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Preparing for Value-Based Contracting? Here are 5 Key Questions for Providers to Consider

In January, 2015, the U.S. Department of Health and Human Services ("HHS") announced it had set a clear goal and timeline for transitioning Medicare reimbursements from volume to value. HHS’s goal is to tie 30 percent of all Medicare payments to quality and cost performance by the end of 2016 and increasing that proportion to 50 percent by the end of 2018. Commercial payers are expected to follow suit and develop their own programs for basing payment on quality or value. Immediately following the announcement from HHS, several major health systems and the nation’s top health insurers announced the creation of the Health Care Transformation Task Force and challenged other providers and payers to commit to their goal of putting 75 percent of business into value-based arrangements by 2020¹.

It is no longer a matter of “if” we are moving to value, but “when." As providers prepare for impending change in reimbursement they must decide if they are going to lead, follow or resist.

5 Considerations

Regardless if providers are planning to engage in shared savings, accountable care organizations, bundled payments, or risk contracts, there are several questions to consider when developing their strategy: 

  1. Are you prepared to participate in value-based initiatives?
  2. Do you understand the healthcare needs in your market?
  3. Have you optimized the technology necessary to support success?
  4. Have you undergone care delivery transformation?
  5. Do you understand the financial implication of new reimbursement methods?

It is imperative to understand the clinical and technical capabilities, resources, and skills necessary to be successful in a value-based world. Conduct an organizational self-assessment to help identify current capabilities and those still needed to achieve status as a value provider. Additionally, catalog the existing payers, products, and value-based programs and know the health care needs in your market and the corresponding services offered. Knowing your capabilities and understanding your market serves as a blueprint or roadmap to develop your strategy and guide successful contracting efforts. As you begin to build the payer strategy, it is important to stay focused on what infrastructure/tools you need to possess or build to effectively manage risk while reducing costs of care and maintaining high-quality outcomes. 

Analytics Drive Positioning

To properly position for value-based care, providers must have progressive financial and clinical data analytics and reporting capabilities. Significant investments in technology and care model redesign are required to improve clinical quality, reduce inefficiencies, improve provider/patient engagement, and optimize financial performance. Payers have massive amounts of data and an infrastructure to collect, aggregate, and analyze the data. Look for payers that are willing to collaborate and work in partnership to leverage the data and infrastructure.

It is equally important to invest the time to understand the financial implications of the new reimbursement methods and the extent to which costs must be reduced and where, how individual participants will be incentivized to achieve these objectives and the short-term investment in the infrastructure required to produce improvements in care coordination and quality.

There is not a one-size fits all strategy, so it is important to know the provider’s readiness to participate in value-based initiatives, the different care delivery needs of the community, the scope of risk to be taken, and have relationships with payers and other providers that will be necessary to achieve success.

1. Source: “Major Healthcare Players Unite to Accelerate Transformation of U.S. Healthcare System” Health Care Transformation Task Force, June. 28, 2015.

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