Glossary and Definitions For Alternative and Value-Based Payment Contract Design
Access to Care: Access to care refers to the ability of individuals to obtain necessary health services in a timely manner, with an emphasis on both affordability and availability of healthcare providers. It is a critical factor in ensuring positive health outcomes and is influenced by several key elements:
Affordability: Healthcare costs, including insurance premiums, out-of-pocket expenses, and medication costs, can significantly impact access to care, especially for low-income populations.
Availability of Services: The presence of healthcare providers (doctors, hospitals, clinics) and facilities within a reasonable distance is essential. This includes access to primary care, specialists, emergency services, and preventive care.
Timeliness: Delays in receiving care, due to long wait times or appointment shortages, can prevent early detection and treatment of conditions, leading to worse health outcomes.
Health Insurance Coverage: Having adequate health insurance plays a significant role in accessing necessary healthcare services. Those without insurance are often unable to afford basic care, leading to disparities in health outcomes.
Cultural Competence and Health Equity: Ensuring care is accessible to diverse populations, including non-English speakers, and accommodating cultural and language needs helps eliminate barriers to care for marginalized groups.
Transportation and Geographic Location: Particularly in rural or underserved areas, lack of transportation or long distances to healthcare providers can severely restrict access to care.
Efforts to improve access to care often focus on expanding health insurance coverage (such as through Medicaid or the Affordable Care Act), improving the distribution of healthcare providers in underserved areas, and addressing cost barriers through subsidies or policy reforms
Alternative Payment Methods (APM): Alternative Payment Methods (APMs) are payment approaches in healthcare that move away from the traditional fee-for-service model, which pays providers based on the volume of services provided. APMs are designed to reward providers for delivering high-quality, cost-effective care, aligning financial incentives with patient outcomes and care efficiency.
Key Types of Alternative Payment Methods:
Pay-for-Performance (P4P): Providers receive financial incentives for meeting certain quality and performance benchmarks, such as improving patient outcomes or reducing hospital readmissions.
Bundled Payments: A single payment is made for an episode of care, covering multiple services provided during a treatment period. For example, a bundled payment for a surgery might cover pre-operative visits, the procedure, and post-operative care.
Shared Savings: Providers are rewarded for reducing healthcare costs below a predetermined target, while maintaining or improving the quality of care. Accountable Care Organizations (ACOs) often operate under this model.
Capitation or Population-Based Payments: Providers receive a fixed payment per patient to manage overall care for a population, regardless of the number of services rendered. This encourages preventive care and better chronic disease management to avoid costly interventions.
Upside/Downside Risk Models: Providers share in the savings if they reduce costs (upside risk), but they also share in the financial losses if costs exceed benchmarks (downside risk). This promotes accountability and careful resource management.
Audit and Compliance Committee: Commonly referred to as an Internal Audit and Compliance Committee, a governance body within an organization that plays a key role in overseeing the effectiveness of internal audit functions, risk management, and compliance with laws and regulations. This committee ensures that the organization's operations align with internal policies and external standards, providing oversight on financial reporting, operational efficiency, and ethical practices.
Key Responsibilities of an Internal Audit and Compliance Committee:
Internal Audit Oversight:
Ensures the independence and objectivity of the internal audit function.
Reviews and approves the internal audit plan, ensuring it covers key risk areas.
Monitors the results of internal audits and the implementation of corrective actions.
Provides guidance on audit scope and ensures resources are adequate for audit needs.
Compliance Monitoring:
Ensures that the organization adheres to legal, regulatory, and ethical standards.
Monitors compliance with internal policies, such as financial reporting practices or healthcare regulations (HIPAA, for instance, in healthcare organizations).
Reviews reports on compliance issues and ensures appropriate actions are taken to address any gaps.
Risk Management:
Assesses the organization's risk exposure and ensures proper risk management strategies are in place.
Collaborates with internal auditors to identify emerging risks and monitor the effectiveness of risk mitigation controls.
Reporting to the Board of Directors:
Provides regular updates and reports to the board regarding internal audits, compliance issues, and risk management efforts.
Ensures transparency and accountability in the organization’s governance structure.
Whistleblower Policies:
Oversees the effectiveness of whistleblower programs and ensures that employees can report unethical behavior or violations without fear of retaliation.
Ensures that whistleblower reports are investigated and resolved appropriately.
In healthcare organizations, the internal audit and compliance committee would focus on issues like Medicare/Medicaid billing compliance, adherence to patient privacy laws (HIPAA), and ensuring that the organization operates within the scope of regulatory frameworks such as those outlined by the Joint Commission or Centers for Medicare & Medicaid Services (CMS). This committee is crucial for protecting the integrity of the organization, safeguarding against fraud or mismanagement, and ensuring compliance with legal requirements. It fosters accountability and transparency, which are essential for maintaining stakeholder trust and avoiding legal or regulatory penalties.
Audit Scope: The audit scope defines the boundaries and extent of an audit, specifying the areas, processes, and activities that will be examined. It outlines the depth of the audit and what it will cover, ensuring that both the auditor and the auditee are clear on the audit’s objectives and focus. A well-defined audit scope is essential to ensure that the audit is relevant, comprehensive, and aligns with organizational goals.
Key Elements of Audit Scope:
Objectives: Clearly defines the purpose of the audit, such as evaluating financial records, assessing compliance with regulations, or reviewing operational efficiency.
Coverage: Identifies the specific areas, departments, or functions that will be audited. For example, the audit may focus on a particular business unit, financial reporting system, or healthcare service delivery model.
Timeframe: Specifies the period under review, such as a fiscal year or a specific project duration.
Criteria and Standards: Describes the benchmarks, policies, or regulations against which the audit will assess the organization’s activities. These may include industry standards, legal requirements, or internal policies.
Depth of Review: Determines how detailed the audit will be, whether it's a high-level overview or an in-depth examination of processes and controls.
Exclusions: Clarifies what areas or aspects are outside the scope of the audit, ensuring that the audit remains focused and manageable.
Bad Faith Actions: Bad Faith Actions refer to deceptive, dishonest, or malicious conduct by a party that undermines an agreement, contract, or legal obligation. These actions typically involve misrepresentation, refusal to meet obligations, or deliberate delays designed to exploit or harm the other party. Bad faith is often characterized by the intentional violation of the spirit or letter of an agreement.
