Integrating Financial Settlement and Reconciliation with Missed Clinical Opportunities: Delivering an ROI

By Raj Lakhanpal, MD, FACEP, CEO, SpectraMedix

Welcome to Part Two of our series delving into the critical aspects of financial reconciliation in value-based care (VBC) contracts for risk-bearing entities (RBEs). You can read Part One, “Value-Based Contract Financial Reconciliation – Four Key Takeaways for VBC Risk Bearing Entities,” here.

Value-based arrangements only work when key stakeholders (health plan, ACO, TIN executives/analysts, etc.) collaborate seamlessly to align incentives towards improved outcomes and quality of care. A critical dimension of this is linking financial reconciliation with missed clinical opportunities, so that everyone has a clear understanding of their financial position within the VBC arrangement and the actionable steps they need to take in order to improve performance. Thinking about financial reconciliation in this way will advance your organization’s VBP arrangements and enable you to take on greater risk. 

This assumes of course that the components essential to effective VBP financial reconciliation have already been addressed within your organization, including understanding your contract portfolio, the existence of a data warehouse to integrate a range of data sets, and the finalization of terms for financial reconciliation. The next step is tying these efforts to missed clinical opportunities. 

Key Drivers

Several key drivers need to be considered to gain a better understanding of missed clinical opportunities. First, an analysis of how individual contracts are performing is needed. Second, understanding whether or not your organization is making or losing money during the performance period is critical. 

After that, you can determine what key value levers need to be impacted in order to improve and maximize performance and how they are trending over time. If readmission rates are high, can we improve them quarter over quarter? Are we stagnant? Are the readmission rates getting worse? Then we can start to identify which interventions will lead to the greatest financial impact. 

For example, over the next two quarters, should we focus on optimizing our risk adjustment scores, improving other quality metrics, or reducing network leakage? Finally, who are the providers (ACO, TIN, NPI) that we need to motivate the most to improve performance and which patients are leading to the greatest increase in costs? 

Targeting the Right Value Levers

When it comes to identifying the most impactful value levers to target, there are several that should always be considered: 

  1. Quality Metrics - I would recommend targeting between 6-12 metrics at most
  2. Risk Adjustment - Is your population appropriately coded?
  3. Utilization Metrics - Emergency department (ED) utilization/1000, hospital admissions rate, hospital readmissions rate
  4. Ambulatory Care Sensitive Conditions Steerage – Potentially preventable ED visits (PPV), potentially preventable readmissions (PPR)
  5. Other Medical Utilization Costs
  6. Network Leakage
  7. Post Acute Site of Service
  8. Other Key Value Levers Depending Upon Priorities of the Organization 

Most contracts are still “Pay for Quality (P4Q)”, so tying timely financial reconciliation to quality metrics is a good starting point. As organizations move from P4Q to shared savings, shared risk, or MLR arrangements, additional value levers to consider adding are those related to costs. These include as medical (ED visits, hospital admissions, readmissions) and drug utilization, to name a few. Identifying preventable events (PPV, PPR) is also important since they help with cost containment efforts and also because many states and health plans incentivize improvement using these metrics. 

As providers gain experience with VBC, they will become more fully aware of the impact appropriately coded risk adjustment has on their arrangements. 

Key Priorities for Your Organization

Once you have refined your organization’s process, you can begin to incorporate other key value levers based on a combination of evolving priorities and the availability of complete and accurate data. Delivering chase-lists of patients (or members) that are contributing to lower quality results, increased costs (PPV, PPR, etc.), or potential loss of revenue (non-compliance with annual wellness visits, network leakage, etc.) should also be a part of this process. This enables clinicians to have a clear line of sight on the value levers to focus on most to improve performance and which patients need enhanced care. 

I welcome any thoughts you have on this series or any other relevant topics. Please feel free to reach out to me at with any comments or questions you may have. 

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