Top Ten Tech Trends 2018: Are the Lines Between Provider and Payer Organizations Beginning to Blur? To Some, That Would be Progress

Sept. 4, 2018
As physician-based and hospital-based organizations plunge further into risk-based contracting, managing the contracts and the processes is turning out to be highly challenging for everyone.

Editor’s Note: Throughout the next week, in our annual Top Ten Tech Trends package, we will share with you, our readers, stories on how we gauge the U.S. healthcare system’s forward evolution into the future.

As the shift from a volume-based to a value-based U.S. healthcare delivery and payment system moves forward—albeit unevenly and not as quickly as some would like—some of the lines between what providers and payers do are inevitably beginning to blur. Industry experts and observers say that blurring will necessarily have to occur, as provider organizations take on more risk. Indeed, many believe, the only way to wring significant savings out of the healthcare delivery system is to compel the acceleration of risk, headed in the direction of partial or full capitation.

These ideas are far from new; indeed, they’ve actively been discussed for decades, including by leading industry lights. What’s more, some industry leaders believe that full capitation will become necessary—among them Brent C. James, M.D. and Gregory P. Poulsen. Those well-known healthcare industry leaders argued as much in “The Case for Capitation,” which appeared in the July-August 2016 issue of the Harvard Business Review. Arguing forcefully for full capitation, they wrote in that article that, “[U]nder the prevailing payment models, which are based on volume of services, providers often don’t receive any of the savings from waste reduction, which undermines both their financial health and their ability to continue to invest in such efforts.” Instead, they said, “The solution to this quandary is to change the way businesses, government, and other purchasers pay for health care to population-based payment. Under this approach, providers receive a fixed per person (or ‘capitated’) payment that covers all health care services over a defined time period, adjusted for each patient’s expected needs, and are also held accountable for high-quality outcomes… It also ensures that providers receive enough of the savings that they can afford to fund the changes needed to bring down costs.”

How the shift to capitation plays out may in fact depend to some extent on what business combinations emerge in the next few years. That said, speaking of the metro Boston and Massachusetts healthcare market, which is in the midst of a great deal of consolidation activity right now, “I think there’s been a definite blurring of the lines” between health insurers and providers, says Barbara Spivak, M.D., president and CEO of the Mt. Auburn Cambridge Independent Practice Association (IPA), a 500-physician organization that participates in a variety of value-based contracts in the area. “You have Partners HealthCare buying Neighborhood Health Plan, a Medicaid plan, and they got rid of the Medicaid and made it commercial. And then it became the insurance plan for their 100,000 employees. That’s a blurring of the lines. And on top of that, they’re trying to buy Harvard Pilgrim, and you presume that they want the geographic distribution to help them to extend into Rhode Island, New Hampshire, and Maine, where Neighborhood isn’t licensed there.” The dizzying combinations and recombinations are scrambling markets like Boston’s, she notes, and forcing physician groups in particular to have to think proactively about how they will succeed in an emerging world of hybrid organizations. Indeed, in some markets, like Pittsburgh, where the 20-plus hospital UPMC health system dominates that market, the fact of that organization’s having a strong provider-owned health plan is helping the overall UPMC organization to innovate quickly around population health efforts.

Barbara Spivak, M.D.

Indeed, some of the moves that the leaders of patient care organizations have been taking have been in response to more aggressive moves by health insurers.

“Payers have ratcheted down hospital payments by creating policies with an eye toward providing care at less-costly locations, designing health plans that put more healthcare utilization costs on members and by replacing fee-for-service payments with value-based contracts. Providers have also teamed up with insurers in partnerships that look to offer better outcomes,” Les Masterson wrote in an article in Healthcare Dive online back in November. “Insurance companies have created policies, designed plans and narrowed provider networks to bring down healthcare costs. They’ve shown success. Expect payers to accelerate those programs and policies and search for more cost-saving levers in 2018. The most public example of health insurers cutting costs over the past year was Anthem’s policies to not pay for unnecessary emergency department visits or imaging services at hospitals. Anthem’s policies looked to nudge patients to less costly outpatient facilities, including urgent care centers and freestanding imaging centers.”

