models profitable will require not only key data about costs, but also accurate, complete information about the care patients receive outside of a single health system. Right now, almost half of the healthcare organizations represented in the HealthLeaders survey said they lacked the analytics capacity to meet those needs.

Those information gaps will make it more difficult for providers to navigate their way to profitability in an environment of rising costs and where some reimbursements for care is fee-for-service, some is risk-based and some is something in between.

Information gaps will make it difficult for providers to navigate their way to profitability.
—John Shewell
Vice President, Healthcare Analytics


Analytic Capabilities for Value-Based Care

Value-based care is here to stay, and providers who survive and thrive in these years of transition will be those who know much more about their costs than they do now. Better data and better analytics will be the key to weathering the transition and finding success.

For example, a hospital may estimate receiving a full reimbursement for care related to a hospital-acquired infection or even a readmission within 30 days. Depending on the quality measures that apply, Medicare and other payers may reduce reimbursements or may not reimburse at all. Decisions made on estimated reimbursements can determine whether a service line lives or dies. Without analytic capabilities sophisticated enough to manage the intricacy of current rules and rates, providers' best guesses may not be good enough.

Other necessary types of analysis include:

  • Calculating the true total cost of care, using the cost of goods sold, such as prescription drugs, in addition to the cost of an individual procedure to determine profitability
  • Modeling for populations before taking on risk-based contracts such as Medicare Advantage
  • Comparing the costs of in-network and out-of-network services to manage leakage and choose intelligent, cost-effective referrals

While many organizations are not yet ready, industry trends suggest that a growing number of healthcare leaders are making the IT investments to meet these new challenges.

Analytics solutions that maximize flexibility --using vendor-neutral technology and easy-to-modify rules engines --will be especially important during this period of constant flux and growing complexity. Solutions that enhance transparency at every level of analysis give users increased control and confidence. An agile, but robust solution such as can accurately model revenue projections for the mix of contracts you have today - and those you add in the future.

The transition to value-based care will be creating uncertainty in the healthcare industry for several more years. Those organizations that move forward with confidence are those most likely to succeed.


John Shewell

About the author

John Shewell is Vice President, Healthcare Analytics, RelayHealth.  John’s team provides Business Intelligence, Financial Decision Support, Population Management and Benchmarking solutions to the healthcare provider market.  
John has more than 25 years of product innovation, technical and healthcare experience, serving in product management, sales, support and services with Studiomaca. Prior to Studiomaca, John was employed by Allegheny Health Education and Research Foundation as a Decision Support Administrator. 
John graduated from Lehigh University with a BS in Computer Engineering followed by a Masters degree in Business Administration.