Contract “Gaming:” Reasons Why Measurement and Value-Based Contracts Can Fail

Summary

Healthplans engage in gaming primarily to optimize financial returns, manage risks, maintain a competitive advantage, meet regulatory requirements, and improve administrative efficiency.
While these practices can benefit Healthplans financially, they often undermine the goals of value-based contracting by distorting performance metrics, eroding trust, increasing costs, and potentially compromising patient care quality.
Addressing these issues requires transparent, fair contract practices, independent oversight, and a focus on genuine improvements in patient outcomes.
Healthplan gaming refers to the manipulation or strategic exploitation of value-based contract terms, performance metrics, and reporting mechanisms by Healthplans to maximize their financial returns or achieve favorable outcomes.
Provider gaming refers to the manipulation or exploitation of contract terms and performance metrics by providers to maximize or protect financial returns to improve patient health but not necessarily public health. Examples include cherry-picking healthier patients, upcoding the severity of diagnoses, undertreating patient with severe problems, and delaying or manipulating the timing of services to meet specific access targets.
Psychologically, cognitive dissonance and moral licensing may drive providers to rationalize gaming as necessary to protect their practice and patients.
Gaming also leads to inefficiencies and increased costs, counteracting the cost-effectiveness goal of value-based contracting.
Moral injury decreases provider morale and increases burnout, reducing care quality and continuity.
Assertions made in this discussion are supported primarily by articles on “gaming” behavior in medical services contracts.

For more information see:
Definitions for Healthy Contracts.
https://www.mentorresearch.org/healthy-contracts-bill-definitions

The combination of psychological pressures, financial constraints, operational challenges, and ethical dilemmas can lead providers to game health plans’ take-it-or-leave-it contracts. Addressing these root causes through legislative reform and improved contract practices is crucial for creating a more sustainable and ethical healthcare system. Understanding the definitions of gaming and moral injury offers insight into the complex motivations and impacts on Providers navigating these challenging contract environments.

Both gaming and moral injury present significant challenges to the success of value-based contracting. By distorting performance metrics, eroding trust, increasing costs, decreasing provider morale, compromising patient care, and introducing legal and ethical risks, these experiences undermine the foundational goals of measurement and value-based care. Addressing these issues through transparent, fair, and supportive contract practices is essential for realizing the full potential of value-based healthcare models.

Healthplan gaming refers to the manipulation or strategic exploitation of value-based contract terms, performance metrics, and reporting mechanisms by Healthplans to maximize their financial returns or achieve favorable outcomes. This can involve various tactics such as setting unrealistic performance benchmarks, selectively enrolling healthier members, and manipulating data reporting.

Healthplans engage in gaming for several reasons. First, to maximize financial returns, they may design measurement and value-based contracts to favor their financial interests. By setting performance metrics and benchmarks that are difficult for providers to meet, they can reduce the amount they pay out. For example, implementing complex metrics that minimize bonus payments or limit shared savings with providers. Second, to manage risk and control costs, Healthplans manipulate performance metrics to mitigate their financial exposure by imposing strict utilization controls that limit the types and frequency of services providers can deliver. Third, to gain a competitive advantage, Healthplans may present themselves as more efficient and cost-effective by selectively enrolling healthier populations, improving reported outcomes and cost metrics. Fourth, to meet regulatory standards and qualify for government incentives, Healthplans may manipulate data, adjusting reporting practices to align with quality metrics required by Medicare and Medicaid programs. Finally, for administrative efficiency, Healthplans may design contracts that streamline processes in ways that benefit their operations. For example, Moda Health requires providers to receive PHI from the Healthplan, which circumvents physician responsibilities to refer and coordinate care, thus disrupting coordination of care.

Provider “gaming” in the context of healthcare contracts refers to manipulation or exploitation of contract terms and performance metrics by providers to maximize or protect financial returns by protecting their patients, without improving public health. Examples include cherry-picking healthier patients, upcoding the severity of diagnoses, and delaying or manipulating the timing of services to meet specific access targets. This behavior often arises from the need to navigate complex, ambiguous, or financially unsustainable contract requirements and policies. Providers might feel justified or see it as necessary to game a Healthplan’s take-it-or-leave-it contract due to several psychological, financial, and operational factors. Psychologically, cognitive dissonance and moral licensing may drive providers to rationalize gaming as necessary to protect their practice and patients. Financially, survival instincts may lead providers to game the system to secure sufficient revenue in the face of unsustainable financial models and cash flow issues. Operationally, the complexity and ambiguity of contract terms and the administrative burden of complying with value-based contracts can prompt providers to simplify processes through gaming. Additionally, unrealistic performance metrics set by Healthplans may pressure providers to game the system to meet targets and avoid penalties.

