Value-based purchasing’s increasing role in managed care contracts
A Guidehouse analysis explores how Medicaid managed care RFPs have changed over the last four years—and what MCO leaders need to know.
Summary
- States are more narrowly defining value-based purchasing (VBP) in managed care RFPs, with clearer targets and accountability.
- States are increasingly adopting the Health Care Payment Learning & Action Network (LAN) framework for evaluating VBP maturity.
- VBP capability is becoming a core competency for MCOs and a major factor in bid competitiveness.
Once an emerging concept in Medicaid managed care, value-based purchasing (VBP) is becoming a core competency for managed care organizations (MCOs).
In 2022, a Guidehouse analysis showed that many state Medicaid agencies encouraged MCOs to begin a shift toward value-based arrangements but largely left implementation details to plans. Today, that flexibility is narrowing. Our latest analysis of Medicaid managed care RFPs, contracts, and other documents shows that more states are requiring MCOs to take on financial risk tied to cost and quality.
Four years after our initial analysis, more state RFPs include measurable targets for how much care should be under value-based arrangements and expectations for movement into more advanced payment models. Many states have chosen to align their requirements with the Health Care Payment Learning & Action Network (LAN) framework, which provides a common structure for categorizing payment models, from fee-for-service arrangements to those involving shared savings, downside risk, and population-based payments.
Many states are requiring MCOs to demonstrate how their provider contracts map to specific LAN categories, how they will advance over time, and how performance will be measured. In our analysis, some states were highly prescriptive, establishing minimum thresholds, glidepaths, and timelines for adoption. Others allow more flexibility but still require alignment with value-based goals and provider incentives. Even less prescriptive states are signaling that plans must be prepared to support provider participation, respond to demand for VBP arrangements, and share accountability for outcomes.
This growing specificity reflects broader state priorities. In many states, VBP requirements are being used to advance key public health priorities across maternal and child health, behavioral health, primary care, chronic disease management, and health equity. Payment reform is no longer separate from these priorities—it’s increasingly the mechanism through which states expect plans and providers to deliver measurable improvements in outcomes.
For MCO leaders, the implications are significant, as VBP capability is now a critical factor in bid competitiveness. Plans must demonstrate that they can manage a portfolio of provider arrangements, assess provider readiness for risk, and track performance at the contract level. This requires robust infrastructure, including data and analytics, attribution models, financial reconciliation processes, and governance structures that support VBP at scale.
Providers will also feel increasing pressure. As states push MCOs to meet defined VBP targets, providers are being asked to move beyond fee-for-service and participate in arrangements tied to quality and total cost of care. Organizations with strong care management capabilities, data infrastructure, and sufficient scale will be better-positioned to succeed, while smaller providers may need to pursue partnerships or phased approaches to build readiness.
For state Medicaid agencies, the shift creates new oversight demands. More explicit requirements can accelerate adoption, but they also require stronger monitoring and validation. States will need to confirm that reported arrangements meaningfully shift payment toward value, improve outcomes, and don’t outpace provider readiness—particularly in markets with limited capacity.
Guidehouse’s full report includes a comprehensive state-by-state analysis of requirements across nine key states and goes into further detail about what this shift means for MCOs, providers, and state Medicaid agencies.