Key Characteristics of Bad Faith Actions:
Misrepresentation: Deliberately providing false or incomplete information to deceive the other party.
Refusal to Fulfill Terms: Failure to meet contractual obligations without valid reason, often to gain an unfair advantage.
Intentional Delays: Deliberately stalling processes to harm the other party or avoid responsibilities.
Undermining the Agreement: Engaging in actions that violate the spirit of the contract, even if there is no direct breach of its terms.
Exploitation: Taking advantage of loopholes or ambiguities in contracts with the intent to cause harm or evade responsibilities.
Why Bad Faith Actions Could Be Illegal:
Contract Law Violations: Bad faith actions typically breach contractual and legal obligations. Many contracts include an implied covenant of good faith and fair dealing, which requires both parties to act honestly and not undermine the agreed-upon purpose of the contract.
Fraud and Misrepresentation: If bad faith actions involve intentional deceit, they could lead to claims of fraud or misrepresentation, both of which are illegal.
Violation of State or Federal Regulations: Certain industries, especially healthcare, finance, and insurance, are highly regulated, and bad faith actions could lead to violations of specific laws governing these sectors.
Behavioral Health Care: Includes mental health and substance use disorders, life stressors, trauma effects, crises, and stress-related physical symptoms. Behavioral health care refers to the prevention, diagnosis, and treatment of these conditions.
Bubble Map: A visual tool used by Internal Auditors to identify, analyze, and prioritize risks, controls, and other significant elements related to an audit. It helps in presenting complex information in a simplified, graphical format, making it easier to understand relationships, assess risk levels, and communicate findings (see below).
Bundled Payments: In some cases, providers may be involved in bundled payment arrangements, where a single payment is made for all the services related to a particular treatment or episode of care (e.g., a surgery or chronic disease management). If the cost of care exceeds the bundled payment amount, providers may be responsible for the overage, effectively sharing the financial risk.
Capitation or Sub-Capitation: Some providers may operate under a capitation model, receiving a fixed payment per patient per month for providing care, regardless of how much care the patient uses. This payment structure places providers at financial risk if the cost of care exceeds the capitation amount, incentivizing them to manage care efficiently.
Certified Internal Auditor (Independent CIA): A professional designation awarded by the Institute of Internal Auditors (IIA) to individuals who demonstrate proficiency and commitment in the field of internal auditing. The Independent CIA designation is recognized globally and signifies a high level of competence and professionalism in internal audit practices.
Confidential and Proprietary Information: Proprietary information or data disclosed by either the Healthplan or Provider to the auditor, including technology, ideas, inventions, trade secrets, computer programs, and business plans.
Contract Audit: An Independent review, objective assurance, and consulting activity required for both payers and Providers, designed to add value, achieve shared objectives, and improve contracted operations.
Contracts of Adhesion: Contracts of Adhesion are standardized agreements drafted by one party, typically a larger and more powerful entity, without negotiation or input from the other party. These contracts are usually presented to the weaker party on a "take-it-or-leave-it" basis, meaning the individual or entity receiving the contract has little or no bargaining power to change the terms.
Key Characteristics of Contracts of Adhesion:
Non-Negotiable Terms: The terms are set by the drafting party and are not subject to negotiation.
Disparity in Power: The contract is typically offered by a party with significant bargaining power (e.g., corporations, insurance companies, or health plans) to a party with less power (e.g., consumers, employees, or small businesses).
Boilerplate Language: These contracts often use standard, pre-printed language that applies broadly to all individuals in similar situations.
Take-It-Or-Leave-It: The recipient must accept the contract as-is or forfeit the opportunity, service, or employment being offered.
Why Contracts of Adhesion Could Be Problematic:
Unconscionability: Courts may find certain terms in a contract of adhesion to be unconscionable, meaning they are excessively unfair or one-sided. This can result in parts or the entirety of the contract being deemed unenforceable.
Lack of Bargaining Power: The weaker party often has no meaningful opportunity to alter the terms, which can lead to unfair situations where they must agree to terms that heavily favor the stronger party.
Fine Print: Adhesion contracts often include complex legal terms or fine print that the receiving party may not fully understand, potentially leading to hidden obligations or limitations.
Legal Standing of Contracts of Adhesion:
While contracts of adhesion are not inherently illegal, courts may scrutinize them to ensure fairness. If the terms are found to be unfair, deceptive, or unconscionable, a court can:
Invalidate certain clauses or the entire contract.
Interpret ambiguities in favor of the weaker party, as courts may apply a more lenient interpretation when the terms were imposed unilaterally.
Contract Violations: In healthcare, when one party in a contract fails to fulfill their obligations as outlined in the agreement. These breaches can involve various issues such as failure to deliver services, late payments, misrepresentation of information, or violating agreed-upon terms.
Contract violations between providers and health plans may include:
Failure to Meet Payment Terms: Health plans may delay or reduce payments to providers without proper notice.
Breach of Performance Metrics: Providers may not meet the agreed-upon quality or cost-efficiency targets set by the health plan, which can result in penalties.
Lack of Transparency: Health plans may withhold crucial information regarding payment calculations, incentive bonuses, or risk-sharing arrangements.
Unilateral Changes: One party making changes to the terms of the contract without the consent of the other party.
These violations can lead to disputes, financial losses, and in severe cases, legal action. Proper dispute resolution mechanisms or clauses are often included in contracts to address such issues.
Continuity and Transition: Continuity and Transition are key concepts in healthcare, particularly in ensuring seamless care as patients move between different settings or providers. These terms are essential for maintaining quality care and preventing gaps, especially during critical transitions in a patient’s healthcare journey.
Continuity of Care:
Continuity refers to the ongoing coordination of healthcare services over time. It ensures that patients receive consistent and connected care, regardless of changes in their health status, the providers they see, or the facilities they visit. This is especially important for managing chronic conditions, where continuous monitoring and follow-up are crucial.
Key aspects of continuity include:
Information Continuity: Ensuring that a patient’s health records, test results, and treatment history are available to all relevant providers.
Management Continuity: Ensuring that care plans are consistent over time, especially when patients move between primary care and specialists.
Relational Continuity: Developing a sustained relationship between the patient and their provider to foster trust and personalized care.
