UNIT THREE NETWORK MANAGEMENT.. Please read the posted article, " Payor-Provider Contracting in Era of Value-Based Purchasing Payment Reform Models. This article is very timely as the Centers for Medicare and Medicaid (CMS) and managed care companies move from a volume to a value based reimbursement methodology. Seeking to reduce costs while increasing quality care and producing good outcomes, managed care companies andCMS are establishing what is referred to as Valued Based Reimbursement or as called in this article, Value Based Purchasing (VBP) contracting with providers and giving them financial incentives to change behavior, drive quality and produce good outcomes.

discuss the overall objective of VBP, identifying the key elements of VBP and models that represent VBP

reference the article. use examples or direct quotes.

article:

Payor-Provider Contracting In Era Of Value-

Based Purchasing Payment Reform Models

What will managed care contracting be like over the next two to

three years or longer?

Obviously, there are different contracting and different

geographical locations that give rise to different types of

contracting issues, according to Russell Foster, principal with

pmpm Consulting Group.

And, managed care contracting in the months and immediate

years ahead will be under the shadow of any form of healthcare

reform. Change is coming, said Foster, and certainly with reform,

there will be changes and modifications in contracting.

"The current level of healthcare expenditure we know cannot be

continued, we need to find ways to moderate the costs if we are

going to be able to deal with the cost issue going forward and to

ensure that more of the uninsured receive better care," he said

Foster acknowledged that the issue of improving quality has not

really been completely addressed despite much effort underway

to define quality. The quality issue "figures" into the managed

care contracting equation.

Under healthcare reform, what are the payors and what are the

providers looking to do to bring value in to the contracting

equation, Foster pondered. We see in the macro sense we're

heading in the direction of value-based purchasing.

"What we call value-based purchasing payment reform models

are all starting to take center stage," Foster said.

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Citing fee-for-service and full risk capitation, he said neither of

those models has played out successfully in all markets. "The

value proposition for both of those left a lot to be desired," he

observed.

"The clear direction is that value-based purchasing is what's

coming. It will very soon be center stage for most contracting

activity in the years to come," he believes.

Focus On Outcomes

While there may be varying definitions of value- based

purchasing, Foster said it really comes down to "elements of

improving quality outcomes, patient satisfaction and reasonable

cost or lower costs.

"Without the outcomes, without the satisfaction, and without the

reduction in costs we are not going to be able to demonstrate the

value proposition," he suggested.

The models that represent value based purchasing range from

shared savings and gain-sharing types of arrangements to

narrowing of networks, said Foster. Contract with specific

providers that have demonstrated the ability to deliver high

quality care at lower costs and are more focus on bundled

episodes of care and evidence informed case rates. Both of these

are in demonstrations throughout the country and in operation in

certain parts of the country, he said. There will be much more to

come in those two areas in the near future, he added.

Foster also pointed to the "clear direction" toward growth in the

medical home area as a way of improving quality and reducing

costs.

"Capitation has always been kind of a negative word, but its

somewhat redefined in this global payment model with

performance incentives," he said. "Global payment," Foster said,

"is another word for the risk capitation that we've all come to

know as the 'C' word in the past but with the added twists of

pay- for-performance and other performance incentives built to

demonstrate cost reduction and the quality that can come with

capitation."

The traditional fee-for-service models, that still exist and are still

in plenty of places around the country, he said, are the primary

method of payment. that Foster believes is, over time, going to

give way to value-based models. "It's pretty clear that

reimbursement systems built around volume and intensity are not

going to be able to demonstrate the value proposition that's

needed. It's going to require fundamental change by providers

that accept fee-for-service to bring value to that methodology."

Foster believes that if fee-for-service is going to continue it will

have to come "with a demonstrated value to the payor." If that

happens it will reaffirm the fact that managing care isn't enough

by itself, "it requires both the management of care and the

management of costs."

The responsibility, he believes, is "not only on the payors' but

the providers' to work with their partners, hospitals and health

plans that they serve or the employers they serve in a PPO

environment. They are going to need to work together as partners

to demonstrate their ability to managed care and costs."