Understanding Value-Based Contracting: Step Three - Managing the Contract
This is the third of our six-part series on the steps to demonstrate value for payers when engaging in a value-based contract relationship.
By Ian Duncan, PhD FSA MAAA, Chief Actuary at Arbital Health
In the first post of this series, we discuss preparations to take when considering engaging in a risk-based contract. Our second post deals with the ways to design the contract. In this post, we’ll delve into the important task of managing the contract and answering the question: How do I monitor the contract to maximize gains and accurately reserve capital?
Management guru Peter Drucker once famously said, “What gets measured, gets done.” That sentiment can clearly be applied to the important task of managing your value-based contract. Signing the contract is not the end, it’s just the beginning.
Something that is not well done in our industry is translating the projections in the contract into an operational model that enables you to track outcomes against plan. Too often the final reconciliation takes place a couple of years after the start of the program. That’s too late to find out whether you’re going to meet the requirements of the contract and get paid for the risks you’ve taken on.
Hope Is Not a Plan
Once the contract is in place, you need to have the mechanisms in place to track performance against projection. In my experience, there often appears to be a tendency with VBC programs to expect that things will evolve successfully because the program is being managed by smart people with good tools. There is an assumption that the program will just deliver the results we expect. Unfortunately, hoping that this will happen doesn’t work. I can’t emphasize enough the importance of having, and sticking to, an operating plan that allows you to track and compare results
Manage the Metrics
Setting up and reporting on clear metrics is vitally important to realizing the value of your VBC program. Establishing and tracking metrics such as expected number of patients identified, patients engaged, and the amount of utilization to be taken out of the system monthly are key to meeting program goals. Most importantly, tracking metrics on a regular basis allows you to quickly see if you appear to be deviating from the plan. That enables you to make the necessary adjustments to optimize the program.
My experience shows that if you want to avoid disputes at the end of a contract, it’s critical to model the effects of parameters and to understand before you sign the contract, what the impact of different parameters and different values of parameters have on your expected outcomes. Establishing appropriate metrics allows you to accomplish that.
Set up regular meetings to discuss the progress of the program to report on the metrics. Ongoing communication is the best way to avoid surprises and disputes at the time of reconciliation.
Rely on Expert Support
One of the questions we often get is how to minimize the cost of monitoring and managing the program and whether the amount of resources required outweighs the value. This is the primary reason that our company exists and why payers should seek contracting support from a partner like Arbital.
We help lower the administrative barrier to entry and overall management of VBC arrangements, accurately measure financial outcomes of VBC, and help improve the performance of VBC contracts. We do this by providing an economic lens and targeting strategy built around avoidable spend and utilization tied to the nature of the intervention’s value proposition. We also provide a centralized repository for you to view, manage, and monitor all your VBC contracts.
Once your contract is in place and operating, the next step is finding ways to improve contract performance. We discuss that in part four of our series.
How Arbital can help
Arbital Health is a technology company focused on accelerating the healthcare industry's transition to value-based care. The company’s platform for value-based contract adjudication enables secure data sharing and contract adjudication among employers, payers, point solution vendors, providers, and Accountable Care Organizations that serve members within a value-based care arrangement.
Download our webinar recording, "Value-Based Contracting 101: Avoiding Pitfalls & Exploiting Opportunities", and discover how to ensure your success.