Welcome to Value-Based Care, Contracts and Payments. This is lecture a, overview of contracts and payments. This lecture provides an overview of alternative payment model contracts. By describing their general elements, discussing how risk calculations can impact them. And describing the information required for successful contract negotiation. The learning objectives for this lecture are to discuss general elements of alternative payment model contracts, articulate how risk calculations can impact contracts, and outline essential data elements and uses during contract negotiations. This unit discusses contracts that enable parties to work together to implement new care models. It covers how contracts are developed and negotiated including common elements that make up value-based contracts. Characteristics of successful contracts and less successful contracts are contrasted. No legal advice is provided in this training. Users who need legal advice should consult their counsel. During the contracting process, parties should develop and document a shared understanding of the required work. Who will do what work, how the work will be evaluated, and how risks and rewards will be allocated. By developing clear agreement, parties can decrease the chances of misunderstandings and disputes. To prepare for value-based contracting, the parties need to understand their own readiness to participate and the risks they're ready to take on. The risk's associated with serving a patient population, involves numerous variables. A useful definition of risk and risk tolerance appears in value-based contracting by Kaufman Hall and Associates. In the value contracting context, risk is incurred through acceptance of a fixed dollar amount in exchange for the partial, or total care, of an identified patient population at a specified quality level. As defined through a contract. Risk represents the uncertainty about whether after incurring the care provision cost, the organization will have a net gain or net loss from this arrangement. Tolerance reflects the organization's capacity to carry the risk without endangering its strategic operational or financial performance or a combination there of, to an extent defined by the organization. Before beginning contract negotiations, each party should consider and understand the role or roles that it is prepared paired to play in the value-based care model, as well as the contractual arrangements that make sense for it, and how it will work with the other organizations in the value-based arrangement. Parties that fail to engage in these assessments are more likely to encounter difficulty during negotiations. Or to find themselves facing unexpected problems during performance of a contract. For a party to assess risks they first need to understand their strengths and weaknesses, risk tolerance and goals. Some of the topics to evaluate include the following, each party should assess the successes and the challenges it faces in its current operations. As well as any gaps it would need to fill, in order to successfully participate in a value-based model. Because addressing any identified gaps demands resources the organization should plan for how it would ad or shift resources and how long any changes would take. To assess the risks and potential returns of a value-based arrangement hospitals health systems and providers should develop and accurate understanding of their cost of care. Of course, this information may be difficult to develop, and many providers cannot accurately calculate their current costs. Recently, a survey by the Health Information Management System Society or HIMSS, found that only three percent of respondents felt their organization was well-prepared to move to a value-based payment model. And fewer than a third of respondents were able to produce profit margin and cost of care data in an automated way. The parties need to assess their own financial position and how much risk their organization is prepared to accept. To understand how they maybe affected by potential contractual terms, organizations should develop financial scenarios for their potential costs and savings. Each organization considering value-based contracting needs, it's leadership and financial teams to carefully consider these issues. Each party needs to consider how value-based approaches fit in to it short and long-term goals and identify it's goals for participation in value-based payment models. An organization should consider what role it can successfully play in a value-based contract arrangement. To position itself for success, an organization also may engage in process improvements as part of its preparation for contracting. Each party should also evaluate the other organizations proposing to participate in the value-based contract. If a party has established relationships with the other organizations, it should identify and address any problem areas. When a party will be working with other organizations for the first time it should evaluate that organization to understand the feasibility of forming good, trusted relationships. Each party should assess existing capabilities to share data among participating organizations. Make no assumptions about what data will be available and easily used. Among the questions to consider are what do electronic health record or EHR, health information exchange or HIE, population health, customer relationship management and analytics capabilities do the organizations have? To what extent are those systems interoperable? What privacy and security concerns need to be addressed for the organizations to share data? How prepared are the organizations to produce timely reports and dashboard information so that providers can do targeted quality improvement? If the parties are planning to use care coordinators or patient navigators as part of a care management strategy, what information do they need to access and how will they access it? Does each participating organization have consistent billing and coding capabilities, sufficient to produce needed data? The parties also should assess the compatibility of all participants needs and goals. If there are areas of conflicting goals they should evaluate their ability to compromise to promote mutual success. And the party should evaluate whether additional roles need to be filled to make the model successful. If there are gaps, and the party should consider whether they will need to bring in any additional organizations, or whether participating organizations may add stuff or contracted support in considering participation in a value-based arrangement, the