Avoiding Risk is Risky Business

By Erin Russ on June 2nd, 2016

If you sat in Economics 101 in college, you understand the concept of “risk-reward”. Historically, healthcare has not been keen to take on risk, only working in a volume-driven manner as providers were paid for pretty much any care they gave, regardless of outcome. Now, as healthcare shifts to more risk-sharing models, the risk-reward equation is changing. Thus, it’s essential for providers to embrace risk to better understand and treat patients, simultaneously thriving in a new revenue model. 

We’re having more conversations around risk & associated financial models with clients here at Dodge. I recently talked with Larry Schor, senior vice president of corporate development and analytics at Medecision (and a data guru to boot), about embracing risk—how we calculate it, how we translate it, and ultimately, how we use it to spur action.

Dodge: What are some of the major challenges that providers are facing when it comes to managing risk?

Schor: Many organizations are looking to take on financial risk, but they don’t have the data needed to manage risk. Though providers have data about patients from within their own four walls, it doesn’t account for patients receiving care in other settings or what's happening in between appointments. This is especially true for patients with chronic conditions—those that are likely to be receiving care from multiple providers and out of networks. You can't manage what you don't measure. And you can't measure what you don't know. This lack of visibility makes it impossible to accurately assess assumed risk.

Dodge: How can these organizations work around these challenges? What do they need in order to truly understand risk?

Schor: To truly understand risk, you must have the most current information about your population as possible. This means information outside of just your system or network, co-mingling claims data with demographic and social determinants and data generated by patients between appointments. Once you have this, you then need to have the governance and procedures in place to enable successful risk remediation—actually doing something with the data to mitigate risk.

To do this, the economics of healthcare must change, with incentives for payers and providers to work together. It’s more than just a technology play—the politics and policies around data must be in place to take on risk successfully.

Dodge: With proper risk remediation, how do you see the healthcare system changing?

Schor: The current healthcare system performs perfectly for what it was designed to do: dealing with acute care at any cost. Now, we’re asking this model to achieve another goal it’s not equipped for: keeping people healthy, out of acute care settings, under a budget. The business model change that healthcare is pursuing requires redefining “success”—namely enabling people with chronic conditions to live independently, spending minimal time in the hospital. Doing this requires a cultural shift, whether the business model changes or not.

Many clients at Dodge, providers and vendors alike, are working to properly embrace and remediate risk. How do you plan to assume more risk, or better manage it, in the future?

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