Post-COVID-19 Contracting - a Lot to Think About

For practices that have been participating in value-based contracts, the coronavirus (COVID-19) pandemic is serving as a ‘stress test’ on the sustainability of these arrangements. Providers have begun to tell us that they see the need for increasing their commitment to this approach going forward. If this holds true, attention to detail within these arrangements will be more important than ever. 

As provider groups approach contracting with Medicare for a value-based option, they have some choices, but no real opportunity to negotiate. Fortunately, with commercial payers, that’s not the case. Items as simple as the term of the contract or as complex as the patient attribution model are negotiable elements that significantly impact the success and sustainability of these arrangements.

In general, health plans prefer longer term contracts. Predictability and provider loyalty are important to them, so they may be willing to make other concessions in return for a longer commitment. If a provider has a preferred health plan that has a large portion of his or her patients, it is worth considering a long-term contract. A contract with a 5 to 10-year term might include the potential for the health plan and practice to co-brand a limited network product. Doing so would likely create opportunities for the provider to negotiate large concessions in the remaining terms of the contract. In return for loyalty, the plan might be willing to offer upfront investment in infrastructure, a greater level of transparency, and dedicated administrative support.  

While attribution logic has become somewhat standardized conceptually, practices may still find variation in the way plans determine which patients are actually included in the contract. Each health plan needs to maintain consistent logic to avoid attributing the patient in more than one contract, but there is still opportunity to negotiate exactly how a cohort is defined. There are various questions that need to be resolved:

• When is the attribution performed? 

• Is that cohort static throughout the year? 

• How often is it updated?

• What are the specific circumstances where patients are added or removed? 

• Are patients who meet a stop-loss threshold completely removed? If not, what is removed?

• If a patient is removed from the budget, is that patient also removed from the quality measures?

• Do some but not all attributed patients have pharmacy benefits through the same health plan? Are pharmacy costs included and, if so, how is that trend estimated?

With nearly 100 years’ experience since their inception, one of the core competencies that commercial insurance companies have developed is skillfully negotiating contracts with providers. Given this experience and expertise, it is particularly important that providers come to the negotiating table with appropriate preparation and support. We believe as providers replot their course in the post-COVID-19 “new normal,” the approach to contracting will serve as a critical foundation for overall strategy and future success. With significant knowledge in managed care contract design, negotiation and administration from both the provider and payer perspectives, NextGen® Advisors are available to support our clients through this process.  If you feel this would benefit your organization, please contact us at advisors@nextgen.com.