Aver’s Bridge from Volume to Value

Aver Bridge from Volume to Value Based Contracting

Today’s healthcare organizations have one foot in each of two different worlds: fee-for-service and value-based contracts. Succeeding in both worlds at once is challenging. Aver occupies a unique space, bridging the gap between these two worlds as organizations transition from volume- to value-based reimbursement. Aver defines a value-based contract as one that considers both quality and cost. Value-based contracts may not always reduce costs, but can at least ensure that costs are contained and predictable.

Aver is keenly focused on helping healthcare organizations use episodes of care and the corresponding bundled payments as one of our value-based contracting tools. History shows that efforts like capitation and even diagnosis-related groups (DRGs) simply shifted risk from payers to providers, resulting in unintended consequences such as cost shifting between public and private payers and awkward impacts on how providers manage care. Despite how far we’ve come in value-based contracting, it is still very challenging for health care providers to manage the total cost of care even in clinically integrated networks. Further, the challenge of managing the total cost of care is intensified when providers don’t have control over patient choices and actions. In comparison, people can more easily wrap their heads around episodes, which are clearly defined and time-bound.

We believe payers and providers can succeed using episodic payments, but more importantly, we believe episodic payments are good for members and patients. My own family’s experience provides a good example of this. At the age of 90, my mother fell and broke her hip. She lives in Greece, where I’m from, and I was on the other side of the world when I received a phone call that she was in the hospital. Once she was stable and her pain was managed, her major concern was how much all this care was going to cost. The hospital explained to me that there were two “plans.” Under the first plan, the hospital would bill the national health service, and my family would be responsible for an additional charge of 7,500 Euros (~$8,000 USD). This payment would include everything from the moment she fell to the post-surgery physical therapy and home health. Under the second plan, my family would be responsible for approximately 4,500 Euros (~$5,000 USD) for the hospital charges, but we would receive separate bills from the ambulance company, the surgeon, the anesthesiologist, the physical therapist, and perhaps a few more. When faced with a known payment of 7,500 Euros versus an unknown amount likely to exceed 7,500, my mother went with the known and predictable amount. This certainty is what most members or patients actually want.

At Aver, we create episodic payment programs that are win-win-win for payers, providers, and members. Over the years we have developed a well defined methodology that typically  involves a seven-step journey to implementing value-based contracting -- from analyses for the biggest opportunity for improvement to reconciliation of accounts.

 
Figure 1. Aver's Bridge from Volume- to Value-Based Contracting

Figure 1. Aver's Bridge from Volume- to Value-Based Contracting

 

Step 1: Prioritize Conditions & Step 2: Assess Providers

Aver begins by using historic data to model the underlying activity in the context of episodes for care. Because we still live in the fee-for-service world, payers and providers don’t have a “lens” through which they can identify episodes. Aver provides that lens.  In the first steps of our process, we identify the biggest opportunities to improve quality and reduce or contain cost. Specifically, Aver identifies which conditions to target with episodes and which providers to engage in a value-based contract. Critically, our methodology takes regional variations into account, allowing for a customized approach to different markets. This allows payers to move toward value-based contracting with a model that can ultimately be implemented and presents opportunities and rewards, as opposed to arbitrarily shifting risk.

 

Step 3: Design Episodes

Next, we conduct further data analyses to inform the configuration of each episode. Though episodes seemingly are conceptually simple they represent complex algorithms. The algorithms by which episodes are identified encapsulate three dimensions— the trigger event, time, and sequence of therapies included. Using both off-the-shelf episode definitions, such as those created by PROMETHEUS, Medicare, and state Medicaid programs; and custom episode definitions; our nuanced logic enables a highly systematic approach to episode definition, so that providers and payers know what is included in the episode, the expected outcomes, and, of course, the total budget. Here, it is important to understand that an episode is not merely a series of activities bundled together with a negotiated case rate. Aver helps clients define and configure episodes, which involves the attribution of events that at times may seem unrelated to a bundle. In addition, Aver can accommodate risk adjustment calculations and corresponding cost implications of care.

Consider a patient on day 68 of a 90-day episode following joint replacement surgery. The patient arrives in an emergency room with an acute myocardial infarction (AMI), but the emergency room is unrelated to the facility that performed his procedure. An episode definition determines whether the AMI is related to his joint replacement, perhaps because of the surgery, or due to some other cause unrelated to the joint replacement.

 

Step 4: Establish Pricing & Contracts

With a clear episode definition, Aver helps payers identify the right price and delivery networks in each market as they work to establish value-based contracts. We work with payers to identify tiered pricing arrangements that include rewards for high quality care and positive patient outcomes. Tiered pricing requires experience and analyses in order to avoid plurality of tiers which can lead to a fee-for-service world through the back door. Aver helps payers establish pricing tiers using patient comorbidities and outcomes to establish the price of a particular episode for an individual patient. The trouble we see with a single (non-risk adjusted) price is that it in some cases it has the unanticipated consequences for “selection,” resulting in member dissatisfaction.

In the future, we’re moving to dynamic prospective pricing, under which providers and patients will know before a procedure is performed what the reimbursement and out-of-pocket expense will be, as well as anticipated outcomes.

 

Step 5 & Step 6: Price and Reconcile Episodes

An episode payment program doesn’t end with pricing. As payers and providers begin adopting value-based contracts, they must deal with the operational aspects. Today, the healthcare system is using a claims adjudication system built for a fee-for-service world and applying that to value-based contracting can be challenging, with a lot of manual processes resulting in errors and potentially increased costs. Aver’s tools administer bundled payments and reconcile with fee-for-service claims, which are the “trading currency” supported by the electronic data interchange (EDI) infrastructure.  We believe that building our value-based contracting solutions on the existing EDI infrastructure is extremely important for couple of reasons. First, fee-for-service is going to be with us for years to come albeit in smaller volume. Second, EDI systems and interfaces with accounting and workflow systems need to be maintained to preserve the integrity of the financial systems that have been developed over time and with billions of investment dollars.

 

Step 7: Application Interfaces

Application interfaces are important to support and enhance user experience and reporting as an essential component for allowing effective and efficient data sharing through existing systems. Embedded into the logic of our our products is the notion of managing outcomes while allowing providers and patients the freedom and flexibility to deliver and access care best suited for their situation, given desired outcomes and financial considerations.

The U.S. healthcare system is in the midst of a transformational change from volume- to value-based reimbursement, but the pace of that change and the timeline for its completion are highly variable and unknown. This leaves healthcare organizations with a foot in both worlds: a challenging environment in which to succeed. Aver helps bring these worlds together, allowing payers to use today’s fee-for-service system in support of tomorrow’s value-based contracts. Using Aver’s analytics, revenue cycle, and reporting solutions, payers, providers, and members can experience success and good health.

 

Nick Augustinos CEO Aver

NICK AUGUSTINOS
Chief Executive Officer
Aver, Inc