Payment reform redefines provider performance management

March 1, 2010
Murali Karamchedu
Murali Karamchedu

Murali Karamchedu is with Portico Systems

A 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 practices.

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

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.