What Value-Based Contracting Means to the Workers’ Comp Industry

Value-based contracting (VBC) widely used in the healthcare system is now a hot topic in the workers’ comp industry, according to a Coventry whitepaper released earlier this year. Though widely discussed among industry stakeholders, a common definition for the practice appears to be missing.

According to Coventry, value-based contracting can be considered an umbrella term that can mean several things, including pay for performance, bundled payments and/or an outcomes-based payment model.

The concept began with HMOs “where medical groups or independent physician associations were paid per member per month to manage the wellness of members for whom they served as a primary care provider.”

In his March 2017 blog on a Workers Compensation Research Institute session that touched upon VBC, Joe Paduda, principal of Health Strategy Associates, defined current workers’ comp care management as “fee and utilization management using discounted networks and external vendors,” and VBC as “bundled payments focused on a patient’s experience and results.”

The whitepaper titled, Defining “Value-Based Contracting” Requires More Than a Few Words, states that “the goal of VBC is to move away from volume-based contracting or fee-for-service contracting eliminating the financial incentive to treat more. A VBC model strips out the payment structures that reward activity over outcome.”

VBC focuses on paying for positive results rather than on process or fee-for-service, the paper added.

The whitepaper outlines four core principles that make up a quality workers’ comp VBC model:

Predictive pricing for providers and payors: An agreement between the two on what it costs to treat certain injuries and illnesses in order to get the worker back to his or her pre-injury condition.

Alternative to fee-for-service: Rather than incentivize for doing more, value-based payment models pay for better outcomes regardless of the services required to reach that outcome.

Shared opportunity for the provider and the payor: Underscores the goals that provider and payor share. There is an upside and downside for both if the value isn’t delivered.

Outcomes focus: The model should be calibrated to deliver the correct mix of services so the injured worker can achieve the best outcome.

The paper describes other value-based models being used by the healthcare system. These include:

1. Case rates – a hybrid contracting model, covering expenses related to outpatient facilities or surgery centers for specific procedures. No coverage for surgeon, lab or radiologist billing.
2. Pay for Performance (P4P) – An incentive program for doctors and hospitals measured by performance.
3. Bundled payments – An episode of care is defined as a set of services, i.e., all costs involved in a knee replacement would be bundled as one fee.
4. Accountable Care Organizations – Quality and efficiency drive payments to doctors in this integrated health system that offer coordinated care to patients.
5. Patient-Centered Medical Homes – Per member, per month fee covers patient care coordination and outcomes. This model sees preventative care as a way to curb costs and treat an injury before it comes serious.

There are differences in how value-based contracting impacts the healthcare system versus workers’ compensation. First, according to the whitepaper, the network contractor in healthcare is often the insurer. That’s usually not the case in workers’ comp. In addition, while a healthcare insurer might cover medical treatment, utilization review and medical case management, workers’ comp insurers usually contract these services out to a variety of vendors. State rules and regulations vary and add another layer of complexity in considering the use of value-based contracting in workers’ comp. Further, the white paper states the old claims mentality will have to be replaced to see the big picture value of this type of model.

Data is also an issue since analytics will need to be used to evaluate a provider or hospital’s success.

According to the whitepaper, some benefits resulting from the use of value-based contracting include:

• A better provider/payor partnership.
• Offering providers incentives on better outcomes.
• Improved outcomes for injured workers.