Reconcilable Differences: How to Ensure Health Plan CFOs Can Verify and Validate Financial Outcomes from Value-Based Programs

This four-part series will thoughtfully and thoroughly analyze the current state of outcomes measurement within value-based care. Along the way, we’ll bring in various perspectives for stakeholders across the industry. In this post, we are summarizing an interview between PopHealthCare’s Vice President for Outcomes and Reporting, Aaron Wells, PhD and  Chief Financial Officer, Bob Waegelein. You can listen to the full conversation here:

In part two of our series, we focused on the powerful impact a well-designed measurement approach, anchored by Coarsened Exact Matching (CEM), can have on the solutions you use to improve health and reduce costs. In this post, we will discuss improving the reconciliation process to more effectively demonstrate outcomes to a health plan’s financial leaders.

Reconciling and proving the financial value created by value-based programs is difficult. Qualitatively, if you talk to members and hear their stories of how a particular intervention has benefited them, you can gain confidence that your efforts are making a difference. But translating that into a dollar value and having buy-in across the board between financial leaders of both parties is not as easy. At times, it requires mathematical gymnastics just to get to an answer that makes everyone comfortable.

Removing the Guesswork

Reconciling savings in value-based care can be a lot like buying a car. You eventually leave with the vehicle, but you never really feel like you won. When it comes down to a negotiated number, no one in the room feels like they have a true sense of the actual value the program generated. The true value ends up being lost because there is so much debate around how the value was calculated.

This is one of the reasons PopHealthCare uses CEM as a measurement methodology. With CEM, you’re comparing participating members to a cohort with shared characteristics. You know your goal is to measure utilization and spend that did not occur because of interventions. You are engaging in basic math, and both parties are operating from the same data. There are no assumptions, and no statistical model, which means you can’t manipulate certain variables to get a different result.

It’s extremely tough to have true reconciliation when you’re looking at a wide range of variables. With CEM, as long as the data is right, and both parties agree on this point, the proven underlying model does the rest. As a result, reconciliation takes a few hours instead of spending several days only to go back at the drawing board.

CEM offers a straightforward formula that is extremely defendable, credible and replicable. There’s no black box. You can clearly follow dollars in and dollars out, so you remove the room for error, personal judgment, or subjectivity. CFOs or other financial leaders can easily run their own analysis to compare results.

Time Well Spent

Instead of debating an endless list of assumptions, the conversation is focused on using the data to better understand the population being served. What are the attributes of people who are succeeding with the program in question? What value were we hoping to achieve with this program? Does the measurement analysis help me better understand whether the right people are being identified for the interventions in the first place?

You also have the flexibility to make adjustments that accommodate market dynamics. Consider COVID-19. Moving forward, the question will be how to control for the impact of the virus long-term, especially when you’re working with members who are highly suspectable to contracting it. But even something as considerable as COVID-19 is only one variable and presents a trivial change in the CEM process.

Taking a Holistic View

We also can’t forget that there is broader value being generated, above and beyond short-term financial return, both for the member and the health plan. If you are too caught up in the great measurement debate, it’s easy to lose sight of the real purpose, which is providing optimal care to individuals who really need additional support. The more accurate, transparent and replicable your measurement model, the less you risk missing the big picture.

At PopHealthCare, we have worked successfully with many health plan CFOs by using the CEM methodology to demonstrate and measure financial impact. Effectively showcasing the results of value-based programs with financial leaders is critical to protecting effective interventions and helping your organization take smart steps toward improving the health of your members. For the full interview between Wells and Waegelein, please click here. If you missed our previous posts in this series, you can find part 1 here and part 2 here.