Operationalizing #2 - Payment Administration and Reporting

Aver - Episode Determination

Payers are committed to pursuing value-based payments as a primary strategy for cost containment and quality improvement.  However, antiquated claims adjudication systems, built for fee-for-service payments, are incapable of operationalizing value-based payments. Instead, payers are forced to set up a manual system for bundled payments, reviewing every claim within every episode, dramatically increasing the administrative costs of value-based payments. The pace at which payers transition to this new payment model will vary, so payers must maintain fee-for-service systems while finding workarounds to operate value-based payments.

Aver’s episode reconciliation process sits outside, and leaves untouched, a payer’s existing claims adjudication system, leaving it to continue processing fee-for-service claims. Aver pulls fee-for-service claims information from a payer’s enterprise data warehouse, compares those claims to predetermined bundled payment definitions, turns them into an episode of care, and reports all the information back to the payer.

 

"Aver’s episode reconciliation process sits outside, and leaves untouched, a payer’s existing claims adjudication system, leaving it to continue processing fee-for-service claims.."

 

What does this mean? Aver takes the headache and financial pain out of operating bundled payments. In this post, I’ll walk through how this works in a retrospective payment environment. I’ll focus on retrospective payment because it is what most payers are using today and because it requires more administrative effort from payers. In contrast, in a prospective payment environment, the payer processes and pays the trigger claim and then the episode initiating provider is responsible for paying downstream providers with whom it has payment agreements. Aver’s Virtual Payer solution assists providers in a prospective payment arrangement, but that’s a topic for another post.

 

How Payers Operate Retrospective Bundles In-House Today

Generally speaking, payers that try to manage bundled payments in-house describe a technological, administrative, and financial nightmare. Here’s how it works:

Under retrospective payment, during the episode of care a provider submits (and a payer processes) fee-for-service claims as usual. So far, so good. The nightmare begins when the episode is over and the payer has to determine the total episode cost—their claims adjudication system simply does not have the capacity to do this.

Following conclusion of the episode and a claims runout period, the payer manually reviews all claims related to the episode, compares those claims to the episode definition and rules, and determines how the episode initiating provider performed relative to the bundled payment amount. If the total cost of services provided during the episode was less than the contracted amount, the payer makes a reconciliation payment to the provider. If the total cost of services provided during the episode was more than the contracted amount, the provider makes a reconciliation payment to the payer. In practice, payers and providers often reconcile on an annual basis for all episodes completed during the year.

 

"This manual process is tedious, costly, and leaves too much room for human error."

 

This manual process is tedious, costly, and leaves too much room for human error. In addition, it leaves payers and providers with no insight into the provider’s bundle performance until well after the episode of care is complete, sometimes as long as 180 days following the end of the episode.

 

How Payers Operate Retrospective Bundles with Aver Today

In short, payers send data to Aver and receive reconciliation amounts from Aver. That’s it. Here’s how it works:

As my colleague, Michael Ceballos, mentioned in a previous post, our payer clients send Aver a monthly feed of all paid claims. Each month, Aver runs every single claim through the payer’s bundled payment definitions using our proprietary software. Our system identifies fee-for-service payments made in relation to an episode of care and assigns that claim and payment amount to the episode budget.

Following this claims processing, Aver sends the payer a report on all open and closed episodes of care. These reports calculate the current spend on each episode and compare it to the contracted amount. This financial reporting is provided at the member and provider levels, and Aver encourages payers to share this information with their provider partners to help them better manage and monitor patients. In fact, Aver provides claim line level detail on each episode and encourages payers to share this insight with providers as they seek to develop more efficient care pathways. This report does not show the allowed amount, but does give the episode initiating provider insight into all the member’s utilization. This helps the provider identify any breakdowns in the care pathway and seek to correct them for future episodes of care.

Aver also incorporates quality metrics into bundled payment operationalization, including any measures captured on a claim form, like hospital readmissions. Aver assesses provider performance on quality metrics and adjusts the total episode budget accordingly.

Finally, Aver determines the reconciliation amount for each completed episode of care. This involves tracking all claims associated with a member in a bundle throughout the entire episode and any allowed claims runout period, which could be up to six months. Following conclusion of the claims runout period, Aver compares the total episode spend to the total contracted amount and notifies the payer of the amount due to or from the episode initiating provider. Some payers may retrospectively adjust the payment made for the trigger claim while others reconcile annually for all bundled payments made during the year.

You’ll notice the absence of expensive manual workarounds and technological nightmares in this description. But you’ll also notice a data lag. Under the current flow of information between payers and Aver, payers have monthly insight into provider performance on bundled payment contracts, but this is not timely enough notification for providers to take action to help a patient who is no longer on the bundled payment care pathway. In a future post, we’ll describe the tools we’re building that will provide concurrent insight into episodes of care while in process.

 

Elaine Daniels Aver

ELAINE DANIELS
Director, Network Strategy
Aver, Inc