Benefit #1 Improved ROI
We’ve recently published a series of blog posts focused on the challenges of bringing risk adjustment in-house. The series is pivoting, and the next few posts will examine the benefits of this effort. One of the most significant benefits of bringing risk adjustment in house is having tighter control over your return on investment (ROI). ROI is an important metric that health plans should be tracking to evaluate the success of risk adjustment programs. It is a measure of the efficiency of your risk adjustment initiatives and is a leading indicator for which programs are most effective.
Vendors may offer acceptable ROI on their services, but their program ROI is unlikely to improve over time. This is especially true when the vendor’s services are tied to volume. The vendor will be incentivized to provide a volume of service that may not be justified by suspecting logic. This additional work will provide marginally less value the more it is expanded. Services such as chart abstraction and in-home visits are particularly susceptible to this. Health plans that bring the work in house can establish the optimal volume based on budget and projected opportunity and can tightly control the level of work. They will not be susceptible to pressure from vendors to expand the work beyond a reasonable volume.
Moving Risk Adjustment In-House Enables Health Plans To Move Away From “Transactional Costs” to “Building Value” Long-Term
Building the capacity to perform risk adjustment in-house is a significant investment in itself. As we discussed previously in this series, fortifying the infrastructure to do the work in house requires a significant investment. It takes a sizable workforce to conduct chart abstraction and to implement an in-home visit program. Building these programs is a long-term investment in which a significant cost will be incurred up front. However, this investment will lead to more sustained value over time. Contracting with a vendor, on the other hand, is a transaction, not an investment. It can provide immediate value, but that value is unlikely to grow.
Doing the work in house sustains value over time in three ways:
- Health plans can respond more nimbly to changes in the healthcare and risk adjustment landscapes.
- Organizations can more readily pinpoint how each program’s value shifts over time, and resources can be more efficiently allocated to the programs that are driving greater value.
- Health plans will have the added capability to coordinate internally with other parts of the business, such as care management and quality, to provide more comprehensive and cost-effective care for members.
It can be difficult to plan for and invest in the future when every year brings different financial challenges for health insurers. However, the challenges will only increase over time. Plans that want to remain viable into the future should begin investing in the business to sustain ROI over time.
Director of Risk Adjustment Solutions
Peter Janelle has more than a decade of experience in health insurance, having worked both for payers and vendors. He has extensive knowledge of Medicare Advantage finance, including risk adjustment, stars, value-based arrangements, and healthcare economics. Before joining Vital Data Technology, Peter was in charge of risk adjustment operations at UCare, a regional Minnesota insurer with books of business in Medicaid, Medicare Advantage, and ACA.
Peter enjoys photography and outdoor adventure. An annual highlight is his annual winter camping trip to northern Minnesota.
Peter holds a Master of Public Policy from the Humphrey School of Public Affairs at the University of Minnesota.