Transition of Care:
Transition refers to the process of moving a patient from one level of care to another, such as from a hospital to home, or from primary care to a specialist. Transitions are often vulnerable points where miscommunication or care lapses can occur, making proper coordination essential to avoid errors, rehospitalizations, or poor outcomes.
Key elements of transition include:
Clear Communication: Ensuring that all relevant information about the patient's care is communicated to the next provider or care team.
Care Coordination: Involving case managers or care coordinators to help manage the transition, especially in complex cases.
Follow-Up: Ensuring patients have a scheduled follow-up appointment and understand their care plan post-transition to avoid complications.
In Oregon healthcare systems like Coordinated Care Organizations (CCOs) or Patient-Centered Medical Homes (PCMHs), continuity and smooth transitions are critical for improving patient outcomes, reducing hospital readmissions, and managing chronic diseases. By prioritizing both continuity and transition, healthcare systems can ensure that patients receive the right care, at the right time, and in the right setting, without unnecessary disruptions.
Controls: Processes, policies, procedures, and mechanisms put in place to manage and mitigate risks within an organization. They are designed to ensure that objectives are achieved, assets are safeguarded, operations are efficient and effective, and compliance with laws and regulations is maintained. Controls can be preventive, detective, corrective, administrative, technical, and legal and compliance oriented. The following are categories of controls:
Administrative Controls: These include policies and procedures that govern the management and operation of Healthplan and healthcare practices in line with value-based contracts. This could involve guidelines for patient engagement and education, procedures for data entry and processing, and protocols for responding to patient feedback.
Corrective Controls: Once issues are detected, corrective controls are the actions taken to remedy the situation. This could involve revising payment practices, enhancing training for care providers, or renegotiating contract terms to better align incentives with desired outcomes.
Detective Controls: These controls are used to identify errors or irregularities after they have occurred. In the context of value-based contracts, detective controls could involve regular audits of billing and reimbursement processes, performance reviews to ensure that care standards are being met, and analysis of patient outcome data to detect deviations from expected health improvements.
Legal and Compliance Controls: These are designed to ensure that the Healthplan and healthcare provider adheres to all relevant laws, regulations, and guidelines. They might include regular training on compliance issues, systems for reporting and addressing violations, and periodic reviews of contract provisions to ensure they remain compliant with changing laws.
Preventive Controls: These are designed to prevent errors or irregularities from occurring in the first place. In value-based contracts, preventive controls could include thorough vetting processes for service providers, detailed contract language that specifies performance criteria, and automated systems to track compliance with healthcare protocols.
Technical Controls: In value-based Healthplan and healthcare settings, technical controls are crucial for managing information technology systems that support contract management, patient records, and performance reporting. Examples include user authentication, access controls, encryption, and audit trails.
Control Library: A control library, also known as a control framework or control repository, is a collection of documented controls that an organization uses to manage and mitigate risks, ensure compliance with regulatory requirements, and achieve business objectives. Controls are specific policies, procedures, practices, and mechanisms designed to prevent, detect, or correct risks and ensure the proper operation of processes within the organization.
Downside Risk: The potential financial losses that Providers could incur if they fail to meet cost or quality targets. In a downside risk arrangement, Providers share not only in the savings but also in the financial responsibility if healthcare spending exceeds the established benchmarks or if quality measures are not met. Providers may face financial penalties or owe money back to the Healthplan if costs exceed benchmarks or quality targets are not achieved. This type of risk-sharing encourages Providers to be more efficient and accountable for both costs and outcomes.
Ethics Point Portal: An Ethics Point Portal is an online system designed to allow employees, contractors, and stakeholders to report concerns related to ethical violations, unlawful activities, or unethical business practices. These portals are often implemented by organizations to ensure transparency and compliance with legal and ethical standards. They enable whistleblowers to report concerns either anonymously or by identifying themselves, depending on the reporting structure set up by the organization.
Key Features of an Ethics Point Portal:
Anonymous or Identified Reporting:
Users can submit reports without disclosing their identity if they fear retaliation. Identified reports are also possible, allowing organizations to follow up directly with the individual.Accessibility:
The portal is generally available 24/7, ensuring users can report concerns at their convenience, often from any location via a secure internet connection.Independent Oversight:
The portal is usually managed or overseen by a company’s Audit and Compliance Committee, Board of Directors, or a third-party service to ensure reports are handled independently and objectively, separate from the day-to-day operations of the organization.Confidentiality:
The system is designed to protect the identity of the whistleblower and keep sensitive information confidential, as required by whistleblower protection laws.Tracking and Follow-Up:
Many Ethics Point Portals provide users with a way to track the status of their report and receive feedback on the outcome or steps taken in response to their concerns.
Purpose and Importance:
Compliance:
An Ethics Point Portal helps organizations stay compliant with regulatory requirements, such as those related to anti-fraud, anti-corruption, and whistleblower protection laws.Preventing Fraud and Misconduct:
By providing a clear, accessible reporting system, organizations can detect and address fraud, unethical behavior, or contract violations early, helping to prevent financial losses, reputational damage, or harm to stakeholders.Transparency and Accountability:
Organizations that use an Ethics Point Portal demonstrate a commitment to ethical business practices and create a culture of accountability, encouraging employees and stakeholders to speak up without fear of retaliation.
Oversight and Independence:
For organizations such as health plans, the portal should be overseen by the Board of Directors or the Audit and Compliance Committee. Independent oversight ensures that reports are taken seriously, investigated properly, and resolved without undue influence from management. Some organizations may even outsource the portal's monitoring and investigation processes to an independent third party, further ensuring impartiality.
Exception Report: A report that identifies instances where performance or outcomes deviate from expected benchmarks or standards. It highlights outliers or anomalies, signaling issues that require further investigation or corrective action. Exception reports are commonly used in industries like finance, healthcare, and management to monitor performance and ensure compliance with objectives. In the context of healthcare and value-based contracts, an exception report could be used to track and inform providers of patient outcomes that meet don't meet expected benchmarks.
Fair Dealing: The requirement that Healthplans engage in equitable and just practices, avoiding exploitation or undue advantage over Providers, ensuring that all interactions are conducted with fairness and consideration for mutual benefits. Fair dealing refers to the principle of conducting business transactions with honesty, integrity, and fairness, ensuring that all parties act in good faith without taking advantage of one another. In legal and business contexts, fair dealing requires transparency, equitable treatment, and adherence to the terms of an agreement.
