A view from the Center

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Innovation through convergence: You cannot do it alone

Steve Jobs once said that he modeled his business after The Beatles. But, it wasn’t their lyrics or their songwriting that captivated Jobs. According to him, he was impressed by the way the four musicians complemented one another – they “kept each other’s kind of negative tendencies in check.” It was this synchronization of character and personality that made Jobs realize that “great things in business are never done by one person, they’re done by a team of people.” Jobs was known for hand picking the best-of-the-best to team together and come up with innovative solutions to big problems.

Today, we may need the same approach in health care: Businesses and leaders who team together to tackle the problems that have long baffled the industry. And, the lesson Jobs took from The Beatles can be just as applicable in health care. When it comes to providers and health plans who collaborate to form provider-sponsored plans (PSPs), generally the rule is: you cannot do it alone.

PSPs are not a new concept. While some PSPs are market leaders, many have not yet reached scale. Despite this scale issue, several factors are making now a good time for health systems to consider launching or growing one, including potentially:
• Capturing market share from the growing individual, Medicare, and Medicaid segments
• Breaking the constraints of fee-for-service (FFS) payments by using risk to align incentives around outcomes
• Creating innovative models of care
• Preparing to succeed under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)

Deloitte has looked at how PSPs perform financially in the past. In Provider-sponsored health plans: Positioned to win the health insurance market shift, we found that PSPs can be financially successful, their core line of business can influence profitability, and their scale and tenure can boost profitability. Recently, we wanted to understand how these concepts are being applied to PSP organizations that are currently in operation. To do this, we convened executives from nine health systems, health plans, PSPs, and other organizations for a day-long discussion on PSPs. We also spoke with executives from national health plans who partner with PSPs.

Five themes emerged from the conversation, which we outlined in Collaboration meets innovation: Executive perspectives on provider-sponsored health plans:

So you want to build a PSP
Running a PSP can be complicated and generally requires that health systems add capabilities. They often require significant capital investment and health plan expertise – expertise that few health systems have in house. But, it’s not enough to just hire a former health plan executive, according to one of the participants. Organizations likely need many competencies to run a PSP, including those related to insurance, investments, and supporting technologies.

PSPs can not only be attractive models for health systems to consider as they look to scale up, better manage population health, and potentially take advantage of MACRA bonus payments and incentives. Many health plans are leveraging PSPs as a new growth channel for their own business or are using it as an opportunity to push their VBC-related collaborations with health systems further along the risk spectrum. But, the health plan executives generally agreed on two critical points:
The market conditions have to be right. Markets with “enough population” for scale; a generally healthy demographic that would benefit from prepaid, well-managed care models; a low penetration of Medicare Advantage or Medicaid beneficiaries in managed care; low unemployment; and a vibrant business community are generally considered more attractive markets for these kinds of collaborations.
Health systems with which health plans collaborate to form PSPs must have desirable characteristics. Organizations that are willing to bear additional financial risk and focused on population health; are market share leaders, have significant delivery system assets, strong leadership, strong financial performance, and positive reputation; and are compatible and forward-looking may make more attractive companions in these types of arrangements.

Especially relevant today is the conversation around MACRA. Many of the executives we spoke to said that as health systems develop strategies for new risk-bearing arrangements and value-based care models, MACRA is expected to play an important role in the planning process. Some even believe that MACRA will accelerate health systems’ adoption of financial risk-bearing arrangements and increase their appetite for launching a PSP.

There are plenty of examples to look to for lessons learned. Examples of collaborations for PSPs include Anthem’s partnership with Aurora Health Care in Wisconsin and Aetna’s partnership with Texas Health Resources. These partnerships leverage the health plan’s capabilities and resources, and the hospital’s brand and care management skills, thereby solving the challenges some health systems face in trying to build their own plans.

What is common among all of these examples is that, generally, no one person or organization is attempting to solve the issues confronting health care today. It is the teaming approach and bringing together the complementary skills and assets that may allow these health care organizations to succeed with new approaches to care delivery and payment models. But, take it from Jobs: don’t go at it alone.

Read the entire Health Care Current here and subscribe to receive weekly updates.

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Author bio

Bill Copeland, Vice Chairman of Deloitte LLP, is a 27-year Deloitte veteran and leads the US Life Sciences & Health Care Practice. Previously, Bill was practice leader for the health reform initiative, focused on serving clients’ needs around the incredible changes resulting from the Affordable Care Act. He was also National Managing Director of our Life Sciences & Health Care Industry Consulting Practice and managed the Health Plans Consulting Practice.