Value-Based Administration: The Secret Sauce of Successful Value-Based Care

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By Lynn Carroll and Rahul Sharma

The U.S. healthcare system’s years-long slow crawl toward value-based care, in which providers assume greater financial risk tied to patient outcomes, appears to be accelerating as a result of the COVID-19 pandemic. 

As providers saw elective service and procedure volumes collapse, they realized that fee-for-service contracts come with risk, too. Providers that entered into value-based arrangements that involved capitated per-member, per-month payments or other global reimbursement models continued to generate revenue during times of lockdown and quarantine, while providers relying on fee-for-service volumes had little recourse for recouping those revenues as patient volumes dwindled. 

This realization on the part of hospital and health system executives may have been one of the main factors that drove increased adoption of value-based (also known as risk-based) contracts, according to a survey of 300 C-suite executives by Numeroff & Associates. The survey revealed that the percentage of provider organizations that had at least one-fifth of their annual revenue at risk increased to 42% in 2020 from 34% the prior year. 

The survey also revealed that experience with value-based contracts is broad, but not particularly deep, as 86% reported at least some experience with an alternative payment contract, but for most (64%), less than 20% of revenue was involved. Not surprisingly, the most frequent barrier preventing progress toward value-based care cited by executives was fear of financial loss.

The survey responses point toward perhaps the greatest challenge standing in the way of value-based care: the ability to promptly and accurately reimburse all members of a value-based care network for their services. And that is where the important, but often-overlooked concept of value-based administration enters the picture. 

Greater collaboration through value-based administration

A value-based network generally includes a host of key stakeholders, including health insurers, primary care physicians, specialists, hospitals, community-based organizations, social services networks and laboratories. In theory, these diverse entities collaborate under value-based care contracts with the shared goal – and shared associated financial incentives – of improving patient care and reducing costs. 

It takes value-based administration to make that happen. A proper approach to value-based administration encompasses three critical elements:

• An infrastructure that supports the complex hierarchies of the healthcare ecosystem and supports complex healthcare data capture and sharing needs
• The ability to accommodate a wide array of alternative payment models – all of which bring their own unique metrics, incentives and payouts with both upside and downside risk – such as capitation, bundled payments and shared savings
• Integration with nonmedical and community-based organizations (CBOs) that address patients’ social determinants of health, such as access to housing, nutrition, transportation and economic opportunity

The last point, integration with CBOs, often proves particularly challenging because many CBOs struggle to access adequate funding and have been understandably reluctant to invest in digital technology on limited budgets. Similarly, many payers and providers that participate in value-based agreements also rely on legacy technology to execute clinical workflows, making it difficult to administer value-based contracts at scale. 

In contrast, value-based administration systems can manage complex networks of multiple stakeholders in multiple roles, delivering the digital data capture and data-sharing capabilities needed to oversee value-based arrangements and manage their performance. Proper value-based administration enables participants to orchestrate both medical and nonmedical resources across all care settings, with the ultimate goal of creating better patient outcomes and lower costs. 

Value-based administration empowers payers, providers and CBOs to share patient information, coordinate care and deliver needed services, all while holding network participants accountable for the cost-and-quality metrics they committed to in risk-sharing arrangements. Few legacy systems are up to that task. 

A scalable, reliable foundation for value-based care

An essential component of a value-based administration system is the ability to capture and manage funding pools, operationalize diverse value-based contracts from a myriad of alternative payment models, and deliver multi-party data sharing and distribution of funds to contracted partners – while tracking performance of these hierarchical arrangements on an up-to-date basis.  These complexities are discussed in Hierarchical Payment Models—A Path for Coordinating Population- and Episode-Based Payment Models(Shrank, et al., 2022)

For example, an efficient value-based administration system would facilitate the transfer of money from a large health system to a home-dialysis provider after receipt of a patient’s post-visit status report, while simultaneously paying a food delivery provider upon confirmation of receipt of the meal from the same patient. 

If value-based care is the engine that will propel the U.S. healthcare system toward higher quality and lower prices, reimbursement is the fuel that feeds the engine. Through an advanced infrastructure, support of a wide variety of alternative payment models, and alignment with organizations that address social determinants of health, a thorough approach to value-based administration ensures the integrity, reliability, and scalability of reimbursement for value-based care. 

Lynn Carroll is the chief operations officer and Rahul Sharma, chief executive officer, of HSBlox, which assists healthcare stakeholders at the intersection of value-based care and precision health with a secure, information-rich approach to event-based, patient-centric digital healthcare processes – empowering whole health in traditional care settings, the home and in the community.