Hospital Impact—How to pick the right provider partner for a value-based care arrangement

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Value-based care partnerships between payers and providers can ultimately serve as the basis for a new business model that is sustainable in the increasingly competitive and cost-conscious healthcare environment.
Eric R. Abrams
Eric R. Abrams

As the healthcare industry continues to move toward value-based delivery and payment models, payers must rethink the way they engage with provider partners. Building new payer-provider collaborations will be critical to success in a value-based healthcare world where both parties share financial risk for achieving health outcomes.

Under such models, payers and providers have incentives aligned around providing the right care to the right patient at the right time, ultimately achieving better outcomes at lower cost. Developing such partnerships can ultimately serve as the basis for a new business model that is sustainable in the increasingly competitive and cost-conscious healthcare environment.

Choose partners wisely

Getting to the point where payers and providers are routinely working together in a true collaboration is going to require more than just new contracting methodology and data sharing—it’s going to require a critical cultural shift. Payers will no longer be able to view providers as “a necessary evil,” but rather as critical partners and even customers of the plan. Providers must recognize the value that payer capabilities, such as utilization and care management, have to offer in getting their patients the best, most cost-efficient treatment.

Christen M. Buseman 

While this necessary cultural shift will ultimately improve relationships with all in-network providers, payer organizations must carefully select the provider partners with which they want to share risk. Just as payers are evolving and adapting new capabilities in the changing healthcare landscape, provider organizations of all types and sizes are at varying stages of preparedness to assume clinical and financial risk for their patients.

To succeed while assuming clinical and financial risk, providers must be able to develop and implement predictive treatment pathways, create accountability for outcomes and be willing to accept payment outside the typical adjudication system. They also need infrastructure and cultural elements to effectively manage variation in cost and quality while still delivering a positive patient experience.

Today, many delivery organizations simply aren’t fully prepared to take on this type of risk. Most providers that ultimately fail to meet value-based outcome and cost metrics do so because they were not set up for success from the start. Therefore, an essential first step to developing a successful value-based payment agreement is to choose the right provider partners.

A framework for success

Payers that are serious about establishing value-based payment agreements must develop a robust process for conducting provider readiness assessments. This will help ensure that they are focusing their value-based contracting efforts on providers most likely to succeed. Developing and conducting thorough readiness assessments requires strategic insight into the clinical and business challenges providers are facing. The task should become a priority responsibility assigned to someone with a clinical background who can form collaborative peer-to-peer relationships with potential provider partners.

A framework of key considerations that should be taken into account while developing and conducting provider readiness assessments might include the following provider capabilities and characteristics:

  • Maturity of programs for managing population health and variation in cost and quality (e.g., clinical leadership structure, use of clinical care paths and monitoring of quality metrics)
  • Risk management and financial operations
  • Internal/external stakeholder alignment on value-based care
  • Patient experience
  • Human capital/leadership for partnership governance
  • Facilities and other assets/partnerships required to execute across the care continuum
  • Cultural aspects of moving to risk
  • Existing referral, admission and discharge patterns as well as information providing insight into care transitions
  • Competitive position in the market
  • IT capabilities

Data and insight in these areas should be collected and analyzed as a means of segmenting providers in the market. Most payers will find that they already have rich data from claims and HEDIS measures that can be analyzed by health system, physician group or even by individual physician. This information can then be used to identify immediate, near-term and long-term potential for developing innovative value-based contracting opportunities.

Manage your provider partner portfolio

After immediate-priority provider partners are identified, payers will need to establish a collaborative tenor with critical clinical and administrative leaders as a prerequisite for successful risk-sharing agreements. This includes positioning the plan as a ready and willing partner in managing cost and quality—a requirement providers are already facing from other payers (and increasingly from patients). It will also require demonstrating that the plan is committed to getting their patients the best possible care.

Careful consideration should be given to what services the plan should offer to help providers manage care (e.g., identifying priority patients for interventions; providing quality data; providing access to analytic tools), and whether these services should be provided for free or for a fee. As plans pilot different approaches with these prepared provider partners, they will be able to leverage learnings for future endeavors. Creating positive clinical and financial outcomes will help sell other providers on the approach and provide a roadmap to follow in the future.

Based on the assessment criteria outlined above, not all providers will be in a position to take on risk today. While these providers aren’t going to be selected for new risk-based contracting agreements, it’s important that plans continue developing positive, collaborative relationships as they continue on their journey toward risk. This will create a pipeline of future provider partners that are ready to participate in a new healthcare insurance business model based on payer-provider collaboration.

Will you lead or follow?

The many challenges notwithstanding, self-insured employers and private payers also have significant opportunities to capture early-mover advantage through improved outcomes and lower costs. Throughout the industry new winners—and losers—will emerge based on their ability to deliver superior economic and clinical value. What will your choice be?

Eric R. Abrams, M.B.A., is a vice president at Numerof & Associates, and Christen M. Buseman, Ph.D., M.P.H., is a research analyst with the firm.