The Road to Value Demands a Smarter Approach to Risk

As healthcare nears year three of the COVID-19 pandemic, hospitals and health systems should consider accepting significant responsibility for the total cost of care from all sources, per covered life, over time. One place to start: Reduce avoidable spending on chronic conditions, which, combined with mental health conditions, account for most healthcare expenditures. This shift will necessitate investments that strengthen the ability to identify at-risk populations and react in ways that help avoid complications and reduce unnecessary costs.Even before the pandemic, it was clear that there were missed opportunities to reduce costs of care. Failures in care coordination contributed to billions of dollars in waste each year. Now, as payers explore innovative risk-based arrangements for addressing the impacts of social determinants of health and delayed care on health outcomes, healthcare providers should seek opportunities to partner with payers in developing shared-risk approaches to patient engagement and chronic condition management. Steps toward designing a model for risk innovation include rewarding physicians and clinicians for managing the total cost of care, involving physicians in discussions around acceptable levels of risk in value-based contracts, ensuring that the organization's cost accounting approach meets its strategic needs, investing in actuaries to study data that can identify rising-risk patients, and exploring innovative partnerships for funding the infrastructure for value.