The healthcare industry is increasingly engaging in value-based contracting; here are some keys to success with these more complex payment arrangements.

Right care at the right place at the right time. Whether one works in a hospital or small independent practice, healthcare providers are leaning on these concepts to deliver valuable care to their patients, and that is in its simplest form: care that results in the best patient outcomes at the lowest possible cost to the patient and the system.

And for the most part, provider organizations have already established the infrastructure and workflows to support this value-based care. Perhaps they have hired additional staff to coordinate discharges or transitions of care, implemented data analytics solutions to prevent chronic conditions, or taking a couple of extra minutes during a routine exam to ask about a patient’s access to healthy food, transportation, and safe lodging.

A majority of respondents to the latest Value-Based Care Assessment from Insights said over 75 percent of their organization’s revenue is from fee-for-service contracts. This was especially true for respondents working in physician practices, of which 64 percent relied almost entirely on fee-for-service payments.

Negotiating value-based contracts that support population health management and other value-adding activities is key. But value-based contracts carry financial risk, even when they are upside or shared savings only, and they require a robust infrastructure to influence patient outcomes and costs.

More physician practices have over 76% of revenue in fee-for-service contracts compared to hospitals and health systems.

More physician practices have over 76% of revenue in fee-for-service contracts compared to hospitals and health systems.

Source: Xtelligent Healthcare Media

Value-based contracts come in all shapes and sizes, from pay-for-reporting to bundled payments for episodic care to full capitation for patient populations. The type of value-based contract organizations implement will depend on the type of care they deliver, the market in which they reside, and their patient population, among other factors.

Physician engagement, and more generally, clinician engagement has proven time and again to be the secret sauce to value-based success regardless of the complexity of the contract. But it will also take more than a clinician champion to enable value-based care; it requires infrastructure.

Organizations need to know what resources they are willing to commit for value-based contract success, says Pearce. And that could be expanding access by staying open later, creating educational resources for high-risk patients, or implementing analytics. These are all considerations when deciding on the type of value-based contract that fits the organization.

Risk appetite, infrastructure, and clinical engagement are all key to the value-based contracting process. Once leaders assess their organization’s capabilities across these considerations, then they are ready to engage with a payer to put a contract in place.

Partnerships are at the core of value-based care. Value-based contracts can bring partners together, but the negotiation process is still key to establishing a partnership that benefits both parties. And provider organizations need to be prepared to go back and forth with payer partners to ensure contracts are appropriate and favorable.

A basic understanding of the organization and its patients sets the stage for smooth value-based contract negotiations. Then, provider organizations can get into what makes them positioned to deliver value-based care.

Our experience suggests that you need to introduce yourself to your provider and contractual payer representatives. The focus should be on your largest payers and use this opportunity to share clinical outcomes and/or patient satisfaction surveys. A willingness to collaborate, highlight your standing in the local market and a willingness to learn from your association with the payers are all key selling points.

As payers eye more narrow networks in an effort to cut costs while improving quality of care for their members. Value-based organizations want to be included in these networks and preferably in the “top tier,” meaning plans identify the practice as high-quality and low-cost. Alternatively, practices do not want to be lost in a long provider directory.

It is important from our experience to have a healthcare attorney review the final draft before approval. These can be tough conversations with payers, but necessary ones. The negotiation process should set reasonable expectations for both payers and providers to ensure the success of value-based contracts, which ultimately benefit the patient.

Trust among payers and providers will certainly move the needle with value-based care—the model hinges on care coordination across every organization in a patient’s healthcare journey, after all. But there are also some other more obvious factors that point to the success of a value-based contract once it is in place.

Cost savings is one of those obvious factors, especially in Medicare contracts. For example, if your ACO meets or exceeds quality measurements, saves money in the Medicare Shared Savings Program, and those savings covered the added costs of the value-based infrastructure, then your ACO contract has been a success.

Financially solvency is key; practices need a maintain a margin of profitability in order to add more patients to the value-based care model. However, some other factors to consider include provider satisfaction with the contract, physician growth in the organization, and patient as well as employer satisfaction with the care delivered per the contract.

Growth after value-based contract implementation is key because organizations need a panel of patients for contracts to work and those patients cannot all be high-risk. Plans without the appropriate clout in the market oftentimes lose their healthiest patients, leaving provider reimbursement hinging high-risk, high-cost patients.

Additionally, quality improvement is another obvious factor. Value-based contracts only work when organizations notice a significant improvement in quality metrics agreed upon by the practice and the payer. Noticeable dips in quality performance necessitate change and possibly another round of negotiation.

In addition to these factors though, organizations should also consider how the value-based contract has improved its standing in the local market.

A successful value-based contract may need to be tweaked and updated as capabilities mature and patient populations shift, but a sign of a successful contract ultimately comes down to its ability to foster collaboration, coordination, and partnership.

Value-based care relies on partnerships to impact a patient’s entire healthcare journey to deliver a high-quality, affordable result that patients are happy with. Contracts ensure organizations get paid and sustain a wide range of services and capabilities necessary for valuable care delivery, it is ultimately the patient who wins when good contracts are in place.

A key strategic point is that a physician practice is adding value-based contracts while keeping their fee-for-service arrangement with the payers. The value-based contracts offer the most realistic opportunity to increase revenue beyond the traditional additional patient volume approach. Most physician practice markets have little or no opportunity to increase their fee-for-service rates going forward. Value Based contracts offer the opportunity to increase revenue above the fixes fee-for-service arrangements.