The starting point for organizations pursuing value-based care models differ, but at the heart of these approaches are common factors that define success. These include an organization’s ability to increase patient volume and tap into new revenue streams.
New revenue can offset losses due to lower utilization, especially within the hospital setting. One way providers can grow revenue is by offering health insurance products.
Two distinct approaches
Some provider organizations have their own health insurance licenses and have offered products for some time. Two recent approaches include products jointly marketed with an insurer, and ventures where the insurer and provider share ownership of the product, with each having a vested interest in profit and loss.
At its most basic, a provider-branded health plan can be a contractual arrangement between a payer and provider group. In this model, the payer still holds the insurance license. The ACO product is then built around the provider’s network of physicians and facilities. However, both entities jointly market the products.
Jointly marketed products take advantage of the awareness and reputation the provider has in the market combined with the marketing and distribution capabilities of the payer. To further differentiate the product, the provider and payer may offer enhanced wellness and care management services for employers. Essentially, the jointly marketed product builds on the strengths of the two organizations.
Shared ownership arrangements are more structured and complex. In these models, providers and payers jointly balance risk and rewards in order to potentially increase their economic return. These can take the form of sharing risk through reinsurance contracts or even developing a new company and insurance license. The second type is more complex, permanent, time-consuming and expensive.
In some cases, however, the rewards may not outweigh the risks. For example, new health plans must have 12-18 months of performance data that meets or exceeds CMS requirements in order to be eligible for a 4 STARS rating on Medicare plans. Since CMS enhances payments based on STARS ratings, this can place any new Medicare health plan at a significant premium-pricing disadvantage to incumbent plans.
Shared ownership arrangements are best suited for provider organizations with specific strengths and attributes including strong local, regional or national reputation, ability to manage risk, strong market share and capital position. For example, entities that have a strong reputation in the community will have a distinct marketing advantage. They can leverage trusted relationships with both consumers and businesses. At the same time, payers can typically complement these efforts with a strong regional or national distribution network.
All of these structures are easiest to implement within organizations that are already highly integrated. Along those same lines, it is vital for the organization to have a robust technology and population health management infrastructure. This includes access to electronic medical records for most, if not all, providers. Finally, an organization that has some strong physician leadership and governance, as well as experience managing risk historically, will be ahead of the curve in this approach.
Of course, a payer’s own risk management and population health expertise can add to these strengths. In addition, the payer typically takes on many operational and administrative functions, which could include enrollment, claims, customer service and underwriting. Finally, payers can contribute their marketing and distribution resources. This approach gives providers access to national accounts, third party administrator services and broker relationships.
Research and product development
The strategic and financial planning for provider-led insurance products typically includes multiple phases. It often begins with an in-depth market evaluation. An advanced capabilities review should be performed to identify gaps needing to be filled. At this point, the insurance product development phase can begin. This phase includes developing competitively priced products and positioning them appropriately. It also includes strategic benefit design in line with the objectives of the organization. For example, lower copays for patients with certain conditions could help improve disease management efforts.
From planning to profitability
While product design and marketing are important, network design and population health strategies are truly foundational elements of these models. For example, members must have access to the right care at the right time and place. In addition, high-cost members should be incented to use resources to improve disease management.
Organizations must also focus on serving patients in ways that meet their unique needs. Today’s consumers demand greater convenience and personalization. As a result, telehealth, online wellness and mobile health tools are important offerings. These tools can extend support to patients anywhere at any time.
In some cases, payers may already have expertise in these areas and can contribute resources. However, it is important that all these elements be integrated into a seamless member experience. This will help drive members to maximize their use of in-network services and programs designed to improve their health. As a result, organizations can keep patients within their network of providers and facilities while improving quality and managing risk.
This is an exciting time of change in our industry. While healthcare reform has brought many challenges, it has also created unprecedented opportunities. Payers and providers are sitting at the table to develop new models of a better healthcare system. Ultimately, this level of collaboration will help our industry achieve the triple aim.