The Evolution of Financial Management to Support Value Based Care, an Interview with George Braunstein, FACHE

George Braunstein, FACHE has 40 years of experience in the health and human service industry, leading both private and public organizations – in institutional and ambulatory settings. He has worked as Executive Director of the Fairfax-Falls Church Community Services Board (CSB) in Fairfax, Virginia and also was the Executive Director of the Chesterfield County Community Services Board. Mr. Braunstein also served as the Executive Director of Behavioral Health for Aurora Health Care in Milwaukee – the largest integrated health care system in Wisconsin with 13 hospitals, 20,000 employees and $1.5 billion in annual revenues.

Ahead of His Time

Starting with in the early 1990s, before NCQA and EHRs were well developed to support Value Based Reimbursement (VBR), George Braunstein was directing an HMO in Milwaukee overseeing behavioral health care. As was the trend at that time for HMOs, cost savings were based on limiting all services across the board. Said Braunstein, “We were struggling with a policy which was a denial of care to attempt to make the bottom line look better.” Despite the reduced services, overall costs were not necessarily declining. When Mr. Braunstein looked at this trend, he had a different idea. Using only simple algorithms and rudimentary financial data, Mr. Braunstein and a nationally based work group quickly realized that there was a “missing piece”, which he described as “how do we create value out of behavioral health”.

The solution was to set up a “single integrated model’ where behavioral health providers were embedded in the primary healthcare system. And instead of strict limits on services, George and his team looked for the most cost-effective ways to reach desired results. One relatively simple strategy was to not limit outpatient behavioral health therapy which had the direct effect of reducing expensive inpatient readmission rates. Mr. Braunstein and his team closely monitored both costs and outcomes and developed a 10 percent withhold reimbursement to incentivize the staff to achieve desired clinical outcomes. As noted by Braunstein, he saw “the need for some kind of continuous quality improvement tool.” The program succeeded. In its first year, Mr. Braunstein noted a two percent pay out and seven percent payout in the second year.

Lessons Learned

This early success laid the groundwork for more sophisticated VBR processes that Mr. Braunstein would later develop in his career. For instance, the implementation of higher financial risk accountable care organizations and the implementation of case rates and bundled rates, to name a few. While these VBR models became more sophisticated, the underlying principles that needed to be in place for VBR to work remain the same. Some of the lessons learned include:

  • Understand your baseline data, both clinical and financial, and make that data available at the “point of impact.” The front-line providers need to be in the loop.
  • Stay on top of the data. Organizations can have a great deal of data but without built-in processes for sharing and accountability, VBR will fail.
  • Be patient. Most behavioral healthcare providers are “mission driven” and may not see the ‘value’ in VBR. Mr. Braunstein noted that although changing organizational culture can take years, continuously providing clinical and financial updates on improvement to providers will help them develop a more “entrepreneurial approach” to their practices too.

When asked what he considered to be the largest barrier to creating a Value Based culture, Mr. Braunstein noted that an overly controlling corporate environment is often hard to overcome. As noted, the transition to VBR seldom occurs overnight and there can be failures. He recommends that you carefully work with your board to ensure that they are both mission-driven and entrepreneurial in their outlook. Finally, some bandwidth for program development and, occasionally, a failure is a necessity for overall success.

Technology and VBR

One of the biggest changes Mr. Braunstein has seen since the early days of Value Based Reimbursement is the development of Electronic Health Records. He noted, “the data can be organized, both performance and financial, to adapt and improve”, more efficiently and allow you “to act more proactively”. Importantly, these systems allow for timely analysis of revenue cycles. As noted by Mr. Braunstein, with ever shrinking budgets in behavioral healthcare, the ability to identify and contain costs is the best way to maximize revenue.

Ten Steps to Align Your Financial Management Systems with VBR

Value-Based Reimbursement (VBR) is an opportunity for payers and providers to establish and build new relationships based on shared goals, outcomes and incentives. Ultimately, patient mental and physical health outcomes are improved. Financial leaders must reevaluate their strategies and system. They must consider the investment in the patient experience, as well as clinical outcomes. Both will likely be measured. Key steps to position the financial systems of the organization to support VBR are outlined.

