Finding The New Market Space

By Monica E. Oss, Chief Executive Officer, OPEN MINDS

Over the course of the past three years, the expansion of the health plan footprint in the field has increased. Health plans manage 95% of commercial/employer members, 90% of Medicaid members, and 50% of Medicare members. And enrollment in health plans on the health insurance exchanges now tops 8 million.

But health plan influence isn’t limited to medical and behavioral benefits. Now 24 states have moved to managed care for Medicaid long-term services and supports. And there are 10 states with statewide managed care models for I/DD support services and 8 states with demonstration projects testing managed care models for I/DD.

Health plans are also covering foster care services across many states. In addition, health plans are expanding into managing 988 services in some communities and providing a wide range of social services.

While the market share of health plans and their control on the distribution of spending has increased dramatically, there are other factors to consider. Health plans are increasing their plans to “backward integrate”, owning delivery system capacity. And this move is accelerating because of increasing payer acceptance of the “narrow network” concept in order to reduce health insurance premiums.

In this changing financing and service delivery landscape—and the increasing influence of health plans, executive teams of provider organizations need to develop new strategies for sustainability. They need to find the new market spaces. Fee-for-service reimbursements are not keeping pace with inflation and new “programmatic” relationships with health plans seem to be a better path to financial stability. As a result, the executive teams of most specialty and primary care organizations will need to consider developing new service models for health plans—models that go beyond a fee for a unit of service.

However, creating and managing these relationships has proven to be a challenge for many executive teams. Our team at OPEN MINDS has developed a three-phase approach to moving from commodity-like low margin arrangements with health plans to gainsharing partnerships. My colleague, Dee DeWitt, senior associate with OPEN MINDS, shared his perspectives on this issue in a recent discussion. In his experience, what separates provider organizations that succeed with health plan partnerships is a committed executive team—one that will devote significant time and resources to creating relationships with health plans and building new service models that fit in this changing financing and service delivery landscape.

The focus on the health plan as a “customer” and on managing relationships with variable reimbursement is not common among provider organization executive teams. The perspective of many executive teams is the result of the legacy of a majority of specialty provider organization reimbursement coming from cost-based or fee-for-service state and local service contracts, particularly for Medicaid services. And the pandemic has added another dimension—with workforce recruiting and retention challenges, executives find themselves with little time (or service bandwidth) to devote to developing new payer relationships or new service models.

Mr. DeWitt encourages these executive teams to focus on improving the performance of their organizations and their service delivery—administrative systems, clinical outcomes, and customer experience. “The overall performance of programs must be viewed holistically,” said Mr. DeWitt. “That means the clinical, information technology, authorization, eligibility, billing, finance, and other teams collectively partner to ensure successful payer partnerships.”

Much of organizational performance improvement will involve expanding technology functionality. Customer expectations are changing—and executive teams need to plan for cost-effective automated systems that are interoperable across their service delivery system and with health plans. For the year ahead, Mr. DeWitt recommends that executive teams first focus on assessing the technology platform that they need for successful health plan relationships. Whatever the new functionality and the investment, this will be an on-going process. Executive teams need to keep on top of customer performance expectations and competitor capabilities—and leverage technology to maintain competitive advantage. “Embrace the fact that technology is not only a support to the delivery of care, but also a support to a successful payer partnership. Technology is ever-changing, and ‘continual adaptation’ should become a part of your organization’s lexicon.”

An organizational culture focused on improved performance is key for success with reimbursement arrangements with gainsharing bonuses, performance penalties, and downside financial risk. With those arrangements, Mr. Dewitt recommends that executive teams develop a plan to ‘ease’ into these new relationships. “In the first year of a risk sharing contract, a provider may want to agree to a one-sided risk arrangement,” said Mr. DeWitt. “This means sharing only in savings and in exchange agreeing to a lesser rate. Later, the contractual relationship can evolve to a two-sided risk sharing agreement that has up-side rewards and down-side risk related to client service and outcomes.”

Looking ahead to a health and human service delivery system focused on integrated whole person services, hybrid service delivery, and performance-based compensation, executive teams need to keep in mind the fundamental changes in every market—with health plans as the architects of financing and service delivery. The needs of consumers won’t change—but how those needs are met will change dramatically.