From 3M Health Information Systems
Five things “payviders” can’t afford to overlook
One surprising development as health care shifts toward risk-based payment is how many health systems intend to become insurers. According to one study, half of health systems have applied or intend to apply for an insurance license. That’s a staggering number, since managing health insurance is vastly different from delivering health care. In fact, it’s a completely different business model from the hospital-centric, fee-for-service-based delivery system that is still the norm in much of the U.S.
Although many payment models adjust for quality or cost performance, most reimbursement for health care is still paid separately for each service like an office visit, test, or procedure. It isn’t easy to dismantle the traditional revenue model without interrupting the system of care delivery.
Yet, the trend toward provider-owned or provider-affiliated health plans does make sense. Providers know that payers intend to increase at-risk payment to upward of 60 to 70 percent. It could make sense for a health system to ease into risk while they can set some of the terms. Besides, owning a health plan means the health system can channel more patients to its own doctors and facilities. It also offers the promise of combining data and other resources to better manage population health.
Over the past two years, the number of provider-affiliated health plans has more than doubled, topping 270 health plans. However, the scope of most new plans is very narrow. Two-thirds of the new plans serve only one population (e.g., Medicare), and 40 percent are at risk for fewer than a thousand dual eligible members (Medicare and Medicaid). There are five challenges these new plans can’t afford to underestimate:
- Payment design
- Provider network management
- Care management
- Risk management
- Data sharing
Most of the newer health plans, certainly the smaller ones, are likely to pay their providers based on fee-for-service, possibly at similar rates or with the same quality incentives as used by other payers. However, that doesn’t help differentiate the health plan in the marketplace, nor does it offer the greatest profitability. For growth and sustainability, the health plan needs to consider including incentives for clinical, cost, and/or utilization targets, shared-savings opportunities and bundled payment.
Provider network management
This involves more than simply owning a medical group. It requires enlarging the ecosystem from acute care to ambulatory and post-acute services, primary care, retail pharmacy, home health and long-term care. It means making sure “owned” resources are competitively priced and high quality. It means managing referral patterns to avoid revenue leakage and to direct members to high-value providers. It means ensuring members have access to the right care at the right setting at the right time. It also means making sure network providers receive enough plan members to justify changes in practice management.
Health systems have made huge improvements in reducing readmissions and hospital-acquired infections. As “payviders,” they need to translate hospital-based care coordination into population health management. How many years has it taken to develop programs to manage the quality of acute care? It will take a similar effort, but broader, to keep health plan members out of the hospital or emergency department, make sure they take medications properly, direct them to preventive care, encourage follow-up visits to manage chronic disease and avoid unnecessary test and procedures outside the hospital setting.
Some health systems have tried to hedge risk by partnering with an insurer or third-party administrator to support claims processing, regulatory compliance or financial risk management. It’s wise to have a guide. But it doesn’t insulate the health system from the risk of managing a new line of business in a competitive market space. Even experienced insurers struggle to manage competitively priced health plans, especially when the risk pool is relatively small or when there is inadequate historical data to accurately assess member health risk. (Witness the exodus of health plans from state exchanges). Health plans need strong analytics capabilities to forecast market trends and population health risk, even small provider-affiliated plans.
One benefit of getting into the insurance business is access to complete member and claims data. Health systems already have near-real-time clinical data. With access to multiple data sources, provider-affiliated health plans have an advantage for clinical and financial analytics. But they shouldn’t be stingy. To overcome the challenges of health plan administration, health systems need to share data with physicians and other service providers. Not only data, but data within population health management tools and integrated in workflows. Everyone within the care delivery system needs to know how they are performing, which members are at risk, and how to act to provider cost-effective care.
It’s a brave new world for provider-affiliated health plans, but promising, too, given the rise of technology. Health care is a laggard industry in adopting digitization and big data. Now is the time to catch up to be able to manage the challenges or risk-based and value-based care.
Kristine Daynes is marketing manager for payer and regulatory markets at 3M Health Information Systems.
Find out how 3M helps payviders with these challenges. Watch this short video.