Modeling Financial Outcomes and Quantifying Risk in Episode-Based Payment Models

AJMC August 23, 2021
David C. Johnson, MD, MPH, Fernanda Bravo, PhD, Eric Kwok, BS, Christine Ahn, MBA, Artem Pashchinskiy, BS, Mark S. Litwin, MD, MPH, Christopher S. Saigal, MD, MPH

This article provides a description of prospective financial simulation methodology and use cases with empirical data for episode-based bundled payments, including implications for contract negotiations and value-based care redesign.

ABSTRACT

Objectives: Health systems and provider groups currently lack a systematic mechanism to evaluate the financial implications of value-based alternative payments. We sought to develop a method to prospectively quantify the financial implications, including risk and uncertainty of (1) transitioning from a fee-for-service to an episode-based payment model and (2) modifying episode-specific clinical cost drivers. Finally, we highlight practical applications for the model to help facilitate stakeholder engagement in the transition to value-based payment models.

Study Design: We created a financial simulation from empirical data to demonstrate the feasibility and potential...

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