A New Business Model for Provider Organizations
Greg Scrine, Senior Vice President, Lumeris Advisory Services
Ricky Garcia, Vice President, Lumeris Advisory Services
Ever-growing healthcare costs and the recognition that one-third or more of US healthcare spending is unnecessary, wasteful, or inappropriate have resulted in pressure on healthcare organizations to cut costs without harming quality. Despite the political changes that are taking place today, there is bipartisan, bicameral support behind the transition from volume to value in healthcare. While some value-based care programs may look different in the future, the value-based care movement is here to stay.
This much is certain: business models for provider organizations have been slow to evolve. How can health systems and physicians adapt to these pressures? The answer is to re-engineer healthcare organizations into a business model that enables population health management (PHM). That new model is the population health services organization (PHSO).
A PHSO maintains a portfolio of people, programs, and health interventions that allow provider organizations to succeed in value-based payment arrangements. The primary goals of a PHSO are to create a bridge across the traditional payer-provider divide and support physician led-teams responsible for managing and coordinating primarycare.
In this document, we seek to articulate the “how” with regard to creating and operating a high-performing, provider-driven PHSO. We draw on Lumeris’ more than 10 years of experience in partnering with providers to redesign care delivery models, operating a health plan, and building information systems solutions.
We’ve found that five components are essential for a successful PHSO. Each of these components must exist simultaneously and be operationally ingrained for a PHSO to achieve care improvement and financial objectives.
Five Essential Components of a Provider-Driven PHSO
- Clear vision, leadership, and organizational infrastructure
- An engaged and high-performing physician network
- A robust and adaptive care management program
- Meaningful value-based contracts serving covered lives at scale
- A comprehensive and functional PHM information system
I. Vision, Leadership, and Infrastructure
A strong sense of direction and a supporting organizational model are key prerequisites for building and operating a PHSO.
To achieve transformational performance leaps, leaders must develop a vision ambitious enough to inspire their physician community. While ambition is a relative term, experience suggests a viable, five-year vision is one that has the PHSO serving at least 100,000 members representing $500 million or more in health spend.
Think Provider-Driven for All Payers, All Populations
Achieving practice density (a meaningful number of covered lives in value-based models within a PCP practice) almost always necessitates a vision that is all-payer and all-population capable. Providers are in the best position to build and operate the singular care management organization, align on common performance measures, manage unified contracting structures, and develop coherent, compelling provider incentive structures that mark a successful PHSO.
Make Physicians the Focal Point
A successful PHM effort is predicated on fundamentally changing the thought processes used and choices made by physicians. As such, a PHSO must be physician governed and led. The goal is to create a governing body for a PHSO that is transparent, balanced, unbiased, and trusted.
Consider a Dyad Model
Moving from vision to operationalization requires leadership excellence. A dyad model pairing an accomplished physician executive with a non-physician management executive enables a PHSO to benefit from diverse and complementary leadership skills. The dyad model also creates more leadership capacity and builds partners for collaboration in what is a complex, ambiguous, and evolving clinical and financial organization.
Decide on a Risk-Bearing Entity
A key decision that should be made early on is determining where the performance risk in a value-based contract is going to be held. While there are many possibilities, risk is generally held either directly by the provider organization or placed with a new entity created for that purpose that may include multiple owners.
The movement toward PHM requires broad understanding and community buy-in. Once the vision has been articulated and agreed to by senior leaders, begin cascading that vision and describing the path forward to key constituencies, including physicians, employees, partners, associates, and the community.
II. Engaged, High-Performing Physician Network
Integral to assembling a high-performing physician network are selecting the right structural model, choosing the right partners, and engaging them in practice transformation.
Choose a Physician Organization Structure
Although other models exist, a network of clinically integrated providers is the most practical and attractive option for most health systems seeking to create a PHSO that can legally negotiate on behalf of its provider members. The structure must hew to federal rules regarding clinical integration to avoid violating antitrust laws.
Select Physician Partners
The physician partners in the network will directly drive the bulk of utilization decisions and influence health outcomes the most. For this reason, the network should be composed of high-performing practitioners that share a common vision for better care at a lower cost. Identifying and selecting the right group practices or physicians is market specific and varies based upon practice characteristics and service area considerations.
Build the Physician Network
A small, dedicated field team—that includes at least one physician—should lead provider recruitment activities. All conversations should be deliberately planned and sequenced. Initial discussions focus on the PHSO vision, value proposition, planned network design and composition, and new care delivery programs. Subsequent conversations dive into specifics regarding how the PHSO will impact the physician and practice and ultimately describe implementation expectations and outline contractual obligations.
Enable Practice Transformation
A PHSO must engage physicians and their teams in adapting their daily routines to realize the benefits of population health management. A proven approach is to assign a dedicated “accountable care team” (ACT) specialist to each practice. ACT specialists are typically non-clinicians who are experts at integrating accountable primary care delivery models into provider practices. Other essential activities to enable practice change include developing governance and leadership, adjusting value-based compensation, analyzing workflow, reinforcing utilization of technology and clinical tools, managing change initiatives, coaching physicians and their team members, and evaluating practice performance.
III. Robust, Adaptive Care Management Program
Employing an effective care management capability is an essential element in driving a PHSO’s success.
Offer the Essentials
The primary objective of care management efforts should be to build a singular programmatic function that is closer to the delivery of care and will serve all populations and payers. At the outset, essential care management programs include complex care management, transitions of care, pharmacy management, and quality management. The care management program should expect to become more sophisticated over time in order to position the PHSO to succeed as more lives are covered under two-sided or full-risk contracts.
