Payment reform redefines provider performance management

In the face of imminent payment reform and deliberate focus on quality and outcomes, health plans are increasingly turning to provider performance management as a strategy to provide an analytical framework for informed decision-making. This change in the health plan’s approach to provider reimbursement is rooted in the need to move from traditional fee-for-service models to a payment model that accounts for providers adhering to best practice service delivery, and ultimately, to improving healthcare outcomes.

Integrated provider performance management’s true purpose is to ensure that the contractual obligations of payment and best practice service delivery are met between health plans and providers. This, in turn, will produce better quality outcomes for members and reduced costs for health plans. As simple as this may seem, performance-based provider contracts involves the marshalling of many activities such as: gathering clinical and member care experience data, the measurement of the level of provider collaboration and the provider’s payment/contractual information, to ensure that these goals are met. As health plans consider the implications of provider performance management, several complex questions must be considered in order to successfully implement a new provider performance management strategy.

Developing an Integrated Provider Performance Management Strategy

1. Assessment of Health Plan Operational Goals

Integrated provider performance management is an innovative, phased evolution, which focuses on three critical areas: the provider’s clinical performance, the health plan’s provider contract information/structure for services rendered, and how integrated performance and contractual obligations influence a health plan’s payment for those services. Health plans must identify their operational goals within each of these areas and determine what process and systems are needed in order to make performance management operational. For example, all health plans will find themselves residing at different phases of the evolution cycle. Consequently, they will vary as to how they materialize from routine maintenance of provider information to external business goals such as operationalizing pay-for-performance programs, provider collaboration and quality targets.

2. Assessment of Health Plan’s Performance Measurement, Contractual and Payment Processes

After determining the operational goals of integrated provider performance management, the health plans need to assess: their processes within provider performance measurement (what will be measured, when and how), the ability to establish and monitor adherence to contracting standards, and the processes involved in final payment to providers for services rendered. To achieve an integrated state for these processes, health plans must understand the inter-dependencies of these actions and if/how their system capabilities could allow for the intelligent combination of this information in order to render accurate claims payment.

3. Assessment of How Health Plans will Measure Provider Performance

The health plan’s ability to measure and report on what they consider to be their operational goals for provider performance management is a critical component for this initiative. It is clear that the healthcare market is calling for greater transparency in the provider payment process, especially when member outcomes become part of the equation. For integrated provider performance management to be adopted by the provider and member communities, a dynamic, flexible and easy to use reporting capability must be enabled by health plans. The reporting capabilities being requested by providers, members and the government are needed in order to move current performance management programs from pay for reporting models, to models that have clearly defined contractual and payment obligations that reward providers and members for improved outcomes.

Again, all of these strategy related considerations call for technologies, applications and processes that connect the planning and operational functions of provider management across the entire organization to improve organizational alignment and provider performance. This, in essence, is integrated provider performance management.

Healthcare Market Trends for Integrated Provider Performance Management

While the call for such a coordinated strategy to provider management is becoming an operational necessity, health plans are also experiencing two new market trends that are pushing the need for these capabilities in a more acute manner.

First, employers are increasingly demanding tailored products and benefit designs. This demand is driven by their increasing awareness of the value of such customized offering to better serve their employee base. Secondly, incentive alignment and payment reform is requiring health plans to establish business practices that are both responsive and flexible in the face of unexpected changes to payment and network structures.

Many health plans are unprepared to adequately respond to these two new challenges. Their current provider management systems and claims adjudication systems are poorly connected to several key business functions such as credentialing, contracting, centralized pricing, negotiation and financial planning. This siloed system approach renders basic decision support ineffective. For example, health plans often fail to easily and routinely answer two key questions: “What providers are covered by a particular contract?” and “What contracts cover a specific provider?” A patchwork of ad-hoc solutions often serve such tactical needs, but were never designed for larger scalability or flexibility. The emergence of tailored products and payment reform further strain these systems and create management challenges for large-scale deployments and new innovative programs.

Current operational systems in health plans work by mapping a few, pre-defined benefit design packages to pre-defined provider networks/products. These older systems lack the sophistication that tailored products demand for accurate claims payment. Health plans are left to cope with this gap by resorting to a patchwork implementation of manual and ad-hoc approaches. Often, these demands for increased system sophistication end up creating highly redundant and disconnected fragments of provider information, such as operative rate sheets/contracts, applicable sub-networks, or network criteria and specifics of contract coverage within multi-tiered health systems. These operational complexities increase the propensity for information leakage and misidentification during the adjudication of claims, as well as challenge the accuracy of the claims payment.

Payment reforms bring further challenges. Traditional payment models, such as fee-for-service and capitation, involve a straightforward set of obligations with the provider. However, programs such as the Patient Centered Medical Home and collaborative care team bonuses require that adjudication and pricing systems have an additional awareness of the collaborators or team members. These team-based associations may have no organizational relationship to the primary care giver, or to additional payment constructs that require the examination of a members’ care over time, or to a provider’s aggregate performance over a population size. In the face of such information demands, many health plans are recognizing the need to coordinate and unify traditionally disconnected business functions regarding setup of providers, contracts and pricing. Additionally, health plans will need to incorporate the members’ care and the providers’ aggregate performance during the establishment of the criteria for pricing and contracting.

The challenges described above are daunting, and require a re-examination of the details of products, networks, contracts, pricing, provider data and the members’ care information. Without examining and improving each of these areas, health plans will fail to achieve the proposed value of integrated provider performance management.

There is an emerging awareness that a bottoms-up codification and cross-functional coordination of all these significant elements is a necessary step in being prepared for and responsive to these new market pressures. As health plans embark on a connected and coordinated strategy for an integrated provider performance management approach, they also recognize the need for a natural evolution, which is in alignment with their own growth and operational goals. All of this activity supports the underlying premise of current payment reforms. Health plans that offer provider reimbursement transparency and an increase ease of doing business with the health plans themselves, are on the right road to enable performance based delivery environments. The health plans that achieve this in the near-term are those that will experience long-term success.

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