Value-Based Contract Financial Reconciliation - Five Key Steps for Health Systems

By The SpectraMedix Team

Timely and accurate financial reconciliation is a critical part of the value-based contracting process and can be the difference between developing contracts that position your organization for a return on investment and failing to do so.

Our latest blog post explores five key steps in the reconciliation process that all providers should adopt.

1. Understanding Your Contract Portfolio

As value-based contracting continues to expand, it will become more complex and risk-based. Health systems need to understand the different risk-sharing methodologies for VBC contracts, including shared savings, medical loss ratio and medical benefit ratio, and capitation.

Additionally, contracting teams must understand and navigate key contractual elements, such as covered services, performance period and phase-in, and risk adjustment. With the pieces above in place, you can get a baseline to understand common denominators and key differentiators across your portfolio.

2. Implementing A Data Strategy

Health systems need a holistic data strategy to accommodate value-based risk methodologies not only for financial reconciliation, but also to run performance analytics and contract scenarios. Data is spread across disparate systems and stewards so sharing it poses a variety of challenges. It's critical to create an inventory of your data to understand what you don’t have and to plan accordingly.

3. Setting Up Reconciliation Requirements

There are a variety of questions to consider while setting up the process of monthly reconciliation to meet the requirements of the contract.

  • What are the refresh frequencies?—monthly, quarterly, yearly
  • What are the key metrics to monitor, evaluate and track?
  • What is the functional form of the metrics?—rolling 12-month, year-to-date, scaled
  • What are the contract benchmarks?
  • How can we best assess monthly, quarterly, yearly trends?

Being able to answer these questions at this stage in the contracting cycle will save you from headaches down the road.

4. Analyzing Performance Data

There are several key indicators that health systems should consider as they evaluate performance and take actions to improve contract results. These include:

  • Relevant analytics tied to contract terms and goals
  • Key value levers—cost and utilization, risk score capture, quality scores, network leakage
  • Trends and the direction of key metrics over time
  • The impact of interventions

Ultimately, these insights need to be shared with different stakeholders to develop a cohesive strategy.

5. Analyzing Contract Scenarios

A forward-thinking contract scenario analysis will allow a health system to better understand and balance potential gains and losses from incentives, penalties, volume changes, and other factors related to value-based care. For example:

  • If I continue to do what I'm doing today, where will I end up by the end of the year?
  • What happens if I change some of my current metrics?
  • How does my contract performance look if I can increase my risk scores?

Contract scenarios help you to better understand relative impacts and relative costs and will arm you to create a more focused contracting strategy across your portfolio.

This blog post covers sections from our eBook, “Value-Based Contract Financial Reconciliation—Five Key Components for Risk-Bearing Entities.” Access the full eBook here.

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