Value-based partnerships between payers and providers have long been tested and launched in pockets within the industry. But today, the rules of the game are changing across all lines of business. Providers and payers need new business models to generate margin, growth, and a competitive advantage.
It’s time to normalize payvider models.
The term “payvider” has been used for several years in multiple ways. Payvider models are strategic risk-based payment or joint ownership arrangements between payers and providers that are intended to profitably grow and retain members by offering excellent services.
A payvider can take on a few different forms from provider-sponsored health plans to employment of physicians by national payers or long-term risk-based payer/provider contracts. These models have quickly become the preferred method to incentivize payers and providers that demonstrably improve member health outcomes and experiences at lower costs.
For example, Phoenix-based Banner Health and CVS Health business Aetna have been working together on value-based care models for years, forming a joint venture health plan in 2016. In February 2021, the Banner|Aetna plan announced a long-term agreement to extend its joint venture relationship, citing an average cost savings of 8%-14%, improved member experiences, and growth to approximately 350,000 members.
According to Michael Nugent, partner at Guidehouse, “Healthcare organizations are at an inflection point. Margin is moving to the beat of the market, risk-based payment, and consumerism. Where an organization is positioned in their market greatly influences their business model.”
So, which markets are ripe for payviders?
To help payers and providers broadly understand where they can most effectively uncover opportunities for payvider models in their markets, the Guidehouse Center for Health Insights developed the Payvider Market Index.
Guidehouse evaluated more than 100 US markets with a population of 500,000 or more based on market size and future growth, as well as current-state value-based payment performance. The Payvider Market Index reveals markets that are ripe for payviders, those with potential for greater scale, and those that need the capabilities to better manage risk.
The Greater Detroit, Miami, Phoenix, and Tampa areas were among the markets with the greatest opportunities for payvider adoption and growth, according to the Index. These markets represent high value-based growth potential given competitive dynamics and demographic/payer changes, with an opportunity to differentiate value-based payment and delivery operations.
For instance, all healthcare organizations need to keep in mind changes coming directly from the Centers for Medicare & Medicaid Services (CMS) and their market’s competitive dynamics. "CMS is aggressively shifting to managed care as its preferred model and private-equity-backed, tech-enabled disruptors are steering business away from poor performers,” said Aimee Sziklai, Guidehouse partner and Commercial Payer leader. “Approximately 40 states are leveraging managed care models to deliver Medicaid services. And Medicare Advantage has become the fastest-growing health insurance market segment.”
There are a few things to know when upgrading to a payvider model.
When entering a contractual or joint ownership partnership, providers and payers must be prepared to both share risk and understand where market opportunities for risk-sharing exist so that they can compete for members.
Additionally, for payvider business models to be successful they need to strategically, financially, and operationally align scorecards to put members first, and have the capabilities to initiate effective negotiations, member enrollment, and point of care transitions, payment, and coordination.
While the Payvider Market Index report is a guide to help providers and payers understand where they can most effectively take advantage of payvider opportunities, Guidehouse is actively working with organizations across the public and private sectors to help them understand their unique market position and capitalize on opportunities that will set them up to best care for their communities.
When done right, payvider models can turn organizations into growth engines that support sustainable margins and better health for all – it’s a win-win scenario for the industry and consumers of healthcare.
If you’re interested in transforming your organization into one designed for growth, read Now is the Time for Payvider Adoption & Growth and get in touch with Guidehouse to design and implement innovative risk-based payment and care delivery strategies.