The Continued Shift to Value Based Contracting

A dominant trend over the past several years has been the push by payers and providers towards high quality, lower cost care.

Understanding this shift and its evolution is crucially important in understanding what influences the decision making of these payers and providers. They also help to understand the formation of various entities, such as accountable care organizations and integrated delivery networks, that are specifically designed to help drive and ultimately deliver value based care.

Accountable Care Organizations

Accountable Care Organizations (ACOs) largely came into existence as a reaction to the passage of The Affordable Care Act and the increased incentives available for offering high quality, low cost care. With the desire to keep patients out of hospitals, the need to control patient populations and offer holistic care become part of their business model.

ACOs are formed by payers, providers or both and hold themselves to meet certain quality metrics while managing costs. The level of risk varies btu ultimately, there is skin in the game and not meetings these metrics can be highly damaging to an ACOs bottom line.

Integrated Delivery Networks

Integrated Delivery Networks (IDNs) are sets of physicians working together with hospitals to form an entire healthcare ecosystem. In this form of healthcare delivery, a patient can receive comprehensive, top-to-bottom care from routine checkups to surgery without leaving a single brand of healthcare provider.

Pharmacy Benefit Managers and Their Role in Value Based Contracting

PBMs traditionally have not been receptive to value-based contracting. But the integration of PBM and health plans, with a greater focus on total cost of care and visibility of data, should make integrated PBMs more receptive to engaging in value-based contracts with pharma. That said, PBMs may still need to overcome implementational barriers such as outcomes data-gathering and analysis.

What Pharma Needs to Know About Value Based Contracting

As US healthcare continues to evolve, it’s more important than ever to stay on top of value based contracting and the way it has shifted the landscape of healthcare delivery.

Mainly, it is important to gauge:

• The specific therapeutic areas were value-based contracts are most concentrated.
• The hurdles that stand in the way of value-based agreements.
• How pharmaceutical manufacturers are prepare for success.
• Where the best opportunities for strategic growth exist?

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