The healthcare model has been slowly shifting to prioritize patient outcomes, transparency, and cost-effectiveness. At the forefront of this change is value-based care, an approach that focuses on improving patient health while controlling costs.
Value-based contracts are central to this model. They align the financial incentives of healthcare providers, payers, and patients to improve outcomes. Value-based contracts foster shared financial accountability among healthcare providers, payer partners, and patients, aligning incentives around quality, outcomes, and cost efficiency, align with the financial incentives of healthcare providers, payers and patients.
They play an integral role in today’s healthcare landscape, aligning with industry regulations and incentives for quality care. Here’s an in-depth look at how value-based contracts work, their benefits, and why they are increasingly being adopted in healthcare.
Value-based contracts can bring a number of benefits, including the following:
A core benefit of value-based contracts is their focus on improving patient health outcomes. Traditional fee-for-service models pay providers based on the number of visits or procedures.
In contrast, value-based contracts incentivize healthcare providers to focus on preventive care and chronic disease management. This shift means prioritizing overall patient wellness.
By putting these areas above others, value-based contracts have the potential to reduce hospital readmissions and prevent complications. Providers are incentivized to encourage healthier lifestyle changes and contribute to better patient outcomes.
Value-based contracts assist in reducing unnecessary healthcare costs by promoting efficiency and accountability. When working under these agreements, providers are incentivized to avoid over treatment and redundant testing, which can lead to significant cost savings.
Emphasizing quality and outcomes over volume supports more sustainable healthcare spending, delivering value for both payer partners and patients. This approach can also promote clearer alignment in claims processing and strengthen collaboration between payers and healthcare organizations.
Regulatory requirements like the No Surprises Act have amplified the focus on transparency and patient protection in healthcare. Value-based contracts support providers and payer partners in collaboratively meeting evolving regulatory standards while advancing shared quality and performance objectives.
Regulations are likely to continue bending toward patient-centered care and financial transparency. In this landscape, value-based contracts provide a structured, compliant framework for providers and payers to deliver quality care while minimizing regulatory risks.
Value-based contracts set patient experience, quality, and predetermined financial targets. They are based on clinical performance and use mutually agreed thresholds as goals to unlock quality performance bonuses or shared savings.
Traditionally, providers are paid by the number of patients they see and the volume of services or procedures they perform. Value-based contracts shift the focus to outcomes and performance.
Value-based contracts in healthcare are frequently designed to bring providers and multiple payer partners together under aligned framework. An approach reflected in all-payer-provider model agreements that promote shared accountability and coordinated performance across the market. This framework lets healthcare providers work with multiple payers under a unified contract, creating consistent performance and reimbursement standards across insurers.
The all-payer approach simplifies billing. It also ensures physicians and other providers are on the same page regarding their value or performance targets. Successful value-based contracts depend on accurate, real-time data. Common performance metrics include:
Your organization will need integrated healthcare technologies like electronic health records (EHRs) and a revenue cycle management (RCM) platform to implement and execute value-based payer contracting strategies. These tools allow you to monitor patient outcomes, proactively address health concerns, and track progression on performance milestones.
Implementing value-based contracts in healthcare can be challenging. This is especially true when you’re faced with clauses like lesser-of language, which affect reimbursement calculations. You must carefully navigate these clauses to ensure that providers are fairly compensated within value-based models. Check out our free ebook on payer agreement alignment conversations for more information.
It’s also difficult to align with healthcare reform initiatives. You must adapt to laws like the No Surprises Act dispute resolution process. This protects patients from unexpected out-of-network bills. For providers in value-based agreements, compliance with the No Surprises Act is essential for avoiding expensive disputes and maintaining patient trust.
The complex data and reporting requirements associated with value-based contracts are among the biggest hurdles you’ll face. Your providers will need access to real-time data and analytics tools.
These allow providers to track patient outcomes and monitor their progress toward performance milestones. Incomplete or inaccurate reporting can hinder value-based success and reduce provider earning potential.
Overcoming all of these challenges requires the right tools. Revenue cycle management technology can simplify the management of multiple payer agreements and streamline reporting requirements.
The best solutions, such as those offered by Rivet Health, allow you to automate processes and integrate data. In doing so, you can create a holistic view of the revenue cycle and the success of value-based contracts.
Value-based contracts are expected to grow in popularity for several reasons. They help satisfy patients’ desire for outcome-based care and can promote compliance with the No Surprises Act.
Insurers and payers tend to view value-based contracts as a positive approach to aligning incentives around quality, outcomes, and cost efficiency. At the same time, they also open the door for performance-based bonuses.
In the long term, the widespread adoption of value-based contracts could transform the healthcare industry by creating a more sustainable system that prioritizes patient health over profits. This change may lead to a landscape in which value-based contracts become the standard for provider-payer agreements.
Sign up for a free upcoming webinar or view an on-demand webinar from Rivet Health to learn more about critical RCM topics like value-based contracts.
Value-based contracts represent a shift toward a more patient-centered healthcare model. Your organization can use these agreements to empower providers to deliver high-quality care.
If your organization is exploring the benefits of value-based contracts, Rivet can help. We offer solutions to help you manage the complexities of payer agreements, strengthen collaboration, and support an efficient and well-aligned revenue cycle.
Schedule a demo with Rivet Health to learn more about how our payer contract management software can assist your organization in leveraging your contracts. You can also learn more about our product offerings and the results our clients have experienced by exploring our whitepapers and ebooks.
