Exploring the Crucial Phases of Value-Based Care Contracts for Effective Negotiation and Performance Monitoring

Value-Based Care (VBC) is meant to make healthcare more efficient and focused on patients. The Centers for Medicare and Medicaid Services (CMS) and private payers want providers to join VBC contracts that sometimes involve two-sided risk. This means providers can earn more if they meet quality targets but may lose money if they miss cost and quality goals.

Right now, only 19.6% of payments under alternative payment models (APMs) have two-sided risk. Even though this number is low, efforts like the Center for Medicare and Medicaid Innovation want all Medicare patients to be in accountable care relationships by 2030. This shows that knowing how to handle VBC contracts is becoming more important.

The Three Crucial Phases of Value-Based Care Contracts

To successfully manage VBC contracts, it is important to understand three main phases: contract negotiation, performance monitoring, and contract reconciliation.

1. Contract Negotiation

This phase is the base for a good VBC contract. Providers must check contract details and set clear and possible goals for patient outcomes, quality measures, and money targets. This phase usually includes:

• Analysis of historical data: Providers look at past patient results, costs, and how services were used to understand how they have done before.
• Setting outcome goals: Clear targets for improving quality and saving money must be made.
• Risk-sharing agreements: The way financial risks are split between providers and payers must be set to make sure terms are fair.
• Use of analytical tools: Some advanced technology tools help providers test different contract options. This helps them see possible financial results before agreeing on terms.

Many providers say they do not have enough skill in contracting, risk management, and financial planning during negotiations. They often feel weaker than payers in talks, which can cause unfair deals. So, administrators and owners need to learn these skills or get help from experts in VBC.

2. Contract Performance Monitoring

After a contract starts, providers must keep watching how well they meet performance and money goals. This phase includes:

• Tracking quality metrics: Measuring patient health results tied to contract incentives.
• Monitoring cost efficiency: Checking costs to make sure the contract’s savings goals are met.
• Data analytics systems: Good monitoring needs fast and reliable data. This helps spot problems early and change how care is given if needed.
• Regular reporting: Providers must create reports to show progress toward goals. These reports help with contract talks and meeting rules.

Watching performance closely helps avoid surprise losses. Providers who track contracts well can improve care and save money.

3. Contract Reconciliation

At the end of the contract period, reconciliation makes sure payments are right based on checked performance data:

• Comparing data: Providers compare their own performance numbers to those of payers.
• Resolving discrepancies: Differences in data must be reviewed and fixed, often needing proof like patient records and follow-up notes.
• Financial adjustments: Final payments are based on agreed data. This may include bonuses or penalties.

This step keeps providers and payers working together fairly. It also shows the need for good data management and records throughout the contract.

The Contract Lifecycle Management Process

Managing VBC contracts is part of a bigger system called contract lifecycle management (CLM). CLM covers everything from starting the contract to renewing or ending it. It includes these six steps:

• Contract Initiation: Checking needs, finding parties involved, and making first terms.
• Contract Creation and Negotiation: Writing and reviewing contract language; discussing terms.
• Contract Approval: Getting legal checks and agreement from those involved.
• Contract Execution: Doing the agreed services and contract terms.
• Contract Monitoring and Management: Watching performance, following rules, and fixing issues.
• Contract Renewal or Termination: Reviewing results and choosing to renew, change, or end the contract.

This planned approach helps healthcare groups lower legal risks and work better. The American Bar Association says 60% of business lawsuits involve contracts, showing why proper contract management is needed.

Healthcare managers and IT staff can use special CLM software like Legisway. This software automates many contract tasks, keeps things legal, and tracks performance.

AI and Workflow Automation in Value-Based Care Contract Management

Using artificial intelligence (AI) and automation is changing how VBC contracts are handled, especially in the U.S. where the healthcare and payer rules are complex.

AI in Contract Negotiation and Modeling

AI tools can look at large amounts of past data much faster than people. These tools test contract terms and money results to help providers pick terms that lower financial risks and improve payment. AI helps plan by guessing possible earnings or losses by year-end under different contract setups.

Automation in Performance Monitoring

Collecting and processing performance data is hard without technology. Automated systems connect with Electronic Health Records (EHR) to track quality and saving goals. Automation cuts errors and makes sure reports are on time. Reporting is key to meeting contract rules.

Central dashboards let managers and IT teams see real-time key performance info. This helps them make faster choices to improve patient care and control costs during the contract.

AI-Assisted Contract Reconciliation

Reconciliation needs comparing data from payers and providers, which can differ because of data errors or different definitions. AI tools can point out mismatches and problems to check. This makes the review faster and more correct.

Automation also helps manage documents needed to back up provider claims, such as patient files or treatment notes.

Benefits of AI and Automation for Medical Practices

• Reduce human errors in data and reporting.
• Keep up with deadlines, paperwork, and changing rules automatically.
• Speed up contract talks and renewals with ready data and modeling.
• Make workflows clear with audit trails and standardized processes.
• Help follow government rules by tracking contract and patient data accurately.

Healthcare IT leaders should focus on using AI tools and automation to succeed in VBC. Companies like Innovaccer and platforms like Thomson Reuters’ CoCounsel show AI is a current tool for providers, not just something for the future.

Specific Considerations for U.S. Medical Practices

Medical practices in the U.S. face special challenges with VBC:

• Regulatory Requirements: Providers must follow Medicare, Medicaid, and state billing rules. VBC contracts often tie CMS quality standards to rewards or penalties.
• Customer Expectations: Patients want good care and clear billing and results.
• Financial Risk: Many practices enter two-sided risk models carefully. Managing this risk well is important to avoid money losses.
• Technology Adoption: Some large hospitals have advanced CLM and AI tools, while smaller practices may find upfront costs hard. Teaching administrators about scalable tech helps more practices adopt it.
• Integration with Existing Systems: Matching VBC tools with EHRs, billing, and patient systems helps create smooth workflows.

Practice owners and managers must plan well, train staff, and add technology to succeed with VBC.

Key Performance Indicators for Managing VBC Contracts

Tracking the right key performance indicators (KPIs) helps practices stay on track during all phases. Important measures include:

• Contract Cycle Time: How long it takes from negotiation to contract signing.
• Renewal Rate: How often contracts get renewed, showing success.
• Compliance Rate: Percent of contracts meeting quality and reporting rules.
• Dispute Resolution Time: Time to settle contract disagreements.
• Cost and Quality Metrics: Depends on each contract but often includes readmission rates, patient satisfaction, and service use.

Looking at these KPIs regularly helps managers know when to change contract terms or make changes in operations.

Final Review

By knowing the phases of value-based care contracts, watching key performance numbers, and using AI and automation, healthcare providers in the U.S. can improve their negotiation and patient care. Good contract management lowers legal and financial risks and helps improve healthcare value overall.