Why physicians in value-based contracts need to get ahead of risk adjustment

With the Centers for Medicare & Medicaid Services (CMS) pushing to tie 100% of reimbursements to value-based contracts by 2025, many physician practices are in the process of preparing to take on additional financial risk. Though there are still two years before we reach this deadline, there are many moving parts involved in making the shift from a fee-for-service (FFS) model to a value-based model. From analysis to buy-in, negotiations, and internal and external education, making the transition is no easy task.

To help practices prepare for this transition, we have laid out our top three considerations for success:

1. Know your population’s risk score.

To properly account for the risk of your patient population – that is, how healthy or sick they are – your risk adjustment and coding data must be complete and accurate. Gaining insight into your patient population will allow you to stratify your high-need, high-risk members (e.g., those with diabetes) into cohorts and determine the best interventions and strategies to manage their care. This will help ensure you receive the proper reimbursements. It will also allow you to be clear-eyed about any contract you enter into where you have to own more financial risk than a traditional FFS model.

To ensure your risk score is accurate, you must be able to aggregate data from multiple sources and carefully analyze it. Partnering with a vendor that pairs natural language processing (NLP) technology with expert coder reviews can go a long way toward doing just that – without adding layers of administrative expenses.

2. Establish a path to sustainable health management.

Once you have established who your sicker patients are, you will then need to lay out a path to sustainable health management. Value-based care sits at the intersection of improved health outcomes and decreased costs. To ensure your expenditures are kept in line with your organization’s ability to pay for them, you must be able to understand how you can improve disease management and prevent costly (and avoidable) expenses, such as hospital readmissions.

A strong risk adjustment analytics platform can be very helpful in this regard. This tool should include a high-need, high-cost report that allows physicians to segment patients based on their clinical needs and financial utilization and then target them accordingly for advanced care. It should also provide clear insights into spending trends, utilization, and operational and financial strengths and weaknesses.

3. Fully understand the value-based care contracts you’re entering.

When transitioning to value-based care, it’s important to ensure you fully understand the risk you are taking on. Before signing a contract, you will need to define revenue and capitation. You will also need to define the division of financial responsibility. In other words, how will the cost of services be divided between the physician and the plan?

In addition, you will want to make sure to review control prohibitions, assignment limitations, and capitation deductions. Finally, as mentioned above, you will need to have accurate and complete risk adjustment data about the patient populations you are agreeing to take financial responsibility for. This information will help ensure that the risk you are taking on is well aligned with your organization’s capabilities.

Establishing a solid foundation

When moving to a value-based model, it is important to understand that no matter how sick or healthy your members might be, the key to success lies in having a deep understanding of your patient population.With this information, you can make informed decisions, such as how to best allocate resources and care for your patients. By taking the steps outlined above, you will establish a solid foundation to build upon that can lead to improved financial and clinical outcomes – a win-win for all.

Meleah Bridgeford is the senior director of risk adjustment analytics at Episource, a leading provider of risk adjustment solutions and services for health plans and provider groups. She has more than 10 years of experience within health care organizations as well as vendor and consultant organizations.