Evaluate Staff Requirements
Determining appropriate staffing levels is contingent on developing a five-year roadmap of covered lives by line of business, level of risk in the contract, and alignment with existing initiatives. The factors used to determine staffing requirements vary depending on the care management component. For example, pharmacy management resources are a function of covered lives, while care transitions resources are based on discharge volume.
Chart a Care Management Course
Each care management component should have its own playbook that defines the program vision and its supporting activities. These playbooks typically include the program’s purpose and objectives; target patient population and stratification approach; enrollment criteria and process; care workflows; and operational performance metrics. Beyond the playbooks, a care management program needs standardized assessments, care plans, intervention descriptions, call scripts, and education materials.
Calibrate to the Opportunity
All care management programs share common foundational elements, however each program must be tailored to the specific populations under management and their supporting value-based contracts. PHSOs should analyze claims, EMR, lab, pharmacy, and other data sources to identify opportunities to improve its care delivery model. These opportunities should focus on capturing out-of-system spending, enhancing care coordination, reducing unnecessary utilization and duplication of services, and identifying new offerings to fill unmet patient needs.
Apply PHM Analytics
PHSOs should have dedicated data scientists and clinical informatics experts who have a core competency in applying analytics in population health management. They should be able to aggregate data from disparate systems, evaluate medical and pharmacy claims data, report longitudinal cost and utilization data, and create comparative databases. A PHSO must be able to prove the effectiveness of its interventions and demonstrate results to internal and external stakeholders.
IV. Meaningful Value-Based Contracts
PHSO success requires finding the right payer partners, defining target populations, and developing a strong deal-making strategy.
Assess the Payer Market
Payer readiness and willingness to move toward value-based contracts varies by market. To determine which payers offer the most potential, the PHSO should gather intelligence on insurers’ existing value-based contracts and hold exploratory conversations with them to gauge their interest. Each payer should be evaluated on their willingness to partner and strategic value to the PHSO.
Formulate a Covered Life Strategy
All PHSOs should develop a roadmap outlining the populations—by payer and line of business—that will be managed over a five-year period. This is an essential planning tool as it feeds financial projections, helps set and communicate expectations, and shapes the care management resources and programs the organization will provide.
At the outset, PHSOs should typically focus on populations for which they bear financial risk (e.g., a self-insured employee and dependent plan or lives under a provider-sponsored health plan). In addition, most PHSOs should consider Medicare Advantage and commercial populations as near-term targets. It’s best to hold off on the most difficult-to-manage populations (e.g., Medicaid) until the organization has matured.
Map Out Deals
The task of designing and evaluating all value-based contracts should fall to a deal team created by the PHSO. This team should outline preferred contracting structures and parameters in advance of entering into payer conversations. If a payer has a baseline shared savings contract, the panel should analyze it and determine the payer’s willingness to customize the arrangement. Before entering into a contract, the PHSO should ask payers to build a financial model based upon preliminary attribution.
V. Comprehensive, Functional Information System
The PHSO and its staff must be backed up by robust technology that supports numerous population health management needs.
Set a Vision and Define Functional Requirements
The goal for a PHSO’s information system must be to establish a core system of record for an individual—a single source of truth about a patient’s entire consumption of healthcare and their medical condition. To meet this goal, the information system must be able to perform three functions—aggregate data from multiple sources across the care continuum, enable automated workflows, and provide advanced analytics. Care teams can also use the information for reviewing comparative performance and sharing best practices.
Establish Data Governance and Dedicated Resources
A PHSO needs to have a core group of business and information technology leaders who serve as the data governance team. This group must be empowered to evaluate and make system selection decisions. PHSOs should also assign dedicated resources (e.g., an executive, project manager, and data steward) to lead and manage implementation activities.
Conduct an Environmental Scan
The data governance team should conduct an environmental scan of all existing data sources, platforms, interfaces, and partners that are relevant to PHM efforts. The research must also include a careful delineation of how individuals may be accessing and using relevant data.
Set a PHM Technology Strategy
Armed with a vision, a set of functional requirements, and an environmental scan, the data governance team should then define an overall PHM technology strategy. Common strategic questions include: Is this a green field project for the organization? Should the PHSO consolidate to a smaller universe of vendors and fill gaps as needed? Or does the organization need to do a full rip and replace?
Adopting the PHSO model allows physicians and health systems to bridge the traditional payer-provider divide and build the capacity to take on performance risk and transform the practice of medicine in a way that improves care quality and keeps cost growth in line.
For more information about how to create a high functioning population health management capability for your organization, please contact any one of the following:
Senior Vice President, Lumeris Advisory Services
Vice President, Lumeris Advisory Services
ABOUT THE AUTHORS
Greg Scrine is a senior vice president with the Lumeris Advisory Services group within Lumeris. Greg leads client advisory teams that work with a broad array of health system, physician, and payer organizations that seek to transform their business and clinical models to excel under population health management value-based arrangements. Greg has pioneered the strategy, design, and creation of population health service organizations for notable provider and payer organizations across the country. With more than 20 years of healthcare experience, he brings a deep understanding of healthcare organizations and a practical perspective to rapidly advance clients on their value-based journey.
Ricky Garcia is a vice president with the Lumeris Advisory Services group within Lumeris. Ricky is a healthcare strategy professional with more than a decade of experience delivering advisory services to hospitals, health systems, and physician groups. His areas of expertise include all aspects of developing a population health service organization, including deploying clinically integrated networks, operationalizing care management programs, and designing value-based contracts.