Risk-bearing entities such as hospital systems, IDNs, and IPAs are central actors in the stage play that is the value-based care (VBC) revolution. However, the script of the story is still being written while the play is already under production. This presents many problems as risk-bearing entities try to realize better outcomes, higher quality care, and a lower cost of care without incurring adverse financial impact based on VBC contractual obligations.
A survey of more than 1,275 CFOs and other personnel involved in value-based contracting noted that some 70 percent need help with “boosting modeling and term revisions” of value-based contracts. It’s clear that the greatest challenge for most risk-bearing entities is modeling and validating payment arrangements either prior to entering new payer contracts or at the time of renewal. Many lack a cohesive approach to merge quality, cost, and utilization metrics for evaluation and improvement efforts[i]. They are ill-equipped to model full contract terms including areas like non-claims expenses and stop-loss adjustment. Risk-bearing entities need to find ways to support provider network growth and innovation in payment models, but lack the tools and resources to do so.
In most cases the reporting from payers is insufficient for the tasks at hand. Quarterly scorecards provide some level of data, but are often not timely or reconciled and therefore misaligned. Received data will be incomplete or redacted from payers. Even complete data will only provide contracted entity-level data, which is inadequate for any efforts towards improving performance to contract. All of this leaves those supporting providers at a disadvantage as they work to provide highly efficient and effective patient care across their network while performing according to contractual terms across many payers.
During the VBC contracting process, risk-bearing entities should be prepared to evaluate risk options and terms, negotiate better contracts, and address the value levers that have the biggest impact on utilization, cost, and quality. This will enable them to achieve their goals of improving performance, optimizing ROI, meeting contract terms, and expanding their payer arrangements and provider network.
The Contracting Process
VBC contracting is all about the process. That process should be data-driven and should give the entire contracting lifecycle—from contract modeling to negotiations to development to implementation to reconciliation— structure, simplicity, consistency, and transparency.
- Contract Negotiation: It’s crucial for risk-bearing entities to explore the various VBC model options based on historic performance and market benchmarks. With this insight, risk-bearing entities are better prepared to make strategic decisions on how to model contract scenarios and what type of contract to negotiate (pay for performance, shared savings, or capitation).
- Contract Tracking: Utilizing analytics software allows risk-bearing entities to track performance on a regular basis. This means the impact (or lack thereof) of value levers can be tracked quarterly and both risk-bearing entities and payers can explore opportunities for improvement or to course correct.
- Contract Settlement: risk-bearing entities need a data-driven system in place that enables them to accurately and efficiently perform a final reconciliation and settle the contract. This way they can confidently check their numbers against a health plan's reconciliation reports and distribute incentives to group members.
Building a Ladder for Success
To be successful in VBC contracting, risk-bearing entities must be able to leverage modern technology and utilize it to build a ladder for success. To build this ladder, risk-bearing entities must keep in mind these key components of successful VBC contracting:
- Market Definition: Risk-bearing entities need to define their market and business line to model incentives, shared savings, primary care capitation contracts, capitated arrangements, and total cost of care contracts.
- Provider Group Definition: It’s critical to be able to define physicians as a group to better isolate, track, and report their performance.
- Member Attribution: The ability to attribute members to providers is essential to developing and implementing VBC contracts effectively.
- Quality Measures Selection: Risk-bearing entities need to select the appropriate clinical quality measures with national benchmarks (HEDIS, MIPS, eCQMs) to measure and evaluate network performance.
- SDOH Integration: Social Determinants of Health (SDOH) are a big influence on outcomes. Getting ahead of the game by integrating these into VBC contracts is critical.
- Evaluating Value Drivers on a Quarterly Basis: Risk-bearing entities need to be able to analyze and assess value drivers quarterly against budget, cost, quality, and performance baselines to enable optimal outcomes.
- Modeling Execution and Payout: Risk-bearing entities should be able to create models that reconcile against the budget and help facilitate payments.
- Adaptability and Flexibility: VBC is always evolving and risk-bearing entities need to be prepared to change as the industry does.
It’s to everyone's benefit— provider, payer, and patient—for risk-bearing entities to take on more risk. Inherent to VBC is the long-term objective to improve quality and lower costs. The ability to negotiate, implement, and manage successful, impactful value-based contracts in collaboration with payers is where that starts.
Best Next Steps
Risk-bearing entities need to take a proactive stand and plan for success in VBC arrangements. They need to evaluate, plan, and leverage the people, processes, and technology that will help them align their obligations across VBC contracts from different payers. They need to work proactively to monitor and impact performance to contract. Following these steps will help risk-bearing entities to better equip themselves for success in the world of VBC contracting.
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