The State of Payer, CBO Social Determinants of Health Contracting

September 22, 2021 - Social determinants of health contracting with community-based organizations remains a complex and challenging task for payers as the demand for answers grows more pressing.

As the industry’s awareness of social determinants of health expands, so does the need for evidence-based solutions. Often, these solutions require health insurers and health systems to contract with community-based organizations that can address the issues more closely.

The share of community-based organizations entering into contracts increased from 2017 to 2018, according to a survey from Miami University’s Scripps Gerontology Center. The survey focused specifically on community-based organizations that served seniors, since the Center conducted the survey on behalf of the Aging and Disability Business Institute.

Of the more than 700 respondents, 41.3 percent currently had one or more contracts and an additional 16.8 percent were not in contracts but were pursuing one. Most organizations contracted with Medicaid managed care organizations (41.6 percent) and state Medicaid programs (28.5 percent). Around 18 percent contracted with a commercial payer.

Despite the rise in contracts between community-based organizations and payers or other healthcare entities, the efficacy of these contracts and contracting processes remains unclear.

READ MORE: Tracking Social Determinants of Health Data in Medicare Advantage

Better Medicare Alliance and NORC at the University of Chicago investigated how Medicare Advantage plans were handling social determinants of health overall, including how they managed contracts with community-based organizations. 

The findings of their report, which drew on literature reviews and interviews with healthcare professionals and policymakers, highlighted the nascency of social determinants of health solutions and data.

In an interview with HealthPayerIntelligence, Caroline Pearson, senior vice president of health care at NORC at the University of Chicago, emphasized that the industry’s understanding of effective payment models and strategies for social determinants of health management is riddled with unknowns. 

These knowledge gaps could amplify the challenges that health plans face in establishing social determinants of health contracts with community-based organizations.

Challenges of social determinants of health contracting

The challenges of social determinants of health contracting begin even before the partners forge a contract.

READ MORE: Payer Gives Community-Based Social Determinants of Health Support

Social determinants of health barriers are, by nature, localized and require a targeted response. As a result, it is a step in the right direction for payers to turn to organizations that have established trust with the community and that have an intimate understanding of the barriers that these populations face.

However, knowing which community-based organizations have the capacity to meet the needs of a health plan’s membership is challenging, Pearson indicated. Small community-based organizations may lack the infrastructure to serve all of a health plan’s members. 

The coronavirus pandemic only amplified infrastructural deficiencies for community-based organizations.

In October 2020, 44 percent of the more than 1,000 community-based organization respondents to a National Council on Aging survey explained that their revenue losses greatly or quite significantly reduced their ability to serve seniors. Additionally, 42 percent of respondents said that staffing shortages had produced the same impact.

These factors drive many payers to rely on larger, national organizations for addressing social determinants of health needs, such as Meals on Wheels to address food insecurity or Lyft to tackle transportation barriers.

READ MORE: ARP Boosted Funding for Home, Community-Based Services, SDOH

After payers have identified the community-based organizations with which they want to contract, they face a host of additional challenges in the contracting process itself.

Community-based organizations often are not designed to strike deals with national health insurers. They are typically small nonprofits that do not have a sophisticated legal department, Pearson said, and they tend to lack experience in contracting.

The capacity problems that may restrict a community-based organization’s ability to handle the payer’s membership may also mean that the organization lacks the staffing to forge contracts with payers—particularly complex, value-based contracts. 

Payers prefer value-based contracts with community-based organizations so that they can track the outcomes of social determinants of health efforts. However, these types of contracts impose an administrative burden on community partners.

As a result, Pearson said that many of the social determinants of health contracts that she and her team at NORC analyzed were based on fee-for-service models.

The community-based organizations are not the only partners that face social determinants of health contracting challenges. Payers also encounter certain limitations.

Primarily, the payer industry still lacks strong evidence to guide expectations about the share of individuals that may require certain social determinants of health services. This number may be essential when establishing population-based payment models with partners.

“We are in such early days of focusing on social determinants of health, so we do not have good data on what people need and how many people need those services. We do not have good past experience on how many people will engage in different models,” Pearson explained.

Finding community-based organizations with data capacity

Despite these challenges and uncertainties, Pearson identified a couple of considerations that can guide payers as they seek to contract with community-based organizations.

Data is crucial for any value-based care contract, particularly for a value-based contract with a community-based organization in which the goal is addressing social determinants of health.

