Design Payment Transformation
What does it mean to design payment transformation, and why is it important?
Payment transformation ensures that financial structures support—rather than undermine—health equity efforts. Traditional payment systems often prioritize efficiency and cost savings without regard to potentially creating or sustaining inequities. This can make it hard to implement and sustain equity-focused care improvements.
By intentionally designing payment mechanisms to support equity-focused care transformation, organizations can:
- Align financial incentives with health equity goals
- Ensure care teams and community partners have the resources they need, when they need them
- Reduce barriers to high-quality and equitable care for underserved populations
A well-designed payment model helps to ensure that equity-focused care delivery are effective in reducing disparities as well as financially sustainable and scalable.
When should I design the payment transformation?
Designing the payment transformation should begin in parallel with designing the care delivery transformation. It is especially important when:
- New care models are being implemented that require financial restructuring.
- Current payment structures create barriers to equitable care; and/or
- Stakeholders express concerns about financial feasibility or sustainability.
Aligning care delivery and payment models ensures that equity-driven initiatives are supported long-term with sustainability ideally shifting away from dependence on temporary funding or grants. The chart below details the steps for designing a payment transformation as well as the approximate number of meetings for which to plan, while recognizing that the estimates will vary from team to team.etails the steps for designing a payment transformation as well as the approximate number of meetings for which to plan, while recognizing that the estimates will vary from team to team.
| Key Activities | Time Estimate: ~ 12+ Hours |
|---|---|
Articulate goals for the payment model | 2-4 one-hour meetings |
Assess the current payment environment | 2-4 one-hour meetings |
| Select process and performance measures that reflect goals | 3-5 one-hour meetings |
| Select a payment model that creates the right financial incentive(s) | 2-4 one-hour meetings |
| Anticipate and plan for operational challenges and opportunities | 3-5 one-hour meetings |
How should I design payment transformation?
To advance equity through payment reform, design payment models that actively support care delivery changes aimed at reducing disparities instead of reinforcing them. Engage stakeholders early, understand their needs, and plan for both upfront costs such as building basic equity-focused infrastructure (e.g., hiring and training staff, establishing strong relationships with patients and community based organizations) in addition to ongoing costs. Select performance measures that align with equity goals, and create incentives that drive meaningful, long-term change. Above all, keep payment models flexible and responsive to data and feedback so they stay aligned with evolving equity needs of patients and front-line care teams.
First, review and discuss the Design Payment Transformation presentation as a team. Be sure to allow plenty of time for discussion and consideration of how the information applies to your own organization(s).
Second, use the Discussion Guide: Design Payment Transformation resource to further refine your team’s understanding of equity-focused payment models and how the concepts and approaches can be applied to your initiative.
Third, use the Leveraging Value-Based Payment Approaches to Promote Health Equity: Key Strategies for Health Care Players to jump-start your payment design process and strategy. It highlights general strategies and key considerations for developing an equity focused payment approach to support care transformation in coordination with provider organizations and patients.
Resources to Design Payment Transformation:
Design Payment Transformation (Presentation)
This presentation introduces the fundamentals of value-based payment (VBP) and explores how Medicaid payers can intentionally design payment models to advance health equity. It walks through key concepts, including:
- VBP payment structures;
- stakeholder roles; and
- a practical checklist for designing payment approaches that address root causes of health disparities.
It includes real-world examples from Connecticut, Delaware, Minnesota, and Washington state. Note that the information in this presentation also applies to other payment contexts (e.g., private insurance).
Discussion Guide: Design Payment Transformation
The Design Payment Transformation discussion guide provides structured reflection and questions to help teams apply payment transformation concepts to their own health equity work.
It prompts participants to examine current payment environments, identify implementation barriers, explore financial and non-financial incentives, and consider how community representatives and key organizational stakeholders can be meaningfully engaged in designing equity-focused payment approaches.
Leveraging Value-Based Payment Approaches to Promote Health Equity: Key Strategies for Health Care Payers
This resource identifies six broad connected strategies and key considerations to guide payers, including Medicaid agencies and managed care organizations, in developing an equity-focused payment approach to support care delivery transformations in collaboration with provider organizations and members. Given the complexity of developing VBP approaches, this tool is designed to highlight general strategies and key considerations, but does not provide a detailed, step-by-step guide
Designing and Implementing Integrated Care and Payment Transformation Initiatives to Advance Health Equity: Lessons Learned from Three Pioneering Health Care Provider and Health Plan Partnerships
Sometimes it is helpful to learn from the experiences of others. This report presents case studies of care and payment transformation models designed and implemented by three pairs of health care provider and health plan partnerships to advance health equity. See page 37 for important lessons that they learned about anticipating data challenges.
