**3.1 Step 1: opportunity analysis**

For any start-up or mature company wishing to enter a value-based contract, the essential first step is to assess the financial opportunity. Payers are subject to multiple new opportunities weekly; a provider or HCM must make a compelling economic case to gain attention. The compelling economic case begins with **opportunity.** Said differently, does what the provider or HCM intend to contract for address sufficient healthcare spending to be interesting to the payer? Opportunity analysis requires a detailed analysis of healthcare spending on the condition or procedure that the provider or HCM intends to manage. This type of analysis requires detailed healthcare spending (claims) data for the business segment in which the provider or HCM operates. Analysis should address condition prevalence and utilization of the targeted condition(s) and estimate the addressable cost they impose. To gain a payer's attention the provider/ HCM must address an economic concern, which in turn combines two elements:


Some conditions impose one but not the other of these elements: for example, in an employer population, an episode of stroke is very high cost but occurs with sufficiently low frequency that the average employer may not have experienced a recent stroke in its population. Employees that suffer strokes experience lengthy episodes, during which another payer (such as Social Security disability, or a retirement plan) may become responsible for reimbursement. As a result, the employer may not view strokes as a concern. Cancer, in the other hand, imposes high costs episodically but with cancer diagnoses occurring frequently enough for a payer to be concerned with managing cancer costs.

Modeling opportunity, particularly for individual diagnoses, requires access to large databases. These may be purchased from data vendors, or providers/HCMs may contract with a consultant for this phase of work.
