Value-based product development is not a “one-size fits all” prospect. It must be tailored to fit the requirements of the market and the provider organization’s capabilities. Four elements are essential for this purpose.
1. A comprehensive payer strategy. A health system should not proceed without first developing a comprehensive, multiyear payer strategy that includes all segment levels, and is aligned with organizational interests, to guide daily contracting activities and payer negotiations. This strategy should include a structured end-to-end contracting process, thoughtful contracting pipeline and shared understanding of success in contracting, which supports effective negotiations.
2. Multiyear payer-segment strategies. Developing explicit payer-segment strategies helps a health system focus its efforts on achieving the goals for each value-based payment contract. Such strategies are needed to inform the managed care team’s efforts to identify and drive results required for success in each agreement.
3. Effective performance monitoring systems. Dashboards and other forms of reporting will be required to understand all aspects of contract performance, both internally and relative to the market. Performance monitoring should include key metrics by payer and an awareness of how negotiated rates compare with others in the market.
4. A strategic approach to negotiated rate-setting. Rate setting should be aligned with the organization’s service-line and enterprise strategy to accurately reflect the value of the services delivered to patients.
5. A defined approach to value. The organization should have a clear understanding of its ability to adopt value-based arrangements in its current state, and it should have defined its preferred cadence for its shift to value-based contracting by crafting a value-based roadmap.
As providers increasingly focus on value-based care, they need to define preferred risk-value models, and the levels of risk they will take in contracting. This effort requires assessment of the organizations clinical risk management capability by payer contract, to effectively negotiate up- and downside risk corridors.