Understanding Value-Based Contracts in Behavioral Health

Value-based contracts (VBC) are agreements between the payer (i.e., insurer) and provider that stipulates that payment for services is based upon predetermined measures, such as patient outcomes. This type of contract means that individuals and insurers pay based on the value of care provided, rather than the number of services. While value-based contracts are widely used in other healthcare fields, their application in behavioral health is far from universal.

To help you better understand if value-based contracts are right for your organization, we’ll explore how they work, how behavioral health providers can use them, and the challenges they bring to behavioral health organizations.

What value-based contracts look like in behavioral health

From providers’ point of view wanting to better help their clients, valued-based contracts can provide a boon to these efforts. This is because, to qualify for a VBC, your behavioral health organization has to demonstrate:

• The delivery of appropriate and necessary services
• The use of an accountable treatment process that utilizes the latest techniques in screening, coordination of care, progress measurement, and more
• Appropriately measuring client outcomes and satisfaction with services and access to care

For the business side of your organization, value-based contracts can also lead to the following benefits:

• They reduce the cost of services by cutting unnecessary processes.
• This reduction leads to savings, which are then shared with payers.
• The enhanced value given to clients leads to growth in the business.

Value-based contracts have proven an effective way to make sure patients and clients receive quality care without overburdening payers. This, in turn, has led to better care and cost reduction for your client base.

In a study conducted by the National Council for Mental Wellbeing, 75% of organizations that began using value-based contracts achieved benchmark results in the reduction of readmission rates and post-discharge follow-up among clients with comorbidities. The participating organizations also saw a combined $204 million reduction in cost.

While these results are promising, establishing value-based care in behavioral health is not without its challenges.

The challenges of value-based contracts in behavioral health

Despite the advantages that value based-care can bring to behavioral health organizations, approximately 10% of behavioral health providers have fully leveraged (defined as greater than 20% of total revenues) a value-based contract. Why is this so low?

At the heart of the issue is the history of payers undervaluing mental and behavioral healthcare. This could, in part, be due to the longstanding cultural separation of the mind and the body, and thus mental health and physical health, in Western medicine. Caring for an individual’s holistic health has only begun to gain widespread acceptance and adoption within the last several decades. According to recent studies, this had led to “issues like fragmentation, imbalanced and unequal pay structures, and carve-outs that act as payment loopholes.”

One of the other major challenges facing the adoption of value-based contracts in behavioral health is more clinical. Unlike the various fields of internal medicine, progress in behavioral health cannot always be quantified. While organizations have made improvements in their ability to track their impact on the community, it remains difficult to report to the payer that an individual coping with behavioral health issues improved by a certain measurable percentage.

Fortunately, there is something behavioral health organizations can do.

How to become a value-based organization

To truly make the most of value-based contracts in your behavioral health organization, you need to do the work. To understand how best to become value-based, we spoke with Carol Clayton, PhD, who has over 30 years of experience in behavioral health and psychology.

Clayton outlined three main objectives that any organization that wants to become value-based must work to achieve: get organizational buy-in, determine your standing among peer organizations, and make better use of your data.

Getting organizational buy-in for value-based contracts

First, determine what is the “win” to get decision makers — particularly senior leaders and clinicians — to care about adopting value-based contracts. Know what is “in it for them.”

To begin, answer the following questions:

• What do the decision makers care about most?
• What does your agency collectively excel in and care about most?
• How does this alignment of individual and collective passion and excellence align with your overall mission?
• How does this collective passion, excellence, and mission link to your payers’ needs and wants, such as access, total cost of care reduction, and/or emergency room or hospital diversion?

When you have answered these questions, you have identified personal and collective reasons to motivate the change toward a value-based contract system.

How do you stack up to peer organizations?

Second, how do you compare to your peers who are already using value-based contracts?

What data do you have and what data-driven story can you tell the payer about your excellence, how it stands out from others, and how it can be leveraged by the payer to assist them with what is most important to them — their financial bottom line? Do you have same-day-access statistics? Do you have a story about crisis diversion or other services that reduce unnecessary use of the emergency room?

Having a comparative financial impact story that sets you apart from your peers is your differentiator to start a discussion with a payer.

Making use of your data

Third, what data and technology structural supports do you have or need to focus on, and what is most important for you in adopting value-based contracts?

Put the data story and the goal in front of your key staff regularly to drive attention and focus to the change goal. To make the change value-based contracts, you may need to start by taking some risks, such as lowering your unit rate while earning more than the differential in a bonus if you meet the performance outcomes.

You must be able to see these performance targets and guide your staff visually for daily “nudges” to focus attention and action on what is most important to create the continuous value story. We know from behavioral economics that pointing people to what you want them to pay attention to and showing them how they are doing against goals compared to others is one of the most cost-effective methods to start a change process.