PHTI: How Purchasers Can Implement Performance-Based Contracting with Digital Health Solutions – MedCity News

PHTI released a playbook guiding purchasers on how to implement performance-based contracts for digital health solutions, focusing on payment models, outcomes and accountability.
Share Options
Share a link to this article
Purchasers are increasingly seeking performance-based contracts — in which payment is tied to outcomes — with digital health solutions. However, implementing these contracts is difficult, especially for employers who have limited resources.
That’s why the Peterson Health Technology Institute (PHTI) released a playbook last week for purchasers on how to effectively execute performance-based contracts. The playbook was created in collaboration with health plans, vendors, brokers, consultants, data warehouses and other stakeholders.
“We have consistently heard from both health plans and employers that the process of negotiating performance-based contracts remains very arduous. … We would really like to see purchasers coming to the table as a customer with high standards, we want to raise the bar on purchasing,” said Caroline Pearson, executive director of PHTI, in an interview. “Every payer should be holding their partners accountable for outcomes that really matter.” 
In a landscape where complexity has long been the norm, the power of one lies not just in unification, but in intelligence and automation.
In addition to sharing best practices for implementing these contracts, the playbook provides toolkits on how to create a performance-based contract for digital diabetes management, virtual musculoskeletal solutions, digital hypertension management and virtual solutions for depression and anxiety.
Here are five things purchasers should know from the report:
1. Purchasers have a wide range of goals when they adopt digital health solutions, including improving member satisfaction, expanding access, improving outcomes and reducing costs. Performance-based contracts should tie payments to these goals while protecting purchasers from risk — particularly when a solution is new, unproven or depends on long-term member engagement. This approach makes it easier for purchasers to confidently invest in new solutions.
2. Purchasers vary widely in their ability to design and manage effective performance-based contracts, and most are still early in adoption. Early performance-based contracts have been mainly experimental and constrained by limited data and resources, leading to challenges around measuring outcomes and enforcing accountability. Larger organizations usually have more leverage in building performance-based contracts as they typically have in-house actuaries and dedicated benefits teams, while smaller organizations don’t usually have the needed resources and have to rely on consultants.
In a recent interview, Esperion president and CEO, Sheldon Koenig talks about the reality of statin intolerance and his company’s expansion into new diseases
“To broaden the use of PBCs, vendors and purchasers will need to align on standard definitions and approaches, while streamlining the performance adjudication process,” the report said.
3. Purchasers are moving past experimentation and toward consistent, data-driven performance-based contracts. Leading organizations are testing vendors through structured pilots, using scorecards to guide renewals and verifying that digital tools actually expand access before scaling. Many are also investing in centralized data infrastructure and audit rights to verify results and improve contracts over time.
4. Many performance-based contracts include performance guarantees, such as clawback arrangements that require purchasers to pay vendors upfront and later recover a portion of those payments if agreed-upon performance targets are not met. However, many purchasers have been disappointed in this model, as they often lead to disputes with vendors and don’t provide great accountability.
Instead, PHTI recommends a “two-stream payment model: an engagement fee combined with a performance-based component that is withheld until performance has been validated. This approach is designed to balance the vendor’s need for payment to support ongoing engagement activities with the purchaser’s desire to reward meaningful outcomes.”
5. According to PHTI, successful performance-based contracts require agreement on three core areas: what the payment model is going to be, how you’re going to measure outcomes, and what the operational components are for the contract. For the latter, this includes deciding who is responsible for conducting outreach to members and what data the payer and vendor are going to share back and forth. 
“Many of these decisions come with trade-offs, such as sacrificing specificity to reduce administrative burden or prioritizing predictability at the cost of vendor accountability,” PHTI states.
Photo: atibodyphoto, Getty Images
We will never sell or share your information without your consent. See our privacy policy.
Alan Murray on improving access for medical transportation.
How can AI benefit and improve patient outcome in the emergency department? Watch the latest episode to find out.
Greenway Health blends smart technology with human expertise to elevate revenue cycle.
We will never sell or share your information without your consent. See our privacy policy.
© 2026 Breaking Media, Inc. All rights reserved. Registration or use of this site constitutes acceptance of our Terms of Service and Privacy Policy.

source