Utilization: The Hidden Revenue Leak in VBC

Two topics dominate almost every conversation about value-based care (VBC): risk adjustment and quality. They are, without question, foundational. Risk adjustment sets the financial baseline for each patient population, while quality metrics confirm we are delivering the right preventive and chronic-care services. Yet there is a third pillar that too often escapes the spotlight, even though it can detract dramatically from organizational performance: utilization.

Why utilization trails its flashier siblings

In value-based care, utilization is the total mix of services a patient receives — how often they use them, where they’re delivered, and at what cost. When patients receive a clinically appropriate service in a lower-cost setting (e.g., an ambulatory surgery center instead of a hospital outpatient department), we say utilization is “optimized.” When they receive duplicative tests, avoidable ER visits, or expensive site-of-service upgrades, utilization becomes a hidden revenue leak.

If utilization is so consequential, why does it lag behind risk coding and quality reporting in mind-share and investment? One reason is visibility. Clinicians lack a clear window into where their patients go for care, what services were rendered, and — crucially — how much those services cost.

Claims data arrive 30-to-90 days late, usually in the form of unwieldy spreadsheets. Administrative teams do their best to translate claims into actionable reports, but the delays mean recommendations land months after the encounter, when changing course is either impossible or prohibitively expensive. In those time frames, utilization becomes a retrospective audit rather than a real-time lever.

Price variation across care settings is staggering. A routine procedure might cost twice as much at a hospital outpatient department than at the ambulatory surgery center across the street, despite both offering identical clinical value. Multiply that delta across thousands of procedures and an ACO’s margin can evaporate. During the pandemic, elective procedures paused and utilization costs plummeted. When restrictions were lifted, we saw a whiplash surge of delayed (and therefore more complex) procedures. The spike collided with the transition to CMS’s V28 risk model which had its own negative effect on revenue — a perfect storm for organizations that had under-invested in utilization oversight.

Shifting from hindsight to foresight

The good news: successful playbooks are emerging. High-performing groups treat utilization with the same rigor they apply to coding and quality. They invest in tools that pull claims feeds nightly, align them to the clinical record, and push actionable insights to the point of care.

Armed with that context, clinicians can initiate a care-coordination referral, discuss setting options with the patient, and document the decision — all before unnecessary cost accrues. The same workflow highlights out-of-network leakage, identifies unfilled referrals, and flags patients overdue for evidence-based early interventions. In other words, utilization intelligence becomes prospective and proactive.

Four principles to operationalize utilization management

So how do you operationalize this vision? It starts with building a system that turns delayed claims data into real-time intelligence, and translates that intelligence into action. Here are four key principles we’ve seen successful organizations adopt.

1. Make claims data time-sensitive and actionable. Waiting a quarter for claims is a recipe for missed opportunities. Pull claims data frequently and automatically — ideally on a daily basis — and integrate it with clinical records to surface issues while there’s still time to intervene. 
2. Embed cost and utilization insights into the clinical workflow. No provider has time to sift through spreadsheets or log into a separate portal. Deliver recommendations at the point of care, in clear, clinician-friendly language. 
3. Make utilization a team sport. Utilization is rarely a solo-physician problem. Empower care coordinators, front office staff, and referral teams with the tools and protocols to close care loops, follow up on unfilled orders, and steer patients to in-network, lower-cost facilities. 
4. Tie feedback loops to shared incentives. Show providers how their choices impact both organizational performance and patient experience. Whether it’s out-of-pocket costs, shared savings, or benchmark scores, connect the dots between individual decisions and collective rewards. 

Building a culture of utilization stewardship

The final ingredient is mindset. In fee-for-service medicine, higher utilization equals higher revenue. In VBC, every unnecessary site-of-service upgrade represents lost shared-savings potential or — under downside risk — actual cash out the door. Leadership must communicate that optimizing utilization can help ensure care that is both cost-effective and excellent.

Initiatives such as CMS’s recently-announced Innovation for Healthier Lives strategy indicate a doubling-down on accountability. Utilization management will determine which organizations thrive and which ones struggle to keep pace. The playbook is clear: treat utilization as a co-equal pillar beside risk adjustment and quality, give clinicians timely and context-rich cost insights, and reinforce behavior with aligned incentives. Do that, and the revenue you save could fund the innovations you dream about today.

Photo: Hong Li, Getty Images

Dana L. McCalley, MBA is the VP of Value-Based Care at Navina. She has more than 15 years of experience in value-based care and population health, leading large high-performing teams and optimizing workflows to drive outcomes. Before joining Navina, Dana was the Director of Quality and Risk Adjustment at Honest Medical Group. Prior to that, she was the Director of Risk Adjustment & Quality at Millennium Physician Group (MPG) for nearly a decade, where she focused on simplifying workflows for the 700+ providers across the organization. Her efforts led to over $159 million dollars in CMS ACO Shared Savings throughout her tenure. Dana received her Bachelors of Psychology from the University of South Florida and her Masters of Business Administration from Liberty University.

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