High Value Network: Generation 4.0
When it comes to healthcare, two truism’s are that medical costs are going up along with demand for healthcare services. And when it comes to organic growth of healthcare volume and expenses, government programs represent a major driver, particularly when considering that on a daily basis thousands of baby boomers age into Medicare. During the last several years CMS has published a number of demonstration programs which are intended to improve the quality of Medicare patient outcomes while promoting financial efficiency on a unity cost or per procedure basis.
Commonalities among the various demonstration programs include: providing financial incentives when providers and plans (through STAR ratings) achieve specific quality and financial metrics, that when properly implemented, result in improved patient outcomes at a reduced cost. Not surprisingly, the discussion among many health plans has started to focus on how to manipulate the size and inherent “quality” of provider networks to achieve performance gains.
The concept is not new, in that payer efforts at developing “Centers of excellence”, proprietary physician networks, private label networks, etc., have been around for at least two decades. These efforts were driven by market considerations, provider availability and consolidation, expectations around consumer demand and use of services. Many times high cost hospitals were screened out and networks were defined by the plan offering, e.g.. PPO, HMO POS and the like. Provider price concessions were expected in return for volume. Provider performance, at least as defined by improved patient outcomes, was not a major consideration in the design of these networks.
At least not until now. Given the current climate of healthcare reform, shrinking payer margins, provider flight from Medicare, percentage declines in medical school enrollment and CMS initiatives to constrain medical expense through improved coordination of care and elimination of unnecessary procedures, Medicare Advantage, Medicaid, and commercial health plans are exploring how the design of networks, around performance, can lead to better patient outcomes and better managed financial costs. Thus, the approach to network design is shifting way from preferred pricing in exchange for volume to a network design strategy focused on horizontal and vertical integration, superior treatment outcomes, more efficient use of resources as well as a willingness to share in financial risk. Population management strategies, establishment of consensus clinical protocols and reimbursement strategies tied to CMS STAR ratings, as well as additional quality and financial metrics, dictate network performance and thus health plan sustainability.
Tracking the measurement and reporting on agreed to metrics require a level of analytical sophistication that was not apparent in the early days of network design. The development of high value networks suggests that payers and providers must share a common vision for network design and consensus agreement on expectations around network performance. In addition network design efforts will require unwavering leadership commitment to ensure long term sustainability.
In the final analysis high value network design is a partnership enterprise between the health plan, the provider and the patient. Contributing components include health services/medical management, provider contracting, actuarial services, finance, analytics/ decision support and management.
As a diversified health services consulting company the Gorman Health Group is well positioned to become a partner in this effort from start to finish including the development of the most appropriate network design strategy to development of performance payment models to the implementation of the final network including assurances that the final network meets CMS network adequacy requirements. When you are ready, give us a call.
Resources
On Friday, September 26, John Gorman, GHG’s Founder and Executive Chairman together with colleague, John Nimsky, Senior Vice President of Healthcare Innovations, discussed the vehicles for achieving what could be characterized as a reengineering of the health care delivery process and its effectiveness. Access the recording here >>
From ACO-type incentives to bundled payments and contract capitation, to full professional and global capitation — where the potential is promising, we can help design and implement these arrangements. Visit our website to learn more >>
Save the Date for the Gorman Health Group 2015 Forum. Join us April 7-9, 2015 at the Gaylord National Resort and Convention Center in National Harbor, MD. Learn more about the event >>