Provider Organizations and the “One Foot in the Boat, One on the Dock” Problem

In many cases, patient care organization leaders are creating provider-sponsored health plans, as well as diving into a variety of risk-based contracts, including accountable care organization (ACO) contracts, bundled-payment contracts, and others, in order to maintain some control over referrals, etc., while still moving ahead into enhanced efficiency and cost-effectiveness. Still, there is great complexity in managing the situations that arise as patient care organizations involve themselves in a variety of different contracts. Looking at the landscape around all this, Shawn Griffin, M.D., vice president, clinical performance improvement and applied analytics at the Charlotte-based Premier Inc., says, “We think that cooperating on price and quality should be the focus.”

Shawn Griffin, M.D.

What’s complex, Griffin says, is how some of the financial and contractual relationships impact productivity and output, he says, referring to value-based contracts. “With some of these combinations, you start to see mixed affiliations. If you have a payer who owns some providers, how do they treat the ones they employ versus the ones they don’t employ? The whole picking teams thing can be very divisive. And some of these groups have existed within silos in the industry. Now, when you combine providers, payers, etc.—a lot of organizations have concerns when they sit down with an insurer that owns a lot of providers, or owns an analytics shop. I don’t think that we necessarily believe there’s a silver bullet with one magical algorithm to save the day. I think it’s going to be people working together to work with innovative models and collaborations, so that we can help people, but not at the expense of the people delivering care.”

Another Piece of the Puzzle: Narrow Networks

Of course, all of these developments are taking place against a backdrop of attempts by the purchasers and payers of healthcare to rein in the escalating overall costs of the U.S. healthcare system. One accelerating strategy on the part of health insurers? The creation of narrow networks. “As much as we want the collaboration,” says Dr. Griffin’s Premier Inc. colleague Steve Valentine, vice president of strategy and advisory consulting for the company, “the competition is clearly heating up, and inpatient volume has gone flat, and more is moving to ambulatory side, and we’re seeing more payers creating and expanding narrow networks and tiered networks.” “Maintaining the network enables you to better collaborate on and coordinate care. It’s the collaboration to make sure you’re sending patients to a good acute-care space, not simply, here we have a coupon,” Griffin adds.

Meanwhile, it’s a challenge to support all of these different contractual arrangements with data analytics and clinical performance improvement processes. “I was at an organization with 2,000 physicians, and only 10 percent were employed, before I came to Premier,” Griffin says. “There are things that can be done to facilitate the transfer of care and efficient delivery of care, when you’re on a single platform, but that’s more because of the EHRs [electronic health records] being siloed.”

And, of course, this entire landscape may be altered by the decision of Seema Verma, Administrator of the Centers for Medicare and Medicaid Services (CMS) to announce, on August 9, a proposal dubbed “Pathways For Success,” which would remove the traditional three tracks in the Medicare Shared Savings Program and replace them with two tracks that eligible ACOs would enter into for an agreement period of no less than five years: the BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk; and the ENHANCED track, which is based on the program’s existing Track 3, providing additional tools and flexibility for ACOs that take on the highest level of risk and potential rewards. That proposal has received very mixed reviews among patient care organization and ACO leaders.

The jury is out as to whether that proposal will end up stimulating an acceleration in ACO participation, at least in the MSSP program, or cause providers to flee MSSP. But the signs are clear: the purchasers and payers of healthcare are determined to push providers further into risk.

The question, industry experts and observers agree, remains how quickly the leaders of patient care organizations can move into and through clinical transformation and organizational performance improvement, in the emerging heterogeneous landscape—the classic “one foot in the boat and one foot on the dock” environment that is being referenced constantly now—to navigate towards success in the next few to several years. And that is a question with no ready answer right now—only a laundry list of challenges and complexity.