Risk and quality metrics are increasingly being used to measure provider performance in value-based contracts, which has the potential to reduce health care costs over time and bring attention to those who are most in need of care

Addressing risk adjustment and quality have always been high on health plan priority lists. Good performance is needed in these areas because it impacts the plan’s rating and payment. With the health care industry rapidly moving to value-based contracting models, health plans are increasingly aligning performance metrics to improve collaboration from providers to ensure that the payer’s interests are addressed.

Understanding the subtleties

Everyone understands that health care costs in the United States are too high and are increasing at an unsustainable rate. Value-based payment models seek to shift the revenue model for providers from increasing volume of care to providing better, proactive care with lower overall costs and better outcomes. Reducing health care costs seems like a worthy goal, but the reality is that a health plan’s medical costs are a provider’s revenue. If the goal is to reduce medical costs, how can it be done without reducing provider revenue?

This is one of the challenges in getting agreement between payers and providers in value-based care (VBC) arrangements. Provider want to do at least as well financially as they do today. Ideally, they’d like to be paid more in a VBC arrangement—but certainly not less. This is why arrangements where a provider can earn upside risk but share no downside risk are popular and the most agreeable to providers. But this has the disadvantage of not reducing costs as significantly as a payer would want.

Embedding risk and quality metrics in a provider’s VBC performance metrics helps ensure that the health plan will get paid for risk-adjusted populations. If the health plan can attract attention to these metrics from providers, this will lead to better cooperation and understanding of the provider in the need to address risk and quality gaps, improve documentation, and engage in more preventive care.

Shifting the paradigm

So how can costs be reduced and not require providers to experience a reduction in revenue? The reality is that health care costs rise every year—usually much more quickly than the rate of inflation. If the industry can work together to make them rise at a slower rate, that gives a cushion to employ better managed care with more health equity so that everyone’s health needs are addressed and not just those who have health insurance and access to care. Those who had unreliable access to care before will now be under managed care and be able to avoid high-cost emergency care that happens today.

Many of those who neglect their care have no insurance or are on Medicaid and have social determinants of health (SDoH) that impact their access to care. Hospitals must take care of these people due to their social mission, but this expensive care often goes unreimbursed. If consistent and accessible care is made available along with assistance to overcome access-to-care issues, the high-cost care that is prevalent today with poorer outcomes can be replaced with preventive care that includes those that do not regularly receive it in the current health care world, and the costs for everyone can be reduced as the principles of managed care has a chance to take effect.

Risk adjustment focuses attention on those who are most in need of care but who are not getting the care they need. Those members with chronic conditions and significant risk gaps are the ones who are prioritized at the top of member chase lists to try to engage them to get back into care. Quality measures proactively address patient demographics that are most susceptible to certain medical conditions. Helping ensure that they get screened is the best way to intervene and head off more expensive care when the condition appears or has worsened.


Risk and quality metrics are increasingly being used to measure provider performance in value-based contracts, which has the potential to reduce health care costs over time and bring attention to those who are most in need of care. Learn more on Change Healthcare’s website.

About the author

Jimmy Liu is a risk adjustment industry thought leader and conference speaker who has been helping health plans nationwide formulate their risk adjustment strategy for the past 15 years. He is one of the original designers and developers of Change Healthcare’s risk adjustment products, including Risk View™ and Dx Gap Advisor™. He also engages in strategic partnerships, client and sales support, consulting, and innovation across the company. He currently serves as vice president of product strategy and consulting services and is also involved in migrating existing products to the new Change Healthcare corporate platform. Liu  is an expert in risk-scoring models, and he is a graduate of the University of Pennsylvania.