Developing a Payment and Spending Strategy to Advance Health Equity: Checklist for Medicaid Decision-Makers
This brief includes a checklist of eight key questions to help Medicaid agencies and other purchasers and payers develop a robust payment and spending strategy focused on advancing health equity. Each of the key questions is illustrated by state examples to show concrete steps for adopting health equity focused payment strategies.
Assessing the Process of Designing a Payment Transformation
Utilize the prompts to discuss the following topics and identify next steps.
| Measures & equity goals | Discussion Prompts |
|---|---|
| Are the process and outcome measures targeted by financial incentives critical to success and sufficient enough to track equity goals? | * What data was used to identify the equity goal. Is it still the right data? * Do current measures capture progress for the populations experiencing disparities, or only aggregate trends? * Are there measures that are no longer useful? Are there gaps that have occurred that require new measures? |
| Competing models & conflicting priorities | Discussion Prompts |
|---|---|
| Are other care or payment models competing for team attention or pulling the team toward conflicting goals? | * Are team members being asked to optimize for metrics in a different model that work against the payment model initiative? * Has the team mapped all active incentive programs staff are associated with and checked for conflicts? * Which competing demands are most disruptive? Can any of those competing demands be aligned or deprioritized? |
| Implementation costs & payment model fit | Discussion Prompts |
|---|---|
| Are there up-front or ongoing implementation costs not covered by the payment model? | * What infrastructure, staffing, or technology costs exist that the current payment model doesn’t reach? * Could additional payment types (e.g., episode-of-care, foundational payments, global budget, pay for performance, etc.) help close the gap? * Has the finance team modeled the total cost of the care transformation against expected payment flows? |
| Payment model evolution | Discussion Prompts |
|---|---|
| How might the payment model need to evolve over the short-, mid-, and long-term to sustain progress and reduce disparities? | * Is the current model designed for launch, or is there a plan for what comes next? * What payment changes would be needed as the initiative matures and the care model becomes routine? * Who has the authority to modify payment arrangements? How engaged are they in planning? |
| Non-financial motivators | Discussion Prompts |
|---|---|
| Have non-financial motivators been identified and incorporated into the care transformation or payment model? | * What motivates the individuals and organizations involved beyond financial incentives (e.g., mission, recognition, peer norms)? – Are those motivators actively built into implementation — or just assumed? – Are motivators consistent across different team members and partner organizations? |
| Incentive design & effectiveness | Discussion Prompts |
|---|---|
| Are incentives working as intended to drive behavior changes most critical to the initiative’s success? | * What data was used to identify the equity goal? Is that data still the right data? * Do current measures capture progress for the populations experiencing disparities, or only aggregate trends? *Are there measures that are no longer useful? Are there gaps that have occurred that require new measures? |
| Is there a mechanism to monitor how stakeholders are meeting incentive targets? Is there a process for when and how to adjust strategies as needed? | * Do you know whether teams are hitting targets through genuine improvement or by gaming the measure? * Is there a feedback loop between performance data and strategy adjustment? * Who is responsible for identifying and acting on unintended incentive behaviors? |
| Disparity gap integrity | Discussion Prompts |
|---|---|
| Is there a process to ensure disparity gaps aren’t narrowing because outcomes are worsening for the previously advantaged group? | * Are outcome trends tracked separately by group, not just as an aggregate gap measure? * Would your current reporting reflect a scenario where the disparities gap closed as a result of decline rather than improvement? – Who reviews those reports and how frequently? |
About the Roadmap Goal and Objective Setting Tool
This tool helps your team realize your vision to reduce and eliminate health and healthcare inequities by providing a centralized resource to:
- Establish process goals that align with each Roadmap component;
- Document task status, champions, and detailed notes;
- Monitor progress across multiple Roadmap components simultaneously; and
- Promote consistent team communication, accountability, and progress.
Use this tool to facilitate and document the development, implementation, and evaluation phases of your health equity initiative.