Step 1. Discern the Goals of the New Paradigm and Investment Needs

A first step is to understand the investment of new service lines, support systems and their staffing implications, technologies and other expectations by payers to successfully meet value-based care expectations in your region. This may include chronic care management, improved care coordination, and integration of physical health. Accreditation could also be required, which is a significant expense for a smaller organization. The clinical and operations teams will specify the resources needed and the finance team will help develop pro-forma to accomplish clinical and operations objectives.

Step 2. Bridge the Gaps Between Finance, Operations and Clinical Leadership

Examine your leadership culture, skill sets and silos. Many behavioral health provider organizations are mission-driven and may be ‘allergic’ to a ‘bottom line’ business model. However, VBR is a more complex reimbursement process that marries quality outcomes with cost effectiveness and ultimately defines reimbursements.

Finance leaders need to understand the clinical outcome and patient experience requirements and how to resource staffing and technology to support them. They must be properly funded. Operations and Clinician Leaders need to learn to formulate and present the ROI on additional resource needs and clearly articulate those in financial terms.

The finance department will need the new skill of correlating service data to VBR contract terms and projecting short and long-term cash needs. Keep in mind the financial analysis is only as good as the encounter data feeding the system. In turn, quality improvement can only be realized when the feedback loops are accurate. The lack of good data will diminish outcomes and over time, drive down cash flow. The finance department can often identify red flags in billing practices. In many organizations this may be a new role for the finance department and necessitates a closer working relationship between finance and operational departments.

Step 3. Evaluate Baseline Costs to Deliver Services

In order to evaluate cost effectiveness, you need a baseline of current costs. The average cost per visit is a good start, and this can also be broken down by service line. Engage with your finance department and ensure you are accurately tracking direct costs like staffing costs, and administrative costs that include occupancy, technology, and infrastructure.

 

Step 4. Determine the Investments Required

Consider the goals and investment needs discerned from Step 1. The development of VBR processes can be expensive. For instance, implementing a new evidenced-based practice can include ongoing trainings, certifications, and continuing education expenses. More to the point, can you afford the VBR plan you are planning? Remember you may have many options such as incentive-based ‘withholds’ that lower your financial risk. Having a sound understanding of your financial bandwidth allows you to effectively negotiate with payers and set up programs that will meet the need of the individuals you serve. Also, carefully assess hidden costs such as workforce training to accommodate a new payment model.

Step 5. Consider Your Cost Strategy

A more in-depth breakdown of costs will help increase that value for the consumer and the organization alike. Key tools are cost-driver analysis, activity analysis, and performance analysis. By understanding these crucial concepts, the move to operational implementation, changes and improved outcomes become viable. A few concepts to consider:

  • Activity-based costing—Identify the key activities of a service. Key activities need to be broken down into definable tasks. Then we can identify the resources needed to complete the task. In turn, changes in productivity can be monitored and addressed on a systemic basis.
  • Target costing—With our initial analysis we can identify the cost of a service to hit a specific target market rate to realize the required profit margin. While this type of analysis is derived from manufacturing processes it can be thoughtfully implemented in the behavioral health setting where profit margins are often slim at best. In the end Target costing balances three areas – price (what the consumers will pay), quality (the acceptable level of quality expected), and functionality (the service components expected).
  • Value engineering—Define the functional outcome and identify ways to improve the process of reaching your goals. For instance, a new technology may be added to a service activity that reduces time spent traveling and associated costs like mileage and insurance. The role of the finance team in identifying cost drivers will be a key step in seeking cross-functional input from service line, IT and quality teams and transforming this information into a holistic view that incorporates the different perspectives on the path to better productivity.

