Signs of Bad Faith in Value-Based Payment Contracts for Mental and Behavioral Health Services Offered by Healthplans
A Discussion Paper
Providers should be vigilant for signs of Bad Faith when evaluating value-based contracts from Healthplans. Ensuring transparency of expectations, fair risk-sharing, realistic performance targets, adequate support, and open communication with payers are the keys to protecting providers’ interests and delivering quality care to patients. If these elements are lacking, providers should proceed with caution, consider negotiating for better terms or should seek alternative partnerships. In some cases, Providers do not have a financially responsible alternative and may find it necessary to sign a contract that is misleading, ill-defined, deceptive and misrepresents the value of the contract to purchasers, providers, taxpayers, regulators, the public and patients. By recognizing the red flags and insisting on transparent shared values, objectives, controls, tests of design and effectiveness, and key indicators of success, providers can protect themselves from being taken advantage of by bad faith contracts.
Lack of Transparency
Ambiguous or Misleading Contract Terms: Value-based contracts which are vague or ambiguous about key terms, such as performance metrics, reimbursement rates, and penalties, are a red flag. For example, if a contract mentions that providers will be reimbursed based on "quality outcomes" without clearly defining what “quality” and “outcomes” are or how those will be measured, the contract may be designed to give the health plan flexibility to manipulate the terms to their own benefit later on. Providers should insist on clear definitions and criteria for performance metrics to ensure they understand exactly what is required and how it will be measured.
Undisclosed Algorithms and Calculations: If the health plan is not transparent about how they calculate performance metrics, shared savings, risk adjustments or incentives for their value-based contract, that is a sign the Healthplan may be hiding the ways they plan to benefit financially. For instance, a health plan might offer a shared savings program but not disclose the baseline costs against which savings are measured, making it impossible for providers to verify if they are being fairly compensated. Providers should request detailed explanations and calculations to understand how their performance will be evaluated and compensated.
Imbalanced Risk-Sharing
Skewed Risk Distribution: A value-based contract that disproportionately places financial risk on providers while offering minimal upside benefits is problematic. For example, a contract might require providers to absorb most of the costs for patients who fail to meet health targets due to factors outside the providers' control, such as socioeconomic conditions, without providing adequate compensation for such added risks. Providers should negotiate for balanced risk-sharing arrangements that can account for factors beyond their control and ensure fair compensation.
Unrealistic Performance Targets
Non-Sensible or Unattainable Goals: Value-based contracts that set performance targets which are difficult or impossible to achieve given the providers’ patient population or resources indicate that a health plan may be setting providers up for failure. Performance targets are flawed if they don’t account for social determinants of health and other external factors affecting patient outcomes, such as the number of people seeking access who would create an unacceptable case-mix severity. For example, setting a target to reduce hospital readmissions by 50% within a year without consideration of the existing health conditions and socioeconomic challenges of a patient population is unrealistic. Providers should ensure that targets are attainable and reflect the realities of their patient population and required work to achieve those goals.
Lack of Flexibility: If a value-based payment contract does not allow for adjustments based on changing circumstances or new information, it indicates the health plan is more interested in securing financial benefits than genuinely focused on improving care. For instance, if new treatment guidelines are issued or there is an outbreak of some new illness, a rigid contract might continue to hold providers to outdated, unattainable targets. Providers should enter value-based contracts that allow flexibility and adjustments in response to new developments affecting population health.
Inadequate Support and Resources
Insufficient Support: Health plans offering value-based contracts in good faith should provide adequate resources and support to help providers meet performance targets. A lack of support, such as insufficient data sharing, training, or technical assistance, suggests bad faith intentions. For example, a health plan might promise to provide data analytics tools or reports to help track patient progress but fail to deliver, leaving providers without necessary information. Providers should ensure that Healthplans commit to providing the necessary support and resources to help them succeed.
Delayed Payments: Consistent delays in reimbursement or shared savings payments might be a tactic to strain providers financially, forcing them to either comply with unfavorable terms or withdraw from a value-based contract. For example, a health plan might take months to reimburse providers for services rendered, causing cash flow problems and making it difficult for the practice to operate efficiently. Providers should insist on clear payment schedules and defined penalties for late payments to protect their financial stability.