An organization’s ability to gather and exchange data could be a key factor in assessing whether the community-based organization will be a strong partner.

“The data requirements to deliver supplemental benefits to a health plan population are pretty high: you need some way to identify those members, you need to be able to receive the referrals from the health plan, and then, increasingly, those health plans really want a feedback loop where you can give them information about the result,” Pearson said.

“That sort of evaluation and follow-up requires a level of data sophistication that not all community-based organizations have. So I do think that is a minimum necessary piece for health plans when contracting.”

However, even with organizations that do not have that capacity, health plans can forge contracts that support them in capacity-building.

Referral platforms and vendors can improve community-based organizations’ technological infrastructure and their ability to meet a contract’s data collection and exchange requirements. These platforms can also help payers identify and organize community-based organizations that fit members’ needs and have become popular among Medicaid programs.

For example, Blue Cross and Blue Shield of Kansas City (Blue KC) worked with a vendor to create a social determinants of health referral network during the first wave of the coronavirus pandemic.

The referral network used an electronic platform to organize social determinants of health screening data and help stakeholders connect members with community-based organizations that could meet their needs. It also helped isolate redundancies in local organizations’ services and offered non-profits quantifiable data that could be useful for grant applications.

Identifying potential benefits of capitated payment models

Although many community-based organizations are resistant to value-based contracts, payers may be able to find local partners that are interested in joining capitated payment models.

“A community-based organization’s ability to feel confident about those capitated models is again, variable based on their capacity,” Pearson noted. “In some ways, it gives them a predictable revenue stream that they can hire against and plan against.” 

A health plan can anticipate the share of its membership that may need a community-based organization’s assistance. In a capitated payment model, the plan can then offer a flat rate based on the projected number of members that will accept a referral to the organization.

This model provides financial stability for both payers and community-based organizations, something that payers can emphasize when pursuing a capitated model with a potential partner.

Still, the capitated payment model is not immune to the issues associated with value-based contracts.

“A capitated model also requires community-based organizations to be able to manage a consistent budget against variable costs, which is something that requires scale,” Pearson added, harkening back to the challenge of an organization’s limited capacity.

Pursuing policies that simplify contracting processes

Better Medicare Alliance and NORC emphasized that certain policy changes could support social determinants of health contracting between payers and community-based organizations.

The report urged the Centers for Medicare and Medicaid Innovation (CMMI) to offer flexible innovation models that could lay the groundwork for better social determinants of health contracting.

CMMI could issue a toolkit that included standard contracting language, Pearson suggested. Community-based organizations that have limited experience in payer contracting could use that toolkit to better communicate with payer partners.

Pearson noted that this idea might find some resistance in the payer industry, which may not approve of standardizing contracts. However, such an approach would allow community-based organizations to have more equal footing in negotiations around matters such as per member per month payment and data quantity and formatting expectations.

Apart from direct contracting support, community-based organizations could receive more reimbursement for non-medical social needs, which could help them expand their capacity to address social determinants of health for a broader spread of patients.

Medicaid waivers have demonstrated how health plans can help fund capacity-building through their social determinants of health contracts. Along with outlining service expectations, some Medicaid programs provide additional funding that the organization can use to enhance data and technology resources, staff training, and community engagement efforts.

The future of social determinants of health contracting

Despite all of these challenges, Pearson had a positive outlook about the future of social determinants of health contracting overall as the industry gathers more evidence on the subject.

Moving forward, building up community-based organizations’ capacities will be critical and social determinants of health contracting may play a role in that process. 

“The larger organizations have a lot of more operational bandwidth but may have less local customization, and the thing that we have learned over years of doing care management and case management is that the success of these programs is really dependent on the connection between the beneficiary and the individual trying to support them on the other side,” Pearson said.

“So, that's why so much of this is local, grassroots, and on the ground. But then, it is building that infrastructure scale at a national level that we need to continue to work on.”

The industry also may need to accept more standardization of the contracting process, Pearson noted.

Additionally, the healthcare industry will need to develop better ways to evaluate whether a social determinant of health intervention is successful.

“We know that having unmet social needs is bad for your health, but we don't actually know if the things that we are doing are fully closing those gaps and actually making people healthier,” Pearson explained. “So we need to start being very disciplined about collecting data, conducting evaluations, and then continuing to improve and evolve these programs as we, inevitably, will have to do.”