Managed Care

Why providers should sponsor health plans again

In the 1980s and 1990s it was all about integrated healthcare networks and profit taking. But it didn’t work out. Perhaps the theory was correct, but there was far too much front end cost and not enough population health management skill to help the plans turn a sustainable profit. Most provider plans ran out of time and money. Now we can see the end of fee-for-service and the advent of capitation. This time health plans are for provider survival. It’s time for providers to move from taking profit from utilization to managing behavior. That means it’s time for population health management based on big data. It’s time for the buyers of healthcare and users of healthcare to work together to take personal responsibility for health. This means moving away from punitive motivation to find benefits and rewards that manage healthy behavior. With provider sponsored health plans it’s time for providers to move into the retail space. Because when providers sponsor their own health plans their delivery systems become commodities, cost centers not profit centers. When the health plan drives the financial bottom-line retail activity is based on capturing any external cost to the health plan. The health plan is incentivized to eliminate as much of the middleman profit-taking as possible. So provider-based health plans become the sponsors of self-directed primary care along the lines of the CVS Minute Clinic, for example. And following the information uncovered in good population health management tools, the health plan enters any activity that can help prolong the health of covered lives and eliminate care related expenses. The Kaiser-Permanente health care system is an excellent model of how it can be done across a large population. My own experience at a major Texas health system and its integrated physician delivery component showed that a healthcare system can launch a successful provider sponsored health plan from scratch. Our plan grew to nearly half a million covered lives in less than five years. The Baylor and Scott & White transaction shows a different way one health system chose to acquire covered lives by merging with a smaller system that owns a health insurance license. When Sutter Health recently launched its health plan the CEO said he wished they had started sooner. His advice to other providers: plan on spending at leased $50 million. Good advice as you can never have too much time or money to get your health plan successful. The important thing to remember is that fee-for-service is yesterday and provider sponsored health plans are the future of healthcare because they are the means to achieve the providers’ mission of improving the health of communities they serve. Share Tweet Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group has been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based...

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How population health management makes capitation the natural successor to fee for service

Guest blogger Rich Williams is a principal at the Advanced Plan for Health a national provider of population health management tools for employers, hospitals, healthcare systems, and health plans. After years of academic incubation the concepts of population health management (PHM) have moved to the forefront in the delivery of American healthcare. The aggregation of clinical databases and the digital tools of “big data” have brought PHM to life. Rather than just data, we now have information. Here’s how it works. PHM providers assemble clinical data from multiple sources to cover the clinical experience of patients in a defined population. This data includes claims, biometrics and other information including Health Risk Assessments. The data is then stratified by clinical and financial risk. This allows the sponsoring organization to identify its exact clinical and financial risk by individual. In the hands of PHM trained case managers and physicians the data is used to create and track interventions that help improve the patients’ health and reduce the risk of medical misadventure over time. PHM tools are also used by medical directors to oversee and evaluate the clinical effectiveness of physicians in a value-based network that have contracted to care for a defined population. Such data was once the exclusive province of health plans and Medicare. Today employers can access population health management data to help direct and determine the effectiveness of their employee based health plans. The growing availability and success of PHM tools has brought the concept of capitation back to the forefront in healthcare payment. Where fee-for-service could encourage duplication and even excess treatment, capitation produces the opposite effect. Capitation fell out of favor in the past because it was believed to succeed financially by suppressing care even when treatments were necessary. Combining PHM tools and capitated payments reduces the risk of withholding services as the accountability is swift and transparent. Given the new value-based contracts, the financial incentives among providers are fully aligned with identifying patients at risk in a population and providing them with timely and appropriate treatment. No other form of healthcare reimbursement has so successfully combined the power of population health management tools with appropriate incentives. While we do see examples today of population health management being used in fee-for-service or bundled contracting circumstances, the true power of the tools becomes apparent when combined with capitated health plans. That’s why some of the brightest minds in health care now see the industry moving towards the combination as the natural successor to fee-for-service. Reducing the temptation to do more to earn more, providers will do right, whether that involves more or less care. It’s a sea change and a change for the better. Tweet...

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Strategies for the future

Lately I have become keenly aware of an absence of strategic direction and a lack of awareness of current and future changes to healthcare delivery. I am perplexed by the call to action and direction that I see every day. I have come to the conclusion that while PPACA has fundamentally changed most of healthcare as we know it, reimbursement is still the same old, same old. My forecast is that as long as fee-for-service is the dominant methodology of payment, we will not see a great deal of true strategic change. I believe that the healthcare industry denial of this reality will ultimately be the downfall of many institutions and providers. Reimbursement methodologies must change because projected volumes and utilization trends will force both cost up and price down. Is your organization prepared strategically and operationally to lead during this change, or to follow and try to catch up? I believe that there are four strategic positions that every healthcare organization needs to consider, then operationalize within a significantly short time frame of 18 – 24 months. They are: The First Strategy is simple – Close the Back Door. Organizations have spent millions of dollars attempting to reduce costs and optimize service. With new reimbursement on the horizon, managing cost will remain critical. The second part of Closing the Back Door is evaluating your revenue sources to ensure that they are at levels that your organization can maintain, and margins that will weather the storms of healthcare reform. Most of the reimbursement shift of the future should be revenue neutral to prepaid services. The Second Strategy – Population Management. Develop methodologies that put the institution into the business of managing a population. In this new environment, you will be asked to manage the population’s behavior and quality of service to a lower cost. The last thing you want is a member in a bed utilizing high cost resources. Manage the population to healthier, less costly services. A tactic here would be to set up care teams that engage skilled providers for their quality using a vast array of sophisticated data analytics. The delivery system must be prepared. The Third Strategy – Consumerism. Two segments, Employers and Employee. Employers are beginning to require employees to take control of their own lifestyle decisions, and as such, writing benefit plans to motivate individuals that do not comply with Quality Standards, i.e., smoking, obesity, hypertension, and diabetes, to mention a few. The second part to Consumerism is that the employee, including spouse and dependents, must take an active role in managing their health and lifestyles making healthy decisions, and complying with management of their diseases. The Fourth Strategy – Reimbursement or the Retail Space. The reimbursement methodology will change and preparations are required for a number of tactics, but overall, you will take on the management of defined populations for a specific prepaid fee. Operationally, you will need a network of Care Teams, ability to establish a solid pre-existing cost for the historical services delivered for the defined population, and the predicted price of future care. I have outlined a number of strategic choices. As a leader ask yourself where you see healthcare going? What is your organization doing to prepare? And is your organization in denial or is it ready? Tweet Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group has been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based...

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