Ma's Observation

Disclaimer: The views and opinions expressed in this article are solely those of the author for self-study purposes and do not necessarily reflect those of any organization or individual.

As the market moves towards a value based approach, participation in underwriting margin presents a potential new revenue stream for health care providers.

Beyond traditional strategic options like cost management, service expansion, merger and acquisition to improve margin and grow business, to enhance value based care (VBC) capabilities and partner with payers could be an unconventional approach to create value for providers.

Financial Structure

Business Model

Provider and payer share investment in population health, which helps them align a common objective: to promote wellness and help patients prevent illness. This model enables provider to participate in underwriting margin. Therefore, facility utilization will be no longer the key business indicator because of the shift from volume to value. The new focus will be how to improve outcome for at risk populations.

Payer continues to offer insurance expertise, HIT, care management capabilities and analytical insights, which could significantly reduce duplicative administrative costs.

The purpose of the establishing a virtual health plan as JV is to leverage technology to better manage the performance of the delivery system by aligning the interests and capabilities of both partners. JV serves as standalone integration hub between provider and payer providing data integration and analytics, care management programs, workflow and training, contracting/network development, customer services, virtual consultation, cross-sites referrals and appointment scheduling etc.

The benefit of the JV model is to 1) improve patient experience and access by investing in technology such as tele-health; 2) enhance provider productivity by reduction of duplicative capabilities, as well as decrease variation by data sharing and integration with payer, thereby reduction of the potential revenue at risk and claw back; 3) increase policyholders satisfaction / retention due to improved product affordability, and affirm healthcare of the future leadership role of value based care.

Considerations

Provider: need to position the physician enterprise to succeed in a environment of lower average bill size and utilization

Payer: need to quickly get to scale to support change and manage cost structure, a single partner or more multiple partners by different lines of business could be utilized; need to target the right patients to limit margin erosion; need to recognize the varying commercial payers' VBC maturity

Virtual Health Plan (JV): need to develop a consistent approach to managing integration points across partners; need to recognize the sophistication of data standardization, integration and analytics