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22 Executive Briefing: Value-Based Contracting Sponsored by: The Time Is Now: 4 Steps to Help Providers Succeed in a Value-Based World By Bob Herman W hether hospitals and health systems are ready for value-based contracts or not, the proliferation of those contracts cannot be denied. Over the past few months, several major hospital-payer deals have reflected a significant shift toward paying for performance and outcomes. In May, Naples, Fla.-based Health Management Associates and health insurer Florida Blue rolled out a value-based, accountable care delivery model for all patients in Brevard County, Fla. In April, all 12 of Livonia, Mich.-based Trinity Health's hospitals in Michigan inked a new value-based reimbursement model with Blue Cross Blue Shield of Michigan. The three-year deal will focus on a valuebased reimbursement model for hospital services, such as follow-up care and other proactive health measures. UnitedHealthcare, the Minnetonka, Minn.based health insurer subsidiary of UnitedHealth Group, upped the ante the most in July when it said it plans to more than double its accountable care health plan contracts with hospitals and physicians by 2017. UnitedHealthcare currently ties $20 billion of its reimbursements to quality and cost efficiency, and it hopes to bump that number up to $50 billion. Providers are turning to value-based contracting with commercial payers in part because these contracts more closely mirror new payment programs by the federal government that begin to move away from fee-for-service. As CMS incorporates a mix of incentives and penalties with the goals of improving outcomes, commercial payers are following suit. As a result, hospitals and physicians are scrambling to adapt. Last, physicians—especially those in primary care—see value-based contracting as an important way to improve the finances of their practices, says Dr. Snowden, who is board-certified in internal medicine. Primary care physicians have often struggled to keep sustainable margins at their practices. Value-based contracts provide opportunities to improve margins if they are able to help patients with chronic conditions manage their health. "Hospital executives are seeing commercial payers negotiate for certain reimbursement for year one, and then requiring advances in patient outcomes to achieve the [reimbursement] escalator in subsequent years," Dr. Snowden says. "But those quality gains can't be achieved unilaterally by hospital staff. They have to coordinate with the physician staff and align physicians as it pertains to the contract with the payer." As a result, Dr. Snowden says, providers are joining aggressive value-based contracting negotiations. However, these types of agreements are still somewhat new and not every organization is guaranteed success. To ensure profitable outcomes-based contracts, Dr. Snowden recommends hospitals and physicians carefully work through the following four steps—steps he says are delivering positive results with several Optum clients. Uncharted territory is a chance to expand care partnerships. The rising interest in value-based contracting can be tied to three areas, says Miles Snowden, MD, CMO of Optum. One of the primary reasons is that hospitals want to convert physician practices they've acquired over the past five to eight years into sound investments. "The initial purposes for these acquisitions were the expanding services to meet patient needs and gain or protect market share," Dr. Snowden says. "Now that they have market share, both hospitals and physicians want to turn it into something that is more efficient and effective." Guiding the management of your network's future www.optum.com/journey