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3 Tips for Negotiating Value-Based Contracts

Analysis  |  By Jay Asser  
   November 29, 2023

Advocate Health's chief medical officer shares what mindset to have in negotiations with payers.

Once you, as a provider, have made the decision to break free from the fee-for-service model to embrace value-based care, the challenge ahead is ensuring a contract that works for you.

Putting that contract in place requires a deft understanding of both what your organization needs and what the payer you're negotiating with requires. It can be delicate dance, but with the right approach and goals in mind, you can establish a sustainable value-based care model that offers better outcomes for you and your patients, says Advocate Health chief medical officer Gary Stuck.

Stuck recently joined the HealthLeaders Podcast and offered his advice to providers hoping to negotiate a value-based contract with a payer.

Here are three tips Stuck mentions to follow in negotiations:

Work together

There's often an adversarial relationship between payers and providers that can pull the parties in opposite directions, but value-based contracts will likely only succeed if both sides are getting what they want.

"The negotiation has to be a win-win because the next year it's not going to be sustainable if both parties don't succeed," Stuck says. "So it has to be a winner for the payer and a winner for the provider. Keeping that in mind, putting that on the table, being transparent about that, and then monitoring that, that's going to create year-over-year success to build on."


Secondly, evaluate your organization and know its limits. The contract has to be the right fit, not just aspirational.

"The other piece for a provider to look at is what current capabilities will drive success," Stuck says. "Is there something built into the incentive model that you're not going to be able to build quickly, or that you already have, in year one or year two? If so, you're going to be in trouble."


Speaking of aspirations, don't try to do everything in one contract. By narrowing your attention on key areas, you will have an opportunity to build off early success.

"Look within your own capabilities or what you could build in an efficient fashion to drive success and then just pick one, two, or three areas of focus because you can't change everything in your health system, or in your network, in a year," Stuck says.

An example Stuck highlights is Advocate Health focusing on reducing unnecessary skilled nursing facility admissions to cut down on long or unnecessary stiff stays, which he says patients and families didn't want.

"Just pick one or two of those areas of focus early on and do them really well, go deep, invest in those areas, knock it out, and have an early win."

Jay Asser is the contributing editor for strategy at HealthLeaders. 

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