Healthcare in 2020 is all about thinking strategically about partnerships. This is creating some pairings that, from a traditional standpoint, are unusual -- such as new collaborations between providers and payers.
As competition between health systems heats up, costs are on the rise. To avoid the crisis of a bursting healthcare bubble, more health systems and payers are increasingly realizing that working together may be their best hope of staying on the leading edge of analytics and cost savings.
A payer-provider union may be the only way forward for many in a market where UnitedHealthcare's Optum division, Kaiser Permanente, and other large, integrated healthcare entities are aggressively expanding, threatening legacy health system and health plan incumbents.
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"Payer-provider business models are starting to converge," said John Poziemski, managing director of Kaufman Hall. "The lines continue to blur in a lot of ways. As a result of some of those dynamics, payer-provider partnerships are becoming more important and will continue to be so for the foreseeable future.
"They're coming to the realization that they're sharing the same problems," he said. "Across much of the country those problems can be as simple or complex as trying to be markert competitive. A lot of these plans and special carriers are thinking of how they remain competitive when it comes to covered lives."
Given market and industry dynamics, a do-nothing scenario won't result in good outcomes. If payers and providers can't forge more strategic relationships, and maintain the transactional relationships they've had historically, they could well open themselves up to disruption by larger, more capital-rich organizations that are emerging.
The other big risk to doing nothing is that these entities may not be able to deliver on their affordability objective. They have relationships with the purchasers, but those purchasers are demanding a better product -- and a more affordable one.
AN IDEAL PARTNERSHIP
There's no one-size-fits-all partnership that's ideal in all situations. There's a broad range of options partners can consider. Poziemski sees that as a good thing.
"Partnerships can range from joint product opportunities, focused on a single product in a single county, all the way to evaluating a vertically integrated merger and alignment model, and bringing the two organizations together," he said. "And then there's everything in between, from building new health plan capabilities to building out provider capacity in the marketplace."
Ultimately, the prerequisites to success are the factors one might expect, including vision alignment at the executive level, and identifying market opportunities -- who the market serves, where the opportunity exists, and where the business might overlap.
Poziemski recommends establishing partnership criteria and identifying the "North Star" for the central collaboration so the entities have the right guardrails and starting principles to proceed.
The specific criteria is dependent on understanding the opportunities to acquire new markets and new members. But the organizations still have to decide what to do with the existing population, since there's still value that can be derived therein.
Other criteria include establishing a business case, understanding the upstream and downstream economics,and understanding how they impact each organization both independently and collectively.
An important consideration in all of this is the independent nature of some physician practices.,
"At the end of the day, payers sell access to healthcare and providers supply access to healthcare," said Poziemski. "There are very few markets where all providers are going to be employed; some will always be independent practitioners. We're trying to support the independent practice of physicians. These partnerships aren't trying to employ all physicians, but align them with their networks. Payers and providers are looking to organize the network of providers to create a high-performing network of care."
And then there's consumerization. It's among the top trends in healthcare, as the sector slowly morphs into a model more akin to other industries, in which consumer preference matters. When patients have choice, they exercise that choice by picking providers and treatments based on quality and costs -- something any payer-provider partnership would do well to keep in mind.
"In all of these partnerships, even though there's a hyper-focus on costs and cost competitiveness, there's also a broad recognition that they need to deliver a differential customer experience," said Poziemski. "That includes quality of care as well. The beauty in payer-provider partnerships is you put the consumer first, which isn't what we've traditionally done in the healthcare marketplace. By forging these partnerships, you give the organization the ability to do that, which is a really critical component to all of this."
There are a few examples of these types of partnerships starting to form across the country. One of the most visible is the partnership between Blue Cross Blue Shield of Minnesota and North Memorial Hospital. In 2019 they linked together to essentially create a new consumer experience-focused company that organized specialty and primary care physicians. Meanwhile, in Los Angeles, California, BCBS joined with a handful of providers, including Cedars Sinai and UCLA, to compete in the marketplace against some formidable competition from the bigger players.
There are others. And Poziemski expects there to be more.
"We're bullish on that, on the opportunities that are available, and the potential that exists for these partnerships," he said. "I think they will evolve rapidly over time. A lot of times, the initial partnership model is not the end, but a means to an end. A lot of organizations start by thinking about, 'How do we jointly invest in physician capacity, or develop health plan products for the marketplace?' But that's a stepping stone to a broader and perhaps more strategic partnership. They'll take the next steps and start to integrate more materially."