Guest Commentary: Changing relationship dynamics of payers and providers in 2011

Guest post by Sam Muppalla and Robert Capobianco

The healthcare community entered into 2010 not completely sure with how the talk on Capitol Hill would end up in terms of healthcare reform. By the end of 2010, the ambiguity of the situation has passed and we are now living with the Patient Protection and Affordable Care Act (PPACA). Its mandates are triggering a need in 2011 to begin a transformation process to the payer and provider relationship in order to increase access, drive down costs and increase the quality of care provided to patients.

Payers and providers are also changing the way they deliver value to the healthcare community. In 2011, we will see a larger effort to experiment with innovative ways to: align provider networks to products, create personalized care, re-package provider services and create new engagement methods for patients in an increasingly technology savvy world.  

The countdown for PPACA mandate readiness and execution has already begun. Due to the inseparable relationship between payers and providers, a mandate that affects one party will likely have a downstream impact on the other, and vice versa. The dynamic relationship between payers and providers is one of the most critical relationships within all of healthcare and is a fundamental building block for successful reform change. This relationship is the starting point to enable increased access, reduced costs and improvements in the quality of care provided to patients. As we enter into 2011, payers and providers will need to embark on the transformation of reimbursement, collaboration and administration processes in order to realign the relationship to be congruent with the objectives of healthcare regulations. The payers and providers that can address these initiatives in a coordinated, transparent and practical fashion will be the leaders in the new era of healthcare.  

Changing reimbursement methodologies: No outcome means no income
In 2011, there is an evolving shift with payers to apply different reimbursement methodologies to incorporate the provider's performance and quality as part of the services rendered. The most notable of the new reimbursement models include global, bundled and episodic payment.

The changes in provider reimbursement will not happen overnight, nor will one model be promoted over another. The current experimentation takes a hybrid approach where a mix of reimbursement models are utilized in the multiple contracts the payer has with its providers. Additionally, the hybrid reimbursement models will be paired with new provider delivery environments (e.g., patient centered medical home (PCMH) and accountable care organizations). The hybrid approach, combined with new delivery environments, will add reimbursement administration complexity for both payers and providers.   

  • Payers need to: have the systems capability to design and execute the intelligent automation and modeling of hybrid reimbursement methodologies, increase the transparency of the reimbursement process and have provider management systems that can manage the relationships and affiliations associated with the new care delivery environment.
  • Providers need to: have the systems capability to enter into and manage the care obligations associated with hybrid reimbursement contracts, increase the transparency and reporting of services rendered to patients and validate/make changes to revenue cycle management systems to enable the flexibility to deal with the fluid changes of reimbursement.

Increased clinical collaboration and coordination
Also in 2011, payers and providers will continue to engage in delivery arrangements, such as PCMH, that facilitate greater clinical collaboration and coordination. Additionally, due to PPACA mandates, accountable care organizations are likely to emerge as another care delivery model for experimentation. The impetus to continue these efforts is due to the pilot results that indicate improved utilization of services, reduction in hospital readmissions/ER services, and an improvement in the patient's compliance and management of their care. The next iteration of these programs is to transition them from pilot initiatives to full-scale programs that engage more providers and cover more patients.

  • Payers need to: in part or wholly subsidize clinical tool and health information exchange technologies for providers, improve capabilities to share relevant longitudinal patient information and improve their communication and coordination capabilities between care managers, providers and patients.
  • Providers need to: adopt/implement electronic medical records, e-prescription and electronic lab order entry systems, enhance their capabilities to receive care alerts for patients, evolve practice methods for electronic consultation (e.g., e-visits) and prepare for larger scale programs with larger care delivery teams and more patients.

Supercharge administrative simplification and cost reduction
The payer and provider relationship is formed from an intricate series of continuous interactions that are often referred to as the provider management lifecycle. Typically, this process between payers and providers is based on a mix of pseudo-systematic and manual-based processes. This leads to an administrative burden for both parties due to the duplicity of systems, processes and responsibilities, which drives billions of dollars of unnecessary costs into the healthcare system. Due to the mandates that institute MLR and administrative cost caps on payers, this is no longer a sustainable process for the creation of provider networks and the management of the provider lifecycle.

The reduction of the administrative complexity and costs within the payer and provider relationship is the "low hanging fruit" opportunity within the reform mandates. By leveraging readily available provider management technologies that utilize automation, rules orchestration and integration, payers and providers can enable a 20 to 30 percent reduction in provider administrative costs.

  • Payers will need to: invest in provider management technologies that enable workflow, rules orchestration and integration, modify and move away from paper based processes, enable provider self service for standard provider interactions and apply analytics to provider management processes for continuous improvement.
  • Providers will need to: examine their payer relationships in terms of the ease of doing business with that payer, inquire about the payer's interest in moving beyond financial interaction simplification, utilize provider information brokers (e.g., CAQH) and prepare the impact that electronic interactions with payers will have on their practice processes.

Editor's Note: Sam Muppalla is Executive Vice President, Chief Strategy and Marketing Officer at Portico Systems. Robert Capobianco is Director of Marketing at Portico Systems.

Suggested Articles

CVS Health is joining forces with UPS to test several different applications for drone delivery, including sending products directly to patients.

A federal judge won't give the Trump administration more time to repay hospitals affected by $380 million in site-neutral payment cuts.

A group of House lawmakers want CMMI's mandatory kidney care model to be as narrow as possible and change how it calculates payments.