The lines between payers and providers are increasingly blurred, as provider organizations gravitate to risk-based payment arrangements and payers build primary care capacity that challenges health systems’ success.
That trend was documented in a Healthcare Financial Management Association survey of more than 100 health system CFOs and finance and managed care executives. The survey was conducted in July and August 2021. The Guidehouse Center for Health Insights analyzed the 2021 Risk-Based Healthcare Market survey findings, and the following sections discuss key takeaways.
Risk-based models gain traction
Health systems that have the right financial, clinical, operational and analytical capabilities in place will continue evaluating and embracing risk-based arrangements, said Todd Nelson, director, partner relationships and chief partnership executive at HFMA.
“We believe this will be the case due to the need to align the payment incentives with the outcome-based approaches needed for cost effectiveness of health,” he said.
Indeed, nearly 60% of health systems responding to the survey plan to advance into risk-based Medicare Advantage models this year; in 2019, just 51% of provider organizations were doing so.
Beyond Medicare Advantage, health systems are diversifying their risk-based payment strategy with a broader array of business lines. Guidehouse partner Richard F. Bajner Jr., who leads payer and provider teams within the company’s Health segment, said systems are increasingly interested in owning the premium dollar through risk-based arrangements to counter the vertical integration strategies of major insurers.
“Large payers have been more aggressive in building and even investing directly in primary care assets to gain control over the flow of care and better manage services delivered to members, compounding the need for payers and providers to align closely on market strategies,” Bajner said.
“These moves have led health systems to gravitate toward programs more favorable for risk-based collaborations — or payvider models — such as Medicare Advantage, managed Medicaid and self-insured models.”
Vertically integrated health plans loom large
More than half — 52% — of survey respondents cited vertically integrated health plans, such as UnitedHealthGroup, as the single market disruptor creating the greatest barrier to their success. In a distant second place, consumer-facing organizations such as Apple, Amazon, CVS and Walmart were cited by 17% of health system respondents.
Indeed, while health systems are attracted to payvider opportunities such as Medicare Advantage, managed Medicaid and self-insured models, 50% of survey respondents said strategic relationships with payers are the top challenge in pursuing them.
Traditional payer and provider relationships have taken a hit in this evolving market, but Guidehouse sees great potential for payvider models that create value for both entities, said Travis Sherman, director in Guidehouse’s Health segment.
“The one-size-fits-all, ‘I-win-you-lose’ approach is no longer a good business model,” he said. “Industry disruption has created new opportunities for health systems to rethink the structure of their payer and provider partnerships, reassess their markets for new entrants with a willingness to innovate together and readjust their network strategy to align with where their market is going.”
Savvy organizations are well-positioned to adjust to changing conditions. “Health systems have a long history of developing, evaluating and thriving under partnership arrangements,” HFMA’s Nelson said. “They have consistently evaluated community need to determine what is the best for the health of the population.”
Top external challenges with pursuing payvider models or increased levels of risk/capitation/joint venture arrangements