In healthcare and contracts, fair dealing means:
Good Faith Negotiations: Ensuring that contract negotiations are transparent and both parties operate with integrity.
Compliance with Terms: Parties adhere to the terms of the contract as agreed, with no hidden clauses or unexpected changes that could harm one party.
Avoiding Exploitation: Neither party should act in bad faith or exploit the other's vulnerabilities, such as withholding crucial information or misrepresenting terms.
In value-based healthcare contracts, fair dealing ensures that health plans and providers work collaboratively, aligning incentives to improve patient care without jeopardizing trust or fairness in their financial or operational dealings.
False Profit Leader: A business or strategy that appears to be profitable (perhaps due to deceptive accounting or short-term gains) but is not truly sustainable or reflective of long-term economic benefit. A false profit leader can occur when a health plan or provider seems to show high profitability or leadership in financial performance, but this success is based on unethical or unsustainable practices. Such practices may include:
Manipulative Contract Terms: A health plan might create contracts that underpay providers, delay reimbursements, or hide important details like performance metrics. This creates short-term financial gains but damages long-term trust and provider relationships.
Cost-Cutting at the Expense of Quality: A provider or health plan could cut corners in care, reducing costs while compromising patient outcomes. While it may boost profits temporarily, it can lead to poor health outcomes and increased costs in the future due to inadequate care.
Fraudulent or Misleading Reporting: Health plans or organizations might misrepresent their financial status or performance data to appear more profitable, drawing in investors or government contracts under false pretenses. This practice could lead to allegations of fraud or legal action.
In the long run, a false profit leader may face significant reputational damage, legal penalties, or loss of market position due to unsound financial and operational practices. In value-based healthcare, focusing on genuine shared value—improving patient outcomes while maintaining financial sustainability—helps prevent such issues.
Fee-for-Service (FFS): A traditional payment model where healthcare Providers are paid for each service performed, such as tests, procedures, or consultations, encouraging a volume-based approach to care.
Gaming: Gaming in healthcare contracting refers to the manipulation or exploitation of contractual terms, metrics, or processes to protect the patients, get around unjust denial of care, or or gain financial or competitive advantage, sometimes at the expense of contract requirements to improve outcomes. Other times to adhere to ethical standards, or maintain the providers moral integrity. Gaming act of manipulating rules, systems, or metrics to achieve a desired outcome, often in a way that is legal but unethical. In business and contractual settings, gaming exploits loopholes or takes advantage of poorly designed systems for financial or competitive gain, typically at the expense of the system's integrity or the interests of other parties.
Key Characteristics of Gaming:
Exploitation of Loopholes:
Gaming occurs when individuals or organizations exploit ambiguities or gaps in rules to gain an advantage that was not intended by the rule creators.Manipulation of Metrics:
In industries like healthcare or finance, gaming often involves tweaking performance metrics or manipulating data to show favorable results, often to secure bonuses, incentives, or favorable contractual terms without actually improving the underlying performance.Legal but Unethical:
Gaming is usually not outright illegal, as it takes advantage of loopholes within existing rules. However, it is often considered unethical because it undermines the intent of the system, harming its fairness or integrity.
Good Faith and Fair Dealing: A legal principle that implies an expectation of honesty, fairness, and integrity in the execution of contracts and in interactions between parties involved in a contractual agreement. This legal principal mandates that parties to a contract must act in good faith and engage in fair dealings with each other, avoiding any actions that would undermine the mutual benefits of the contract.
Good Faith: The obligation of Healthplans to act with honesty, fairness, and integrity in all contractual dealings, ensuring that their actions reflect a sincere commitment to fulfilling their contractual obligations without deceptive practices. Good faith refers to the honest intention to act without deception, fraud, or the intent to mislead or take unfair advantage in any relationship, agreement, or negotiation. In legal, business, and contractual contexts, acting in good faith involves transparency, fairness, and a commitment to fulfill obligations as intended.
Key aspects of good faith include:
Honesty: Parties involved should deal truthfully and provide accurate information without withholding critical details.
Fair Intentions: Both sides must genuinely intend to honor their commitments and obligations, without creating hidden disadvantages or exploiting the other party.
Reasonable Effort: Parties must make a sincere effort to fulfill their duties under the contract or agreement, even if challenges arise.
In healthcare contracts, good faith is critical for ensuring that health plans and providers collaborate transparently, avoiding manipulative tactics like withholding information or misrepresenting contract terms. It’s essential for building trust and ensuring equitable dealings in agreements, particularly in value-based payment models, where long-term relationships and patient care are the focus.
Healthcare quality control refers to the systematic processes and measures used to ensure that healthcare services meet established standards of safety, effectiveness, and patient-centered care. It involves monitoring and improving the quality of care provided to patients by tracking performance metrics, identifying areas of improvement, and implementing corrective actions to achieve better patient outcomes.
Key elements of healthcare quality control include:
Standards and Benchmarks: Setting clear goals for quality, such as reducing infection rates or improving patient-reported outcomes.
Measurement and Monitoring: Using data collection tools like Patient-Reported Outcome Measures (PROMs) or clinical indicators to track performance against benchmarks.
Error Identification: Identifying discrepancies between expected and actual outcomes, such as through exception reports, and understanding the sources of error or success.
Corrective Actions: Implementing changes or interventions to address gaps in care quality and enhance performance.
Continuous Improvement: Regularly reassessing performance and adjusting practices to sustain high standards of care.
Healthcare quality control is essential for ensuring safe, effective, and patient-centered care while reducing costs and improving overall healthcare system efficiency.
Healthplan: Any organization that provides or arranges for the provision of health benefits through insurance or other agreements. A health plan is a type of insurance coverage that provides financial protection and access to medical services for individuals or groups. Health plans can be offered by private insurance companies or government programs, and they come in various forms such as Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Exclusive Provider Organizations (EPOs), and Coordinated Care Organizations (CCOs). The key elements of a health plan typically include:
Coverage for Medical Services: Health plans cover a range of medical services, including doctor visits, hospital stays, surgeries, prescription medications, preventive care, and sometimes mental health services.
Provider Networks: Most health plans have a network of preferred healthcare providers and facilities that members are encouraged or required to use in order to receive the full benefits of the plan.
Premiums, Deductibles, and Copays: Members typically pay a monthly premium for coverage, along with deductibles (the amount paid out-of-pocket before coverage kicks in) and copayments (fixed fees for certain services).