Step 6. Take A Systematic Approach to Payer Contracting

It is a critical step to develop, hire or outsource the talent to negotiate payer contracts effectively. Practices should take small steps when entering into VBR. Gain experience with a few select outcome performance areas before entering into a full risk agreement. As you get experience with payer expectations and they with your practice’s cabilities, you can then broaden the contract risk. Identify the diagnoses or procedures you can most easily impact. Consider what matters to your payer by finding two to three diagnoses that comprise the most potential spend for them. It is ill advised to blindly enter into the contracting process without understanding your costs, reporting capabilities and current performance. As provider organization must objectively demonstrate both the improved results and ‘cost effectiveness’ of their approach, it will make it possible to negotiate to thrive, not survive. Also prepare the payer contracting function with national and regional benchmark data. Closely examine the underpinnings of benchmarks such as HEDIS measures. It will come in handy to level-set realistic expectations.

Step 7. Refine Your Revenue Cycle Management

A clear understanding of the hard and soft costs will help to determine the transaction price; an organization’s ability to identify the payment terms for the services provided. While the transaction price was is relatively clear in the fee for service system, the uncertainty of VBR needs heightened attention. Remember, many VBR reimbursements are not determined until the results are obtained. While an agile Electronic Health Record (EHR) can shorten this turn around, there can still be a lag in reimbursement timing. Having the economic stability to deal with these fluctuations is key to the organization.

Another key area of input by the finance department is timing of payment. If an outcome goal is reached over two fiscal financial periods, what is the contract language on how that incentive should be paid out. Again, the generally tight profit margins in behavioral health require a clear understanding of the financial terms of the VBR contract, including payment cycles.

Step 8. Evaluate Supplier Contracts

Consider your vendors and suppliers to be your partners in the delivery of value-based care. Under HIPAA rules, you are required to have business associate agreements with vendors who handle your organization’s Protected Health Information (PHI), which protects your organizational risk. Likewise, build in shared accountability into vendor agreements, whenever possible, to ensure timely metrics, adherence to system uptime slas, and data availability to obtain target reimbursements in providing cost-effective care. Perhaps you outsource your chronic care management program. You should have clear performance expectations in your contract to mirror payer performance. Insist upon performance guarantees and financial penalties if the vendor doesn’t perform to established expectations. Routine rebid of vendor relationships help organizations contain costs and maximize their quality.

Step 9. Bring Your Board “On Board”  

A financially savvy provider organization executive team understands the need to align strategies for organizational performance with their ability to manage financial risk. The board has a fiduciary duty to oversee the financial investment and return on value-based care. An important element of this process involves effective education of the board or bringing the ‘board on board’. This topic is often neglected in literature, yet some resources exist (see Get the Board of Directors on Board for ChangeGetting A Board On Board, and A Chaotic Environment Demands Fluid Strategic Planning).

Step 10. Leverage Technology for Efficient Cost Reporting

Many organizations are drawn to the belief that the VBR processes will be managed with EHR software. The good news is that EHRs have become increasingly more agile in the ability to output quality and financial data. The bad news is that there are pitfalls with over reliance on software. George Braunstein has been Executive Director of numerous behavioral health care provider organizations and has seen the evolution of ever more sophisticated software. He notes, “EHR software should be seen as support for VBR” and not a substitute for substantial planning and process implementation. George also noted that without consistent feedback and ongoing education at all organizational levels, there will be little functional change within your organization. (see the Financial Thought Leader article for the complete interview with Mr. Braunstein).

Final Thoughts: You’re Not Alone

Fluency in the language of finance is uncommon in the world of behavioral healthcare. Even seasoned administrators may struggle with the intricacies of alternative payment arrangements and shared risk. The evolution of VBR has made it a need to become familiar with financial processes, however, it does not mean you need to be an expert. Identifying and utilizing your available staff subject matter experts is always a good starting point. Once you have a sense of your organizational financial capabilities you can then move to process planning. Again, finding good resources is critical. For instance, an organizational preparation guide (see https://vbcforbh.com/does-your-strategy-prepare-you-for-success-in-a-value-based-market/) can demystify and give direction to successful VBR implementation. Finally, the use of an agile EHR can give you the systemic support throughout the VBR process.