Value-Based Contracting-A 2014 Managed Market Strategy

Terri Bernacchi, strategic consultant, audit and risk assessment, CIS, identified value-based contracting (VBC) as a forward-thinking approach for pricing and market needs. She discussed how VBC can improve formulary access, how it can impact the healthcare insurance exchanges, and how it can influence provider/payer reimbursement models.

Ms Bernacchi said while common vernacular defines VBC as “contracting,” it should really be thought of as value-based purchasing. With contracts, sometimes terms such as VBC can mean different things to different stakeholders, especially within hospitals.

Citing UnitedHealthcare, Ms Bernacchi said VBC models “represent an evolution in clinical and payment methodologies that will create quality and cost outcomes, foster greater accountability, and take advantage of innovations in medical technology.” VBC intends to align incentives among stakeholders (including patients) while improving clinical outcomes and the patients’ care experience.

Ms Bernacchi also said that if the only thing a cliniclal practice is doing is cutting product costs, they will never meet their savings goal. There has to be a change to organizational processes, and the patient must come first. Done correctly, an appropriate value-based decision will be made. VBC is “an unfolding experiment that shifts incentives,” said Ms Bernacchi.

She said further that the current health system in the United States is based on the idea that “someone else” pays for most of what a patient utilizes. Thus parties making value-based decisions on what components to use must be able to:

• Have no disincentive to use the right thing for the patient
• Provide evidence that the component cost was justified
• Show that component costs are reasonable

The timing is right for VBC; the economy requires it as there is simply not enough money to continue operating the health system processes in the United States as they currently exist. Additionally, technology is better and improved digital tools make patient population management more effective. Finally, as the number of elderly and chronically ill continue to increase in the United States, value-based, patient-centered care will be essential.

Still, Ms Bernacchi cautioned that there are challenges to adopting VBC strategies. Some models of care, such as the accountable care organizations, focus on short-term annual costs. As well, proving value in new types of contracts, although important, requires quality metrics.

According to Ms Bernacchi, the strategy for pharmaceutical and device companies to adopting VBC should include: cultivating the familiar—such as working with thought leaders at academic centers, making the case early about the benefit of VBC, building consumer interest, contracting to remove obstacles (such as a risk sharing agreement), addressing new influences and trading partners (such as pharmacy benefir managers or local providers), and contracting objectives (such as access to data).

Most of all, Ms Bernacchi said, do not enter an agreement with anyone who has no desire to innovate.