Noteworthy or Just Another Episode? Exploring Episode of Care in a Value-Based Care Environment

Posted by Jo Anne Hunt on June 05, 2018

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With the current shift in America toward a value-based medical payment model, “episodes of care” (EOCs) are gaining support. EOCs are redefining the way health care organizations manage patient care and connect outcomes and value to payment. By leveraging insights from the EOC approach, both providers and payers can clearly understand the quality and total cost of care and make adjustments that optimize resources, drive towards better health outcomes, reduce costs, and generate higher patient satisfaction.

Care episodes – including professional services, facility inpatient and outpatient services, and prescription drugs – have been discussed and experimented with for years, with varied success and acceptance from the health care community. But, critics ask: Can you truly identify an EOC considering all the practice variations present in American health care systems?

The criticism may have been warranted a few years ago, but two developments suggest the tide has turned in favor of using EOCs: (1) The underlying data on patient care is continually improving in both quantity and quality. (2) Application service providers are building increasingly sophisticated models for identifying medical episodes for specific medical conditions.

Deerwalk’s Plan Analytics application takes advantage of both developments to give health care providers options to recognize the value of EOC quality measurement.

Quality Matters

Under fee-for-service, health care providers measure and manage around the individual services they provide. Their focus has been on volume, revenue, cost, and efficiency of delivery – in essence, a factory mentality. Historically, they were disinclined to measure quality because it didn’t hit the bottom line.

However, under fee-for-service, additional services and readmissions – incurring higher costs – are often needed to compensate for poor quality. And service quality and customer satisfaction are important for a host of market and regulatory reasons.

Private and government insurers are responding by increasing the proportion of payment tied to quality, and while the cost of production is still important, the focus shifts to total cost of care and bending the cost curve for the population served.

Different approaches are emerging for connecting payment to value:

(1) Bundled payment, where there is a flat fee for a given outcome (e.g., a hip replacement);

(2) Shared savings, where the payer and provider share the savings when a quality outcome is produced below estimated cost; and

(3) Fully capitated accountable care, where the provider is paid for providing medical services to populations of patients.

In all three cases, providers need EOCs to measure and analyze the quality and cost of outcomes. If a provider wants to assess its readiness for bundled payment or shared savings contracts, or determine how to price them, EOCs can serve as the foundation for its analysis. If a provider is managing an accountable care organization (ACO) population and wants to drive out unwarranted waste, it needs the clinically actionable insights from EOC analysis that take it beyond the baseline performance measure.

Value to Providers

Deerwalk’s Plan Analytics application includes an optional module for using medical care groupings to drive a variety of EOC-based reports, both standard and customized.

EOC-based reporting provides a better understanding and accounting for health care providers. Once you have EOCs as your standard for analyzing care, you gain deeper insight into both cost and quality:

(1) How much variation is there in episode cost? What component and utilization costs drive the variation? Are there opportunities to shift patients to a better price point?

(2) How much variation is there in quality and outcomes? What care processes produce the best results? What are the opportunities to improve patient care pathways?

With more actionable clinical information, providers can better engage clinicians and support staff in performance improvement activities. It’s a lot easier to engage a clinician on quality than cost.

EOCs also give providers a new lens for looking across a population of patients, giving insight into which clinical conditions are driving costs. As you manage and optimize the delivery of episodes, you tend to standardize resources, reduce variation, and have more predictable operations. With greater stability and predictability, you can plan with greater confidence, whether for budgeting, facilities, resources, contract negotiations, or partnerships.

Value to Payers

Plan Analytics’ EOC reporting has value for payers as well.

First, the measures that you’re currently using often don’t adequately capture how your clinical enterprise works. You really need to understand what’s driving costs from a clinical perspective, and then use that information to engage providers, align resources, increase efficiencies, and optimize care. You need EOC analysis to develop that capability – it’s a better unit of measure and analysis.

EOC-based reporting can give payers insight into how care is being delivered across providers. Which providers have better cost and quality? Payers can share the feedback with providers and can reward providers based on comparative results.

Second, you need EOCs to succeed in a market with value-based payments. You need the insight into your clinical costs and quality. Third parties may aggregate a lot of useful comparative data for you, but you still need the means to learn and improve your operations, as well as to price services and negotiate contracts.

Third, adopting EOC is a strategic business decision. Whether it’s to support bundled payment, manage an ACO, or identify improvement opportunities, you’re leveraging EOCs to change how you measure and manage.

Deerwalk Plan Analytics customers seeking more information on its optional EOC groupers should contact their account managers.

To learn more about Deerwalk's Population Health Analytics solutions, click below to contract us and schedule a demo.


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