Value-based care contracts now account for a large growing share of revenue for healthcare systems; however, this is uncharted territory for systems designed for fee-for-service care. And this disconnect has real consequences. Fee-for-service metrics are no longer relevant for measuring, let alone optimizing care outcomes, quality measures or the financial aspects for these organizations. When healthcare organizations measure the wrong things, they focus on outdated success indicators and miss indicators that drive performance in value-based care.
This phenomenon is especially true in revenue cycle management. Standard metrics such as days in accounts receivable and denial rates can’t capture the dynamics of risk-bearing models. As a result, teams continue to chase benchmarks that no longer align with the way revenue is generated, costs are managed or quality is rewarded.
As healthcare systems work to protect margins and success under new payment arrangements, it’s imperative a shift is made to evolve revenue cycle metrics. This shift must include measurements across clinical, operational and financial functions to create an effective, shared view of overall and specific performance.
The limits of traditional revenue cycle metrics
Fee-for-service revenue cycle operations differ greatly from value-based care operations. FFS focuses on optimizing reimbursement for volume, measuring metrics like clean claim rate, AR aging and denial overturn rates. These metrics measured the efficiency of claims submission and collections, not the alignment of financial, clinical and operational performance.
Value-based care has changed the financial model; however, revenue cycle metrics have lagged behind. Days in AR or a high percentage of clean claims doesn’t tell you much about the status of your organization’s ability to capture risk scores, close care gaps or position itself to earn shared savings. Traditional fee-for-service revenue cycle metrics also don’t reveal revenue fluctuations due to missed attribution opportunities or inefficient population health interventions.
Healthcare systems that rely solely on legacy metrics are often those experiencing underperformance in value-based contracts. Shared savings targets are missed, benchmarks aren’t met and penalties accumulate. The data they’re currently using to make decisions paints an incomplete picture.
The metrics effective value-based care must measure
Success in value-based arrangements requires measurement of the speed at which healthcare systems are paid as well as how effectively they manage risk and cost relative to quality. Healthcare systems need a new set of metrics that align revenue cycle functions with clinical outcomes and operational efficiency.
Healthcare systems must evolve metrics in these key areas:
- Risk Adjustment Accuracy
In risk-bearing models, accurate coding and documentation are critical to securing appropriate reimbursement. Metrics should be measured beyond basic coding error rates to assess the full clinical picture of every patient. -
- Are diagnoses updated annually and full reflective of the chronic illness or disease burden?
- Are coding and clinical documentation teams working together in relation to population health initiatives?
- Can specific providers and/or locations where risk scores consistently fall short be identified?
Risk adjustment measures influence the revenue baseline for value-based contracts and have a direct impact on financial performance.
- Care Gap Closure Velocity
Closing care gaps drives quality scores and cost savings in value-based arrangements. Traditional revenue cycle metrics don’t measure the speed at which care gaps are addressed.- How long does it take to close high-priority care gaps after identification?
- Are patients proactively engaged and tracked to completion?
- Can teams identify which gaps have the greatest financial and clinical impact?
Speed matters. Delayed interventions hurt quality scores and lead to avoidable utilization and higher costs.
- Attribution Stability and Opportunity
Attribution volatility creates uncertainty for care management and revenue forecasting. Legacy revenue cycle measures can’t address this challenge.
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- Are attribution shifts and their impact on shared savings targets tracked?
- Can patients likely to churn out of an attributed population be identified?
- Can underattributed populations where outreach could improve panel size and stability be identified?
Metrics that reveal attribution patterns and trends help healthcare organizations protect revenue and proactively plan for future need.
- Cost of Avoidable Utilization
ER and ED visits, readmissions and unnecessary inpatient stays can erode margins under value-based contracts. While operational teams track these events, revenue cycle leaders must connect and understand their impact to financial outcomes.
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- What percentage of total costs can be attributed to avoidable utilization?
- Which care settings or patient cohorts drive the largest losses?
- Can teams act quickly enough to change the trajectory of high-risk patients?
Integration of these measures with performance traction allows healthcare organizations to target interventions that with high impact.
A Shared View of Performance
One of the largest challenges to updating revenue cycle metrics is the distribution of responsibility for value-based performance across departments. From finance to clinical operations to care management to coding teams, each team works from differing data sets and modified success criteria.
This misalignment easily creates blind spots. Clinical teams may focus on quality metrics while revenue cycle staff track denials, without connecting risk adjustment accuracy or shared savings opportunities. As a result, leaders are left without a holistic view of the metrics that drive financial and operational health of the organization.
Healthcare systems must establish a shared view of performance that bridges data silos to evolve revenue cycle metrics. This requires several key components of a mature data strategy:
- Integrated Data Sources
Claims, clinical and operational data can no longer be siloed. The data must be combined in a single environment rather than analyzed individually or in isolation.
- Real-time Visibility
Metrics must be updated regularly to support timely in-the-moment interventions for impact and success.
Only 38% of health systems report having real-time visibility into the financial impact of avoidable utilization.
Healthcare Finance News, 2024
- KPI Alignment
Leaders across departments must agree on a unified set of metrics associated directly with value-based benchmarks and outcomes.
Organizations and departments that work off the same metrics and data sets work in unison, not against one another. Together, they’re able to identify root causes of underperformance and coordinate action for full efficiency.
Performance Optimization with Reporting
Evolving revenue cycle metrics isn’t just to improve reporting, it’s a shift that enables healthcare systems to actively manage performance rather than react after the fact.
Traditional fee-for-service revenue cycle operations lends itself to retrospective action. From denial reviews, claims appeals and the recovery of lost revenue, preventative measures aren’t the focus in FFS analysis. This approach doesn’t work for value-based models.
62% of healthcare executives say their current revenue cycle metrics do not adequately support value-based contracts.
HFMA, 2024
Proactive discovery and intervention is necessary for value-based care leaders to forecast, model and adjust performance in the moment. The move from static dashboards and spreadsheets to dynamic analysis that identifies trends, uncovers root cause and supports scenario planning is paramount. When leaders can see the full picture and understand the impact of various decisions, decision-making moves from reactive to proactive – a positive step toward improving outcomes.
Shifting Focus with Forward Momentum
As value-based care contracts expand throughout healthcare and hospital systems, the way success is measured must be modified. Healthcare systems can’t afford to work off the wrong metrics or with outdated tools. Legacy revenue cycle metrics once designed for FFS can’t capture the full spectrum of financial, clinical and operational performance needed to fully understand and realize success in risk-bearing arrangements.
By evolving metrics to include risk adjustment accuracy, care gap closure speed, attribution stability and avoidable utilization costs, healthcare organizations can align their revenue cycle with value-based objectives. The most successful systems integrate these measures across departments, establish a unified view of performance and use analytics to drive proactive action.
While this may not be an easy shift to adopt, it’s necessary. Metrics shape behavior. And if you use inaccurate or inappropriate measurements to make decisions, teams will optimize for the wrong outcomes. When you measure what matters in value-based care, you create the conditions for true performance optimization.
