Payer/Provider Contract Management 2.0 for Payers

The day-to-day management of fee-for-value (FFV) transactions is virtually 100% manual, with critical calculation of value-based payments performed by spreadsheet or custom programming in SAS or SQL. As the number and breadth of value-based relationships grow, the industry’s administrative burden worsens. Important FFV calculations and financial settlements are months delayed, lacking transparency and accuracy. The ability of payers to launch new value-centric benefit products is hobbled by inflexible contract and payment platforms.

Today, the provider contract is the center of a provider network relationship management dual closed-loop ecosystem. This ecosystem is where:

  • rates, reimbursements, networks, and terms are modeled
  • claims are examined continuously for accurate or more profitable reimbursement
  • directories and networks are continuously updated,
  • contracts and networks and providers are continuously measured and providers are continuously delighted

First, the closed loop for provider performance starts with the data being entered into the provider system of record as managed by a provider information management system. Data there is used as the demographic base for contracts; in those contracts, live terms of payment and product are managed, and terms/fees are communicated to the claims engine. Claims are then analyzed in bulk by a unified “provider cost/quality performance” set of analytics, and the results are put back into the provider systems of record, finishing that loop for use by network managers, provider relations, contract managers, directories, network adequacy analysis, and the rest of the organization.

Similarly, the closed loop for provider reimbursement starts with the fee schedule inside the contract management system that has been modeled using live claims into a prospective or retrospective value-based reimbursement engine, and communicated to the claims reimbursement engine, then the claims occur, and the results of claims analysis is put back into the contract management engine, finishing that loop to show profitability and be the system of record for settlement.

Whether using best of breed or one vendor, the silo of provider contract management for payers has been pulverized, enhanced, distributed, and made more complex. New software combinations and broader, tighter, and integrations are required to meet today’s complicated payer/provider contracting environment.

When re-architecting payer/provider contract management 2.0, look past the authoring silo to the two closed loops of performance and reimbursement. Test how provider contracting affects the provider relationship, demand transparency and seamless interfaces as data is collected, authored, executed, modeled, and re-instantiated in the next version of contracts; force this hub of data to move from its tangential home to being the hub of your provider relationship management ecosystem.

For the full findings on Contract Management for Payers, please refer to the IDC report, Payer/Provider Contract Management 2.0 for Payers (Doc #US43259117) on

Jeff Rivkin is Research Director for Payer IT Strategies with IDC Health Insights. Click here to learn more about research from IDC Health Insights. 

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