Hello from day two of The 2020 OPEN MINDS Strategy & Innovation Institute. This year, what has been top of mind for many executives attending the Institute is how to adapt your strategy in the current crisis—and how to use innovation to succeed in an altered health and human service landscape.
But one question keeps coming up—where do “value” and “value-based” reimbursement fit in all of this? I think the looming budget deficits will make all payers focus more on the value of what they get for the money spent on beneficiaries. These deficits would also likely propel more use of managed care by Medicaid and Medicare—and more value-based reimbursement that includes more financial risk to provider organizations. My initial thinking about what likely lies ahead was confirmed by Charles Ingoglia, the chief executive officer for the National Council for Behavioral Health, in our panel discussion, Navigating The New Normal With COVID-19 Part 2: An Update On Sustainable Strategies For The Disrupted Market, with David Klements, president and chief executive officer of Qualifacts System and Jon Wolf, president and chief executive officer of Pyramid Healthcare.
How do executives demonstrate the value of their service lines and use their performance data to establish a competitive advantage? How do they leverage that data to get more and better contracts with health plans and other payers? That was the focus of yesterday’s session, Demonstrating Organizational Value To Gain A Competitive Advantage, which featured Joe F. Rutherford, chief executive officer of Gracepoint; and Nicole Lawson, Ph.D., deputy executive director and chief operating officer at Oakland Community Health Network (OCHN).
My big picture takeaway from their comments? Provider organization executive teams need to become experts at “demonstrating” their value as a method for landing new business. They need to understand what data the health plans are looking for; to gather that data and manage their operations to improve that performance; to know the performance of their competitors; and to communicate those performance differences to health plan executives.
Mr. Rutherford spoke from his experience at Gracepoint, which developed a medically integrated collaboration with a local Tampa-area hospital to target psychiatric consumers who were using emergency departments (ED) frequently, at an average cost of $2,032 per visit. With this program, Gracepoint was able to reduce avoidable ED readmissions by 51% and the time it took to cycle through the ED by 57%.
Dr. Lawson presented the payer perspective. OCHN is a managed Medicaid behavioral health organization responsible for Oakland County, Michigan. They have a broad provider network and have developed 15 different value-based models for provider contracting, including bundled rates, monthly case rates, capitated approaches, and fee-based payments with incentives. One example is a value-based arrangement for employment services with the desired outcome of increasing the number of working age adults in integrated employment at competitive wage rates. OCHN pays incentives for achieving specific performance targets.
How do executive teams use performance data to get new and better contracts? Our speakers suggested six steps.
Be strategic—Provider organization executives need to look a couple of years ahead and choose a strategy to demonstrate value that will (eventually) position them for revenue growth either through affiliations or additional contracted services. What organizations do you plan to communicate your “better value” to? What performance measures are important to those organizations and their managers? Those are the important questions.
Be consumer-focused—Being consumer-focused is essential for success not only for increasing consumer referrals, but also for gaining traction with preferred health contracts. Some of the common measures of consumer performance include Net Promoter Score and measures of consumer engagement. Good performance on these measures demonstrates a commitment to a person-centered planning process, evidence-based practices, and consumer engagement. Dr. Lawson explained, “Quite simply, a ‘provider-of-choice’ is person focused. When these critical elements of a collaborative service network exist, product, promotion, and price naturally fall in place.”
Be prepared to go “at risk”—Most payers are skeptical of performance data. To demonstrate your confidence in your data, be prepared to assume some financial risk based on your data. Mr. Rutherford noted that when he started this new service, “I rolled the dice on this, in all honesty. We wanted to have it documented that this would work, and we did offer it free of charge. Now they pay our expenses plus some administrative savings.”
Start small—It takes data to succeed, but not too much all at once. Select a limited number of performance measures to start and expand over time. This will allow your program experience and your relationship with your payers to drive the process. (For more on a best practice model for becoming a data-driven organization, see my presentation with Relias’ Carol Clayton, Ph.D., Making Tough Decisions In Turbulent Times: 12 Steps To Creating Your Data-Driven Organization.)
Communicate—Communicate early and communicate often about your performance with the target customers, both payers and consumers. One mistake that executive teams commonly make is to assume that your stakeholders know about, and understand, your great performance difference. Think about communicating this information using white papers, industry presentations, social media, consumer group meetings, local market press releases, and your web site. These are just a few channels to consider.
Be persistent and prepared to pivot—Demonstrating value is a moving target. As new competitors enter the market, management teams need to be prepared to constantly improve their processes and practices to be “best in class.” This requires persistence and the ability to continually modify both your service solutions and your relationships with partners (either other provider organizations or payers). Dr. Lawson explained, “Failing forward is still progress. Be willing to start and know you will have to make changes as you learn and progress.”
In the post-crisis era, market advantage will go to the provider organizations that can demonstrate the “value” (the performance metrics versus the cost) of their services. This needs to be an integral part of strategy and will require innovative thinking to meet complex multi-stakeholder needs in a market with increasing competition for consumer services. I am reminded of the words of Philip Kotler, the marketing consultant—“There is only one winning strategy. It is to carefully define the target market and direct a superior offering to that target market.”
For more on health plan relationships, check out these resources from The OPEN MINDS Industry Library:
- Navigating The Changing Relationships Between Health Plans & Provider Organizations
- HealthPlan Relationship Building Skills Key To VBR Success
- Building Successful Partnerships With HealthPlans: An Insider’s Guide To Payer Relationships
- What Are HealthPlans Actually Doing?
- Making VBR A Success: What HealthPlans Can Do
- HealthPlan Business Development For The Entrepreneurial Provider Organization—Step-By-Step
- Using Your Performance Metrics To Build A Value Proposition For HealthPlans
- Defining ‘Value’ Is Key To Provider/HealthPlan Conversations
- Five Keys To ‘Partnering’ With HealthPlans On Social Determinants
- How To Build Value-Based Payer Partnerships: An OPEN MINDS Reading Book On Best Practices In Marketing, Negotiating, & Contracting With HealthPlans
For more on the innovations, as well as the strategies, that are leading provider organizations through one of the most trying times in recent memory, stay tuned all week as we discuss strategy for specialty provider organization management. You can follow us on twitter @openmindscircle #OMstrategy.