During the value-based contracting process, health plan executives should be prepared to do all of the following: evaluate risk options and terms, effectively manage and negotiate better contracts, and address the value levers that have the biggest impact on utilization, cost, and quality.
In this blog, we’ll take a look at three critical phases in the value-based contracting process, along with the technical components and expertise that health plans need to create effective contracts.
Successful value-based contracts are created and managed through a well-defined process. It should be data-driven and give the entire contracting lifecycle—from contract modeling to negotiations to development to implementation to reconciliation—structure, simplicity, consistency, and transparency.
It’s no secret that negotiating a value-based contract can be an arduous process. It’s crucial for a health plan to explore various options based on the historical performance of their providers and market benchmarks. This positions them to make strategic decisions on how to model different contract scenarios and what type of contract to offer (pay for performance, shared savings, or capitation).
A core component of this process is identifying and analyzing the value levers that have the greatest impact on quality and financial performance, incorporating them into contract models, and developing a plan with the provider to address them within the contract parameters. Here are examples of important value levers and how they impact contract performance:
A systematic, technology-driven approach to value-based contracting enables health plans and providers to track performance on a regular basis. The value levers can be tracked quarterly and both parties can explore opportunities for improvement. At mid-contract, if health plans are not seeing expected results, there is time to course-correct. Quarterly reconciliation of the contract will also enable both parties to make adjustments as needed.
The health plan can use the original model to do final reconciliation and settle the contract. For provider groups, the health plan might produce a reconciliation report. Provider groups can check their numbers against the health plan’s reconciliation reports and distribute incentives to group members.
Frequent reconciliation is also critical. For most value-based contracts, the shared savings/losses are due at the end of the year. No one likes surprises though, so frequent reconciliation enables you to gather feedback throughout the year to improve performance on an ongoing basis.
To be successful in value-based contracting, health plans must leverage modern technology and value-based care best practices to manage the complexities of contract modeling, development, and implementation. The following key components of value-based contracting enable health plans to maximize their opportunities in value-based arrangements:
The objective of value-based contracting is to improve quality and lower costs. The ability to knowledgeably and effectively negotiate, implement, and manage value-based contracts in collaboration with your providers is the foundation for successfully meeting that objective.
This blog post is based on our SpectraMedix white paper titled “Value-Based Contracting: A New Guide for Health Plans”. This post covers the later portion of the paper. You can read the previous post to get the full picture here.