Healthcare industry payers are now moving aggressively toward value based care and reimbursement models with their provider networks.

Payers of all types – employers, commercial insurers, government or individuals – can’t indefinitely sustain cost trends higher than overall economic growth. Healthcare services are simply becoming too expensive for consumers, employers, and taxpayers. Further, at some point increasing even effective investments in healthcare that lead to better outcomes starts to result in diminishing returns in terms of cost avoidance.

The payer imperative is to find the sweet spot where investment in prevention and high-quality care balances out financially with the cost avoided through better health and lower utilization of high cost services.

Here are seven strategies to help payers successfully transition to value based care & reimbursement. (For more information from the provider perspective, read 8 Provider Strategies for Value Based Care Financial Sustainability.)

1. Re-invent Yourself as a Healthcare Company

More specifically, reinvent yourself as a full continuum integrated healthcare management company. The financial theory of a value based care & reimbursement model is that keeping a population of individuals as healthy as possible given their situation will ultimately cost less than treating them only after they are acutely ill.

The key is to align and tightly coordinate all prevention and clinical healthcare activities across a continuum that includes wellness, primary and acute care, chronic disease management, recovery and long-term care. In doing so, you can prevent expensive episodes, reduce redundant services, improve patient safety, and achieve better healthcare outcomes at lower total cost for a stable population over time.

Whether you are a payer or provide administration services on a payer’s behalf, you are likely to have the scale, expertise, and the data visibility across the set of providers and services used by a population necessary to effectively coordinate healthcare.

2. Accelerate Shifting Financial Risk to Providers to Align Payer-Provider Incentives

Shifting financial risk and accountability to clinical providers is the core concept of value based care & reimbursement. In of itself, this won’t necessarily minimize cost. Payers need to support the efforts of providers in their network to minimize inappropriate utilization and maintain quality and service levels. At the same time payers should strive to support increased patient volume to network providers to offset revenue losses from decreased utilization. This will ensure that payer and provider incentives are aligned.

The power of aligned payer-provider incentives is generally underestimated. Mitigating the historical tension between payers and providers so that everyone works for cost-effective care results in improved cooperation, sharing of information, communication, and ultimately member health.

3. Optimize Provider Network Design and Performance

The key to cost-effective population healthcare is coordination across the full continuum of services a member might utilize. We must recognize that coordinating care is a burden for providers – at least when compared to the largely siloed way care has been provided in the past – so they need to be incentivized to change their coordination behaviors and practices.

The basic approach is to shift financial risk for both cost and outcomes to providers. But the positive impact of this can be turbocharged by increasing their patient volume. Obviously, a payer has more clout with a provider who is depending on them for significant patient volume. Narrow networks are a critical strategic and operational priority to increase patient volume with providers while concurrently minimizing total utilization.

Designing a narrow network and then continuously optimizing its performance is a complex process. You’ll need to balance individual provider performance, steerage patterns, market preferences, disruption potential, product design, and network adequacy regulations. Fortunately, there are now new tools available to assist this process. Plan on investing more here in both tools and the expertise then you have traditionally.

4. Support Enhanced IT and Business Intelligence Infrastructure

Core to financial viability in the value based model is knowing when and how to invest in care for individual patients. Comprehensive business intelligence predictive, prescriptive, and monitoring capabilities are essential to appropriately stratify the population to define where and how to focus resources and attention and to manage ongoing care. These capabilities should utilize data from multiple sources, media, and timeframes (including real time).

Payers must invest in their internal capabilities to organize and analyze this data. But without appropriate infrastructure on the provider side to efficiently collect the necessary data and share it with payers, there is no there there. Payers must consider targeted investments and incentives to support provider efforts in the required data measurement, collection, and communication technology.

5. Support Innovation

Both clinical and information technology continue to advance. The advent of genomic and related testing to drive personalized precision medicine through advanced diagnostics and therapeutics is revolutionizing care. Advances in nanotechnology, surgical robotics, and new bionic medical devices provide entirely new ways to treat injury and illness.

The key challenge for payers is to identify the point at which covering the cost of utilizing new technologies and related products and services provide a positive return on those metrics that matter, and then to encourage their appropriate use (which is no easy task!).

Being late to support new approaches can result in serious erosion of market share. Not to mention that almost by definition, these advances will ultimately be cost effective in a value based model that truly focuses on total value. Payers don’t necessarily need to support cutting edge approaches, but they don’t want to be considered hidebound either. Members, providers, and competitors will notice.

6. Expand Your Universe of Health Status Determinants

Research from organizations including the World Health Organization (WHO) and the Centers for Disease Control and Prevention (CDC) have identified that healthcare interventions drive only around 20% of population health status. Non-medical factors including behaviors, genetics, and multiple social factors and environmental factors drive the other 80%.

An individual’s housing, employment, community safety, income, education, food availability, etc. all play critical roles. Innovative payers are recognizing that while they cannot solve every problem, it can be in their financial interest to support various efforts at improving the overall environment where their covered populations live and work.

7. Integrate with Providers

Many payers are combining with provider networks to achieve stronger alignment of objectives and coordinated execution of operating strategies. These integrated delivery systems can deliver more cost-effective care for patients across the healthcare continuum, more predictability and confidence for plan members and providers, and greater value for the ultimate payers – insurers, employers, taxpayers, or individuals.

These strategies all require an initial investment of time, money, executive leadership attention, and management talent and capacity. If properly designed and executed, payers will successfully transition to the evolving value based healthcare ecosystem.

To learn more about how Arlington Healthcare Group can help you define and execute your organization’s strategic plan for transition to Value Based Care & Reimbursement, contact us today.

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