The healthcare space has a plethora of innovative models looking to improve patient outcomes and get compensated for the value they create. They often reach out to our healthcare actuaries and consultants looking for insight on how to demonstrate impact in a credible way and convert that impact into a revenue stream.

Be crystal clear on your care model’s value proposition

It seems obvious but sometimes the cart is put before the horse. New support or enablement companies need to be able to clearly define what value they expect to create, how that value is created, and for whom. As a simple example, if the model is intended to “lower healthcare costs,” you need to be able to support what and how the costs and utilization of the patient population will be impacted. What are the conditions or procedures the new model is aimed at improving? Does your solution reduce unnecessary care (inpatient admissions, emergency care, specialist visits, overmedicalized end-of-life care)? Look for existing research such as clinical trial data or credible clinical literature to suggest that this healthcare outcome is reasonable to expect.

Define care model business strategy

Consider how the impact of the care model can translate into financial value for the buyer of the solution, and over what timeframe. This may seem obvious, but in healthcare often the solution user and the solution payer are different entities. Is the user (patient) paying for it? Is the employer paying for it in a self-funded plan? Remember that US healthcare, for the most part, is priced and shopped for on an annual basis. If the impact of your solution will take longer than that to realize impact on outcomes, you already have initial challenges to overcome.

Optimize data utilization for effective healthcare solution evaluation 

Consider what data is needed to support an evaluation of the impact of your solution, both initially (in pilot) and on an ongoing basis with future clients. Data sets vary in their availability, level of detail, completeness, timeliness, complexity, and ownership. Your paying client may not have access to all the data you require to assess the impact of your solution. For example, providers may not have access to all a single patient’s healthcare utilization and claim costs when that patient is also seeking care with multiple unrelated providers and pharmacies. Outcome-based healthcare assessments need to be operationally viable, so thinking through data needs, data flow, and timing are critical to a business model that works. 

Understand your clients’ perspective on revenue or shared savings models

Financial model outcomes that payers will typically look for:

Simplicity in methodology

Payers may have multiple programs targeted at managing the same patient and are unlikely to attribute patient outcomes to a single program. It can be overly complex to tease apart the individual contributors so a simplified “partial credit” approach may be preferred to calculating financial impact.

Transparency in shared saving calculations

Payers will need to understand each of the components in the shared savings calculation process to prevent surprises, misunderstandings and misinterpretation. Avoid black box calculations that payers can not independently evaluate.

Credibility of the methodology and underlying data

Consider the importance of logical analysis and patient volume in minimizing the impact of random variation in individual healthcare costs. This should be based on the payer’s own experience rather than on a proxy.

Efficiency of the evaluation process 

The evaluation process should be cost efficient and not operationally complex. This is a process that is continually performed by both parties, and it is necessary to minimize friction in timely reporting.

Adaptation to short-term measurement periods

As we mentioned above, healthcare is priced and shopped for on an annual basis making it crucial to reflect impacts in the short term (less than one year). This allows for timely adjustments and ensures the effectiveness of the strategies implemented.

Regular client reporting on both activity and outcomes

Often underappreciated or overlooked, regular client reporting is a crucial aspect of any solution offering.  Solution providers should include consistent feedback mechanisms to their customers, ensuring transparency and demonstrating how financial savings can be achieved. Examples include tracking and reporting on how many members were identified, contacted, reached, and engaged with the solution. Clear definitions of these phases and categories are essential, taking into account the specific care and business models. 

These are exciting times of innovation in healthcare. Using data to assess, demonstrate, and be rewarded for value creation holds great promise but can be a complex exercise. Thinking through these core areas with your team, perhaps with the help of external perspectives, can go a long way in ensuring you are building a solution that creates value for all parties involved.