The journey from fee-for-service to value-based care has been a long and trying one for the U.S. healthcare system.
The Centers for Medicare and Medicaid Service (CMS) set a goal of 50% of all payments from its programs being associated with a value-based care model. In 2022, that number stood at 38%. Now, according to a 2024 analysis, nearly 70% of Medicare Advantage enrollees have opted for a value-based care provider. Despite the slow rollout, patient preference for value-based care is growing.
Why are these models behind schedule? In a word, complexity.
Complexity of Value-Based Care Contracts is the Main Obstacle
On paper, the advantages of a value-based care model are obvious: payers and providers share a mission to help patients live better, healthier lives. Value-based care (VBC) compensates for those outcomes, not the specific medical treatments used to get there. They incentivize what works and disincentivize what doesn't.
However, these models are difficult to design in a way that both sides feel comfortable with the terms, and then difficult to orchestrate once in place. For a value-based care agreement to work, there needs to be strong alignment on what will get measured, how it will get reported, and when payments will be released. Even when payers and providers are aligned on broad frameworks of value-based agreements, their execution can prove to be an administrative challenge with lots of room for risk.
The good news is that payers and providers continue to innovate toward a value-based care future. Some of those innovations focus on the agreements themselves—the contract.
Contracts Are the Foundation of the Payer-Provider Relationship
Contracts are the foundation of payer-provider relationships – defining the rules by which they play (and pay).
Yet, for all their importance, contracts have long remained static in many healthcare organizations—locking the critical business information they contain in dense legalese and tables. This has made putting contract terms into practice a highly manual effort that delivers little visibility across an organization. This leads to contract terms not being followed, destroying value – across all industries, World Commerce & Contracting estimates that 9.2% of a contract's value is eroded because the terms are not fulfilled.
Challenges of Managing VBC Contracts Without a Contract Management Platform
Poor contract management is a nonstarter for value-based care. Without proper controls, visibility, and management, payers and providers are challenged to be on the same page when executing against the terms negotiated in a value-based agreement. This can lead to misalignment in practice adjustments or the outcome tracking and reporting required to consistently capture an agreement's incentive. The ability to recoup costs, mitigate potential revenue leakage, and understand the full efficacy and impact of different models across agreements, are imperative for an organization to optimize.
The Rise of Contract Intelligence
That's where the innovation comes in.
Forward-looking healthcare organizations are beginning to treat their contracts as blueprints for their operations, where they capture their goals and fulfillment requirements for these critical relationships. By digitizing these documents and connecting them to operational systems, they can ensure those goals are met, and compliance is achieved for payment without penalty.
At Icertis, we call this contract intelligence – ensuring the full intent of every contract across the organization is correctly captured and fully realized.
Few areas are riper for contract intelligence than value-based care.
Consider a scenario where a payer and provider emerge from negotiations with a value-based approach associated with their at-risk diabetic patient panel: the contract contains the agreed-upon parameters for the population, what outcomes will be measured and reported, for how long, and how they will be compensated for performance.
Thanks to advanced contract lifecycle management (CLM) capabilities, building this contract is simplified because it is managed digitally. Both sides collaborate on a single shared document as redlines are negotiated, and signatures are gathered. Contract metadata can be configured to capture information on the payment model type (shared savings, bundled payment, capitated, etc.), what regulatory authorities may be associated with it, coding associations, and covered populations and services.
Once executed, this information flows across the organization, enabling stakeholders to track outcomes across all the parameters just mentioned. Obligations spelled out in the contract can be set up as their own workstream to ensure compliance, and when it comes time to settle, finance can match what was paid against what the company was entitled to.
All this information remains anchored to the single source of truth for the payer-provider relationship, the contract. Contract parties can quickly understand how a single contract is performed, or how different classes of agreements worked. All of which make future negotiations smoother and more data-driven.
On the Road to Better Health
The United States, famously, spends more than any country on healthcare but has the worst outcomes among the 11 wealthiest countries in the world.
Value-based care can be a powerful tool in aligning our dollars to the outcomes we want to see in our healthcare system. Contracts are a critical link in the process and can serve as the foundation of better healthcare operations.
To learn more, visit our dedicated contract management solutions pages for healthcare payers and healthcare providers.