Value-Based Contracts: Some modern health plans also include value-based contracts, where reimbursement is tied to patient outcomes rather than just the volume of services provided.
In the U.S., examples of government health plans include Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), while private health plans are offered through employers, the marketplace, or individual policies.
Medically Necessary and Reasonable Care: Services are considered medically necessary if they are provided for the treatment of a behavioral, mental health, or substance use disorder diagnosis. These services must be safe, effective, and appropriate for the patient based on generally accepted medical guidelines, empirical evidence, or standards recognized by relevant scientific or professional associations. The services should be consistent with the diagnosis identified in the behavioral and mental health assessment and provided according to an individualized service plan. The care must not be for the convenience of the patient, the patient's family, or the provider, nor for recreational purposes, research, data collection, legal requirements, or for maximizing provider reimbursement. Services are deemed medically reasonable if they are justifiable and appropriate based on accepted medical standards, clinical evidence, and the specific circumstances of the patient's condition.
Minimum Necessary Information: Healthcare providers shall have the discretion to define what constitutes "Minimum Necessary Information" when using, disclosing, or requesting protected health information (PHI) for purposes of payment, healthcare operations, or other permitted uses under applicable law. Providers shall base their determination of the minimum necessary information on the specific requirements of the patient's care, diagnosis, and treatment, and the necessity to fulfill the intended purpose of the disclosure or use. The PHI requested by a Healthplan or other entity should be the least amount necessary to achieve a clinically and legally reasonable objective. Healthplans exercising a request for PHI under this section must document the rationale including the specific factors considered and an explanation of why the information requested, used, or requested is deemed the minimum necessary. Providers will determine if such information is private, confidential and or sensitive. The provider may decide in consultation with another qualified provider that such disclosure of private, confidential and or sensitive is not appropriate if the consequence will more likely than not cause harm to the patient in the present time or distant future. The consultation, decision and reasons will be documented in the patient’s medical record
NCQA (National Commission on Quality Assurance): A non-profit organization dedicated to improving healthcare quality through the administration of evidence-based standards, measures, programs, and accreditation. NCQA's mission is to improve the quality of health care, focusing on ensuring that patients receive care that is safe, effective, patient-centered, timely, efficient, and equitable.
On-track and Off-Track are terms commonly used in healthcare quality control, project management, and performance monitoring to indicate the status of progress in relation to set objectives or goals.
On-track: Refers to individuals, processes, or outcomes that are meeting or exceeding the expected benchmarks or targets. In healthcare, a patient or provider is "on-track" when they are progressing as planned toward goals, such as improving health outcomes or reducing costs in a value-based care model.
Off-track: Refers to when the progress or performance is not meeting the set targets or goals. For instance, in healthcare, a patient may be classified as "off-track" if their condition is not improving as expected or a healthcare provider is not achieving the performance outcomes required under a contract.
Oregon Health Authority (OHA): A government agency in the state of Oregon responsible for overseeing public health and healthcare services. OHA manages various programs such as Medicaid (Oregon Health Plan), behavioral health services, and public health initiatives. Its mission is to ensure that all Oregonians have access to high-quality healthcare, with a focus on improving health outcomes, promoting health equity, and reducing healthcare costs. The OHA works to develop policies, coordinate with health providers, and regulate health plans to meet the state's health goals.
Oregon Health Authority (OHA) Values: A set of core values that guide the OHA mission and vision for improving the health and well-being of all Oregonians. These values typically include:
Health Equity: OHA is committed to ensuring that everyone in Oregon has fair access to health services, regardless of race, ethnicity, socioeconomic status, or geography. They focus on reducing health disparities and promoting equitable health outcomes.
Accountability: OHA emphasizes transparency and accountability in its operations, ensuring that resources are used effectively and that they are responsive to the needs of the community.
Collaboration: Working with communities, healthcare providers, and other stakeholders is key to achieving shared health goals. OHA values partnerships to improve the overall healthcare system.
Innovation: OHA supports innovative approaches to healthcare delivery and public health, aiming to transform the healthcare system to be more efficient and effective.
Stewardship: As caretakers of public health resources, OHA prioritizes the responsible management of funds and programs to maximize public benefit.
These values align with OHA’s mission to promote better health for all Oregonians through improved access to quality care, a focus on prevention, and health system transformation.
Patient Engagement: Strategies to engage patients in their care, ensuring that their preferences and values are considered in treatment decisions. This includes providing education, supporting self-management, as well as involving patients and sometimes family or significant others in care planning. Patient engagement refers to the involvement of patients in their own healthcare decisions and management. It emphasizes collaboration between patients, healthcare providers, and the healthcare system to empower individuals to take an active role in managing their health and well-being. Effective patient engagement can lead to better health outcomes, improved satisfaction, and more efficient healthcare delivery.
Key components of patient engagement include:
Education and Information: Providing patients with clear, accessible information about their health, treatment options, and care plans so they can make informed decisions.
Shared Decision-Making: Healthcare providers and patients work together to make decisions that align with the patient's values, preferences, and needs.
Self-Management Support: Encouraging and equipping patients to manage their own health conditions, often through tools like mobile apps, monitoring devices, or wellness programs.
Communication: Open, ongoing dialogue between patients and healthcare providers to ensure understanding, trust, and cooperation.
Patient engagement is essential for value-based care models, as it promotes active involvement in managing chronic conditions, preventive care, and adherence to treatment plans, ultimately leading to better patient outcomes and more efficient care.
Patient-Centered Care: A healthcare approach that emphasizes treating patients with dignity, respect, and involvement in decision-making. It focuses on understanding the individual preferences, values, and needs of the patient, ensuring that they are active participants in their own care. Key components of patient-centered care include:
Individualized Care: Tailoring treatments to meet the specific needs and values of the patient.
Empathy and Respect: Building a respectful relationship that considers the emotional, cultural, and social aspects of a patient's life.
Collaboration and Communication: Providers work closely with patients to share information, educate, and engage them in their healthcare decisions.
Support for Self-Management: Empowering patients to take an active role in managing their health and making informed decisions about their treatment options.
This model seeks to improve patient outcomes by fostering a strong patient-provider relationship and enhancing the overall healthcare experience.
