Buy or build? 4 crucial considerations for risk adjustment software decisions

Buying vs. building risk adjustment software. What’s right for you?

It is no secret that healthcare risk adjustment is an evolving landscape for all lines of business. As healthcare adapts to more and more developments in technology, finding and building software that is up-to-date and leveraging the latest technology is a smart choice for health plans.

Risk adjustment efforts play a critical role in determining appropriate reimbursement, improving patient care, and creating and establishing financial stability for health plans. When exploring options to manage risk adjustment programs, health plans have the option to either purchase out-of-the-box software solutions or build custom in-house software. In this blog, we’ll explore the differences in these approaches and provide insights to help organizations determine the best fit.

Here are the four “C’s” to consider when determining whether to build or buy risk adjustment software.

Compliance

The importance of compliance in risk adjustment cannot be overstated. Remaining compliant while running risk adjustment programs is crucial to ensure that health plans meet legal requirements, maintain fairness and equity, prevent fraud, and retain the trust of stakeholders.

On the purchasing side, health plans should feel confident that their software vendor is staying up to date with all regulatory changes, including risk model changes and updates to guidance provided by the Centers for Medicare & Medicaid Services (CMS) and other regulatory bodies. In addition, data security must be top of mind. This includes leveraging a HITRUST® certified platform, that can provide peace of mind regarding security, availability, and continuity. Conversely, if a risk adjustment team decides to build out its own software, the dependence on in-house expertise of the risk adjustment landscape falls solely on them, leaving more room for human error.

Cost

Associated costs are one of the starting considerations for organizations when deciding between buying or building risk adjustment software. When working with a vendor, upfront costs are typically inclusive of licensing fees, implementation fees, and setup. Additionally, ongoing costs for factors like subscription, maintenance, and support of the software must also be considered when weighing the pros and cons of building or buying a risk adjustment software.

One benefit of using a vendor solution is that the costs can be much more predictable. Software companies are able to provide detailed information that enables health plans to know both the up-front and per-member per month (PMPM) costs associated with their risk program.

When building a software solution internally, there will be fixed costs associated with data storage and security, initial software development, and the hiring and training of software engineers to create and sustain the solution. It can also be challenging to budget for unforeseen maintenance costs and ongoing software updates due to changes in risk models and regulatory requirements. However, the health plan is in complete control of its budget, data, and internal timelines for software enhancements. Plus, when building in-house solutions, issues can be more quickly addressed and prioritized.

Customization

The level of customization an organization desires can significantly impact the decision-making process. If you are a buyer, there may be limited ability to customize the software, and customizations may require additional costs and unknown timelines. Additionally, the software may not fully align with specific organizational needs and workflows. However, some vendors are flexible and often receive feedback from customers on preferred enhancements. It is important to remember when working with more dynamic SaaS solutions, there may be little need for tailored customizations.

With an in-house platform, the organization has complete oversight of the software’s features and functionality, the ability to adapt to evolving needs, and may be able to ensure that the software is compatible with other internal systems. However, the need to build out the software from scratch can pose roadblocks to getting the software up and running.

Control

Whether purchasing or building, it is important for health plans to ensure that they are not only identifying suspected conditions and year-over-year uncoded conditions but also spotting instances where a member is potentially over-coded – ultimately improving overall risk score accuracy.

Regardless of whether a health plan uses a vendor or an in-house solution, a focus on informed analytics should be front of mind. There are risk adjustment software vendors that have analytics informed by years of primary source data to support the power of their suspecting logic and help organizations create a powerful prospective and retrospective risk program.

Considering the above-mentioned items, having total control of the product is great if you have the dedicated technology resources and budget to upkeep the system. A plus when purchasing risk adjustment software is that the contracting process is common and health plans can easily implement service-level agreements to guarantee timely assistance. Control is great and often preferred, but organizations should consider how much time they are willing to invest in the product itself, the launch timeline and most importantly, what comes next if the investment doesn’t work out as planned and they have to end up selecting a vendor anyway.

Making the final decision

The final decision between buying or building risk adjustment software is a significant one with implications of compliance, cost, customization, and control amongst many other considerations.

At the end of the day, organizations must carefully evaluate their specific needs, budget constraints and long-term goals. Buying pre-existing software offers the organization speed and convenience but may lack the customization necessary to meet specific requirements. Building custom software provides control but comes with high upfront costs and unknown development timelines.

The final decision should be driven by circumstances, objectives, and finding the balance between convenience and control.

Whether your health plan decides to build or buy, a robust risk adjustment solution is essential to thrive in today’s complex risk adjustment environment.

Learn more about our risk adjustment software, Converged Risk today.

Inovalon and design®, Inovalon®, and the Inovalon ONE® Platform are trademarks of Inovalon, Inc.