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Valued-Based Payments Leading to Value-Based Supplier Pricing?

by John Moore lll | December 23, 2014

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Healthcare organizations (HCOs) are undergoing strategic shifts as they move from volume to value-based reimbursement models. Not only do they have to think about different metrics on how they track their own revenue and finances but also on how they negotiate prices with their various suppliers including the possibility of some value-based pricing arrangements from health IT vendors.

While HCOs are undertaking value-based pricing agreements with other HCO suppliers including pharma/biotech firms and medical device manufacturers, it is still a foreign concept to HCOs and health IT vendors with the exception of one vendor we spoke to. Instead, HCOs are taking a ‘staged deployment’ approach and instead of engaging in actual value-based pricing agreements are limiting their upfront financial exposure by enrolling select patient populations and often deploying a minimal set of solutions from a health IT vendor. If the HCO is achieving acceptable results, they will look to add additional lives, payer types, and deploy additional IT solutions/modules over time.

Public payers who are looking to add ‘accountable care’ elements and expand beyond traditional payer-led population health efforts are not looking to enter into value-based pricing agreements either for the solutions themselves. Instead, public payers are also looking to limit their initial financial exposure by demonstrating a ‘proof of concept’ with improved outcomes upfront over a certain trial period. If the outcomes are acceptable, the public payer will increase both the population covered under the arrangement and expanded additional solution deployment.  

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