Gaming and moral injury can significantly undermine the success of value-based contracting. Distorted performance metrics, caused by practices such as upcoding and cherry-picking, make it difficult to accurately assess care quality and effectiveness, preventing value-based models from achieving their goals. Erosion of trust between Healthplans and providers can lead to more stringent controls, complicating care delivery and reducing collaboration. Gaming also leads to inefficiencies and increased costs, counteracting the cost-effectiveness goal of value-based contracting. Moral injury decreases provider morale and increases burnout, reducing care quality and continuity. Compromised patient care arises when providers prioritize contract adherence over optimal care, undermining patient outcomes. Legal and ethical risks associated with gaming can result in significant financial and reputational damage to healthcare organizations.

Addressing these issues requires transparent, fair contract practices, independent oversight, and a focus on genuine improvements in patient outcomes. Legislative and regulatory solutions, such as those aimed at improving contract transparency and fairness, are essential to reduce the need for providers to game the system. Understanding the definitions of gaming and moral injury provides insight into the complex motivations and impacts on providers navigating these challenging contract environments. Both gaming and moral injury present significant challenges to the success of value-based contracting, distorting metrics, eroding trust, increasing costs, decreasing provider morale, compromising patient care, and introducing legal and ethical risks. Addressing these root causes through legislative reform and improved contract practices is crucial for creating a more sustainable and ethical healthcare system and realizing the full potential of value-based healthcare models.

Outline

Reasons Healthplans Engage in Gaming

What is Healthplan Gaming and Why Do They Do It?

1. Maximizing Financial Returns:

Revenue Optimization: Healthplans may design value-based contracts to favor their financial interests. By setting performance metrics and benchmarks that are difficult for providers to meet, they can reduce the amount they pay out.
Example: Implementing complex metrics that are challenging to achieve, thus minimizing bonus payments or limiting shared savings with providers.

2. Managing Risk and Costs:

Cost Control: Healthplans manipulate performance metrics to manage financial risk and control costs. By shifting financial risks to providers through stringent contract terms, they can mitigate their own financial exposure.
Example: Imposing strict utilization controls that limit the types and frequency of services providers can deliver, thereby reducing overall plan expenditures.

3. Competitive Advantage:

Market Positioning: By gaming the system, Healthplans can present themselves as more efficient and cost-effective compared to competitors. This can attract more customers and increase market share.
Example: Selectively enrolling healthier populations who are less likely to require intensive healthcare services, improving reported outcomes and cost metrics.

4. Regulatory Compliance and Incentives:

Meeting Regulatory Standards: Healthplans may manipulate data to meet regulatory requirements and qualify for government incentives. This can ensure compliance and secure additional funding or bonuses.
Example: Adjusting reporting practices to align with quality metrics required by Medicare and Medicaid programs, ensuring continued eligibility for government funding.

5. Administrative Efficiency:

Simplifying Processes: Healthplans may design contracts that streamline administrative processes in ways that benefit their operations, sometimes at the expense of care quality.
Example: Implementing rigid formularies or care pathways that limit treatment options, simplifying management but potentially restricting optimal patient care.

What is Provider Gaming and Why Do They Do It?

Provider “Gaming” in the context of healthcare contracts refers to the manipulation or exploitation of contract terms and performance metrics by providers to maximize financial returns without genuinely improving patient outcomes. Examples include cherry-picking healthier patients, upcoding the severity of diagnoses, and delaying or manipulating the timing of services to meet specific performance targets. This behavior often arises from the need to navigate complex, ambiguous, or financially unsustainable contracts requirements and policies.

Providers might feel justified or see it as necessary to game a Healthplan’s take-it-or-leave-it contract due to several psychological, financial, and operational factors. These contracts often place providers in challenging positions, leading them to resort to gaming as a survival strategy. Here’s an in-depth look at why this might happen:

Psychological Reasons

1. Cognitive Dissonance:

Providers might experience cognitive dissonance when the contract terms conflict with their professional and ethical standards. To reduce this dissonance, they may rationalize gaming the system as necessary to protect their practice and patients.

2. Moral Licensing:

Providers may justify gaming by believing their overall impact on patient care is positive, and bending the rules slightly is warranted to ensure the financial viability of their practice.

Financial Pressures

1. Survival Instinct:

Unsustainable Financial Models: Value-based contracts can be financially challenging, especially if the performance metrics are unrealistic or if reimbursement rates are inadequate. Providers might game the system to secure sufficient revenue to keep their practices afloat.
Cash Flow Issues: Delays in payments or insufficient reimbursements can create cash flow problems, prompting providers to manipulate reporting or service provision to ensure timely and adequate payments.

