Well-Intentioned Arrangements with Unintended Consequences

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When episode initiators with expertise in one part of the care continuum (say hospital) partner with conveners with expertise in another part of the care continuum (say post acute), they often consider dividing responsibilities and economics within such areas of expertise. In this example, the hospital knows how to run a hospital and therefore will take upside and downside risk on acute portion of the bundle.

In exchange for the partnership, the convener then accepts responsibility for the post acute portion and shares the upside with the episode initiator. Well-intentioned, fair, easy, not…

Here are some unintended consequences of well-intentioned arrangements:

1

Ratio of acute and post acute split – If this was fixed at a point in time and waste was trimmed out of one part of the care spectrum (most likely post acute), then the mix in reality moves further and further away from the original fixed ratio.

Consider overcoming by having a ratio based on a rolling average of say recent four quarters (one quarter is too volatile), but acknowledge that many episode initiators may have low volumes in a number of episodes even on a four-quarter basis.

2

Multi-factor volatility – While a ratio of acute and post acute can be agreed upon, there are many other elements that introduce variance – hospital’s (or other care provider) own DRG pricing change over time, wage factors, trend factors etc. They make for inelegant spreadsheets and even more inelegant economics sometimes.

3

There are some episodes where one part of the care continuum performs particularly well and the other part may be mediocre / marginally. If responsibilities and economics were not equally shared, then one party favors certain episodes over another during episode selection. On that episode, then the other party is uncommonly reliant on the performance of their counterpart and may experience red from volatility.

ownedoutcomes_exhibit

The good news is these elaborate financial arrangements rest on a foundation of care improvement and that gets us ahead as a nation. Whoever said structuring is easy… CMMI, episode initiators, conveners – I feel for you.

Anita Pramoda
Truth catcher - not important that I am right, important that I find the right answer. Focus as a noun? Obsess with my customer's needs as waking thought and resting reflection. Focus as a verb? Enough to intensely iterate, but not to produce motion sickness instead of momentum.
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