Providers can prepare to negotiate risk-based contracts.

#5in5_Blog_BannerLaunch a web search for physicians and contracts. Much of the information you’ll find relates to employment contracts — agreements of hire, salaries, on call hours. But, with the changing health care industry doctors, hospitals and other providers are finding themselves negotiating new kinds of contracts.

They are sitting down across the table from payers and talking about patient health rather than total number of procedures performed.

It’s part of the transition away from fee-for-service agreements and toward fee-for-value contracts.

Fee-for-value contracts shift risk to providers. They pay based on outcomes rather than volume. They may pay one price per each enrolled patient, which is known as capitation. They may reimburse providers through a bundled payment, or offer one price for all services connected to a condition or treatment. There are also shared-savings agreements and pay for performance.

While many health care providers are still operating under a fee-for-service model, they need to prepare for a change.

According to a 2014 study by ORC International, 90 percent of health plans already include some value-based reimbursement in their contracts. That is a percentage that will likely grow, fueled by Medicare requirements and the Affordable Care Act.

Providers can position themselves to succeed. First, they need an in-depth understanding of the medical services they plan to provide, the historical costs of providing those services and the way that care was delivered.

Gathering that kind of data and analyzing it may help determine whether a provider will be able to realize improvements in quality standards in a measurable way. It may help translate cost per procedure to cost per outcome and use that information to negotiate contract terms.

To learn how to access cost data and what behavior to avoid when negotiating with a payer, take five minutes and listen to this Optum Provider #5in5 podcast: Keys to contracting success: Negotiating risk.

About the author

Elena WhiteElena White currently serves as vice president of the Risk Quality & Network Solutions division for Optum. She has more than 18 years’ experience leading network optimization initiatives, network development and expansion, business planning, provider reimbursement development, transformation to risk-based arrangements and medical cost management strategies for both health plan and provider organizations.

Elena holds a bachelor’s degree from University of California at Riverside and master’s degree in business administration from Loyola Marymount University.

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