Patient-Centered Outcomes: Focusing on outcomes that matter most to patients, such as improved mental health, functional status, and quality of life. Patient-centered care include:
Respect for patients' values and preferences: Healthcare providers acknowledge and consider the patient's desires, needs, and perspectives.
Coordination and integration of care: Efforts are made to ensure that healthcare is continuous and coordinated across different settings and stages of life.
Information and education: Patients are given comprehensive information and education about their health status, diagnosis, treatment options, and prognosis in an understandable way.
Physical comfort: Attention to providing physical comfort, including pain management, and assistance with daily needs.
Emotional support: Addressing anxiety, fear, and emotional distress associated with illness.
Involvement of family and friends: Considering the role of the patient's support network and facilitating their involvement as desired by the patient.
Overall, patient-centered care is about considering patients as partners in their healthcare and tailoring the care process to fit individual patient circumstances and preferences.
Policy Analyst: A person assigned to the Value-based contracting initiatives who is responsible for researching, analyzing, and developing health policy initiatives to enhance the effectiveness of healthcare services in Oregon. This role involves significant interaction with stakeholders, analysis of health data, and the development of strategic policy recommendations. This includes:
Research and Analysis: Conduct thorough research on current health policies, healthcare trends, and legislative changes affecting healthcare at the state and national levels. Analyze data related to healthcare delivery, public health outcomes, and other relevant metrics to inform policy decisions.
Policy Development: Develop and propose policy recommendations based on research findings and analysis. Draft policy briefs, reports, and presentations that clearly communicate policy proposals and their potential impacts.
Stakeholder Engagement: Collaborate with various stakeholders including government agencies, healthcare providers, patient advocacy groups, and the public to gather insights and feedback on policy initiatives. Facilitate meetings and discussions to ensure diverse viewpoints are considered in policy development.
Implementation Support: Assist in the implementation of new health policies by providing expertise and guidance to ensure policies are effectively translated into practice. Monitor the rollout of new policies to evaluate their effectiveness and identify any areas needing adjustment.
Regulatory and Compliance Monitoring: Keeping abreast of changes in laws and regulations that impact health policy and practice within the state. Ensure that all policy recommendations comply with existing legal and regulatory frameworks.
Payers: In healthcare, payers refer to organizations or entities responsible for financing or reimbursing the cost of healthcare services. They manage health benefits, collect premiums, and determine reimbursement rates for providers.
Key types of payers include:
Private Insurance Companies: These organizations, like Blue Cross Blue Shield, Aetna, and UnitedHealthcare, offer health insurance plans to individuals or groups, typically through employers or the marketplace.
Government Programs:
Medicare: A federal program providing healthcare coverage for individuals over 65 or those with certain disabilities.
Medicaid: A joint federal and state program that offers healthcare coverage to low-income individuals and families.
CHIP (Children’s Health Insurance Program): A government initiative providing healthcare to children in families who earn too much to qualify for Medicaid but can’t afford private insurance.
Self-Funded Employers: Large employers that take on the financial risk of providing health benefits to their employees, often using third-party administrators (TPAs) to manage claims.
Role of Payers:
Contract Negotiations: Payers negotiate rates and terms with healthcare providers, including hospitals, physicians, and clinics.
Claims Processing: They manage the process of approving and reimbursing claims for services rendered to insured individuals.
Value-Based Payments: Increasingly, payers are moving towards value-based care models, rewarding providers based on quality outcomes and efficiency, rather than volume of services.
Payers play a crucial role in the healthcare ecosystem by determining access to services, reimbursement levels, and shaping the way care is delivered through their contractual agreements.
Population-Based Payments (PBPs): A healthcare payment model where healthcare providers are paid a set amount per patient over a specific period of time, rather than being paid per service provided. This model is designed to encourage healthcare providers to focus on maintaining the health of their entire patient population. The payment is calculated based on the number of patients they are responsible for and aims to cover all or most of the care that patients may need. PBPs incentivize providers to offer preventive care and manage chronic diseases effectively to keep patients healthier and reduce unnecessary healthcare costs. Healthcare providers focus on preventive care, care coordination, and improved outcomes, rather than the volume of services delivered.
Key Features of Population-Based Payments:
Capitated Payments: Providers receive a lump sum per patient, regardless of the number of services provided. This incentivizes keeping patients healthy and managing chronic conditions effectively to avoid costly interventions.
Risk Adjustment: Payments are often adjusted based on the health status of the patient population. For example, providers managing sicker patients may receive higher payments to account for the increased care needs.
Focus on Value-Based Care: PBPs are part of the broader value-based care model, which ties reimbursement to the quality of care and patient outcomes. Providers are rewarded for improving population health, reducing hospital admissions, and achieving cost savings.
Cost Control: By placing a cap on the total amount a provider can earn, PBPs aim to limit excessive healthcare spending while promoting efficiency and better health outcomes.
Providers: Refer to individuals or organizations that deliver medical services to patients. They include a range of professionals and entities such as:
Physicians: Doctors who diagnose and treat illnesses.
Nurses: Healthcare workers who provide direct patient care, administer treatments, and assist in medical procedures.
Mental Health Professionals: Psychologists, psychiatrists, counselors, and therapists offering mental and behavioral health services.
Specialists: Medical professionals who focus on specific areas of healthcare, like cardiologists or neurologists.
Hospitals and Clinics: Institutions that provide a range of healthcare services, from routine checkups to emergency care.
Pharmacists: Professionals who dispense medications and provide pharmaceutical care.
Providers are key to the healthcare system, delivering essential care and services to promote patient health and well-being.
Quality Pool: A fund set aside by health plans or healthcare organizations to incentivize providers based on their performance. Providers can earn payments or bonuses from the pool if they meet specific quality metrics related to patient outcomes, safety, and care standards.
Rebasing Targets: Annual cost targets are adjusted, which may reduce providers' share of savings over time, making it harder for them to achieve long-term financial benefits. Rebasing targets in healthcare contracts, particularly in shared risk and value-based payment models, refers to the practice of resetting or adjusting the financial performance benchmarks annually based on previous cost-saving performance. This adjustment recalibrates the baseline or target against which future savings are measured.
Over time, as providers generate savings, these targets often increase, requiring continuous improvement year after year. This can make it difficult for providers to achieve the same level of financial benefits because they must continually reduce costs beyond previous performance to receive shared savings. In some cases, this process can diminish incentives for providers, as the goalposts keep moving, making it harder to benefit from cost savings in the long term.