experience represented by the participants can be a success factor. Among medicare Accountable Care Organizations or ACOs for example, some data suggests that increased experience with value-based payment. Was associated with a greater likelihood of positive financial outcomes. In considering participation in a value-based arrangement and what level of risk to assume, it is critical for the parties to know as much as possible about the patient population. Obtaining the desired data, however, can be difficult. No single party is likely to have comprehensive data, and there may be challenges in sharing data. Organizations may collect different data elements and format data differently, so combining data across sources often is difficult. The parties should start early to identify data sources and evaluate the available data. First, it is important to know the number of patients to be covered by a proposed contract and the geographic area to be served. Understanding the patient attribution methodology is also important. Next, the parties should evaluate the population's health and the services currently used and projected to be needed. This evaluation may include questions about the population's age and sex, disease prevalence, and severity and utilization patterns. Social determinants of health factors such as income, education, employment, and geographic hotspotting. Cost burdens such as high co-pays that could cause patients to avoid or delay seeking care. Depending on the type of value-based arrangement being considered, the parties also may assess their capacity to minimize the rate at which patients seek care outside the network. For example, if the parties are considering an ACO arrangement and evaluating their ability to control the total cost of care, they should consider how often patients are likely to seek care outside the ACO network and how they might be encouraged to seek care within the network. The parties should also evaluate how out-of-network referrals will be handled under the potential contact. For example, the parties should consider will out-of-network referrals be treated differently depending on whether the referral is needed because of an access issue for timely appointments, as supposed to be needed because of a complex medical issue requiring a particular specialist? Does the contract measure timeliness for referral appointments? If a patient who is covered under a value-based contract goes to a provider that is listed in-network on the plans provider directory, but that listing is incorrect, how will the visit be covered? Will the patient be liable for the added expense when the directory is not correct? Are there any services that need to be carved out of the agreement? The risks an organization is willing to tolerate depends on its position and goals. Each organization should be prepared for a range of scenarios, including the possibility of multiple risks occurring at the same time. The assessments the parties do while preparing for contracting helps them understand the resources that are in place so they can evaluate the likelihood that they, and other participating organizations, will be able to meet all the contractual obligations. They should also assess opportunities to mitigate risks, and the possible consequences of any failure to meet obligations. To understand risks related to contractual obligations, the parties will ask questions, such as, will the right care be delivered to the patients? What is the capacity of the provider network, including the number of providers and their specialties? What size of patient panels will providers be responsible for? Will administrative functions, including staffing, coding, and contract administration, be properly done? To evaluate actuarial risks, the parties need to understand the patient population's needs and the cost to meet those needs. As noted earlier this includes questions about the population's health and expected utilization, as well as the costs of delivering care. Each party also needs to assess its own financial position under different assumptions, in case its estimates of costs turn out to be incorrect. For organizations such as hospitals and health systems, that often do not have actuaries on staff, it maybe prudent to obtain outside help with this analysis. Transitioning to a value-based model can demand a lot of organizational resources. Each organization must consider how other organizational priorities are affected when staff time and other resources are focused on the value-based arrangement. As the parties move from pre-contracting assessments into contract negotiations, they need to address multiple issues. Contracts should clearly lay out the obligations of each party. In a value-based arrangement with multiple participants, it is important to identify all of the participants and their roles and responsibilities, including administrative, governance, data sharing, which should address content, frequency and timeliness, delivery of patient care and quality. This is a rapidly changing environment, and different models are being explored around the country. The contract should include provisions for decision-making needed to address changing conditions. Establishing a process may enable parties to avoid later problems. For example, an organization that withdrew from participation in a pioneer ACO, observed that its model was not flexible enough to respond to changes that occurred when the participating organization expanded, and essentially doubled the ACO's size. The parties should work closely with their legal counsel to assure that the value-based arrangement complies with applicable laws and regulations. For example, in a bundled payment arrangement, there may be the need for a hub for a distribution of payments to the individual providers. In the case of an ACO, or a ACO-like arrangement, administration may be especially complex, involving a separate legal entity with particular governance provisions. Counsel can help the parties structure their arrangements to be consistent with antitrust and other legal requirements. The contract also needs to be clear about the population to be served, including who is in the population, the geographic area and how patients will be attributed to providers. The Health Care Transformation Task Force's key elements to consider in ACO agreements notes the primary objective of any attribution model should be to allow patients to become active participants in their care, while enabling providers to be held accountable for the appropriate patients. The contract also should specify the contract performance period. A