Health care provider organizations across the country are in various stages of development on their journey toward a value- and risk-based future. Many of these provider organizations, including large integrated delivery systems, academic medical centers and regional/community hospitals, are seeking to work more collaboratively with employers as part of their value-driven strategy. Health care organizations typically see employers as attractive “target markets,” in part due to their willingness to explore innovative care delivery and contracting alternatives, such as direct contracts, accountable care organizations (ACOs), patient-centered medical homes (PCMHs) and centers of excellence (COEs).
While the employer market appears attractive, especially the large employer market, health systems often have relatively little experience working with employers, particularly in a more commercial/business relationship. Developing the necessary organizational capabilities to serve the employer space will be essential for success in a value-based future. We have summarized these capabilities in a top 10 list of success drivers for the future value-based world.
High-Value Offering
The first four success drivers cluster together under the banner of defining a high-value offering. While this seems self-evident, we’ve seen a number of health systems consider employer-facing offerings without having them “fully baked.” These key success drivers include:
1. A well-articulated product/service offering with a compelling value proposition
First and foremost, any offering to employers, marketed either directly or indirectly, must have a clear, distinct value proposition that is strategically designed to capitalize on transition to value-based care. The offering(s) could include many forms, such as: ACOs, patient-centered medical homes, centers of excellence, bundled payments, branded (or white labeled) onsite clinics, narrow/high-performance networks and care management programs. In any case, there must be a clear articulation of how the customer – the employer and their plan members – will see lower costs, improved health or an improved experience of care from the offering.
2. An aligned, configured network to deliver on the value proposition
The value-based offering must have a robust provider network to deliver on the value proposition. The clinical network typically consists of the system’s own facilities and practitioners, but may require affiliations, alliances, acquisitions, or other forms of partnership to be complete and competitive. All partners need to be screened for key factors such as quality, cost and capacity. Beyond the clinical network, health systems often need to engage other operational partners, such as third-party administrators, pharmacy benefit managers or others.
3. Contracting structure and terms that support the value proposition
Value- and risk-based offerings can be complex, and the associated contracting can be challenging. Health systems need a coordinated contracting approach for their offerings, inclusive of agreements with employer customers/clients, health plan partners, networked provider partners and operational partners. In particular, the contracts need to reflect the new realities of value-based care, including elements such as attribution, exclusions, reimbursement structure, risk adjustment and well-defined metrics for tracking success as well as formal performance guarantees. These contracts should reflect emerging best practices and remain aligned with other, existing contracts health systems may have in place.
4. Appropriately priced offerings, reflecting short- and long-term risk
Health systems launching new offerings must have robust actuarial and financial processes to accurately price services offered on a value-based basis. Health systems often find this extremely challenging, as most have historically focused on fee-for-service/discounting as the primary basis for pricing. Progressive systems are not only using core actuarial tools, but adding simulations and other sensitivity analyses to provide further insight to their leadership on the range of upside and downside financial risk associated with these new offerings.
Target market and consumers
The next several success drivers focus on ensuring health systems are clear and precise in terms of the market their offering is intended to serve, and the means by which they actually reach or “sell” to that market. Again, these have not been functions or skills typically present in most health provider organizations.
5. A clear, focused target market for value-based services
Health systems need to develop a clear understanding of who the client/customer will be for their offering – a direct employer, a health plan, individual consumers on the public exchange, a health system’s own employees, a Medicare or Medicaid offering. Once the customer is clear, systems need to have foundational knowledge of the market — is that market growing, shrinking or changing? What are current and potential future competitors doing in this target market? Systems often need to tailor their offering based on emerging insights from the market assessment. Importantly, health systems must appreciate that doing value-based business commercially involves a business-to-business (B2B) or wholesale component (e.g., the employer purchaser), as well as a business-to-consumer (B2C) or retail component (e.g., individual consumers/patients), each of which require different capabilities and skill sets.
6. A holistic perspective on individual consumer behavior
Under any model of value-based care, health systems will need to have a comprehensive understanding of the behavior, decision making, motivations and health status of individuals in their target market. Consumers make decisions at several key junctures, such as at the time of benefit enrollment, or when they are deciding which provider to use and how best to pay for their care. A thorough understanding of consumers in employer-sponsored plans will surface insights that can advance the health systems’ value-based strategy on several dimensions. In particular, how the system will engage consumers to be proactive partners in improving their health will require a departure from the older paradigm where the provider role is to act as the infallible, all-knowing purveyor of clinical advice, while the patient role is to passively comply with the advice rendered.
7. A practical, flexible sales and marketing approach for value-based offerings
Health systems need to develop creative approaches for getting their offerings introduced to their target market. They should seek to understand buying patterns and priorities, particularly for distinct markets such as the self-funded employer space. To reach this market, systems will need to understand the role of channel partners and intermediaries such as benefits consultants, private exchange operators and brokers. Systems need to build teams, processes, and tools to effectively sell their value-based offerings in an increasingly complex and competitive market.
Operating platform to deliver
The final success drivers in our top 10 revolve around establishing an effective operating platform to deliver on the proposed value proposition. This typically includes an EHR but goes significantly beyond health information technology to include the entire delivery process, ideally connected and well-integrated from start to finish. Large employers in particular are highly attuned to a potential partner’s ability to deliver to their employees and dependents. Health systems must be able to demonstrate a robust operating infrastructure in order to succeed with employers.
8. A next-generation integrated clinical delivery approach that achieves triple aim goals
The core of most value-based offerings is improved care and coordination at the patient and population levels. Most health systems are working diligently to improve their care coordination and management approaches, including optimizing individual care as well as population health management. With respect to the clinical delivery approach embedded in their value-based offering, systems need to ensure there is a clear organization model, appropriate staffing levels and competencies, supporting technology, and a robust clinical care foundation to drive improvements in cost and outcomes.
9. A practical analytics and reporting approach to manage value-based operations
Success managing value-based initiatives requires up-to-date information from multiple perspectives: clinical, operational, financial, administrative, consumer/patient perspective, etc. Many discrete technologies and applications within health systems make it challenging to integrate information to provide actionable insights. Successful systems will curate available reporting and analytics, and integrate both clinical and administrative data to develop a clear picture of performance for each of their value-based offerings. These analytics will be instrumental in demonstrating the impact of the offering to current and future customers.
10. An efficient, expert financial structure to manage and mitigate risk
As value-based offerings introduce new and different types of risk, health systems need to explore both traditional and emerging structures for managing risk. These include existing tools, such as reinsurance, stop loss, captives and other forms of financial risk management. Progressive systems are also incorporating additional forms of risk that are inherent in a value-based strategy, such as cybersecurity risk and malpractice risk.
This top 10 list provides a checklist of considerations for health care providers wherever they are on their journey to the value-based future. For those beginning or in the early stages of the process, this list could potentially serve as a business plan or road map for a future offering. For more experienced systems, this list could help identify improvement opportunities, and help to identify key interdependencies as they naturally occur as these offerings evolve over time. Failing to adequately consider and address each of these 10 drivers will increase the risks to provider organizations, such as financial losses, wasted time and effort, and missed market opportunity.
Peter Bresler has over 25 years of consulting and business process outsourcing expertise focused on health care strategy, mergers and acquisitions, process and organization design, change implementation, human capital measurement and HR function effectiveness. He can be reached at peter.bresler@willistowerswatson.com.
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