Key Aspects of Mutually Beneficial Value-Based Care Contracts

By Innovista Health Nov 13, 2023
Discover the key components of a mutually beneficial value-based care contract.

Healthcare is moving toward value-based care (VBC) at an ever-increasing pace. Many hospitals, healthcare systems, physician practices, and payers have already committed to the care approach that prioritizes good patient outcomes over the volume of services rendered. 

Providers and payers need to forge successful partnerships that further the VBC mission of improving population health. Mutually beneficial contracts are at the core of those relationships. However, designing such an agreement can be a challenge, simply because the principles behind VBC and fee-for-service (FFS) models are fundamentally different.  

Fortunately, with careful consideration and negotiation, it’s possible to draft a VBC contract that benefits both payers and providers, says Broadus Sheffield, divisional vice president of payer relations at Innovista Health. 

A Different Negotiation Process 

Before entering the VBC contract negotiation process, payers and providers both need to realize that it may be unlike any agreement discussion they’ve had before. Those core differences between VBC and FFS systems are the reasons. They approach healthcare from disparate perspectives, which shifts the negotiation process.  

Much of the discussions during FFS contract negotiations can hinge on how much payers will pay for individual services or procedures. This focus frequently puts payers at odds with their providers. However, the financial components of VBC contract discussions make payers effective partners to providers in the push for better patient outcomes.  

Under a VBC system, payers link provider payment to how well they fulfill quality measures, not service quantities. These measures can include clinical outcomes, cost effectiveness, and patient satisfaction.  

However, shared cost savings are a fundamental component of the VBC payment model. This means physicians must be willing to assume some level of financial risk. At the same time, payers must agree to reward providers who achieve these quality outcomes. 

Key Aspects of a Good Contract 

With this pivot toward a new payment model, good contracts between providers and payers will be vital to success. 

“As the healthcare needs of individual patients and patient groups evolve and change, a VBC contract must be flexible,” Sheffield says. “But it’s still important for each contract to have a solid framework to help guide any changes as the payer-provider relationship matures.” 

Before arriving at the negotiating table, payers need to be sure any proposed contract they are designing includes these elements: 

  • Care coordination fee 
  • Competitive rates 
  • High and low targeted medical loss ratios 
  • Quality incentive programs 
  • Shared savings 
  • Upside/downside risk (optional) 

 For a VBC contract to work well across the board, both parties should insist it addresses specific factors that impact them. 

 Providers should insist on elements such as: 

  • Access to data (claims data, payer-shared data analytics, reporting) 
  • Data operating systems that provide information in usable formats 
  • Provider incentives aligned with the long-term vision for VBC 
  • Quality outcome targets linked to reimbursement and reduced costs (care effectiveness measurement, patient satisfaction) 
  • Regular performance review 
  • Report card status 

 At the same time, payers should hold firm to: 

  • Compliance requirements 
  • Membership growth partnerships 
  • Non-reimbursed costs 
  • Capitation with clear per-member-per-month expenditures for each member 

Encouraging Successful Negotiations 

Even though healthcare is undeniably pivoting toward the VBC model, some providers may still be nervous about adopting the approach. Payers can entice them to the negotiation table, Sheffield says. 

“Payers need to be sure that their potential physician partners know that they are willing to commit to competitive rates and additional incentive opportunities,” he says. “They need to reassure providers that they will provide vendor and staffing support with tools and resources conveniently available online.” 

It’s also important to offer special reporting abilities and network and interventional capabilities to improve care—and pledge to implement a data operating system that delivers actionable information to boost practice management. 

However, payers aren’t the only ones who need to prove they will be a good VBC partner. Providers must also demonstrate their ability to succeed within the model, offering up: 

  • Attribution/membership sustainability and plans for growth 
  • Case studies on disease management for population health 
  • Evidence of provider relationships that may be helpful during contract negotiations and management, budget discussions, and patient panel modeling 
  • Vendor partnership successes 
  • Year-over-year performance 

Aligning for Positive Patient Outcomes 

Within a VBC system, achieving high-quality population health outcomes requires collaboration. Fortunately, payers and providers can work together in several ways. 

  • Alignment of clinical goals: Identify the quality measures, such as HEDIS reporting, that involve the specific healthcare goals and objectives. 
  • Address communication obstacles: Evaluate the technology tools used to integrate data between both organizations. Work together to find solutions to any roadblocks.  
  • Use standard quality measurement tools: Agree to use the same risk adjustment models, trends, and measure interventions to ensure both parties stay on the same page during future conversations and negotiations. 

 It can also be helpful to create a joint operating committee that meets regularly to monitor performance based on measures laid out in the contract. This group should keep tabs on available resources for treating patients with high-cost diagnoses. It should also evaluate costs linked to specialists and hospitals and track any referral patterns providers develop.  

Where Management Services Organizations Fit In 

Management services organizations (MSOs) like Innovista Health can play a valuable role in ensuring a VBC contract benefits both payers and providers alike. In essence, an MSO is the bridge that brings profitable and reasonable terms to both parties at the table. 

With an MSO involved, both payers and providers can avoid getting lost in the weeds of contract details. Instead, the MSO looks for opportunities for growth and expansion in locations where providers already practice. They also examine factors that could lead to a more attractive contract for physicians, such as in-office services offered at reduced cost or referrals sent to preferred hospitals and specialists.  

During these discussions, MSOs can be a liaison for both sides and ensure equitable contract terms. 

Ultimately, achieving the goals of a VBC system is a marathon effort rather than a sprint. When payers and providers come to the negotiating table prepared to use data to agree to factors such as performance metrics and benchmarks, there’s a high likelihood they’ll walk away with a mutually beneficial contract.