Healthcare Analytics Articles

Value-Based Healthcare and the Role of Health Analytics


Value-based healthcare has already transformed much of the health sector—a trend that will continue to change operations, payment structures and, ultimately, the way health organizations approach delivering and evaluating services.

While there are different models for implementing value-based care (VBC), the broad goal behind VBC programs is to shift the focus from quantity of procedures to a stronger emphasis on positive patient outcomes. In some pay-for-performance VBC models, for example, payers may incentivize providers to offer more preventative care services by adjusting the amount paid on traditional fee-for-service pricing if the provider reaches specific performance thresholds.

The shift toward value-based care was recently documented in a survey commissioned by health technology company Change Healthcare, which found more than 80% of payers are considering or have already implemented one of the models of VBC studied. Furthermore, as the industry looks toward adoption of VBC, the next stage is likely to be focused on optimization, meaning health organizations will have to address challenges such as how to effectively evaluate their value-based healthcare implementations and how to ensure they’re measuring performance metrics that are truly indicative of care quality.

Health analytics can play a pivotal role in optimizing VBC by helping organizations better understand the intricacies of their operations, providing more transparency into patient outcomes and identifying ways to lower costs while still achieving higher quality of care.

What is Value-Based Healthcare?

Value-Based Healthcare
Though VBC healthcare is broadly focused on creating positive outcomes for patients, it also often yields advantages for health organizations by creating efficiencies, reducing error and increasing the accuracy of quality assessments. In the Change Healthcare report cited above, the average medical cost savings for implementing VBC strategies was 5.6 percent.

However, one of the challenges to adopting VBC has been differences between models, many of which are still being researched to determine their effectiveness. While not exhaustive, here are some popular value-based healthcare models:

Medicare Quality Incentive Programs

The Centers for Medicare & Medicaid Services have developed a full range of quality incentive programs that are designed to improve patient care as well as transparency. They achieve this mission through payment incentives or reductions as well as through incentives for improving transparency between health organizations and the public. For example, one of the goals driving the Medicare Advantage Quality Improvement program is for Medicare Advantage Organizations (MAOs) to provide incentives to providers for excelling in quality assessments.


Although many pay-for-performance VBC initiatives come from Medicare Quality Incentive programs, some private insurance companies have also leveraged this model. Pay-for-performance revolves around offering financial incentives to providers for meeting quality of care objectives. This is typically achieved through adjustments to typical fee-for-service pricing. For example, payers may penalize providers who fail to meet performance thresholds.

Accountable Care Organization

The primary goal behind accountable care organizations is to better coordinate care across different specialties and services. One such model is to treat a hospital and “extended hospital staff” as a focal point of accountability. Under this strategy, care is coordinated so that performance measurement considers services throughout the hospital and extends to referrals made by doctors.

Bundled Payments

With bundled payments, reimbursement models shift toward paying for an entire cycle of care, rather than paying ad-hoc for different services provided to treat the same condition. The objective for this model is to encourage providers to optimize the procedures and services they offer so that positive patient outcomes can be achieved more efficiently.

Patient Centered Medical Home

The patient-centered medical home is a framework and model of organizing care to focus on better coordination of services, higher quality of care, improved accessibility of services and accountability for considering the entirety of a patient’s needs. This often translates to primary care facilities serving as the focal points for coordinated services and providers.

Benefits of Value-Based Healthcare

Although the primary goal driving the implementation of value-based healthcare is centered on quality, organizations have seen benefits that extend to their operations and reduced costs. In February 2019, for example, health services provider Cigna announced that it exceeded its goal of using alternative models for 50 percent of its payments, which translates to roughly 3.6 million patients receiving care through a value-based model. Between 2013 and 2017, this transition helped save Cigna more than $600 million, and the company highlighted data analytics as a critical element of this success.

Adopting value-based models can create efficiencies when implemented and executed well. For example, an accountable care organization could help better coordinate services, reducing the chances that unnecessary procedures are performed. Because there is a greater focus on communication between different services offered, this model can also ensure that diagnoses and effective treatments are performed more quickly.

When looking at accountable care organizations (ACOs), one study noted a 4.9% reduction in per-patient spending with physician group ACOs. However, it is important to note that hospital-centric ACOs didn’t achieve the same benefit.

The drastic differences in outcomes suggests that while value-based care can yield considerable benefits to organizations throughout the health sector, there is not a one-size-fits-all approach to implementing VBC. As pressure from healthcare legislation and market demand mounts on payers, providers and other health organizations, they will need to find and adopt the VBC models that best work for their services and their patients. Health analytics will likely play a central role in these initiatives by delivering insights into VBC strategies, better evaluating their effectiveness and helping organizations to optimize the delivery of their services to achieve lower costs as they make this transition.

The Role of Health Analytics in Value-Based Healthcare

Without health analytics, many value-based care models will not be implemented or managed optimally. Analytics technology and techniques provide greater visibility into costs, risks and patient outcomes. Some of the other key benefits of health analytics for value-based care include:

  • Improved ability to track the effectiveness of value-based care strategies
  • Opportunity for reducing cost across the organization
  • Ability to create efficiency or innovation through analysis of larger data sets
  • Improved quality of care and transparency to better meet standards set by regulations such as the Affordable Care Act

Historically, some of the main challenges to implementing value-based care revolved around poor incentive structure and overall implementation. By using predictive modeling to develop better incentive structures in pay-for-performance models, health analytics technology has proved to address some of these core issues.

Given the pressure from legislators and widespread adoption of value-based care, many healthcare organizations have come to realize that it isn’t a question of if to adopt VBC, but how to do so effectively. However, even when looking beyond the adoption of VBC, healthcare analytics has the potential to create incredible value. Christiana Care Health System in Delaware turned to predictive analytics in order to better estimate potential costs of service and provide more transparency into patient outcomes. According to Terri Steinberg, chief health information officer and VP of population health informatics, analytics played a crucial role in achieving the level of precision required to make accurate financial predictions, and this lets the organization pass savings on to patients.

Moving Forward with Health Analytics

The momentum for value-based care shows little sign of stopping, with nearly half of payers having implemented accountable care organizations and more than one-fifth developing other VBC models. Between 2015 and 2017, the number of health payments tied to VBC grew from 23% to 34%, showing the same growth span across many organizations within the health sector.

The increasing adoption of value-based healthcare puts even more emphasis on making smarter decisions, mitigating risk and delivering preventative care. Health analytics is a key driver for empowering these decisions because it enables health organizations to better use their data, find missed opportunities and identify the variables that most affect patient outcomes. At the same time, utilizing health analytics technology effectively is not without challenges.

Analytics technology is reliant on applying descriptive and predictive models to large amounts of data that must often be more deeply integrated for analysis. For the health sector, bringing different types of data together can break privacy laws, and, if a data breach occurs, can damage patient trust.

As the health analytics industry grows, there will be many different vendors as well as different types of solutions and platforms. This will require healthcare leaders across technology, operations and other functional areas to ensure they understand the nuances of different approaches, so they can make effective analytics decisions for their organizations.

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