Building Provider Contracts That Meet Your Members’ Health Needs and Your Business Objectives

Rick Valentine
Managing Director of Business Intelligence Strategy
DST Health Solutions

Payers are adopting innovative provider-payment strategies to keep pace with the rapidly evolving healthcare market. How do you know whether your reimbursement strategies are giving you the results you need?

An advanced optimization tool will allow you to conduct in-depth evaluations of your provider-payment strategies, gauge the likely impact of possible changes, and identify the optimal payment structure, given your members’ evolving health needs. The optimal structure is one that incents physicians to deliver the best and most appropriate care to members while helping the payer meet its quality and financial objectives.

Advanced Optimization

In recent blogs, I’ve written about the power of advanced optimization to turn data into actionable information, and improve efficiency and effectiveness within business functions across the payer enterprise. Provider payment is one of the many functions that can be transformed through advanced optimization. Other functions include benefit design, bid preparation, care management, formulary management, and network management.

Until now, payers have lacked affordable analytical tools to help them fully leverage the power of their data. While many payers have recently begun to adopt predictive tools to forecast future events, advanced optimization tools add a powerful new dimension: prescriptive analytics. In addition to making predictions, these tools suggest decision options to take advantage of those predictions. They guide payers to the best possible business decisions and their consequences – before decisions are implemented.

As the healthcare industry moves away from volume-based care and toward value-based care, advanced optimization can help payers develop payment structures that promote provider performance in areas such as utilization, quality, outcomes and cost, as well as adherence to evidence-based medicine guidelines and participation in data-submission initiatives. That can help improve the quality of care while reducing costs – key objectives of value-based reimbursement strategies.

Matching the Reimbursement Methodology with Your Objectives and Your Members’ Evolving Health Needs

To devise the optimal payment strategy, you’ll need to know when to use a given reimbursement methodology. Advanced optimization can help you determine when a particular methodology such as fee for service or capitation is the most effective one to use within a given contract. You may find that it’s best to use fee for service, for example, in some areas of the contract and other methodologies in other areas of the same contract.

Advanced optimization enables you to simulate interactions among doctors, patients, and your health plan. This helps you understand the consequences of using specific payment methodologies.

The tool helps you select the most effective methodology on the basis of a wide range of variables, including:

  • Disease burden of your members
  • Physician quality and clinical outcomes
  • Physician compliance with HEDIS® measures and other requirements
  • Utilization patterns
  • Prescribing patterns
  • Patient satisfaction
  • Incentive models
  • Physician participation in data-submission initiatives.

An added bonus is that advanced optimization can make contract talks less contentious. After running your analysis, you can present all relevant data to providers, helping them understand the rationale for a proposed payment methodology.

In future blogs, I’ll focus on the power of advanced optimization to help you reach peak efficiency in benefit design, bid preparation, and formulary management.





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