Q&A: Negotiating value-based contracts

Q: Are there any tips or best practices for negotiating and evaluating value-based contracts with payers?

A: Numerous financial and operational considerations exist for healthcare providers entering value-based care, including capital requirements, unit costing and tracking, financial assessment and planning, and contracting capabilities—specifically, the strength of the providers' contracting relationships. A strong data infrastructure and expertise in value-based operations is also required for providers to meet quality targets and proactively, effectively, and efficiently manage the care of a specific patient population under a value-based contract. For a better idea of how this may affect operations, consider how the FFS model works today. Doctors and other caregivers focus on treating each patient clinically, while financial services staff members handle revenue concerns, such as eligibility, authorization, and payment. Care delivery and revenue management may occur in distinct, separate episodes that involve limited coordination and collaboration between different providers. However, under a value-based care model, emphasis is placed on the entirety of the patient’s medical care, because the payment is based no longer on the number of services provided but the overall quality of services and, ultimately, the patient's sustained health. This will require a much more coordinated vision of care for the patient with common clinical goals and objectives as well as financial strategies. Healthcare organizations must dramatically transform coordinated care models, improve physician engagement and alignment, and build the technology
infrastructure for sophisticated data analytics and financial modeling to effectively manage the new clinical and financial risks associated with value-based contracting.

Evaluating a specific value-based contract requires weighing the potential benefits and risks related to the organization’s capabilities and resources, as well as the financial impact and credit risk. Three factors that are absolute must-haves for successful implementation of value-based contracting are physician engagement, transparency and accountability, and performance measurement and improvement.

For more information, see The Essential Guide to Healthcare Payer Contracting.