The pandemic revealed the vulnerability of fee-for-service models to shifts in volume. The crisis also accelerated the entrance of disruptors with quickly evolving new models for primary and other top-of-funnel care. At this moment, traditional volume-based providers are more vulnerable than ever to uncontrollable events and from competition with new points of access to care.
In addition, new regulations are helping to simplify the shift to value. Examples include the new safe harbor provisions of the federal anti-kickback statute finalized in January 2021. These new safe harbor rules support value-based care, reducing the hurdles for organizations looking to move into more risk-based contracts and expand their portfolio. Cumulatively, regulatory changes and industry shifts are driving a sharp uptick in capitated and risk-based payment arrangements.
In a new post-pandemic world with a confluence of factors accelerating the shift to value, diversifying payment models is no longer an initiative or pilot program. Transitioning to a value-based system is now the most prudent course to achieving resilience in a rapidly evolving environment. Now is the time to assess and strengthen your strategy for meaningful risk-based contracting.
As you move into population health management, it is essential to align your payer contracting strategy with your overall population health strategy. Decisions on whom you contract with, how those contracts are designed, and the quality metrics and targets defined in the contract must all be considered in terms of their impact on population health management. Along with delivering care within a high-value network, risk-based contracting is the cornerstone of your transition to value. These building blocks form the foundation for a holistic transformation to value-based care and moving into meaningful risk-based models.
Secure both resilience and growth as you put value at the core of your operations with these key principles:
Design a contracting strategy with the end in mind
A comprehensive contracting strategy can help you accelerate the shift to diversification and risk expansion. The contracting strategy must factor in how far an organization plans to go in the value-based journey, along with its appetite for risk and goals for diversification.
Defining value-based contracts is more than a financial exercise, however. It also requires operational and clinical alignment to be successful. When designing a payer contracting strategy, your contracting team and leadership team will need to:
- Evaluate your risk portfolio as a whole. Taking on meaningful risk-based contracts requires demonstrating competency in early value-based arrangements, showing payers that your organization can successfully manage pay-for-performance arrangements.
- Define a multi-year contracting strategy to support payer negotiations. The specific approach/tactics will depend on your organization’s ultimate goals. This strategy should also include planning for the operational and cultural shifts needed to manage risk. An experienced partner can help mitigate the myriad risks that come with those shifts.
- Define specific quality metrics critical to your organization and contracts. Knowing the quality metrics that matter most to your organization enables you to focus on the long-term goal of increasing lives under total cost-of-care arrangements. Doing so also enables you to lead the contract negotiation process rather than allowing payers to drive it. It also enables providers to focus on a smaller number of metrics and have a greater impact on care.
- Think holistically about metrics across contracts rather than managing on a contract-by-contract basis. Then you can align them with your long-term value-based strategy.
- Prioritize your payers. Identify and prioritize those contracts that align with your diversification strategy and support future growth. Taking a long-view approach will also enable you to build a strong relationship with a collaborative payer partner that supports you throughout the journey to value and beyond.
Perform on today’s contracts
Successfully managing your contracts is vital for demonstrating to payers the readiness and potential of the organization to expand into value-based care and grow your risk portfolio. To perform on today’s contracts, it’s essential to align clinical performance with overall contracting and quality goals along with delivering care in the network. Promoting care continuity will stabilize and grow volume as you build a scalable, sustainable framework to promote a better consumer experience and improve outcomes.
Effective risk-based management models manage financial risk management and improve outcomes by reducing avoidable utilization and minimizing care variability. Success, however, relies on overcoming these specific barriers:
- Poor transparency into value-based formulas and metrics,
- Inconsistent alignment with physicians,
- Lack of actionable insights for motivating behavioral change at the point of care, and
- Suboptimal coordination between clinical, financial, contracting, and operational stakeholders.
Fortunately, a single approach can address all these issues: Systematic simplification and standardized managed care that aligns to value-based performance goals. Measure progress in care delivery against the performance goals at organizational, pod-, and physician-based levels. Avoid siloed, incremental approaches that rely on just implementing existing EHRs or adding staffing to solve problems. EHRs can only provide data and visibility for what’s accomplished in the EHR. Adding staff is not a scalable solution and can lead to inefficient and uncoordinated operations.
Instead, centralize payer activities and simplify quality metrics to help manage internal activities, enable your organization to align activities and metrics, and track progress toward overall goals more easily. As well as redesigning care delivery, you will need to align provider financial incentives to promote best practices and reward physician behaviors tied to value, not volume.
Leverage technology designed for managing population health with capabilities to identify where resources are needed and to perform predictive modeling and risk stratification. Dashboards will enable you to analyze, track and generate reports on value-based contract quality measures and performance.
Build tomorrow’s contracts
Your contracting strategy is your road map for negotiating and optimizing future contracts that will support higher risk-based models geared toward managing total cost of care. Best practices building these contracts include:
- Give clinicians a leading role in contract negotiations. Strong clinical leadership is needed to implement the changes successfully. Engage physician leaders before negotiations to define the quality and clinical performance metrics and to orient the agreement around the physician-patient relationship.
- Establish improvement and education processes after agreements are in place. Continuous performance improvement takes place in pod meetings and via chief medical officers’ regular communications on progress against goals. A steady drumbeat of updates and guidance will keep your network working effectively against the contract quality metrics and toward the system’s overall goals. Incorporate learnings as you progress to ensure sustainable success.
- Change the dynamic with payers. With a shared strategy to improve outcomes to lower the total cost of care, relationships with payers can become more collaborative than combative. Work with payers to define contracts that provide for both provider and payer, including achievable incentives, mutually agreeable metrics, and collaborative governance.
Meaningful risk-based contracting is not just about your agreements with payers, however. Building and aligning to value-based contracts is an inherently holistic, system-wide effort. All parts of the system — leadership, physicians, and team members — will be more engaged in the transition to value-based care when the building blocks are in place, including meaningful risk-based contracting. With your building blocks in place, your organization will be more resilient against the unexpected and more able to thrive in a value-based system.
