360-Degree Risk Adjustment: A Strategic Lever for Risk-Bearing Entities

Seize a competitive advantage in 2017 by adopting an integrated approach.

Welcome to 2017. If the last year has taught us anything, it’s that the insurance industry is in for another bumpy ride in the coming months. In my last post, I introduced 360° Risk Adjustment, Health Fidelity’s proven framework for risk adjustment optimization. To summarize, “360° risk adjustment” refers to the comprehensive set of ongoing activities which project, detect, and capture all commensurate member risk, and thereby risk-adjusted payments, to cover healthcare expenditures for a member population.

Risk adjustment is often outsourced to vendors, where there is poor visibility into processes and performance. This traditional “black box” risk adjustment approach is no longer viable, and I believe organizations can do better. If you’re looking at your 2017 operating plan, thinking, “I’ve got bigger issues to tackle; why should I redirect resources internally to capture a miniscule increase?” then consider the following arguments:

1. The Business Case:

First and foremost, 360° risk adjustment allows risk-bearing entities to better manage their financial health by strengthening both the top and bottom line. Accurate risk adjustment leads to greater RAF accuracy and risk-adjusted revenue; additionally, sophisticated data and performance management capabilities will increase transparency across the organization and foster a culture of continuous improvement. 360° risk adjustment also sets up organizations to improve quality ratings and protect against compliance risks in this changing regulatory environment. Organizations will also benefit from an enhanced ability to control costs through scalable automation and interdepartmental collaboration.

 

2. The Market Power Case:

Organizations taking advantage of 360° risk adjustment can gain a competitive advantage and leapfrog their peers in this increasingly challenging market. A more complete understanding of the organization’s member population allows for more accurate pricing of premiums and an ability to better tailor products and services. Plans designed to best fit the market’s needs along with high quality ratings can drive member retention and growth. In addition, 360° risk adjustment improves payers’ ability to attract reputable, high quality provider groups into the network. Conversely, 360° risk adjustment improves providers’ ability to compete for payer contracts, including value-based contracts. Incorporation of scalable solutions will lead to an increased ability to manage greater volumes of data without straining budgets.

 

3. The Patient Care Case:

360° risk adjustment engages providers and members alike to help organizations achieve “Triple Aim” goals: better quality of care, better health outcomes, and lower costs. A modernized risk adjustment approach allows for greater visibility into population health; in turn, this information can direct care management and disease management efforts, ensuring that providers are equipped to deliver the right care to the right members at the right time. Again, the results should include improved care and healthier, more satisfied members.

Looking ahead

Clearly, the stakes are high, and they will only continue to grow. I believe that one of the first things that must occur to make 360° risk adjustment a reality is a shift in mindset. Traditionally, risk adjustment has been perceived as simply “checking the boxes” – performing a set of tasks that comprise a required actuarial exercise – instead of a crucial effort that has far-reaching implications across the organization. When risk adjustment is treated as a priority and brought into the organization’s long-term strategy, it can be properly leveraged as an asset to drive growth and advance the organization’s mission of keeping patients healthy. Risk-bearing entities who embrace this approach to risk adjustment will outpace their competitors in the transition to value-based care models.

That being said, risk adjustment optimization need not be an all-or-nothing effort. Organizations can begin with small improvements. In fact, our initial blueprint development process identifies and prioritizes low-hanging fruit that will yield the greatest results. In next month’s blog post, we’ll examine how to assess the status quo and develop this blueprint for improvement.

As I mentioned last month, Health Fidelity is releasing a series of eBooks that delve into 360° risk adjustment in greater detail and outline our recommendations for success. I hope you give them a chance to influence your 2017 plans.