Unrelenting waves of change in today’s health care world are prompting those within the industry to take control by steering their own course.Providers and payors are choosing convergence to satisfy the mutual need to reduce costs and sustain operations, and to extend options for quality care.
Cost and care concern both sectors
Both sectors are affected by many change elements — health care reform, regulation flux, Medicare and Medicaid reimbursement declines, looming moves from a fee-for-service to a value-based model, and shifts in patient population and demand.
Much of the result of these changes comes down to a struggle to maintain a financial foothold. A macro look at the U.S. health care system as a whole reveals that patients here are spending more on health care services than those in many other developed countries — almost four times what is spent in countries such as Israel. And for the health system itself, multiple factors have squeezed margins, and reimbursement has not kept up. Indeed, it has backed off.
While the spending tide is rising, it is not lifting all health care. Life expectancy in this country is actually significantly lower than in many of the countries where cost is less. Greater spending has not led to greater health. For the sake of patients and industry alike, costs must be brought under control and health care delivery must be made more efficient.
Sectors consider business implications
Beyond the change elements that affect providers and payors in common, each sector faces additional implications.
Providers are monitoring:
- How quickly CMS will move to accountable payment models
- States’ decision to participate in the Medicaid expansion program, which will help determine the number of uninsured people
- Sign-up through the exchanges by uninsured people, unrelated to whether a state participates
Payors are monitoring:
Sectors unite in solutions
Modification of insurance products
Composition of the insured population
Evolution of provider reimbursement arrangements, from fee for service to value based
Provider integration, hospital/physician consolidation, expansion of physician practice groups
Timing of key provisions of the Affordable Care Act, impacts on rate and price adequacy
As they formulate their strategies, providers and payors are turning to each other to work together on business issues and care delivery. The appeal of convergence, or vertical integration, is combining financial resources to fund improvements and invest in innovation, and creating stable provider networks. The aim is efficiency — cost-effective coordination of care for policyholders/patients.
Providers and payors choose from potential convergence models:
- Integrated delivery system
- Joint venture/partnership
- Joint sponsorship of accountable care organizations
- Creating bundled payment plans around specified diseases
It takes innovative thinking, as well as challenging the traditional positions on two sides of the care spectrum. One such case was the coming together of a national health plan company and a large health system in the eastern United States. The resulting Highmark-West Penn affiliation demonstrates the success possible in convergence.
- Payor acquisition of ancillary organizations
- Medical management companies
- Pharmaceutical management companies
Sustain, grow and thrive together
With the efficiencies possible through convergence, spending can be reduced and care coordinated for improved outcomes. With the efficiencies possible through convergence, spending can be reduced and care coordinated for improved outcomes. Read more about ways to create scale and competitive advantage: “Provider/payor convergence: A prescription for growth?” and “Convergence holds allure, risk, governance complexity for providers and payors.”
The provider/payor convergence: A panel discussion that shines a light on the pros and cons of convergence webcast panel members:
Anne McGeorge, national managing partner, Health Care, Grant Thornton LLP
Mark Lastner, managing director, Financial Services, Grant Thornton LLP
Jack M. Stover, shareholder and attorney in the Highmark affiliation, Buchanan Ingersoll Rooney PC
Ronald E. Chronister, specialist/iInsurance industry onsultant and attorney in the Highmark affiliation, Buchanan Ingersoll Rooney PC