February 27, 2025 - Many people in the healthcare industry believe value-based care is the cure to the issues of a fee-for-service care model. The idea is simply that patients or groups should pay not for services, but for the value they receive. This would theoretically encourage a doctor to request or share bloodwork with the patient’s other doctors, to avoid waste.

The spirit is commendable, but these initiatives are often launched with great fanfare only for clinic groups or practices to realize they rely on a potentially faulty assumption: That those values or costs can, in fact, be measured.

That measurement is often challenging — more challenging than navigating the existing financial complexities of the present model. In this article, we explore some of the complexities of accounting for value-based care, and questions to ask.

Why value-based care is difficult to calculate

A National Institute of Health meta-analysis of 1,930 value-based studies found that very definitively, yes, giving healthcare leadership accurate cost information can help them launch value-based care models. Notably, those leaders need accurate:

• Benchmarks
• Cost drivers
• Total costs
• Cost savings
• Insights into how to adjust care paths

That meta study found there are three most effective methods of arriving at this data: process mapping, expert input, and direct observation. These are studies any healthcare company of any size can undertake. However, the authors also warn that it is immensely difficult to gather data that is accurate enough to make decisions, and clear enough to bet the business on it.

This is because the data quality largely depends on the organization's goals. For example, “While costing short, or partial, care paths and surgical episodes produces accurate cost information, it provides only limited decision-making information. Practitioners are advised to focus on costing full care cycles and to consider both direct and indirect costs through time-driven activity-based costing (TDABC).”

In other words, healthcare companies quickly run into tradeoffs: Is your organization optimizing for better episodic treatments or longer health spans? The more easily calculable and available information — short-term episodes — obviously can’t capture the full “value” picture. Whereas costing time and activity over patient lives will reveal better information for making decisions — and yet requires far more time and power to capture and compute.

In reading these studies, we are reminded of the adage that all models are wrong, but some are useful. Part of your organization’s challenge in building your value-based model will be understanding the tradeoffs, what questions you hope to answer with this data, and who will implement those conclusions.

To build your model, you must grapple with:

• Incomplete information about your populations
• The wide-ranging impacts of comorbidities and interventions
• The support physicians will require
• Legacy ERP systems with poor integrations

Incomplete information about your populations

It is easiest to create a value-based model for a medium-sized, well-defined population such as a localized network of clinics. Above or below that size, you may run into segmentation and data quality issues. Nationwide organizations may have to create multiple models of varying accuracy, and very small practices may not have enough information to begin with.

According to Bill Georges, former chief strategy officer at Horizon Blue Cross Blue Shield, who helped pioneer their value-based care program, “Most providers still don’t have the data- and technology-driven capabilities to deliver value-based care effectively at scale.”

The wide-ranging impacts of comorbidities and interventions

Further complicating this analysis is the difficulty of providing cause and effect across populations whose lives are complicated and whose activities are unknowable. This requires rigorous statistical analysis and years of testing to control for. Similarly, the models may suggest interventions that an organization, such as a surgical practice, cannot control for because they are “upstream” earlier in that person’s life.

The support physicians will require

If you have produced a model, how do you activate it throughout your services? Do not discount the amount of support busy physicians and professionals will need to understand how to make decisions based on value-based data — especially when it runs counter to their training. They will also need new technology for timely access to that data so they can make decisions. If a healthcare company implements a value-based model only for physicians to not have that data at the point of care, they can’t really intervene before conditions grow acute.

Legacy ERP systems with poor integrations

Many healthcare organizations will find they struggle simply to access the necessary patient data, even if allowed. As Bill Georges wrote in his op ed: “Hard Truth #3: For value to work, payers need to rely on providers, but many providers aren’t equipped with the right data, technology, and systems.”

How can you derisk this analysis?

Amid the present accounting and financial talent shortage, many healthcare organizations are choosing to outsource these analyses. This not only gives them access to niche healthcare finance talent, but allows them to hire those people more quickly for just a limited basis. Want to explore projects like this? Please contact Mike Zyborowicz, at mzyborowicz@citrincooperman.com or Kieran Higgins, at khiggins@citrincooperman.com to learn more about Citrin Cooperman’s Business Process Outsourcing Services and Healthcare Services.