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Episodes of Care: A better path to improved clinical and financial outcomes

By François de Brantes on 10/13/20 9:46 AM

Frustrated by continued health plan inflation and point solutions that keep piling up and sometimes fail to live up to their promise, employers are looking for more comprehensive approaches that deliver measurable value today—and tomorrow. 

An episodes-of-care payment program can help employers achieve systemic and sustainable healthcare delivery reform that provides greater spending control and predictability, eliminating ‘point solution exhaustion.’ 

Episodes-of-care refers to an all-inclusive health-and-payment model in which a single, bundled payment includes all services associated with the treatment for an illness, condition or medical event rather than a separate fee-for-service model. Episodes-of-care programs bring together comprehensive care and cost reduction through an approach that also improves the member experience. This ‘inclusivity’ makes the episodes-of-care experience greater than the sum of its parts.

We know that healthcare doesn't begin when the patient enters the provider’s office—and it doesn’t end when s/he exits. Episodes-of-care programs are designed to address those financial and medical realities. For example, an episode-of-care single-payment model would include all physician, inpatient and outpatient care for a knee replacement procedure vs. separate payments for each aspect of treatment. Similarly, it would include all the care for a person who has one or more chronic conditions.


Let’s take a closer look at what’s driving cost savings and quality improvements under an episodes-of-care model.

Drivers of cost savings
The two primary benefits of an episodes-of-care program are financial and quality-of-care, and they go hand-in-hand. The financial incentives negotiated with participating providers are based on improved patient outcomes in a model where a more integrated approach to patient treatment drives greater efficiencies and lower costs.

Payers realize cost savings in three ways: 

  1. By negotiating a single payment to providers for any number of procedures or conditions at a price point that is lower than the current fee-for-service costs; 
  2. By agreeing with providers that a portion of the payment will be held back and contingent upon reaching specific quality gates; and
  3. By never having to spend on any complications of care.

For example, in the case of treatment for an event such as open heart surgery, payers create a guaranteed price and hold providers accountable for delivering the outcome over the entire duration of care, including any specific clinical problems that may arise during that time period. If a provider achieves the mandatory quality criteria for each clinical episode and, in doing so, reduces the previous rates of complications, s/he will receive the full negotiated price for the episode (and therefore realize a good financial performance).

Health benefits
The quality criteria met by the provider translates into a health benefit for the patient. By tying cost incentives to the clinical outcome rather than provider productivity or other time-based metrics, the quality of patient care remains central to the episodes-of-care model.

Quality criteria are stipulated in the contractual agreement with providers, who are kept informed on their performance while the patient is still within the episode-of-care. At every critical decision point, providers are aware of what they must do in order to achieve both the target price and improve quality of care. This communication is crucial to success.

The episodes-of-care model in action
Let’s look at pregnancy and delivery. In a fee-for-service model, what happens in the prenatal period is completely separate—from a payment perspective—from what happens during delivery or what happens with the baby after delivery. There is no integration or incentive to align the different stages of care, which may have a negative effect on both mother and baby. 

In an episodes-of-care approach, care is inclusive of the entire nine month prenatal period, the delivery, 60 days after delivery for the mother, and 30 days after delivery for the baby. What happens under prenatal care largely drives the baby's health at the time of delivery, and the baby's health at the time of delivery is the primary driver of treatment costs after the baby is born. The reason for a baby going into a routine nursery or an intensive care nursery is almost always driven by baby birth weight, and the difference in cost between those care settings averages $100,000. 

Having a single price for all phases of care for the mother and the baby creates a convergence of interests between all clinicians during the entire episode-of-care, focusing their efforts on getting the best possible outcome for mother and child.

The Signify Health episodes-of-care model
Signify Health functions as a central player in an episodes-of-care model, working equally with the health plan sponsor to guarantee the target price, and with providers to enable them to perform quality care by keeping them informed throughout the duration of the episode. We do this at scale, managing billions of dollars of at-risk episodes every year. 

Our technology, analytics and home and community-based services drive true value-based care, helping to close clinical and social gaps and delivering a better member experience. Importantly, for those whose outcomes cannot be optimized without addressing underlying social determinants of health, Signify’s social care coordinators ensure that the individual’s addressable social needs are met. The result is a more powerful solution than health plans can deliver alone — one that delivers guaranteed prices, full warrantees on quality care, and seamless coordination across all sites of care for a wide range of conditions and procedures.

By applying Signify’s proven model, payers can address more than 50% of medical spend—5 times more than historical approaches such as narrow networks or centers of excellence programs. This represents substantial savings potential, along with positive impacts on clinical outcomes and stop-loss insurance costs. With such benefits, employers can finally achieve true price transparency, get warranties on quality care and cost, and better engage members in management of their health—all elusive goals that are very achievable under an episodes-of-care program.