Value-Based Contracting: How to Engage in the New Payment Models

Value-Based Contracting is a range of reimbursement methods from Fee-For-Service with incentives for value to full risk-based agreements.

Medical Groups/Practices will want to engage all payers to take on risk and upside potential for the delivery of high-quality care with lower costs. This suggests a diverse approach to contracts that leverage quality results to reimbursement methods.

Develop a strategy to migrate your reimbursement model to support the primary care engagement with the patient.

Strategy Design

Begin with aligning contracts and compensation. Each payer has a different process so invest in knowing them. As a part of this process assess the percentage of revenue by each payer and align to the number of patients in your practice.

To be successful in these new high-quality care models, practices will need to consider new capabilities. This could include care coordination, management, or delivery of quality measures. Create tools within your practice to ensure your staff is keenly aware of these processes and build them into your work streams. This will enable efficiency and reduce operational costs.

  • Understand your patient population.
  • Focus on clinical initiatives with all patients.
  • Look to early interventions such as patient engagement and care coordination.
  • Remove redundancy such as non-evidence based treatments from your practice of care.

Medicare Quality Payment Program

Participating in these programs is a great way to leverage potential upside revenue and gain experience to leverage other value-based payment models. The Center for Medicare and Medicaid can provide a wide range of data to help you learn about your practice.

The Center for Medicare and Medicaid Quality Payment Program improves Medicare by helping you focus on care quality and the one thing that matters most — making patients healthier.

The Quality Payment Program has two tracks you can choose:

  • Advanced Alternative Payment Models (APMs) or
  • The Merit-based Incentive Payment System (MIPS)

If you decide to participate in an Advanced APM through Medicare Part B, you may earn an incentive payment for participating in an innovative payment model.


Commercial Value-Based Contracting

Value-based contracting is an arrangement with clinicians that rewards value created through the health outcomes produced. The reward is care coordination incentives, performance bonuses, shared savings, and/or shared risk. Efficiency is a result, and financial upside is achieved by sharing in the savings achieved. Efficiency can be administrative cost reduction and evidence-based care delivery. A key focus is measuring quality with preventative services by limiting disease progression.

Many payers have engaged in these types of contracting models and will continue to move toward financial risk adoption. The goals are to improve the patient’s experience with increased care coordination, care management, and improved population based health initiatives with the goal of reducing the per-capita health care.

Additionally, understand your local market, identify what the value of a covered life is for your practice and implement new reimbursement models.

Practice Optimization & Transformation

Medicare, Medicaid, and value-based payment programs have a common thread: know your patient population, and stratify the health needs of your patients. As a result, you will be able to leverage alternative payment models or value-based payment contracts to improve the practice revenue. Focus on designing operational processes to capture quality data and create a scorecard to demonstrate the value generated. This will enable reimbursement conversations with all the payers. Additional areas to consider are:

  • Identify High Value Revenue Opportunities
  • Improve Network Volume
  • Improve the Efficiency of care delivery (use your resources well)
  • Improve Operational Costs, know your ROI

Key Engagement Activities:

  • Align staff work efforts – Identify and leverage staff resources for the work effort to support “top of the license” work. Engage in appropriate behavioral health and socioeconomic needs of your patients. Each care team member can support efficient and effective quality care. Streamline work plans and clinical pathways to establish quality baselines.
  • Enhance Patient Engagement – Meaningful patient engagement drives better outcomes. This happens with sustained engagement over time. Expand engagement to be inclusive and customer-centric designed around the patient’s needs. Evaluate how your practice engages with your patients. Look to phone coaching, digital home monitoring, web outreach, secure messaging, and Interactive Voice Response systems. Develop a patient loyalty model which in turn can drive and sustain a good and supportive long-term relationship.
  • Customer Service Expansion – Become the Central Point of Care. Adopt a “Call us first” methodology to help patients/consumers navigate access to care. There are many benefits from this approach: accessing appropriate care, triage care needs, leveraging the practice portal, and network alignment to support “in-network” utilization.
  • Data Capture – Create a patient data map to enable touch points reinforcing quality measure reporting. MIPS/MACRA/QRUR/Payer data all use these touch points as measures. Leverage all data which means require your payer partners to provide you with actionable data. Minimally obtain standard claims-level data extracts which will provide necessary data to enable engagement.


It is essential for physicians/medical groups to engage in value-based contracting to improve reimbursement. The structure of these agreements can bring opportunities which will enhance efficiency, improve payer-provider relationships, and drive patient engagement.

This is a big step and one that can be challenging. There are many resources available to help you build your strategy but start now. Embrace the opportunity to optimize and transform your practice to enhance your financial success and improved patient care. Otherwise you’re delaying great opportunities.