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Tip of the week, part 1: Succeed in performance-based contracting

Managed Care Weekly Advisor, August 8, 2007

Performance-based contracting (PBC) should not be construed as a revenue-cycle management program or an isolated academic project. Organizations must launch a full-fledged program to improve quality and leverage pay for performance (P4P) as the driver of hospital and physician collaboration. Here's how:

  1. Assess the feasibility of PBC for your organization: Conduct an internal assessment of management and staff members. Consider how to structure your contractual obligations and the HMO responsibilities. How will competitors respond? What are the business advantages of being first in the market? What are the drawbacks of being last?

  2. Evaluate your organization's preparation for P4P: Conduct a thorough review of current process-improvement tasks, including the scope of work and estimated timetable. Examine the gaps in your ability to collect and analyze clinical and financial information. Objectively appraise the skill sets of your physicians, and evaluate areas in which quality can be measured and demonstrated through widely accepted performance indicators, such as Health Plan Employer Data and Information Set measures.

  3. Build physician support for hospital initiatives: Engage your physicians to work collaboratively with the hospital on quality and efficiency projects. Improved scores on core measures and external report cards lead to increased reimbursement under P4P contracts, she said. Decreased length of stay leads to improved Medicare margin, and greater efficiency brings reduced costs for lab, radiology, surgery, and other services. And when physicians are engaged in redesign, they're more likely to accept the results.

  4. Identify key employers in your community: Most health systems and physicians don't know how many patients come from which employers in their service area, as insurers and third-party administrators typically control payments to providers. Identify and establish relationships with employers through health information fairs, lunch-and-learn events, and health screenings.