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How to Calculate the Elusive ROI for Care Management


As healthcare providers move more deeply into risk, many are focusing more intently on trying to calculate the return on investment (ROI) from care management programs.

Answering the ROI question is exceedingly difficult. Just by way of example, a recent report from the Next Generation Accountable Care Organization Model Evaluation (NGACO) specifically highlighted the ongoing challenges of calculating ROI for care management in value-based strategies.

Anecdotally, the NGACO evaluation authors believe care management is “effective in reducing utilization, changing provider culture toward proactive prevention, and improving patient self-management and care transitions.” However, they also believe it is too early to see any “impact in quality, cost and utilization.”

We know that successful care management programs require significant investments in personnel, IT support and collateral resources to support cross-continuum care coordination and ongoing quality improvement initiatives. ROI, however, isn’t the only consideration in play. Care management also generates value on investment (VOI) – tangible outlying or downstream results that are not immediately attributable to the specific actions of care management or care managers. These are equally important in evaluating the impact of a care management program.

Understanding the Input Domains

So, how does one even begin to answer the ROI question? Getting to an ROI or ROI/VOI around care management needs to start with the right inputs. Put another way, we need to define the parameters than can inform the inevitable calculation. Not surprisingly, these grow from foundational elements often associated with taking risk for a population – payment, people, and process.

We recommend five broad areas to consider:

  1. Value-based payer contracts, including attributed lives, delegated populations, value-based quality metrics and additional incentives for participation
  2. Financial investments and associated costs of personnel resources (not just care managers but also those that support and inform them), electronic health record (EHR)/IT and collateral elements like quality improvement initiatives
  3. Caseloads or capacity for the care management team members and the productivity expectations for time dedicated to care management duties. This could include patient/caregiver contact, screening, assessment, education, evaluation and documentation (productive time) as well as expected administrative/non-productive time for meetings, travel, etc.
  4. Organizational focus on care management activities across the enterprise, including strategic imperatives or aligned initiatives that the care management teams address. Popular contenders are readmissions avoidance, transitions of care, complex/high utilizer patient care management, ED avoidance, closing gaps in care, post-acute care utilization and quality metrics.
  5. Standardized and measurable processes and data for the defined populations receiving CM services. Providers will want to survey their maturity in risk stratification and segmentation criteria and ability to capture discreet data points in the EHR, like appropriate coding and associated revenue, which could include annual wellness visits, chronic care management, transitional care management and similar efforts.

Given the rampant variation across health systems, there are likely to be a range of challenges when it comes to populating data for these domains. To that end, organizations should deploy a structured approach to fill in the data for these domains and ultimately set the stage to calculate an ROI.

Setting the Table to Talk About Care Management ROI

In our experience, starting with contracts is foundational, followed by a clear sequence of steps.

  1. Begin with contracts: Start by cross-walking all contractual obligations for the populations you must manage or are at-risk. Having a strong understanding of what lies in each contract allows you to accurately determine the requirements that dictate success (for each program and overall) and tailor the care management model to address those needs.
  2. Clarify system goals for care management: You must clearly define “what problem care management is trying to solve,” based on the contractual requirements and broad system, ACO or population health priorities. This will focus care management offerings and requirements and practically outline the specific measures of success.
  3. Define the population: Based on the contracts and goals, clearly define the populations to receive care management services. Identify and segment the attributed lives and deploy a robust risk stratification methodology that will inform appropriate worklists of patients for care management.
  4. Partner with providers: Aligning with providers on the define populations will not only lead to improved outcomes but also reduce the burden on the individual practitioner. Clear understanding of roles by team members will maintain integrity of the process, leading to success with organization and contractual goals, as well as patient goals.
  5. Standardize workflows: Using care management program goals as the bedrock, standardize workflows and education for care management teams. Create discreet EHR data fields to measure and evaluate the care management program. For instance, if a system goal is to advance goals of care conversations, create (1) a robust education program to ensure care managers are proficient in supporting providers, and (2) the means to document these crucial conversations. Thus, EHR data can be leveraged to track and trend the volume of advanced care planning conversations taking place.
  6. Create scorecards: Create and freely share data and scorecards to routinely evaluate the program. Data can be used to identify opportunities for improvement or understand positive deviance and detect exceptional performance outcomes by care managers. Examples from high performers could be leveraged to educate other team members. In addition, the scorecards become a feedback loop to leadership, providers, and care managers.
  7. Understand VOI: Beyond the specific goals and outcomes directly tied to care management actions, outline the range of other measures that are indirectly impacted or promoted by care management: patient experience and satisfaction, clinical outcomes, reduced avoidable admissions or ED visits, decreased leakage, team engagement and connectivity with community resources. The NGACO report highlighted that “care management programs shifted how clinicians and others think about patient care, bringing preventive care to the forefront and challenging the preconceptions of diagnostic care that many providers have traditionally relied on.”
  8. Hardwire the model: Consider achieving care management or population health program accreditation via NCQA or a similar entity to institutionalize standardization and best practices and position for increasing scale and risk into the future. More payer partners are looking to external validation of care management and population health programs, especially as both performance capabilities and risk potential increases.
  9. Negotiate with knowledge: Finally, leverage available data and scorecards that track return on investment and quantify the financial impact on system goals and payor contracts to inform contract negotiations. Ultimately, you want care management program success to yield “second generation contracts” which are specifically developed to align with the care management program design and capabilities. As a result, ongoing and future success will be easier to achieve and ideally self-perpetuating.

Using traditional budgetary approaches (annual views) and evaluations based on revenue will never capture the true contribution of care management.

It’s important to acknowledge that accurately calculating the ROI for care management programs is not easy. It requires a systemized, strategic approach with buy-in from senior leadership. The aim is to create a valid measurement methodology comprehensive enough to truly evaluate a return (both monetary and non-monetary) that is tied to payer contracts and system goals.

Following the steps outlined above, stakeholders will have the tools to start improving the narrative around the value of care management – and help senior leaders understand the dimensional complexity of inputs and measurement that are behind high-quality care and exceptional patient outcomes.

Learn more about how Premier helps providers in the transition to value.

This article initially ran in Healthcare Innovation on Feb. 3

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