longer performance period allows the parties more time to work through initial set up and move into actual performance under the contract. A contract could specify an initial performance period and potential extension periods. In addition, in case there is need to end the contract early, the contract should specify conditions in which a party might terminate the contract before the end of the performance period, and how the parties will unwind their agreement under those conditions. Providers in a traditional fee-for-service, or FFS, environment generally are paid for services as the services are delivered, with the full risk of the cost of care assumed by the payer. At the other end of the spectrum, in accountable care arrangements, the providers bears at least some accountability to manage costs, report quality metrics or achieve improved population health outcomes. Across the spectrum of value-based arrangements, there are a number of different ways the contract can specify payment and allocate financial responsibilities among purchasers, payers, providers and patients. The parties to a value-based payment contract must come to a clear understanding of payments and budgets, including looking at opportunities to improve quality and decrease costs. A value-based contract addresses how providers are paid and provide meaningful incentives for improvement. There is no simple answer about the level of payment incentives that motivate change in how care is delivered. In interviews of provider organizations that tied physician compensation to performance measures in 2014, incentives to primary care physicians were found to run from a low of 8.5% of compensation to a high of 60%. Some organizations also included other types of incentives and supports designed to tap into physicians' intrinsic motivations for patient care. The parties need to agree on what services will be covered by the contract and how payments will be made. For example, a contract could include some value-based components such as bundled payments for some services. While other services maybe paid on a traditional fee for service spaces. If bundled payments are used, the parties need to define the covered episodes of care and the price. Possibly incorporating factors such as the severity of the patient's condition. In contracts where risk is shared, the party should determine whether limitations will be included to protect parties from extreme outliers. When savings are shared, there needs to be agreement about how the shared savings will be allocated among the providers. Who have contributed to the outcome for the patient. Incremental strategies to increase value based arrangements may include a variety of approaches such as incentives for meetings specified quality benchmarks. Extra payments tied to specific activities such as payments to clinics that are certified as patient centered medical homes. Or payments for care coordination and management. For example, the chronic care management fee under the Medicare physician fee schedule, for non face to face care coordination services that meet specified criteria. For shared savings, the parties must decide how to share savings or cost increases. In an upside arrangement, providers share in savings of cost reductions but are not financially responsible if costs increase. In an arrangement including both upside and downside risk, providers are also responsible for cost increases. As explained, in Value Based Contracting by Kaufman, Hall and Associates. In a shared savings contract with upside only arrangements, hospitals and healthcare systems receive savings payments for efficiencies. And benefit from decreasing the number of services, while meeting measures of quality. For providers to realizing a net gain, the savings payment must offset the laws of revenue associated with decreasing the number of service units. If the shared savings contract includes both upside and downside arrangements which introduce risk. Providers receive a savings payment if care is delivered efficiently, but also receive a deduction if efficiencies are not realize. If providers can not decrease cost, they lose revenue. In capitation contracts, providers are paid on per member per month basis for all of the cost of providing upon care. If the cost of providing care to the members is higher than expected, providers realize lower profits. In partial capitation, the agreed upon care could be limited to particular conditions or services. In global capitation, the payments cover all of the care that the patient needs. The parties could also draft a contract with financial structures to promote greater efficiency over time. For example, the Executive Director of the Healthcare Transformation Task Force recommends whatever the financial structure of a contract is, it should have two options available. One model should be based on historical claims which is more effective for moving high cost providers into structures that decrease cost. The other model should be based on regional cost trends. So providers can continue to become more efficient. Ideally an ACO that starts in the first model would shift to the second model over time. Measuring performance is a key component of value based contracting. And the parties need to agree on metrics and how they are produced. To do so, the parties need to agree on how they will share and use data. And maintain both confidentiality and data quality. The parties to a value based contract need to select measures and identify measurement periods. Measurements should be relevant, evidence based and timely so that the information provides a basis for action. Alignment across other reporting requirements can help reduce the cost and frustrations of reporting. The parties may choose a measure set developed through an alignment process. For example in February, 2016, the Core Quality Measures Collaborative. Published version one of a consensus course set for ACO, PCMH and primary care measures. The set contains measures for cardiovascular care, diabetes. Care coordination, indoor patient safety, prevention and wellness. Utilization and cost and or overuse, patient experience, behavioral health and pulmonary measures. The set also lists future areas for measure development. The parties might select other measures to address needs of particular patient populations. Depending on the measure selected, the parties could set measurement reporting periods to align with other reporting requirements. Setting targets is another essential element of measuring performance. The party should come to agreement on the targets to be reached for the