Manipulative Practices
Selective Risk Adjustment: Health plans might use risk adjustment mechanisms in ways that unfairly shift financial risk to providers. If adjustments do not accurately reflect the complexity of the patient population, that can result in providers being unfairly penalized. For instance, a health plan might adjust risk scores to downplay the severity of patient conditions, making it appear providers are underperforming when they are really dealing with high-risk patients. Providers should ensure that risk adjustment methods in a value-based contract are fair and transparent.
Excessive Administrative Burden: Imposing excessive administrative burdens on providers, such as requiring extensive treatment documentation and/or frequent reporting, make it difficult for providers to comply with value-based contract terms, increasing the likelihood of penalties. For example, a contract might require detailed monthly reports on a wide range of metrics, consuming significant time and resources that would otherwise be spent on patient care. Providers should seek to minimize unnecessary administrative burdens and to focus on meaningful metrics.
Bait and Switch: Creating a contract that seemingly has a low downside risk to entice providers into signing. However the contract is part of scheme by the Healthplan to retain contracts, improve their brand, and gain greater market share. The nature of contract is intended to benefit the Healthplan financially. Once providers are invested in the contract and have committed resources, the contact is changed to reflect requirements that were previously not disclosed. The contract is offered as “take-it-or-leave” measurement and value-based payment contract which had a hidden upside risk (i.e., benefit) to the Healthplan.
Poor Communication and Engagement
Unwillingness to Negotiate: A health plan that is unwilling to negotiate or discuss terms of a value-based contract may be acting in bad faith. Open, honest negotiation is essential for establishing fair agreements. For example, if a health plan refuses to consider provider feedback on unrealistic performance targets or penalties, it suggests the health plan is more interested in their own financial gain than in collaborative partnership. Providers should seek value-based contracts with health plans willing to engage in good faith negotiation and consider providers’ perspectives.
Lack of Engagement: If a health plan does not engage in regular communication or provide timely responses to provider inquiries, that indicates a lack of commitment to genuine partnership. For instance, if providers have questions about a value-based contract’s terms or they need assistance with meeting performance targets and the health plan is unresponsive, that shows disregard for the providers’ needs and challenges. Providers should ensure there will be clear channels of communication and regular engagement with the health plan.
Failure to Fully Support the Quadruple Aim
Improving Work Life of Healthcare Providers: The contract does not enhance provider work-life balance undermines supportive work environments, increases administrative burdens, offers no professional development opportunities, or ignores factors that lead to burnout. The aim should be to acknowledge that provider well-being is essential for delivering high-quality patient care and sustaining the healthcare system.
Transparent Shared Values, Objectives, Controls, Tests of Design and Effectiveness, and Key Indicators of Success
Transparent Shared Values and Objectives: A good faith value-based contract should have clearly stated values and objectives shared by the health plan and providers. This means both parties agree on primary goals, such as improving patient outcomes and reducing healthcare costs. For example, a contract should explicitly state that both parties are committed to evidence-based care, patient-centered practices, and increased quality and improved health at reasonable cost. Transparency in these shared values, objectives, controls and key indicators of success ensures that both parties are aligned in their efforts and that there is no hidden agenda.
Controls and Tests of Design and Effectiveness: Effective contracts include mechanisms to monitor and evaluate a value-based contract's design and implementation. That involves setting up controls and regularly testing the effectiveness of the contract terms. Regular audits and performance reviews help ensure that both parties are adhering to the contract and that intended outcomes are being pursued or achieved. For example, quarterly performance reviews can assess whether providers are meeting targets and whether the health plan is providing the necessary support.
Key Indicators of Success: Clearly defined key performance indicators (KPIs) are essential for measuring the success of a value-based contract. These indicators should can include screening for symptoms and functional problems, progress, therapist-patient alliance, and patient satisfaction. For instance, KPIs might include patient satisfaction scores, readmission rates, or cost savings. Transparent reporting of these indicators helps build trust and ensures that both parties are working toward the same goals. For example, a contract might include a KPI to improve patient satisfaction scores by 10% over a year, with regular progress reports shared between the Healthplan and providers.
By incorporating transparent shared values, objectives, controls, tests of design and effectiveness, and key indicators of success, Healthplans and providers can create equitable and effective value-based contracts. Those elements demonstrate that both parties are committed to the same goals and that there are clear mechanisms in place to monitor and evaluate progress.
DISCLAIMER and PURPOSE: This discussion document is intended for training, education, and 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.
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