Value-based contracting is a complicated process. Payers need tools that enable their contracting teams to standardize every step—from modeling to execution to reconciliation—so that everyone is marching to the beat of the same drum. They also need to be enablers of success—arming their provider networks with insights to proactively identify, intervene, and close the loop on the areas that impact cost and performance the most within the contract terms.
In this blog, we demonstrate how health plans can leverage advanced contract modeling, analysis, and financial reconciliation capabilities to develop and execute win-win value-based care arrangements with their providers. We’ve broken it down to the following five keys to success:
1. The Pivoting Role of the Payer
To be successful in value-based contracting, it is imperative for payers and providers to collaborate and work together more than they ever have previously. The role of the payer has changed, and they need to envision themselves as all of the following:
- Provider enablers
- Provider support managers
- Co-owners of utilization improvement
- Savvy investors
In a partnership model, it's incumbent on both parties to take the lead in creating effective strategies for improving cost and quality. One of the most valuable ways payers can support providers in value-based care is to invest in new care models and technologies. Both are happening at an accelerated rate, and payers are typically ahead of the curve compared to their providers.
2. Understand your Contract Levers
As value-based contracting continues to expand, it will become more complex and risk-based. Each contract needs to address both your needs and objectives as well the aspirations of your providers. There are several key contractual elements that payers need to understand to occupy this new role. These include:
- Covered services
- Performance period and phase-in
- Risk adjustment
- Quality adjustment
- Patient attribution
- Provider network
- Payment terms
3. Scenario Modeling
Once you have formulated a contract, and you have explained all the terms of the contract clearly to your providers, the next step is to gain buy-in. A prime way to achieve this is through scenario modeling. A forward-thinking scenario analysis enables providers to better understand and balance potential gains and losses, performance impact, volume changes, and other factors.
Key elements of your scenario analysis should include:
- Conservative and optimistic performance scenarios
- The relative impact of various value levers
- The correlation between relative impact vs. relative cost and difficulty of execution
4. Analysis & Reporting
Let's assume now that you have successfully gotten buy-in from providers. Now that the contract is in motion, it could be assumed that you as the payer can take a step back, but this is far from being the case.
At this stage of the contract lifecycle, your providers need active support in course-correcting the terms of the contract as necessary. You will need to collaborate with them to:
- Identify relevant analytics tied to contract terms and goals
- Identify and manage key value levers tied to contract terms, such as:
- cost and utilization
- risk scores
- quality scores
- network leakage
- Track trends and the performance of key metrics over time
- Analyze the impact of interventions
- Understand advanced analytics and reporting capabilities needed beyond Excel
5. Financial Reconciliation
In addition to sharing analysis and reporting, you need to give your provider organizations a sense of how they are performing against the contract terms. Providers will be anxious to know where they stand over the course of the contract lifecycle, so open communication regarding the performance of the contract is key.
For most value-based contracts, shared savings/ losses are due at the end of the year, and this can lead to surprises that make providers anxious. Frequent financial reconciliation for your contract can help ease that anxiety, especially for providers who are new to adopting value-based contracts. If you only reconcile contracts annually, it means you won’t have feedback throughout the year to drive performance improvement and will not be able to make meaningful course corrections.
Looking to dive deeper into the content covered here? This blog is based on our most recent eBook, “Embracing Value-Based Contracts: Five Keys to Success for Health Plans”, which expands on all of these topics. You can access the eBook here.