Leveraging total cost of care performance data

To flourish during the transition from fee-for-service reimbursement to value-based reimbursement, practices need to be adept at conducting total cost of care (TCOC) analysis to help prevent loss of revenue. By focusing on four key areas — physician compensation, payer contracting, ACOs/CINs and M&A/strategic partnerships — practices can position themselves to deliver better care and lower costs.

Physician compensation

To meet reimbursement requirements, which are tied to total cost of care, practices should revise their payment compensation methodology. As Aaron Cohen, principal, healthcare co-practice leader, Citrin Cooperman, White Plains, N.Y., expressed during his session at MGMA18 | The Annual Conference, practices should:

• Utilize TCOC scores: Under MIPS, practices can evaluate the overall performance of their providers. These scores are linked to individual National Provider Identifiers (NPIs), even for providers who report as a group. As a result, practices can assess how individual providers will affect reimbursement.
• Employ data when determining physician compensation: TCOC performance score data can help practices evaluate how providers are performing with all their patients and compensate and incentivize the providers accordingly.

Correspondingly, physicians who earn high TCOC performance scores can better promote themselves to secure higher compensation and qualify for bonuses.

In the big picture, exceptional TCOC performance can increase a practice’s value in regard to clinically integrated networks (CINs) and accountable care organizations (ACOs), along with making a practice more attractive as a strategic partner. Therefore, practices should take TCOC into consideration when compensating high performers. Conversely, low performers can adversely affect a practice’s value when being considered as a strategic partner or for clinical integration.

Payer contracting

According to Cohen, TCOC data is of the utmost importance to payers. “They are going to look at that data quite a bit when considering what your reimbursement will be moving forward,” Cohen said. “The lower the cost of care, the higher profits to the payers and the greater potential opportunity for those payers to offer lower premiums in the future to attract more customers.”

By assessing this quantifiable data, practices can use TCOC performance to differentiate themselves from other practices and negotiate more favorable payer contracts. It also can help practices pinpoint opportunities to obtain larger shared savings, team with payers to identify savings for high-risk and high-cost patients and uncover ways to determine future savings.

For high-performing practices, this data is their ticket to influence payers. “This is a good methodology to put pressure on the payers to pay the practice fairly, because without that fair payment, practices are progressively going to be joining health systems and other higher-reimbursed practices like supergroups,” Cohen stated.

ACOs and CINs

ACOs and CINs are effective in bringing integrated healthcare providers together in a specific geographic area to share data, coordinate service, improve care, reduce costs and ultimately enter into value-based care contracts with payers. “Under those value-based care contracts, there are cost targets that are set, and by beating those cost targets providers are rewarded with higher payments,” Cohen noted.

Likewise, because shared savings are stratified and based on TCOC performance, practices can use data to leverage better deals when becoming part of an ACO or a CIN. “Being able to go into these arrangements and to say, here’s my data, it’s very positive, should put you on a track to getting a higher percentage of shared savings,” Cohen asserted.

This allows primary care physicians and specialists to analyze data and make referrals based on that data. Similarly, for hospitals and other healthcare facilities, they can use positive cost of care performance data to augment patient volume, especially to high-quality, low-cost care settings.  

M&A/strategic partnerships

During the past five to 10 years, consolidation has been a driver in the healthcare industry through mergers and acquisitions (M&A) and other strategic partnerships. Up to this point, cost of care performance hasn’t been a huge consideration when assessing practices, but Cohen believes that could change going forward. “There’s no question productivity remains a very important aspect … but [TCOC] is also being seen as more credible, because it’s absolutely crucial for successful value-based arrangements, which are becoming more and more important to private equity-backed groups and health systems,” Cohen said.

Additionally, when M&A deals are being considered, purchase price will be affected by such determinants as MACRA penalties and commercial contracts, as they are included in discounted cash flow analysis. As Cohen noted, one of the benefits for practices is that “really positive [TCOC] performance will be factored into future rate experience, as well as volume expectations, because it’s likely that volumes are going to go up for those providers that are able to demonstrate that they are lower cost and high quality.”

In addition, TCOC performance will affect the percentage of shared savings and profits providers earn. As Cohen related, lower cost of care will drive profitability. “The top-performing providers are in a position to negotiate for a higher percentage of any profit sharing that they’re undertaking through these joint ventures, strategic partnership arrangements.” On the other hand, the group acquiring or partnering with another group may only go forward with an agreement if low-performing providers are held out of the deal; otherwise those individuals could affect reimbursement.

TCOC performance data can be an invaluable tool for practices as they transition to value-based reimbursement. By zeroing in on these four areas of TCOC performance, practices can better leverage data in payer contract negotiations, physician recruitment and compensation, organizational integration and strategic partnerships.