agreed upon metrics. The parties to a value based contract will want to explore the pros and cons of different approaches and tailor the targets to their situation. A fixed threshold target, where providers are rewarded for achieving a set performance rate. Provides clarity but may not motivate ongoing improvements. Relative targets, that is metric scoring that compares multiple providers and rewards some percentage of the top performers. Such as the top 25% present other challenges and often are disliked by providers. Relative metrics can be difficult for providers because they cannot tell in advance where they will fall in the rankings. Also, if a measure has been unused for some time and is topped out or nearly topped out. There may not be a meaningful difference in performance between those who are rewarded and those who are not. Improvement targets where providers are measured against their past performance may penalize those who performed well early. Some approaches set multiple fix threshold targets. So rewards are available on a continuum. For example, Emory Healthcare Network uses a tiered incentive plan. Where the bonus for primary care physicians depends 10% on overall ACO performance. 20% on performance of the local health network against quality and cost targets. And 70% on individual performance on approximately 25 metrics. Finally, there should be a process for data and information gathering in order to generate essential knowledge. Again, this requires an understanding of the health IT infrastructure and data. For example, different organizations may have different policies on matching patients to records. That is, determining whether Maria Garcia, who has an appointment with Dr. Ann Nguyen today. Is the same person who had an appointment with Dr. George Smith a year ago. The parties need to think through how to match patients across different care settings. As well as their capabilities to attribute patients to providers for measurement. To ensure that all parties have confidence in the measures, the parties need to produce report that are timely and reliable. And this requires setting standards for data elements and formats. Timeliness and other processes to reduce administrative burdens. As the parties look ahead to implementation of the value based arrangements, a number of considerations arise. High quality patient centered care should be at the heart of any value based arrangement. To support this kind of care, the parties to the value based contract need strategies for coordinating care. And ensuring communication among members of the patient's care team. Including the patient and family members or friends selected by the patient. The relationships among the participants in the value-based arrangement are critical. To work successfully over the long term, the participants need good working relationships and trust. In addition, for any value-based arrangement, it is important to involve physicians and other clinicians in setting direction. In early stages, clinician engagement includes involving physicians to select measures that make sense. Clinicians also need to be involved in determining the incentives that will move the dial on quality improvement and identifying when technical assistance will add value. On an on-going basis, clinicians need to be able to see the connections to the value based arrangement goals. Among the tools to support value based arrangements, robust data and health IT infrastructure are critical to manage population health while ensuring high quality and keeping costs low. Tools may include Electronic Health Records or EHRs, Customer Relationship Management or CRM tools, Risk Stratification Tools, Analytics and Predictive Modelling, and Patient Registries and Population Health Tools. Health Information Exchange or HIE Services which allow care teams to share data and may include functionalities such as alerts to a care team in events such as a patient being seen in an emergency department. The parties also need to be ready to adapt in a changing environment. Adaptability to changing targets and a readiness to embrace innovation can help organizations thrive. Organizations that remain stuck in their thinking or approach may miss opportunities for improvement. Negotiating a value-based contract may require shifts in thinking. To begin with, each organization needs the buy-in and support of it's own leadership. If an organization's leadership is still grappling with its strategic direction, the organization may not be prepared to come to the negotiating table. As the parties begin discussions, the negotiation teams should focus on mutual long-term success, as opposed to an adversarial approach focused on short-term gains for individual participants. Because transparency and trust are key to long term relationships, those qualities should be nurtured from the beginning of the party's interactions. To help promote that approach, each party may consider the needs of the other participants and where each organization can help reduce uncertainty or ease administrative burdens. In addition, the parties should evaluate the opportunities to lower costs while improving quality. For example, where can the parties work together to help hospitals and providers avoid unneeded care, such as duplicative tests, to adhere to best practices on over utilized services such as low back imaging, to prevent hospital acquired conditions. Participants in value base contracts should not fixate on maintaining their current pricing, but instead should consider their profit margins and financial sustainability in value based scenarios. Each organization will want to include a number of skill sets and perspectives in its negotiation team. This includes contracting, legal and regulatory, finance, quality management and improvement and clinical. Remember that if physicians and other providers are not included, it will be difficult to achieve buy-in among those who work most closely with patients. For quality improvement work to succeed, clinicians must be actively engaged, and have a feeling that the work is consistent with clinical realities, not a sense that an initiative is being foisted on them or distracting them from patient care. This concludes lecture A, Overiew of Contracts and Payments. In this unit we described the process of preparing for contracting, contract elements, thriving in a value-based system, and successful negotiation teams. Through this overview, you learned about general elements of alternative payment model contracts, risk calculations affecting contracts, and finally, essential data elements and uses.
