Sheila Taton

The COVID-19 pandemic exposed the significant downside of the traditional “fee for service” (FFS) payment model for hospitals, health systems, and private practices. Millions of Americans postponed elective procedures, leading to steep revenue declines in 2020 because no procedure means no fee.

With the Delta variant fueling the virus’ ongoing spread, hospitals and health systems are struggling with capacity and utilization constraints along with rising expenses, even as hospital margins remain down compared to pre-pandemic levels (excluding federal CARES funding), according to a new Kaufman Hall 

 based on hospital financial data from August 2021.

Pandemic-related disruption to revenue streams has motivated many health systems to look beyond the familiar FFS model to explore and adopt value-based arrangements. But many health systems using alternative payment models have experience only with upside-risk contracts. These types of contracts absolve providers of financial responsibility if costs and utilization exceed the limits agreed upon with the payor.

Payors, though, increasingly are pushing downside risk onto hospitals and health systems, putting more pressure on these provider organizations to control costs. This has created challenges for many healthcare organizations that lack experience with risk-based arrangements that include performance and cost-containment goals. Many provider organizations that are unaccustomed to being financially liable for controlling costs have struggled to qualify for bonus payments.

Providers entering into value-based arrangements are also far less experienced than payors at negotiating contracts. As a result, some providers are more likely to agree to disadvantageous financial terms they do not fully understand. Given the traditional lack of visibility into performance, it’s not surprising that many provider organizations are unsure how to effectively balance quality and cost.

Yet having that transparent performance information can enable providers to apply analytics and determine where to make quality care improvements that also enable better cost and utilization performance. With the right data and an advanced analytics platform, hospitals and health systems can identify gaps in care and choose the best course of action to eliminate them.

Data analytics allows providers to gain insights from performance management measures and metrics that hold the clues to financial viability under risk-based and pay-for-performance contracts. By embracing advanced analytics, hospitals and health systems can accelerate their path to value.

Performance-based payment models are designed to compensate providers based on specific measures and outcomes. Inexplicably, however, health systems under risk-based contracts often lack data on cost and quality measures and don’t have efficient methods for measuring and tracking required performance metrics.

 to provide the needed information for reporting - yet payor data is often three or four months old by the time it reaches the health system. Such delays in receiving actionable data compromises an organization’s ability to make adjustments in real time.

Providers wouldn’t need to rely on payors for data, however, if they deployed advanced analytics to assess their own performance relative to quality metrics. Advanced analytics helps keep providers fully informed of their performance relative to contractual incentives. Real-time transparency allows providers struggling to meet quality metrics to immediately make changes to eliminate performance gaps.

With analytics, clinicians have access to information that drives more efficient and effective clinical workflows, identifies care gaps, and enables changes that improve the quality of patient care.

Advanced analytics is an essential tool for value-based care success because it can accelerate the path to value by ensuring that relevant information is readily available to authorized users across the care continuum. Armed with the right data, healthcare providers can make evidence-based decisions that improve clinical and financial outcomes and improve operational efficiency. All three of these areas are vitally important for success in a value-based world.

While analytics historically has been considered a technology solution, any platform offering transparency into operational and financial data along with clinical data is a powerful business solution that can be used to drive performance across a healthcare organization.

Analytics also improves payer-provider alignment regarding incentives and shared goals, including the delivery of cost-effective outcomes and long-term patient health. Analytics helps achieve these goals by identifying opportunities for clinicians to intervene with patients who have lifestyle-associated risks, such as smoking and obesity, and offer them opportunities for education and counseling. Over time such interventions can lower the cost of care by reducing future care costs, especially for patients with diabetes, heart disease, and other chronic conditions.

Succeeding in a value-driven environment requires a commitment, a strategy, and a plan - but it also requires the right technologies, including advanced analytics tools that include AI and machine learning capabilities and the automated configuration, calculation, and delivery of insights. Organizations should also consider a cloud-based platform that offers lower up-front costs and ongoing maintenance expenses, as compared to an in-house, on-premise solution.

With the help of advanced analytics, provider organizations are better positioned to deliver quality care, optimize resources, and control costs, and ultimately accelerate their transition to value.

Sheila Talton is president and CEO of Gray Matter Analytics, which she founded in 2013.

This article was originally published on Managed Healthcare Executive®.

Sheila Taton

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Analytics for advanced care success