Operational Challenges

1. Complexity and Ambiguity:

Ambiguous Terms: Contracts often contain complex and ambiguous terms that are difficult to interpret. Providers may game the system as a way to navigate unclear guidelines and ensure they meet performance metrics.
Administrative Burden: The administrative burden of complying with value-based contracts can be overwhelming. Gaming the system can be seen as a way to simplify these burdensome processes.

2. Pressure to Meet Performance Metrics:

Unrealistic Targets: Healthplans might set performance metrics that are difficult or impossible to achieve. Providers may resort to gaming to meet these targets and avoid penalties or to secure bonuses.

Ethical and Professional Concerns

1. Patient Care Prioritization:

Providers may feel that the terms of the contract prevent them from delivering optimal patient care. Gaming the system can be perceived as necessary to prioritize patient needs over the constraints imposed by the contract.

2. Lack of Support and Communication:

Healthplan Intransigence: If Healthplans are unwilling to discuss or negotiate contract terms, providers might feel they have no choice but to game the system to ensure their practice's sustainability and to advocate for their patients.

Examples and Context

Cherry-Picking and Upcoding: Providers might select healthier patients to meet performance metrics more easily or exaggerate the severity of conditions (upcoding) to receive higher reimbursements. These practices can stem from a need to ensure financial viability in the face of stringent contract requirements.
Delayed Services: Providers may delay necessary services to avoid penalties or to align with performance metrics that benefit their financial standing.

How Gaming and Moral Injury Undermine the Success of Value-Based Contracting

Gaming and moral injury can significantly undermine the success of value-based contracting in several ways.

1. Distorted Performance Metrics:

Example: When providers engage in gaming, such as upcoding the severity of diagnoses or cherry-picking healthier patients, the performance metrics that Healthplans rely on become skewed. This distortion makes it difficult to accurately assess the quality of care being provided and undermines the integrity of the data used to make decisions.
Impact: Distorted metrics lead to incorrect conclusions about the effectiveness of care strategies, ultimately preventing value-based models from achieving their intended goals of improving care quality and reducing costs.

2. Erosion of Trust:

Example: If Healthplans discover that providers are gaming the system, it erodes trust between the two parties. Healthplans may become more stringent and suspicious, implementing even more rigid controls that can further complicate the provider’s ability to deliver care.
Impact: This erosion of trust can lead to a more adversarial relationship, reducing the willingness of providers and Healthplans to collaborate effectively on patient care initiatives.

3. Inefficiency and Increased Costs:

Example: Gaming often leads to inefficiencies, such as unnecessary treatments or delayed care, which can increase healthcare costs rather than reduce them. For instance, providers might delay services to align with performance metrics, potentially leading to worse health outcomes and higher long-term costs.
Impact: Increased costs and inefficiencies counteract the primary goal of value-based contracting, which is to create a more cost-effective healthcare system.

What is the Impact of Moral Injury on Value-Based Contracting

1. Decreased Provider Morale and Burnout:

Example: Providers experiencing moral injury due to conflicts between their professional ethics and Healthplan requirements are likely to suffer from emotional and psychological distress. This distress can lead to burnout, reduced job satisfaction, and a higher turnover rate among healthcare professionals.
Impact: High turnover and burnout reduce the continuity and quality of care, which are essential components of successful value-based contracting. Moreover, it can lead to increased recruitment and training costs for healthcare organizations.

2. Compromised Patient Care:

Example: When providers are forced to choose between adhering to contract requirements and providing the best possible care for their patients, patient outcomes can suffer. For example, if a necessary treatment is not covered under a value-based contract, the provider may have to choose a suboptimal alternative.
Impact: Compromised patient care undermines the goals of value-based contracting, which seeks to improve patient outcomes through better care coordination and evidence-based practices.

3. Legal and Ethical Implications:

Example: Providers who feel morally compelled to game the system may also be exposing themselves and their organizations to legal and ethical risks. This can include lawsuits, penalties, and loss of professional licensure if their actions are deemed fraudulent or unethical.
Impact: Legal and ethical issues can result in significant financial and reputational damage to healthcare organizations, further undermining the success of value-based contracting models.

Legislative and Regulatory Solutions For Gaming

Proposals for legislative reform, such as those aimed at improving contract transparency and fairness, are essential to address these issues. By ensuring that contracts are clear, fair, and enforceable, and by establishing independent analysis and reporting oversight, these initiatives can reduce the need for providers to game the system.

In summary, the combination of psychological pressures, financial constraints, operational challenges, and ethical dilemmas can lead providers to game Healthplans’ take-it-or-leave-it contracts. Addressing these root causes through legislative reform and improved contract practices is crucial for creating a more sustainable and ethical healthcare system.

DISCLAIMER and PURPOSE: This discussion document is intended for training, education, or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.

Mentor Research Institute