In their continuing quest to reduce costs and improve health outcomes for employees, employer plan sponsors are looking beyond traditional ASO contracts with health plans to new models, including direct contracting options with health systems. For progressive health systems, this represents an important opportunity for volume, revenue and margin growth.
Given the importance and magnitude of health spending, employers typically use a structured procurement process, including a formal request for proposal (RFP), when considering direct contracts with local health systems. Effectively responding to these RFPs is typically an early hurdle that can be challenging for health systems unaccustomed to this type of commercial process. As direct contracting opportunities increase, health systems will need to learn how to compete and win in this process that involves different stakeholders, financial considerations and service expectations than traditional contracting with insurance carriers.
In addition to the foundational aspects that health systems need in order to deliver a high-quality offering to employers, such as infrastructure to support administration, metrics reporting and privacy issues, health systems need to be able to “sell” their products both directly to employers as well as indirectly to employees. This challenge is somewhat different than what health system executives are used to facing. Being aware of the key components of this new commercial value chain, and being prepared to pivot, are critical success factors for gaining market share in the competitive, highly dynamic commercial market.
Selling to employers
Health system commercial leaders must consider several key items when employers’ HR departments become direct prospective clients. These elements will be included specifically in the questions that make up the RFPs from employers.
Product definition
Health systems need to clearly articulate their offering, including any associated risk shared with the employer. Specifically, elucidating how risk is being proposed and value being shared is key. Being able to define the model used, whether an ACO, COE, HPN, PCM or some combination, is also necessary to compel employers.
Being able to communicate the health system’s experience delivering value to other customers in the past is also a differentiator. This could be along the lines of membership, cost savings or improved health outcomes, among others. Further, indicating the aspects that differentiate the offering from other provider-sponsored plans, traditional health plan offerings or dedicated “carve-out” vendors in the market, is imperative.
When defining a product and communicating its merits in an RFP response, some roadblocks health systems run into may include ill-defined administrative capabilities (as they’ve typically relied on their carrier partner’s administrative chassis), a vague value proposition for the offering (for example, failing to explain the structure of an ACO offering, and target cost and quality improvement goals, rather than just stating an ACO is offered), and the lack of documented history and outcomes in administering the product, whether from similar commercial offerings or relevant CMS-sponsored offerings like a Medicare Shared Savings program.
Performing a formal product assessment with a partner can assist to help clarify the above issues, giving employers a better understanding of the product and what value would be derived from partnering with your health system.
Market environment
To create a compelling value proposition in an RFP, an understanding of market dynamics is key. Health systems should look at the demographics and clinical composition of the population at the employer who issued the RFP (and other large employers in the market). Appropriate care management and clinical programs to support a population can be offered with an understanding of where there will be demand. As an example, knowledge of the age distribution of the population to ascertain care needs can assist in tailoring an offer. A look at competitors’ offerings and where there is open space to differentiate also positions a health system for success when competing on an RFP.
Network composition
In addition to defining the product and understanding the market, a health system should assess its own network composition to understand how to position itself to serve employers. Network elements to examine include number and distribution of PCPs, specialists, facilities, labs, urgent care, etc. Gaining an understanding of whether a wrap network is needed, or whether to partner with a carrier to fill access and clinical gaps, should also occur. Ancillary components of a product offering, such as prescription and behavioral services may be evaluated by an employer, and an approach to address these network components should be identified before any attempt to win commercial business.
When patients become customers
When preparing to respond to an RFP, health systems also need to consider how their offering will differentiate itself to employees, who will now be both product “customers” and health system patients. Employers will make the decision to include health systems in a procurement process if they believe not only that there is a financial opportunity but also that having provider-sponsored offerings will be an appealing option for their employees, especially when offered side-by-side with a traditional plans and services offered through insurance carriers and/or specialty vendors. Health systems must pivot from thinking of the population they are serving as patients to thinking of them as customers, who may also be patients. The customer piece of this is key; customers have different needs and expectations than patients. For example, customer service delivery is very different for someone who is calling to check on the status of a claim, locate an in-network specialist or file an appeal. Employer plan sponsors, who will ultimately make the decision to engage the health system via the RFP process, will typically probe on this customer orientation extensively. Unfortunately, most health systems are early on their journey in establishing a strong customer orientation. Again, note the difference between a customer orientation and a patient orientation — employer-led RFPs will explore both.
Responding to these customer elements of the RFP can be challenging, unless these capabilities are built in to the health system’s direct-to-employer offerings from the start. Key elements often include offering consumer-grade tools (mobile, web, etc.), as part of an overall high-quality customer experience (streamlined, simple navigation to care).
Health systems considering a direct-to-employer strategy for any of their offerings need to be able to effectively respond to RFPs. These responses need to be complete, in terms of addressing all aspects of the employer’s inquiries, as well as compelling, in order to differentiate the offering from other health system, carrier and vendor competitors. Some health systems have gone as far as to complete responses to a “mock” RFP developed by a consultant, sourcing advisor or local employer coalition as a means to gauge how complete and compelling their RFP responses are. Based on feedback they can adapt both their underlying product offer, as well as how they represent it in an RFP response, in order to be more successful in future commercial opportunities.
Having a sense of the substance of information that employer RFPs are intended to draw out, and how to best position the assets a health system offers as a direct contracting partner, is key to being able to be competitive in the changing market and partner directly with employers.
Jackie Merola is a consultant in the Health System Consulting practice at Willis Towers Watson.
Peter Bresler, M.B.A., is the Health System Consulting practice leader at Willis Towers Watson and is based in Chicago.
Jessica Jones, M.A., is the Health System Consulting practice operations manager at Willis Towers Watson.