In essence, rebasing targets can erode the financial advantages for providers, even if they consistently deliver high-quality, cost-effective care.
Residual Risk Analysis: Residual risk analysis is the process of evaluating the remaining risk after all mitigation measures and controls have been implemented. It helps organizations understand the level of risk that persists despite efforts to reduce or eliminate potential threats. This analysis is crucial in risk management, allowing organizations to make informed decisions about whether the residual risk is acceptable or if further actions are needed.
Risk Control Matrix (RCM): A tool used in risk management and internal auditing to document and assess the controls implemented to mitigate identified risks. It serves as a comprehensive repository of risks, their associated controls, and the evaluation of those controls' effectiveness. The RCM is instrumental in ensuring that risks are managed effectively and that controls are in place to mitigate the impact and likelihood of risks materializing.
Risk: Defined an “uncertainty that matters.” In contracting, true risk is that achievement of an objective is uncertain.
If an objective will be achieved because of a fact, constraint, requirement, problem, or issue, then there is no risk. Uncertainties are not risks because they are irrelevant. The only reason we need to identify, understand, and manage risks is whether they matter.
Risks matter if those risks affect the achievement of one or more objectives. Objectives define and describe what matters. Objectives tell us about requirements for outcomes, deliverables, time, cost and/or performance. Patient-centered objectives may relate to health, career, family, or fulfilment. Provider organization objectives might include growing the value of their services, enhancing patient satisfaction, protecting providers’ reputations, and operating with an appropriate profit.
The explicit link between risk and objectives explains why risk management is so important in all aspects of contracting. The risk process requires shared clearly defined values and objectives. It is not possible to define risks without context. We must know what is “at risk”, what matters, what we are trying to achieve.
Risk Corridor: A financial mechanism designed to stabilize costs in insurance markets, particularly in contexts where pricing uncertainty is high, such as new health plans or reforms. Risk corridors limit both excessive losses and gains. They work by setting a target cost. Insurers that have costs falling below this target pay into a pool, while those with costs exceeding the target receive payments from the pool. This helps mitigate the risk insurers face and ensures more predictable financial outcomes.
Risk Impacting Objectives (RIO): A structured process used to identify and analyze risks that could affect the achievement of specific objectives within an organization. This process involves examining the interaction between risks and the organization’s goals to determine how these risks could potentially impact the ability to achieve desired outcomes. By understanding these risks, organizations can implement strategies to mitigate them and ensure they are better positioned to meet their objectives.
Risk Mitigation Strategy: A plan or approach used to reduce or eliminate potential threats that could negatively impact a project, organization, or activity. It involves identifying risks, assessing their likelihood and potential impact, and implementing measures to manage or minimize them. Key components include:
Risk Identification: Recognizing potential risks that could affect objectives.
Risk Assessment: Evaluating the probability and severity of risks.
Preventive Measures: Taking steps to avoid risks or reduce their likelihood (e.g., setting up controls or safeguards).
Contingency Planning: Preparing actions or alternative plans to minimize the impact if a risk occurs.
Monitoring and Review: Continuously tracking risks and the effectiveness of the mitigation measures, making adjustments as needed.
A well-executed risk mitigation strategy helps in managing uncertainties and ensuring smoother operations or project outcomes.
Risk Pools: A risk pool is a fundamental concept in insurance and health care finance, representing a group of individuals whose health care costs are combined to calculate premiums. The primary purpose of a risk pool is to spread financial risk across a large number of people so that the costs of health care are predictable and manageable for insurers. This collective risk-sharing allows insurers to balance the cost of claims among a large group of policyholders, making premiums more stable and affordable for everyone involved.
Residual Risk Analysis: A residual risk analysis is a process used to identify, assess, and manage the risks that remain after all preventive and mitigating measures have been implemented. It is an essential component of risk management that helps organizations understand the level of risk they still face despite having implemented controls and safeguards.
Shared Objectives: Refer to common goals or targets that multiple stakeholders or teams agree to work towards collaboratively. In healthcare, for example, shared objectives might involve improving patient outcomes, reducing healthcare costs, or enhancing access to services. In business or project management, shared objectives are essential for aligning team efforts and ensuring that everyone is focused on achieving the same results.
Key aspects of shared objectives include:
Alignment: Ensuring that all stakeholders understand and agree on the goals.
Collaboration: Working together to achieve the objectives, with clear communication and coordination.
Accountability: Each party is responsible for contributing to the success of the shared goals.
Measurable Outcomes: Defining specific metrics to track progress toward the shared objectives.
By establishing shared objectives, teams and organizations can foster a sense of unity and purpose, ensuring that efforts are coordinated and focused on the desired outcomes.
Shared Savings: Shared Savings is a financial incentive model used in value-based healthcare, where providers are rewarded for reducing healthcare costs while maintaining or improving the quality of care. It aims to encourage healthcare organizations to focus on efficiency, prevention, and care coordination rather than the volume of services provided.
Key Components of Shared Savings:
Cost Targets: A predetermined cost benchmark is set for a group of patients over a specified period. This target could be based on historical spending data or an agreed-upon budget.
Savings Calculation: If the provider or healthcare organization delivers care for less than the cost target while maintaining high-quality outcomes, the difference (or savings) is shared between the provider and the payer (like Medicare or a health plan).
Quality Metrics: To qualify for shared savings, providers must meet certain quality benchmarks, which can include patient outcomes, care coordination, and patient satisfaction.
Upside Risk Only: Some shared savings models allow providers to share only in savings without any penalty if costs exceed the target (upside-only). This is a less risky option for providers.
Upside and Downside Risk: In models with both upside and downside risk, providers share in both savings and losses. If costs are lower than the benchmark, they share in the savings; if costs exceed the target, they must absorb part of the excess cost.
Shared Value: Values developed by the Provider and healthcare leadership that are adopted by Provider practices and the healthcare organization. Shared values are achieved by implementing shared objectives. In the context of Value-Based Payment (VBP) healthcare contracting, shared value refers to creating financial incentives that benefit both healthcare providers and society by improving patient outcomes while reducing costs. The shared value approach aligns the financial interests of healthcare organizations with public health goals, promoting high-quality, efficient care.
