As a result of the regulatory changes that have taken place in the American health care system over the past few years, more and more payors and providers are joining forces in an effort to drive improvements in the cost, quality, and efficiency of health care services. Today, these unique payor-provider partnerships—which are centered on value-based collaboration and come in many different types, from co-launched products to brand-new joint ventures—are taking off at an accelerated rate all around the country.
Given the diversity of current payor-provider relationships, which can vary considerably depending on the market, the parties’ capabilities, and the provider’s appetite for risk, there’s clearly no single set of rules for how such partnerships should play out. However, according to a recent article from Oliver Wyman Health, there are four key lessons that can help lead payors and providers to partnership success.
Recognize the importance of local market dynamics.
When it comes to goals and expectations about what a payor-provider partnership can actually achieve, the competitive market positioning of each partner can have a huge impact. It’s very important, therefore, that both players clearly understand each other’s position from the outset so that they can determine a way to proceed that will maximize their chances of success.
For example, high-share payors and providers tend to favor a less aggressive approach. Most often, this takes the form of either a product-based partnership, which seeks to protect market share position by focusing on targeted market segments and particular strategies to achieve price points, or a partnership that seeks to implement risk and clinical transformation but in incremental stages. Low-share payor-provider partnerships, on the other hand, frequently adopt a radical approach to financial construct (50/50 equity partnerships are not uncommon), and work collaboratively to achieve the goal of driving ambitious clinical transformation and offering a truly differentiated, competitive product.
Drive alignment through shared economics.
Discount-for-volume contractual arrangements are quite common in many existing market partnerships. However, because incentives for improving the efficiency and quality of care are not always fully aligned, these types of arrangements may not prove sustainable over the long term.
To foster collaboration and accomplish partnership goals, it’s essential to properly incentivize all parties. Key to achieving this level of alignment—particularly among payor, physicians, and hospitals—is openly addressing challenging areas such as the tension between keeping total cost at a manageable level and supporting the traditional fee-for-service structure of most hospitals. Figuring out how to make the economics work requires a willingness on the part of both partners to be open and collaborative; this makes it easier to explicitly define how care coordination will work within the system and what strategies can help manage the overall economics and drive market share improvements. Payors especially must work to understand physician compensation structure in order to find the best ways to incentivize physicians and, consequently, drive behavior change.
Over the long term, the most successful partnerships tend to be those where the parties can commit to a shared vision and use key performance indicators and clinical metrics to assess performance improvement and ensure that they are truly transforming the core underlying business.
Don’t “set it and forget it.”
Many current partnerships find themselves plagued by low membership and operational issues while their impact on the market remains minimal. Often, this is due to a lack of commitment at the outset of the partnership, sometimes known as the “contract and pray” approach (or, just as applicable, “set it and forget it”). Launching a payor-provider partnership involves much more than simply setting up joint governance structures; it’s equally important, as mentioned above, to define clear expectations for clinical and operational roles and data transparency, and to check in on how those expectations are playing out, on an ongoing, collaborative basis.
Data transparency is a particularly important issue that both payors and providers need to be aware of and agree on. In order to execute its clinical transformation strategy, a provider must be able to make data-driven care management decisions, and to do that, the provider needs timely and actionable data to be shared by the payor. This level of collaborative data sharing has emerged as one of the defining features of a successful partnership, as it helps gain provider buy-in and alignment.
Focus on consumer experience as a primary differentiator.
While price is presently the main point on which partnerships are competing, true market leaders are aware that long-term success will hinge on their ability to deliver a better customer experience. However, there’s no question that the capacity to do this will require significant investment and collaboration. Although early partnerships have been experimenting with creative workarounds, most have yet to achieve a meaningfully differentiated customer experience; but as consumers’ expectations grow and integrated payor-providers become increasingly important rivals, partnerships will need to leverage all the resources they can to transform clinically and deliver a superior customer service experience.