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ACOs Turn to Episodic Analysis to Improve Clinical, Financial Performance
By Brett Furst

The Centers for Medicare & Medicaid Services (CMS) and other insurers are moving from a fee-for-service to a fee-for-value approach incorporating shared risk arrangements under health care reform.

Instead of receiving payments separately, accountable care organizations (ACOs) will share in a bundled payment, a lump sum payment from payers to be split among all parties involved in a defined episode of care. Therefore, it’s critical that chief financial officers (CFOs) and physicians of these organizations gain insights into episodes of care to determine the best way to improve quality and cost-effectiveness.

What some ACOs may still be missing out on is the immediate opportunity to leverage data analytics around episodic analysis and cost profiling. For CFOs analyzing their return on investment, acute and specialty care is and will continue to be one of the largest cost drivers in health care. Those organizations that aren’t effectively using financial and performance tools such as episodic analysis run the risk of missing a major opportunity to benefit from their analytics.

Episodic analysis assists ACOs’ financial and clinical organizations in analyzing cost and variations in practice patterns for surgical specialties by pinpointing drivers of clinical and medical expense variation. This helps support the ongoing efforts to provide better quality and more affordable care for patients more consistently.

By using episodic cost profiling to analyze where there are variations in payment and performance, CFOs and physicians together can now accurately understand the cost vs. quality equation throughout the claims pathway. This is critical with the pay-for-performance approach to health care today. Those ACOs that best use episodic profiling in specialty and acute care areas will be able to achieve a greater return on investment than many of them may realize is possible under current health care reform.

For instance, as providers seek ways to improve cost-efficiency and care transitions around episodes of hospitalization, they also have the chance to drive performance through more empirical evidence and better transparency throughout the continuum of care. This creates more immediate efficiency, utilization, and value, leading to a more tangible return on investment than a longer-term strategy, such as those found through wellness and prevention, can provide.

ACOs also can use fiscal modeling incorporating more advanced algorithms for claims analysis that enhances their risk and reliability adjustments throughout the claims pathways. For many organizations, the way data are aggregated and rolled up throughout the health care system among all players still isn’t intuitive enough to provide the truly actionable insights that will help ACOs and other players to benefit from improving performance across their organizations.

To better understand where they can change guidelines or clinical pathways, CFOs and physicians within ACOs also can use episodic cost profiling to evaluate variations in clinical performance—for instance, in and out of network, within its own system, and compared with other systems.

It’s clear that the gap for CFOs looking to improve an ACO’s performance—both clinical and financial—involves having a thorough understanding about what to do when it comes to variations in risk. Once they do so, CFOs then can expand into or take a more targeted focus on those market opportunities that they may be missing out on today.

For instance, the Value Partnerships Program in Michigan is a collaborative approach among payers and providers designed to empirically measure performance and improve quality in specialty and acute care. These partnerships have achieved positive results through better use of data analytics to provide decision support within provider organizations.

When it comes to determining whether acute and specialty care episodic procedures are appropriate, episodic cost profiling positively impacts how everyone—providers, physicians, purchasers, health plans, and federal programs—can more effectively approach the dynamic claims pathways under health care reform.

ACOs today may know the financial and clinical pain points of their system, but without episodic cost profiling, they still don’t truly know how to treat it. Through a better understanding of the efficiency and utilization variations of care episodes within their systems, CFOs and their physician partners can adjust business processes and clinical pathways throughout the enterprise to reduce those variations.

— Brett Furst is CEO of ArborMetrix, which provides a database platform and analytics engine for hospital and specialty-based care.