Key elements of shared value in VBP contracting include:
Improving Health Outcomes: Providers are rewarded for delivering better patient care, such as reducing hospital readmissions or improving chronic disease management, which enhances public health.
Cost Efficiency: By focusing on preventive care and more effective treatments, VBP models reduce overall healthcare costs, benefiting both the health system and society.
Collaboration and Transparency: Health plans, providers, and communities work together under clear, measurable objectives that focus on patient well-being, creating a mutually beneficial system.
Shared value in VBP contracting integrates economic incentives for providers with societal benefits, driving sustainable improvements in healthcare quality and efficiency.
Standardized Quality: The establishment and adherence to uniform quality standards and measures across different healthcare settings and providers. These standards are designed to ensure consistent care quality, improve patient outcomes, and facilitate benchmarking and performance evaluation. By defining clear, evidence-based criteria for processes and outcomes, standardized quality helps in assessing the effectiveness of care and identifying areas for improvement, ensuring that all patients receive care that meets established high standards.
Standardized Outcome Measures: Specific, quantifiable indicators used to assess the effectiveness of health interventions across different settings. These measures provide a consistent way to evaluate and compare the performance of healthcare providers, ensuring that patient outcomes meet established benchmarks. They focus on results like patient survival rates, recovery times, and quality of life improvements, helping to drive improvements in healthcare quality and accountability.
Stop Loss: A risk management tool used to protect healthcare providers from significant financial loss. It sets a maximum limit on the amount of loss a provider can incur in a given period, ensuring that unexpected high costs from patient care do not financially destabilize the provider. Once expenses exceed this threshold, the insurance or payer covers the additional costs. This mechanism is crucial for providers, especially in arrangements where they bear financial risk related to patient outcomes.
Test of Design: An audit procedure used to evaluate whether a control, process, or system is properly designed to achieve its intended objectives. This type of test assesses the adequacy and effectiveness of the design of controls, rather than their operational effectiveness. The goal is to ensure that the control, if operating as designed, will mitigate risks, and achieve the desired outcomes.
Test of Effectiveness: An audit procedure used to evaluate whether a control, process, or system operates as intended in practice and achieves the desired outcomes. This type of test assesses the operational effectiveness of controls, determining if they are functioning properly and consistently over time to mitigate risks and ensure compliance with policies and procedures.
Upside Risk: The potential financial benefits that Providers can gain if they perform well under value-based contracts. In an upside risk arrangement, Providers are rewarded for delivering high-quality, positive outcome, cost-effective care. These rewards typically come in the form of bonus payments or shared savings when the Provider manages to keep costs below a pre-established benchmark while meeting or exceeding quality performance metrics. Providers receive financial rewards (bonuses or shared savings) for cost savings and quality improvements.
Value: In value-based payment (VBP) models, value is generally defined by multiple stakeholders, but the concept of value in patient-centered care is primarily based on the outcomes that matter most to patients themselves.
Key Players in Defining Value:
Patients: At the core of patient-centered care, patients are key in defining value, with their preferences, experiences, and outcomes being prioritized. Value is often measured by factors such as improved quality of life, reduced symptom burden, functional improvement, and overall satisfaction with care.
Healthcare Providers: Providers define value by delivering effective and efficient care that improves health outcomes. They also ensure that care aligns with patient goals, such as managing chronic conditions or avoiding unnecessary procedures.
Payers: Health insurers and payers (like Medicare and Medicaid) define value based on cost-effectiveness and the ability to achieve better patient outcomes at lower costs. They establish reimbursement frameworks that incentivize quality over quantity.
Regulators and Policymakers: Entities like the Centers for Medicare & Medicaid Services (CMS) and health authorities often define value based on population health outcomes, reducing healthcare costs, and achieving standardized quality benchmarks.
Value Frameworks and Guidelines: Various organizations, such as the National Quality Forum (NQF) and Institute for Healthcare Improvement (IHI), develop value frameworks that help measure value through standardized quality metrics like patient-reported outcomes (PROMs), patient satisfaction, and the reduction of hospital readmissions.
In patient-centered care, value is deeply tied to patient-reported outcomes and the alignment of care delivery with what patients identify as meaningful, such as improving their ability to function in daily life, reducing pain, or achieving personal health goals
Value-Based Payment (VBP): Payment models that incentivize Providers based on the quality and efficiency of the care they deliver. a newer approach to fee-for-service that incentivizes providers to focus on quality outcomes and incentivizing providers to reach benchmarks, rather than (a) the quantity of services or (b) the quality of services rendered.
Values: The Oregon Health Authority (OHA) defines values in value-based payments as the delivery of (1) evidence-based, (2) person-centered care that contributes to (3) improved health outcomes at a reasonable cost. OHA's value-based payment (VBP) models aim to achieve the Triple Aim: better health, better care, and lower costs for Oregonians. These models prioritize flexible, patient-centered care that focuses on keeping people healthy rather than on the volume of services provided, ensuring that the care delivered is both cost-effective and high-quality.
Value-Based Payment (VBP): Payment models that incentivize Providers based on the quality and efficiency of the care they deliver. a newer approach to fee-for-service that incentivizes providers to focus on quality outcomes and incentivizing providers to reach benchmarks, rather than (a) the quantity of services or (b) the quality of services rendered.
Value-Based Payment Compact Principles: Engaging stakeholders across the healthcare system, ensuring transparency and accountability, and encouraging innovation and flexibility in payment methodologies to adapt to changing healthcare needs. This approach supports long-term sustainability in healthcare financing and delivery in Oregon.
Voidable Contract: A valid agreement that can be legally enforced but contains elements that allow one or both parties to void (cancel) it. Reasons for voidability include factors like misrepresentation, fraud, coercion, undue influence, or the contracting party's legal incapacity. The contract remains in effect unless the party with the right to void it chooses to do so. Once voided, the contract becomes unenforceable and is treated as if it never existed.
Whistleblower Protections: Legislated legal safeguards designed to protect individuals who report illegal, unethical, or fraudulent activities within an organization. These protections ensure:
Confidentiality: The identity of the whistleblower is kept confidential to prevent exposure to harm or retaliation.
Anti-Retaliation Measures: Employers or organizations cannot retaliate against whistleblowers through termination, demotion, reduced payments, or other punitive actions.
Legal Recourse: Whistleblowers are entitled to legal protection and may seek compensation or reinstatement if retaliatory actions are taken.