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Value Based Contracting - Damn the Torpedoes!?

My experience over the past three years assisting various healthcare clients with data and strategy have ultimately come to rest on one important concept - how to define and convey value to the other party. And then, how to create a contract to equitably capture and reward that value. The dialog involves not just strategy, but practical aspects like data, analysis, systems, process. Conveying value in a Covid-wracked landscape could not be a more timely topic.

For healthcare, the concept is broadly termed "Value-based contracting." We have been talking about it for decades. It means different things to different people. Some see it at a functional answer, like case rates or capitation. Some see it as a type of warranty or guarantee for "quality of care delivery", defined in a myriad of ways. With the passing of the transparency pricing rules, there is an even higher fevered pitch to get something on paper. For some, in reality, it is a bit like expecting a wheel-barrow to perform like a Ferrari.

The common issues I have seen clients face in defining value revolve around (1) completeness of data, (2) creating summaries or analysis of that data that reflect an understanding of the other party's needs, and (3) being able to capture and communicate outcomes measurements in a timely and transparent manner. These are the challenges facing the smallest provider organizations and the largest insurers, as well as the newest innovators. As with any system dynamic, the process will only function as well as the lowest common denominator. Progress on value based contracting, across the entire healthcare eco-system, has to recognize the fundamental boot-strapping that has to take place first.

There is no shortcut to having the right data to tell the right story. Hard work is needed to sift through legacy systems, clunky EMR and perhaps even paper records to put together a representation of the baseline, the "where we are starting from" portion of the dialog. From here, we can apply modern methods of computational powers to describe the patient experience through the care management and care delivery processes. In the face of incomplete data, we have to decide on what is good enough, a fair representation. It may not be a perfect representation, but this is not the part of the dialog to focus limited resources in terms of people and time.

Jumping right into the analysis and prediction by applying the latest artificial intelligence or machine learning tool on this incomplete data is an exercise in frustration. Solid care management or care delivery processes, supported with tools of their own, are needed first. If you are an tech-enabled innovator, does your client have these in place? A best practice within the design and implementation of a standard process is automated data collection and feedback, that considers patient interaction and empathy. While API/cloud enablement makes the data collection and analysis scalable, is that type of data architecture consistent with the legacy systems being used today? How much work is required to move in that direction? Who has time for that?

One thing we have seen as a result of the Covid pandemic, is that time is truly of the essence. There is an imperative to shift the way our systems support our care delivery processes, and we need to change the nature of the data we are collecting to be more purposeful and outcomes driven. My clients, which range from health-technology start-ups to physician led IPAs, are making great strides. We practice a fair amount of patience in the face of the urgency, and continuously ask ourselves if we are fully reflecting the message we intend to convey, and the value we create. Level setting like this helps us identify where we are chasing perfection instead of driving clarity or value.

Despite the frustrations and the pressure, despite the anxiety and stress, it is an exciting time in healthcare, not only for the changes we are creating today, but also for foundation of the future we are laying. We are all working on this together, and we will only get there as a team if we continue to help each other. So, sure, Damn the Torpedoes! and lets continue to forge ahead, but with intent as well as awareness of the challenges we all face. Be patient. We have many lessons to learn along the way.

I would like to hear your thoughts. Please email your reactions to or DM me @shifthealthcare on Twitter.


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