SAN FRANCISCO — As risk-sharing models continue to hold across the industry, hospital leaders are being forced to look deep within their organizations and figure out how to orchestrate deals that meet their needs and match their capabilities.
In some cases, that means working with insurers to iron out shared savings arrangments; in other cases, it may mean launching a provider-owned health plan. Frank Williams, CEO of consulting firm Evolent Health, was on hand yesterday at the Health Forum–American Hospital Association Leadership Summit to help hospital leaders figure out which approach may work best for their organizations. He pointed to one study showing that the average health system is earning about a 3 percent margin. By 2020, that number could flip to the negative for those who stick to the status quo.
"There is a cost to just standing pat and continuing to do what you're doing," Williams said. "I think that's why we are seeing a lot of innovators and leaders begin to move and say, 'we can't tolerate this because it won't fund our mission,' and so we've got to look at a new way of getting paid or a new way of delivering value."
Williams pointed to another study, predicting that close to 90 million people will buy their insurance off of exchanges by 2018. Health systems are uniquely positioned to offer their own products to shoppers with their strong local brand name, well-formed networks, trusted culture and mission, access to all data from patients, and the ability to integrate care. Williams pointed to a few key characteristics that health systems should have in place to excel at this:
- Sufficient scale to support the investment in the required infrastructure
- Population health performance integrated with the provision of care
- A network aligned with the value-based model
- Financial and administrative management to support value-based payments
- Technology that drives workflow through the continuum of care
- A physician-led structure across the system
That doc-led nature, in particular, is critical to provider-owned health plans. He gave an example of one such organization that was losing millions each year on its plan, despite its dedication to population health. Yet, by enhancing its alignment with physicians, the institution improved outcomes and recorded a $16 million year-over-year gross margin improvement, paving the way for a statewide expansion of the offering.
Those who don't have those components or the proper scale — Williams says 50,000 lives is a good place to start — are finding ways to partner with payers on shared savings contracts. Others, meanwhile, are joining up with larger networks to gain the benefits of consolidation without the headaches, perhaps piggybacking on a provider-owned plan. Whatever route your hospital decides to go, don't underestimate the importance of culture, he adds.
"My one warning is [that] I don't think you just sort of paint a different sign and assume that the organization is going to change with it," Williams said. "When you look at the best organizations in pop health, it is all about culture. And so, how do you take the strengths of your existing organization and the mission and values, but also translate them to a way that you're really innovating and doing some things differently? My big suggestion is: Don't take this part of the equation lightly, because I think it is incredibly important."