Business Drivers and Market Forces for Healthcare Payors

I was recently, working on a business case, so, by popular demand, I am presenting "Business Drivers and Market Forces for Healthcare Payors"

A. Transition from Volume to Value (V2V) based reimbursement system

1. Payers should not require primary providers to meet rigid certification or accreditation standards in order to participate in improved payment systems (such as ACO models) that improve outcomes or reduce costs
2. Payers should phase in changes to support the changes in primary care
3. Payers should make bundled payments to provider organizations and partnerships that demonstrate the capacity and expertise to manage the full episode of care and associated patients
4. Payers, providers, regional collaborators and other organizations should take steps to facilitate the transition of bundled payments, including public reporting about the total cost of care, providing technical assistance to providers, and making transitional changes to payment systems
5. Pilot projects for new payment systems should be designed to gain experience with care changes that will both improve quality and reduce or control costs

B. Bring the Individual and Family plans for specific markets under the volume to value structure

1. Such as Healthcare.gov
2. State Exchanges 

C. Evolving patient needs require localized and flexible provider-networks / products

Democratization of Healthcare: Population Health Management As A Business

What's Up With Healthcare Analytics?

• Increasingly there is talk of need for healthcare analytics. 
• We understand analytics but what is the healthcare analytics for? 
• What is analytics supposed to provide in healthcare - for who and for what? 
• Analytics by definition is required to provide actionable insights, i.e. data driven decision making. Needless to say, this is both art and science. But is it just that? 
• Guess what: big named companies are selling solutions that claim healthcare analytics that cost an arm and a leg for Hospitals; Hospitals that are already at 15% revenue loss Y2Y

What's My Interest

As I am doing my MBA from New York university's Stern School of Business, I am specializing in Corporate Finance, Strategy and Operations. After considerable research I have come to the conclusion that Democratization of Healthcare requires running Healthcare As a Business. To that effect one needs to recognize that undoubtedly many healthcare institutions, i.e. hospitals (providers) are indeed failing to be profitable. This is despite the advent of Accountable Care Organizations, which is a Top 3 CMS innovation agenda. This is grave matter because according to a recent Harvard University study, Medical Expenses is #1 Cause for Personal Bankruptcy. The caveat of this study is that 78% of the people had health insurance. Other than the argument that those people gambled away their health insurance, the key lies in understanding the following in this prescribed order:

1. Healthcare Reimbursement in Current World 
2. Triple Aim in Healthcare – the vision 
3. So, there is need for Healthcare Payment Reform 
4. Analysis of different Healthcare Payment Models 
5. Issues with choosing an ACO Model of Choice 
6. Revisiting ACO Model Analysis (Risk and Reward) 
7. Why is it tough to select ACO Model of Choice 

So, here is my latest installment on Democratization of Healthcare: Population Health Management As A Business

Introduction

While I am not giving the strategy outline itself, my intent it to make those in hospitals aware of key strategy tenants to solve the puzzle of how to make ACOs successful or how to design and implement Population Health Management. 

• There are more than 400 ACOs in the country but fewer than 10% are profitable. 
• Does this mean that ACOs are not going to be successful? 
• If ACOs are a failure than how can Population Health Management ever be successful? Considering that the operating principle of ACOs is the underlying element of Population Health Management. 

Strategy Tenants for Making ACOs Successful

http://www.ihi.org/Engage/Initiatives/TripleAim/pages/default.aspx

Issues confronting ACOs:

• There are many ACO Models as choices 
• Where to start? 
• How to design the ACO Model? 
• What Metrics should be used in deciding the ACO Model of Choice? 
• The main issue: How to decide what Metrics should be used? 

If you made the observation, the main issue is the last issue. However, most hospitals get stuck in the middle and jump to conclusions about the best approach to take for implementing whether ACO or Population Health Management and as a result encounter failure with the operations plan. Simple metric such as Per Member Per Month or alike do not suffice strategy planning. 

• Isn't the operations plan derived from strategy? 
• Isn't the main issue the lack of a well defined / well thought through strategy? 

Bottom line:

• We need more Accountable Care Organizations 
• But, Need a cost efficient solution for Providers and Payors 

Conclusion

As always I enjoy writing my blogs. Healthcare is a business. A business that measures primarily on two dimensions: (a) quality of care, and (b) cost of care. Healthcare is an interesting industry because it is multi-faceted. The patient gets service at a hospital or by a physician. The patient most probably has to pay some out of pocket fees. The physician (or hospital) bills the insurance carrier (payor). The patient is also paying the insurance carrier. The insurance carrier is also getting paid probably by the employer of the individual (the patient). 

If you have interest in learning the specific strategy and supporting operations, feel free to contact me.