Aaron Wells is a principal consultant with InfoWorks and a respected data scientist. He has an extensive background in the healthcare industry and value-based care, specifically. The following is the first article of a two-part series of peer-reviewed journal articles written by him, published on MedicalEconomics.com. You can read part two here.

Achieving accurate, transparent, and replicable monetary estimates of shared savings in value-based care

With the passing of the Medicare Improvements for Patients & Providers Act in 2008, value-based healthcare has steadily become the cornerstone reimbursement methodology to change provider behavior from transaction-based care to longitudinal, patient-centered care. With the Centers for Medicare & Medicaid Services (CMS) Primary Cares Initiative launched in January 2020, CMS is aggressively moving the market toward value-based reimbursement. In the commercial payer space, several commercial payers have dedicated significant people, processes, and technology to create value-based arrangements across the healthcare landscape. All of these payers, representing the continuum of public and private insurers, are striving toward a common aim initiated by CMS – reform how health care is delivered and paid for in order to better care for individuals, better health for populations, and lower cost by moving toward paying providers based on the quality, rather than the quantity, of care provided to patients.

Over the last 12 years, myriad methods have been tested for monetizing the “value” in value-based care, with no clear indication regarding the methodology yielding the highest fidelity estimate. Underscoring this point is the current use of two different methodologies by the Center for Medicare and Medicaid Innovation (CMMI) for monetizing value derived by the Next Generation Accountable Care Organization (NGACO) Pilot.2 Further complicating ambiguity in monetizing value-based care is the lack of standards or best practices. This article, which is one in a series, aims to provide an overview of monetizing value-based healthcare and highlight Coarsened Exact Matching as the prominent method for monetizing value. A follow-up article will enumerate a set of best practices providers and payers can follow when entering into value-based contracts.

Monetizing Value-Based Healthcare

In healthcare contracting, the term “value” denotes the monetary equivalent of a system of connected, timely, and appropriate care for a given individual that results in a better health outcome than was anticipated. Value, in this context, is a macro level measure of both what does occur (e.g., coordinate care across multiple providers) and does not occur (e.g., unplanned acute hospitalization). Specific to the latter measure of value, specialized methods are required to monetize health care externalities. Principle methods utilized by prominent leaders in value-based contracting include quasi-experimental and actuarial trend-based methods. Quasi-experimental methods are predicated on retrospective evaluation of a common outcome observed in at least two cohorts (treated, untreated) from the same population matched on a shared set of individual-specific attributes over a minimum two time period basis.

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