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Aligning Contracts With The Goals Of Value-Based Care

Aligning Contracts With The Goals Of Value-Based Care

Forbes09-07-2025
Ted Chien, President and CEO, SullivanCotter, Inc.
Health systems moving toward a value-based care delivery model need to adjust several operational factors to be successful. This includes creating pathways for a better patient experience as well as improving the ability to measure changes in patient satisfaction and cost of care. While some of this can be done by adopting new tools and technologies, changing the mindset of clinicians is equally important for supporting a successful shift.
In value-based models, compensation for physicians and advanced practice providers (APPs) are tied to care quality and patient outcomes rather than service volume. However, I find this strategy can fall apart for many health systems at the contract, compensation and incentive levels.
Incentivizing The Shift To Value-Based Care
Quality can only improve when employees are incentivized and compensated based on the right metrics. These can include goals like:
• Reduced rates of readmission
• More proactive management of chronic illness
• Improved patient access and satisfaction
• Reduced spend on care
• More effective preventative care measures
At the same time, physicians, APPs, nurses and other clinicians are all demanding more personalized employment structures. With burnout remaining a persistent problem since the pandemic and the continued pressure of labor shortages, clinicians are looking for more flexible and supportive employment arrangements combined with a positive culture fit.
Requests might include limiting travel between multiple locations, restricting after-hours and on-call responsibilities or other approaches that offer a reduced workload. Some clinicians may even opt for lower compensation—including accepting part-time or telehealth-only employment contracts—to enable a better work-life balance.
Younger generations of the clinical workforce have experienced the pressures of the job firsthand and are leaning toward employment structures that actively support well-being. In fact, 91% of residents in a recent survey placed a higher priority on work-life balance and workplace culture over compensation.
These new clinicians are looking to trade traditional production-based pay structures for greater security, higher guaranteed salaries and expanded benefits. This includes housing assistance, student loan forgiveness, child care benefits and more.
New Models For Compensation Design
Many high-level compensation design practices have remained relatively consistent year over year, despite the shift toward value-based care and the evolving perspectives of clinicians. However, the legacy "one-size-fits-all" compensation approach no longer fits. Health systems are actively looking for new compensation models that align with recruitment and retention strategies, value-based care delivery models and cost efficiencies.
In some case, especially among larger, tier-one health systems, there is now a greater variation in the number and type of plans being used. This approach supports more customized and personalized incentives aimed at specific roles rather than at groups of people or specialties.
As the market looks to align compensation more closely with how care is delivered, health systems are experimenting with varying pay approaches for clinicians based on the care delivery model currently in place. For instance, two employees with similar tenure and skills may have different pay models based on the responsibilities and volume of time they are able to commit.
Evolving Comp Models Require Different Contracts
As business models change and incentives and compensation evolve alongside them, clinical and administrative teams need to reconsider how they develop and administer employment contracts.
At a very basic level, employment contracts outline base salaries, bonuses and benefits and are usually tied to specific deliverables. If specific work hours are negotiated, these must be clearly outlined along with the corresponding effect on compensation. While this part of the contract isn't new, the language around compensation that allows for work flexibility or hybrid in-person and telehealth hours may also need to be considered.
Contracting is one key element of managing a successful program. Administering the program is equally important. Many opportunities exist to improve the contracting and administrative process. Too often, contracts do not align with how programs are administered, leading to unintentional risks—with the most important being a lack of trust and engagement among clinicians.
In the face of high turnover, retention may also be an important consideration. For example, a contract might stipulate specific employment terms or stability clauses that encourage alignment and commitment from clinicians to the mission of the enterprise.
Clarifying Incentives In Value-Based Contracts
In a value-based care model, programs like the Medicare Shared Savings Program (MSSP) encourage the formation of Accountable Care Organizations (ACOs) to coordinate care, improve outcomes and reduce spend while maintaining quality. Physicians who participate in shared savings programs receive a portion of the cost savings achieved through efficient care delivery. This element of compensation needs to be clearly defined in the employment contract.
Nursing contracts are also changing based on what motivates employees to remain in their jobs. A recent study from Lotis Blue Consulting analyzed data from approximately 1,000 clinical professionals representing more than 400 organizations to uncover the underlying psychological drivers behind decisions to stay at, consider leaving or quit a job. It found that job stability and a consistent work schedule are important factors in job satisfaction—even more so than compensation. This points to the importance of building schedule expectations into contracts to reduce uncertainties in work hours.
As health systems continue to work toward more patient outcome-centric models, it's important to remember that other aspects of the business must be redesigned to incentivize employees to shift alongside the business. By creating and administering contracts that lay out clear expectations, offer rewards and incentives based on desired outcomes and meet the contemporary expectations of clinicians, health systems will be in a much better position to retain the talent needed to achieve success.
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