Value-Based Payment Engine Component #1: Identify and Price Episodes

Aver’s value-based payment engine works to take the pain out of bundled payment operation for payers, providing an outsourced solution for management of episodes of care. It is comprised of  four major components:

  1. Episode determination - identify members that are in episodes based on flexible eligibility criteria, and establish a budget based on a tiered or variable risk model.
  2. Concurrent episode monitoring - associate adjudicated claims to episodes and concurrently share episode statuses versus their established budgets with contracted providers.
  3. Quality data collection - collect quality data based contract rules and incorporate it into episode performance and reconciliation calculations.
  4. Episode-centric reconciliation - instead of reconciling completed episodes 6-12 months at a time, issue settlement payments upon completion of each episode.

In this post, I’ll focus on the first element, episode determination.

Before launching a particular episode of care for a particular patient, payers face at least two operational pain points. First, payers must identify patients whose episode of care qualifies for a bundled payment. Second, payers must determine the bundled payment amount. Identifying episodes of care and pricing them both require payers and providers to exchange information about the patient, ideally before the episode begins. Aver’s value-based payment engine facilitates that communication.

Today, most payers manually check each member against the episode rules, a time-consuming, cumbersome, and expensive process, and typically use one price for all episodes of the same type, regardless of patient characteristics. Today, there is no mechanism for payers to exchange information with providers in order to determine a member’s eligibility for a bundle or the price of that bundle in advance. But payers and providers do exchange some information before certain care is delivered through a process known as preauthorization, precertification, or utilization management. In this process, the provider sends information about the patient and the procedure they wish to perform and the payer indicates that they will pay for, or authorize, the procedure.

Aver's new payment engine solves headaches associated with  determining member eligibility for bundled payments and setting the price of the bundle. These tools use the information exchanged between payers and providers in the existing utilization management process to seamlessly launch each episode of care.

Once it is determined that the member qualifies for the bundled payment program, Aver next eliminates the pain point of determining the payment amount. Payers struggling to sign value-based contracts with providers routinely hear that setting one price for all episodes does not reflect the risk status of that provider’s patients. Providers want a pricing structure that is more responsive to individual patient characteristics. Tiered pricing, in which the episode price is determined, in part, by an individual patient’s risk profile, helps ensure the payer’s investment in the bundle more closely matches the actual costs of care.

 

"Providers want a pricing structure that is more responsive to individual patient characteristics. Tiered pricing, in which the episode price is determined, in part, by an individual patient’s risk profile, helps ensure the payer’s investment in the bundle more closely matches the actual costs of care."

 

Implementing a tiered pricing strategy requires payers and providers to agree upon the risk tier to which an individual patient is assigned, which determines the total budget for the episode. Aver’s value-based payment engine uses information exchanged by payers and providers during the utilization management process to set episode-specific information, including the total episode budget, network recommendations, and expected utilization.

The total episode budget is the most critical piece of information for payers and providers to have before an episode of care begins. It is based on the risk tier into which a patient is placed. Data needed to assign a patient to a risk tier will vary slightly based on the type of episode but may include the patient’s age, weight, body mass index (BMI), diagnosis codes, procedural code, and comorbidities. Payers and providers are already in possession of much of this data and it is often used in existing utilization management processes. Aver will receive this data, run it through the episode and risk tier definitions that payers and providers agreed to under the contract, and communicate back to both parties the total episode budget. For example, a provider seeks preauthorization of a knee replacement for a 66-year-old male smoker with a BMI of 33. Based on this and perhaps other information, and using the risk tier definitions the payer and provider agreed to, Aver determines the total episode budget for this member is $27,000, and communicates this amount back to the payer and the provider.

The information provided to Aver from the utilization management process will also help generate network recommendations for providers. These recommendations will be specific to the characteristics of the patient about to begin an episode of care, based on Aver’s analysis of historical claims data. Taking the example above, Aver would mine historical claims data for patients treated by the episode initiating provider with similar characteristics to the 66-year-old patient. Aver would review those episodes and offer the provider network recommendations based on successful past episodes measured in terms of cost, quality, and outcomes. For example, episodes of care for similar patients may have been successful when the surgery was performed at a particular ambulatory surgery center, with a particular home health agency, or a particular physical therapy provider. In sharing this information, Aver can inform the provider about what network partnerships have worked well in the past for similar patients.

The final piece of information Aver can offer based on information gathered during the utilization management process relates to expected utilization. This builds on the network recommendations described above, providing a bit more detail about, for example, expected length of stay with a home health agency or anticipated number of physical therapy visits.

These new tools will truly revolutionize the way payers and providers engage in bundled payment contracts. Today, all of this information - total episode budget, network recommendations, and utilization - is available, but not until after the episode is completed, sometimes up to 180 days following episode completion. While this helps providers change their future behavior, it doesn’t offer the concrete information and insight they need for the patient in their office. Aver’s new tools will offer that information for a particular patient based on the performance history of a particular provider.

Most importantly, Aver will manage a payer’s bundled payments and provide payers and providers with all this information in an automated and outsourced way, working with payer’s existing claims adjudication systems while eliminating existing, expensive manual workarounds payers are using to implement their value-based strategy. These new tools will also help payers and providers manage the total budget, network partners, and utilization while the episode is in progress. By taking the pain out of episode identification and pricing, Aver can help health plan focus on growing their value-based payment models.

 

"These new tools will truly revolutionize the way payers and providers engage in bundled payment contracts."

 

Most importantly, Aver will manage a payer’s bundled payments and provide payers and providers with all this information in an automated and outsourced way, working with payer’s existing claims adjudication systems while eliminating existing, expensive manual workarounds payers are using to implement their value-based strategy. These new tools will also help payers and providers manage the total budget, network partners, and utilization while the episode is in progress. By taking the pain out of episode identification and pricing, Aver can help health plan focus on growing their value-based payment models.



NEIL SANGHAVI
Vice President, Product
Aver, Inc


Want fresh insights on Value-Based Care delivered right to your Inbox? Become a member of the Aver Insights Community