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By Monica E. Oss

Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.

-Peter Drucker

As I sat in the town hall discussion, What Are Payers Looking For In Value-Based Partnerships? A Town Hall Discussion On What Payers Need From Provider Organization Partners, at The 2018 OPEN MINDS Performance Management Institute, I thought of this passage from one of Peter Drucker’s books. Just substitute “value” for “quality” – and this was the discussion in a nutshell.

Payers from Cigna, Magellan, and Beacon at The 2018 OPEN MINDS Performance Management Institute

Our panel featured three health plan executives on the front lines of managing the needs of complex consumers: Paul Duck, Vice President, Strategy Development, Beacon Health Options; Lisa Kay, Clinical Program Manager, Cigna; and Lisa Sasko, Senior Vice President, Commercial Sector Lead, Provider, Magellan Healthcare. The conversation quickly moved past the growth of alternate payment models and value-based reimbursement and the importance of preparation to the changing relationship between health plans and provider organizations. The theme: whether provider organization executives view the health plan or the consumer as their customer, the dynamic is the same. Both customers are not looking for a “vendor” – they are looking for a partner.

This is a pretty basic marketing concept—the exchange concept—but it has not been common in U.S. health care. If you remember your “Marketing 101” class, the “exchange process” is when a customer trades money to an organization in exchange for satisfying a specific need or want. The concept is deceptively simple. It is not the “commodity” purchasing model of fee-for-service health care where all services are interchangable “widgets” (see When Does Performance Not Matter? and Up The Food Chain – From FFS To Preferred & Exclusive Status). Rather, it is focused on solutions to specific issues – and the “best fit” of those solutions to the customers’ needs. It is the basis for more complex relationship marketing and partnerships between organizations. There are (typically) two elements to the marketing exchange process, and our panelists referenced both during the town hall discussion.

First, understand what your health plan customers need. As our panelists suggested, before you approach a health plan, you should understand who the important players are in your local market, know the details of their contracts (including the required financial and clinical outcomes), and have a feel for what the other provider organizations in their network can deliver – and what they can’t. You need to have a clear take on your market differentiator – what you do well, what makes you better than your competitors, and how your organization will add value to the payer. If you don’t have this information, your team needs to build a health plan “playbook” as a first step (see From Health Plan Contract To Health Plan Partnership In Four Steps and The Health Plan Marketing Roadmap).

Second, be clear about what you want. Start with what you want to gain by contracting with a potential health plan partner and then develop a plan that outlines exactly what you need to make the relationship work – what are your financial requirements, what are the timelines to move forward, what outcomes can you meet, and what data do you need from the health plan. What this looks like in practice is a health plan presentation of what you can do for their members that is unique and adds value – with the performance your organization will deliver and the financial risk you are willing to assume.

After your initial meetings with the health plan managers, you may discover there is a “gap” between what you thought the health plan needs, what the health plan executives actually want, and your organization’s current services. How do you bridge this gap in the marketing exchange process? Adopt nimble product development processes (see The Strategic Challenges On The Road To Value-Based Reimbursement and Building A Nimble Management Team To Respond To Opportunities In A Value-Based Market – Exclusive New Webinar For Elite OPEN MINDS Circle Members). To meet the needs of your health plan customers, you need a model for rapid cycle innovation that allows your team to evaluate and modify current services and enables new market-driven service line development. This is where the “rubber hits the road” in the exchange process.

For more on the concept of “marketing exchange” in business-to-business settings like this, check out this old (but useful) 1998 article from Harvard Business Review: Business Marketing: Understand What Customers Value – which starts with the phrase “Everything is worth what its purchaser will pay for it.” And take a look at the “strategic quality” concepts of David Garvin in This Is A Headline You Want To Avoid or Would You Give A Refund To Dissatisfied Consumers?.

Our panelists at the institute noted that though there are impediments everywhere to making health plan/provider organization partnerships work, the reality is that value-based reimbursement is already well on its way to becoming the dominant model. This is a challenge for executives on both sides of the relationship. For provider organization executives, it is important to keep in mind that the organizations that are early adopters and make the transition to this new partnership model early will have some strategic advantages. They will have a permanent seat at the table to help define what these partnerships look like and more wiggle room in getting up to speed – a distinct advantage over their competition.

For more on the evolving health plan/provider organization relationship model, join us at The 2018 OPEN MINDS Strategy & Innovation Institute in New Orleans on June 6 for the plenary address: “Going Beyond Innovation – Developing Partnerships With Health Plans,” featuring Charles Gross, Ph.D., Vice President, Behavioral Health, Anthem, Inc.

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