How value-based provider-payer partnerships can work

As the health care market changes, we are starting to see new partnership models that strive to improve costs, health outcomes and patient satisfaction. These new partnerships are between unlikely bedfellows: physicians and payers; physicians, hospitals and payers; and hospitals and payers. Increasing numbers of these new partnerships are leading the way in reimbursement and care model innovation.

Cynthia KilroyThe payer goal is to address the double-digit premium increases that threaten the long-term viability of private health insurance. Market research suggests that if payers can offer the same plan at a 10-15% lower premium, they can increase market share – and that aligns with the provider goals.

As the partners come together they need to define the model for their reimbursement contracts. There is no way the partnership will work if all the savings accrue to the health plan or if the health plan focuses on provider unit cost reduction. There are several questions that need to be answered when entering into these partnerships:

  1. What are the savings goals to make the partnership competitive?
  2. How will the savings be achieved?
  3. How will the surplus savings be divided?
  4. What capital investment is needed to achieve the savings?

The partnerships’ reimbursement models can come in all shapes and sizes. But from my experience, the most effective models will be in a “Provider-Payer Shared Savings Aligned”partnership, where the payer and provider come together with resources and capital to change the system and share in the upside and downside based on their ability to impact medical costs. This model creates the interdependence between the provider and payer so that each organization has a vested interest in reducing costs.

Cynthia Kilroy

Download (email required) Optum’s latest white paper “A  Model for Value-Based Provider/Payer Partnerships

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