Becker's Hospital Review

46 Executive Briefing: Partnership Opportunities to Meet Reform's Demands Sponsored by: Better Care, Greater Value: New PartnerA history ship Opportunities for Health Systems, of innovation. Insurers and Physician Practices By Rob Langheim and Anne Vars, Kurt Salmon The first ambulatory strategy. The first relocation of an ver the past three campus. The first hospital developments since the entire AMC years, hospital and are accelerating at a pace not seen 1990s. More recently, these partnerships have health system CEOs have become inapplying U.S. health care evolved to include Middle East creasingly focused on closing businessexpertise in thepayors. deals with What will weor other providers physician practices do for you? Insurance companies, faced with pressure to O in search of new growth opportunities, but there increase premiums in a stagnant economy and is some risk that the patients' perspective will be » Strategy the need to cover a greater mix of patients, have lost in this flurry of activity. Hospital, payor and sought to gain physician leaders need to ensure their strategies Assets more predictability over how care » Facility and Capital is delivered by acquiring large physician pracare keenly focused on improving patient care. tice groups and Becoming » Operations is a growing more aligned, together, and Performance health systems. Humana, Cigna and WellPoint have made purchases of physitrend in healthcare affiliations. cian groups, clinics and post-acute care providImprovement ers over the past few years. Insurers including With new payment models aimed at rewarding value created Information Technology » over volume growth, physicians, UnitedHealth Group, Aetna and Blue Cross have also purchased technology companies that hospitals and payors have an unprecedented create health information exchanges and faciliopportunity to align around the interests of patate electronic health record conversion, among tients. In the past, the only way providers and other things. www.kurtsalmon.com payors could share in the value created through better patient outcomes and higher-quality care As an alternative to outright purchase, partnerwas if they were part of a fully integrated proship is also growing in popularity. One recent exvider and financing system. Fragmentation has ample is UnitedHealthcare and North Shore-LIJ thus far resulted in competing priorities for Health System's collaboration to offer several these two sides. tiered benefit plans designed to address accountable care concepts. But with health systems, physicians and payors under significant pressure to reduce costs and Some providers are also working to offer their improve quality, all parties are exploring new own insurance plans, making up an estimated 20 relationships that have the potential to create percent of networks that market an insurance shared value by improving quality, eliminating product, according to a Washington Post article. inefficiencies and aligning shared incentives. InSteward Health Care, a hospital chain based in dependent community hospitals may also feel Boston, began offering its own health insurance enticed to enter into these types of partnerships. plan that will be 20 percent to 30 percent below market rates and cover treatment only in its own Hospitals and health systems can no longer afhospitals. And in Minnesota, Medica, a health ford to wait on the sidelines and miss out on insurer, and Fairview Health Services teamed up opportunities to form new relationships with to form an ACO offering a health plan that will physician groups and insurers. Hospitals and pay for services only in Fairview's seven hospihealth systems deciding to wait to develop these tals and 350 clinics. relationships may lose their strategic positioning in the market and diminish their ability to And this trend is not limited to just hospitals construct affiliations that fit with their strategic or insurers. For example, kidney dialysis giant priorities. Market-leading organizations will not DaVita paid approximately $4.4 billion to acstand still in this uncertain time. quire HealthCare Partners, the country's largest operator of medical groups and physician netRecent trends works with more than 8,300 physicians, in an In the past three years, systems have increasingly effort to persuade the government that it can sought affiliations with each other via mergers manage all its kidney patients' health needs, not and acquisitions to create scale. Further, busijust their dialysis. ness arrangements with physicians and acquisitions of physician groups to increase alignment 4 partnership options From the health executive's perspective, deciding which partnership approach is most attractive is not a simple, clear-cut endeavor, since each market is unique and each partner is different. The value proposition must be apparent to all parties, though the market strategies a provider can pursue may be impacted by the payor with which the provider is partnering. Choosing a partner, deciding on the best partnership model and prioritizing among market opportunities must all occur together. Many hospitals and health systems are expanding their range of services beyond the operation of hospitals to function more as integrated networks that provide a broad array of offerings, including a mix of outpatient and post-acute services in addition to the services traditionally offered by hospital systems. Providers that operate as networks can capture revenue sources from a diverse group of patients, changing their patient mix to add those who need less hospital care. This is essential in an environment that is focused on costcontainment and changing care delivery models (e.g., preventive, palliative and chronic care). Health executives should be looking for this kind of expansion whenever possible. As hospitals and health systems look to the future, there are a number of strategic options worth exploring: 1. Create a health plan. Providers may want to consider offering their own health plan if they can incorporate a large enough patient base to sufficiently spread the risk and have the capital resources to develop and fund a product. Under the old fee-for-service model, physicians and hospitals were incented to grow volumes of patients to admit, perform a test or procedure, etc. New payment schemes are experimenting with economically sustainable ways of keeping patients out of the hospital. Offering a health plan will help health systems align their interests with those of partnering physicians and enable hospitals and affiliated physicians to share in the value created by reducing costs and improving outcomes, helping offset the inevitable declines in hospital utilization.

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