Activating the VBC Flywheel in the Evolving Risk-Based Environment

Balancing automation with expert input to effectively navigate the complexities of contract management.

Healthcare systems have weathered over a decade of transition efforts towards value-based care (VBC), a seismic shift aimed at improving patient outcomes while reducing costs. Today, nearly every risk-bearing entity in the industry has explored varying avenues toward managing population health outcomes, but their success is not consistently realized. Unsurprisingly, fine-tuning the VBC flywheel has become a top priority for organizational leaders working to enhance health and care and achieve increased operating income and sustainable business growth.

Industry analysts suggest that providers can systematically move from average performance to the top 10th percentile within their respective peer groups (footnote 1). For example, ACOs/CINs that begin with a 6% median savings rate can realistically achieve 12-13% gross savings relative to the Medicare benchmark when the value-based flywheel is operating at full capacity.

In dollar terms, managing 50,000 Medicare lives could mean an extra $35-40 million in gross savings (footnote 2)—that's like getting an $18-20 million boost in incentive payments with a two-sided 50-50 risk deal. This impressive gain relies on the flywheel effect, which we'll delve into further down. Once you set up the proper operations and executive functions, hitting the 90th percentile is more about science than artistry.

As healthcare organizations gather more up-to-date and accurate data, their experience in managing populations annually helps them significantly improve their contract modeling, network performance, and accuracy in financial analytics. By refining their strategies based on past years' experiences, health systems can promptly make corrections. This early action gives them an informational edge in discussions with payers.

What Makes up the VBC Flywheel?

The flywheel includes key elements such as contract modeling, optimizing provider networks, managing performance, and financial reconciliation.

For organizations managing a 50K Medicare population across 3-4 risk-based contracts:

• Our team's analysis of 2022 MSSP ACO performance suggests that health systems engaging in "good" value-based risks can secure an additional 1-4% in incentive payouts -- even without changing their VBC operations. This could mean missing out on $14-15M from modeling activities alone. The complexity of this effort is significant. Simulating contracts and optimizing networks alone demand an investment of 150-160 analytics hours per contract. Additionally, teams must undertake activities like loading historical claims data, analyzing provider performance, and conducting further contract analytics to assist in payer negotiations.

• Innovaccer's customers, through real-time performance visibility and core workflow enhancements, are likely to see modest savings of around $8-9M. However, healthcare providers that haven't tapped into the potential value of $20M+ by years 4-5 are essentially leaving money on the table. When customers identify early opportunities and integrate them into clinical workflows, they have consistently managed to reduce readmissions, lower emergency department visits, take care of high-cost and rising-risk patients, and enhance risk capture — to list a few achievements.

• Heading into the CFO’s office, we find the pivotal phase of financial reconciliation and settlement. Organizations should compare interim payments to performance benchmarks at least quarterly or semiannually, based on the availability of payer data and the claims runout period. Those engaging in regular, semi-automated reconciliation processes historically secure the full financial incentives. In contrast, those neglecting this risk losing $2-3M in annual reimbursements.

Driving Value: Essential Capabilities for Success

Leading healthcare organizations are now automating repeatable contract simulation and performance management tasks. By giving teams high-tech digital solutions, population health leaders and experts can spend their time on more valuable activities. This shift doesn't just improve strategic decision-making; it also cuts down on mistakes from doing the same analytics tasks over and over, driving more efficiency and value for the organization.

What Can and Can't You Automate?

Automating healthcare contract management boosts efficiency and accuracy, but it has its limits. Knowing what you can and can't automate is key for organizations looking to improve their operations. Let's dive into what you can automate:

• Aggregating data from various sources, including payer claims, clinical systems, HIEs, etc.
• Executing claims analytics, such as cost and episode groupers, risk models, trending, and applying IBNR and seasonal adjustments.
• Repeating monthly or quarterly financial incentive calculations per contract terms to reduce administrative burden.
• Providing the provider network with timely visibility on their performance, so they are motivated to support value contracting requirements as part of their daily routine.

Areas that require significant expert involvement and are not easily automated:

• Capturing the full complexity of contract terms is challenging. Contracts often have nuanced clauses that require human judgment to interpret accurately, as those terms are loaded into expert analytics engines.
• Assessing whether network evaluation methodology aligns with contract needs often requires subjective analysis and expert judgment, but accurate data and an organized structure for viewing it greatly improve that evaluation process. 
• Diagnosing the source of performance deviations against planned targets requires understanding the context and implications, which will never be fully automated but can be more visible with complex analysis.
• Pinpointing the correct levers to improve current performance typically requires expert insights that go beyond what automated systems can provide. This is the transformational shift that allows experts to focus on tasks that only they can do.

While automation can facilitate frequent comparisons between payer-reported and actual performance data, interpreting these comparisons and taking action based on them requires human expertise.  Examples include: understanding variances in attributed patient counts, validating higher quality scores from additional gap closures documented clinically, and uncovering patterns in risk adjustment inconsistencies.

How to Activate Your VBC Flywheel

As healthcare organizations grow and their payment and care delivery models evolve, their ability to harness automation for contract management will be pivotal. While many repetitive and data-intensive tasks can be automated, areas requiring nuanced understanding and expert judgment remain dependent on human intervention. By balancing automation with expert input, organizations can effectively navigate the complexities of contract management and unlock significant potential in the dynamic landscape of US healthcare.

Three Things You Can Do

1. First, benchmark your overall network performance against peers in the immediate market.
2. If the performance is below average, consider reevaluating your value-based operations. For example, integrating patient registries into care management workflows and tracking clinical outcomes are two small but mighty changes, allowing for better prioritization of patient care and allocation of resources.
3. For organizations that have nailed the basics and are looking to make the next big leap, it’s time to consider scaling contracts and expanding into more evolved yet attractive value-based arrangements. The key to success is investing in contract and performance modeling infrastructure that can offer greater confidence in winning in these risk transfers.

How Can Innovaccer Help?

Learn more about Innovaccer's financial analytics and contract management solutions, which consider key factors like cost, quality, utilization, and patient volume to provide providers with quality insights for improving contract performance and achieving year-end VBC goals, eliminating the guesswork.