9 key components of value-based care contracts

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By Kelly Kolepp

A value-based care contract is an agreement between healthcare providers and payers (such as insurance companies or government agencies) that aims to shift the focus from quantity of services provided to the quality and outcomes of patient care. 

The contract establishes a framework where reimbursement is tied to achieving certain healthcare objectives and improving patient health outcomes. 

While the specific components may vary, here are some common elements of a value-based care contract:

  1. Patient attribution methodology
    One of the most important components of a value-based care contract is the methodology used to attribute patients to the providers participating in the value-based care arrangement. Attribution can be prospective or retrospective. Most methods include consideration for plurality of primary care services.
  2. Performance metrics
    The contract defines a set of measurable performance metrics or quality indicators that providers must meet to receive reimbursement. These metrics can include patient outcomes, cost savings, patient satisfaction, adherence to clinical guidelines, or reduction in hospital readmissions.
  3. Quality targets
    The contract sets specific targets or benchmarks for each performance metric. Providers must achieve or exceed these targets to be eligible for financial incentives or bonuses. The targets may be established based on evidence-based guidelines, historical data, or industry standards.
  4. Financial incentives
    Value-based care contracts often incorporate financial incentives or penalties to motivate providers to meet or exceed the performance targets. Providers can receive bonuses or increased reimbursement for surpassing the targets, while underperforming providers may face financial penalties or reduced reimbursement.
  5. Risk arrangements
    Depending on the contract structure, providers may assume varying degrees of financial risk. In some cases, providers may be responsible for cost over an established benchmark or penalties if they fail to meet established targets.
  6. Care coordination
    The contract may emphasize care coordination and integration across different healthcare settings and providers. This can include initiatives such as care management programs, care transitions, patient engagement, and the use of health information technology to facilitate communication and collaboration among healthcare teams.
  7. Data sharing and reporting
    To evaluate performance and outcomes, the contract typically requires providers to collect and share relevant data with the payer. This can involve sharing clinical data, patient health information, and other metrics as outlined in the contract. Providers may also be required to regularly report on their progress towards meeting the established targets.
  8. Continuous improvement
    Value-based care contracts often incorporate a culture of continuous improvement. Providers are encouraged to analyze their performance data, identify areas for improvement, and implement evidence-based practices or interventions to enhance patient care and outcomes.
  9. Reconciliation terms
    The value-based care contract should define when and how the financial Incentives and Risk Arrangements within the contract will be reconciled. It’s common for there to be quarterly reconciliations with a final reconciliation 6-12 months after the performance year. A delayed reconciliation allows for supplemental data submission and medical claims lag.

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