Commercializing the Fee-For-Value Investment – Part II: How to do it

In my previous post, I talked about the need for providers to commercialize their investments in the new fee-for-value model. The new model requires significant investment in population health management solutions, analytical and technology infrastructure and network management capabilities. Providers need to think about growth in their market share to reduce the per member per month costs of delivering the capabilities and amortize the investment over time. Cynthia Kilroy

To achieve this goal – with an eye toward increased market share and long-term profitability – providers need to develop a strategic approach to determine opportunities to expand their population under risk contracts. There are several strategic areas that providers should evaluate to ensure maximum return on their investments:

  • Health plan partnerships and public applications
    Providers need to think globally and strategically about which health plans and applications – public and private – they want to partner with by market and by product. Health plans want to partner with the lowest-cost, highest-quality provider to offer the lowest premium price in order to drive market share. The development of a “road map to value” plan can illustrate contract scenarios and align payment strategies to clinical integration and performance improvement initiatives. The value proposition and partnership will be different for each health plan and could include shared-risk contracts, narrow networks, co-branded products or investment partner strategies. Finally, when providers evaluate health plans they need to think about culture alignment, market differentiators and baseline medical costs.
  • Direct contracting to self-funded employers
    There is a trend in the industry for self-insured employers to contract directly with providers for services, including narrow or high-performance networks or carve-outs for population health management services (wellness, prevention, chronic and complex care management and disease management). As providers invest in new capabilities, they need to determine if they want to go directly to employers. While direct contract management may not change practice traffic, new payment arrangements may allow physicians to share in the savings they generate, instead of sharing them with the health plan.
  • Private and public exchanges
    As health care and defined contribution models take on more retail characteristics, providers need to think about how they want to participate in the new exchange marketplace. This includes strategies for private and public exchanges that allow providers to target Medicare, individuals and small group employers – as they shop and compare health plans’ product, benefits and costs. Providers must also think about how they want to participate in private exchanges – including those supported by large retailers, medical associations, employers and payers. As for the public exchanges, providers need to make a decision if they want to offer provider-sponsored plans or partner with payers for co-branded plans.
  • Management Service Organization (MSO) outsource service
    As large providers develop MSO capabilities to organize physicians and support bearing risk, they can create a regional outsource solution to support other providers in the community to enter into fee-for-value contracts. The outsource solution offers the other providers in the community access to financial, clinical and technology solutions without the initial investment and allows them to deliver the services on a fixed-cost basis. Traditionally, organizations have developed MSOs on a hospital-by-hospital basis with varying degrees of sophistication and costs. Providers with the ability to manage the clinical and business process for provider organizations can capitalize on their investment by designing, installing and managing systems and controls to significantly improve population health management, revenue management and network management.

Recognizing and thinking through these strategies will be important for providers as they work in the new market models.

Cynthia Kilroy

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