In the human services field, major shifts are underway in how government agencies and insurance payers are contracting with service providers. One of these shifts is known as “Selective Contracting,” and this new model represents big changes in the way agencies will secure funding and deliver care.
If you’re not already familiar with Selective Contracting, it reflects just one of the ways funders are becoming more discerning about which organizations will be awarded contracts for providing services. Under this model, funders establish minimum performance standards and quality thresholds providers must meet to be eligible for contracts and funding.
How Selective Contracting Works
Selective Contracting represents a significant shift from traditional models where any qualified agencies simply agreed to the government’s or insurance companies’ terms and reimbursement rates. Under Selective Contracting, payers use quality metrics, demonstrated outcomes, cost effectiveness, and other measures to systematically narrow their contracting networks.
For example, a state Medicaid agency may decide to only award their outpatient mental health contracts to providers that can demonstrate the ability to deliver successful treatment completions, client satisfaction scores, health outcome measures, and/or penetration rates in underserved areas. Agencies that can’t provide proof on these measures get excluded from the network and lose access to those funding streams.
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Why Payers Are Moving Toward Selective Contracting
There are a variety of reasons for the shift to Selective Contracting. Here are a few of the primary drivers of the move in that direction.
- Controlling Costs: Contracting with only high-performing providers that meet defined quality standards, payers limit their provider panel sizes. Having fewer contracted agencies allows payers to better manage utilization and steer clients to the most cost effective and highest-value providers.
- Prioritizing Quality Assurance: Selective Contracting allows payers to filter out lower-performing providers that don’t meet defined quality benchmarks. Payers require the use of evidence-based clinical models – those proven to achieve good outcomes in a cost-effective manner – rather than reimbursing for unproven or inefficient practices.
- Incentivizing Efficiency: Under Selective Contracting, agencies’ contract renewals are tied to performance metrics such as cost per episode of care or readmission rates. The need to meet these metrics provides greater incentives to optimize efficiency, reduce waste/redundancy, and provide appropriate levels of care to control costs .
- Rewarding Integrated Care Coordination: Coordinating care across multiple providers is incentivized under selective contracts, reducing redundant services, preventing disjointed care plans, and managing overall utilization more effectively. Providers are rewarded for practicing an integrated, whole-person care approach.
- Enhancing Accountability: In order to meet the quality standards necessary to earn Selective Contracts, agencies must adhere to comprehensive data reporting and quality metrics requirements. The ability to effectively measure their performance and costs provides concrete evidence to hold them accountable for areas in need of improvement.
Speaking of reporting and metrics, becoming a data-driven organization is becoming non-negotiable for Human Services Agencies. It’s simply not possible to meet the requirements of Selective Contracts without the systems and technology in place to reliably record and report client data.
The Implications for Human Services Agencies
For Human Services Agencies, the impact of the shift to Selective Contracting cannot be understated. Agencies that cannot demonstrate high performance, outcomes tracking capabilities, and use of evidence-based practices with reliable and valid reporting may find themselves locked out of key funding sources. This will limit the revenue those agencies can bring in – or even drive them out of the market completely.
To meet payer’s Selective Contracting criteria, agencies need to make significant investments in technology (e.g., Electronic Health Records), workflows, quality assurance processes, staff training, and more. And they need to do it fast. These changes will soon be the predominant – if not the only – way to win contracts for providing certain services. Simply being a legacy provider will not be enough.
While raising quality standards is always a desirable outcome, many smaller providers may have more difficulty reorganizing how they operate to adhere to Selective Contracting requirements. With fewer human, financial, and other resources, investing in the processes and tools they need can be far more daunting than it is for larger agencies. The possibility that smaller frontline organizations, especially those which serve marginalized communities, will get squeezed out of the market is a concern in the industry.
The Critical Element for Preparing for Selective Contracting: EHR
As we alluded to above, it’s imperative for Human Services Agencies to invest in the technology that will allow them to record and report reliable data and become data-driven organizations. Without this technology and reporting, agencies will be unable to earn Selective Contracts. No matter how well they deliver the services they provide, if they can’t prove it with data, they won’t qualify for the contracts.
Therefore, the key technological component to demonstrate the value delivered to the people an agency serves is a fully implemented Electronic Health Record (EHR).
Getting Started with an EHR
As first steps, an agency must both select EHR software that will be most effective for their needs and establish documented, standardized workflows across the agency. Documented workflows inform how EHR forms will be set up to capture client data in a uniform manner.
Consistently entering data into the system ensures the accuracy and reliability of the data that’s pulled out of the system for reporting purposes. Selecting the software and documenting workflows go hand in hand because the EHR an agency chooses must have reporting capabilities aligned with their reporting and compliance needs. The right EHR may have built-in reporting options and/or the capability to integrate with a Business Intelligence platform. The key is ensuring the agency’s technology can conglomerate data across sources, including the EHR, so they can fulfill the requirements for Selective Contracting.
Managing Change During EHR Implementation
Although it’s mission critical for Selective Contracting purposes, adopting an EHR is more complex than introducing any other type of new software to a Human Services Agency. Once an agency implements an EHR, it becomes their Enterprise Resource Planning (ERP) tool – the critical platform they will use to manage and integrate their entire organization. Consequently, the shift to the EHR requires changes that touch each employee and every process across the agency. Although moving from paper to electronic records typically makes everyone’s jobs easier in the end, steering the whole agency in a new direction can be a daunting task for a variety of reasons.
Any agency, regardless of size, can benefit from partnering with consultants who are experts in Organizational Change Management (OCM) and Electronic Health Record implementation. Also, these professionals help agencies strategically leverage their resources and develop timelines that work for each organization, as they get up to speed.
In addition, reputable third-party firms provide dedicated Change Management resources and proven methodologies to drive EHR adoption. They achieve this by working closely with end-users, redesigning processes, providing training, and overcoming resistance.
Finally, consultants with expertise in both OCM and EHR adoption provide best practice guidance on optimizing EHR configuration. This involves everything from setting up templates and workflows to creating content libraries to drive higher EHR efficiencies and designing reports to align with Selective Contracting requirements.
That is, they don’t just help with the initial EHR implementation, but they also help agencies establish how to leverage the software to demonstrate their value. EHR consultants can provide long-term guidance for optimizing use, mastering reporting, and/or interpreting new functionality over time. EHR software vendors often lack these change capabilities and typically cycle off after the initial EHR deployment.
The Bottom Line
Whether you’re in favor of it or not, Selective Contracting represents a major paradigm shift that will soon represent how contracts are awarded. Human services agencies need to strategically prepare now to remain viable and competitive under this new performance-based contracting landscape. Stay tuned for more on the operational impacts of Selective Contracting and other shifts in how agencies are funded (e.g., Value-Based Purchasing) and how agencies can prepare themselves to succeed in this new Human Services landscape.
