Beating the Zero-Sum Game, Together

Payers and providers can both succeed in a value-based world if they commit to a new kind of partnership.

Zachary Hafner
Advisory Board

Even with the future of health policy and the ACA in question, one thing seems pretty clear: Customer demand for value is here to stay. If you’re still bickering over rate hikes and contract minutiae, then you’re out of step with the new health care economy. In progressive markets, savvy payers and providers that work together rather than constantly bumping heads are pulling ahead at the expense of slow movers and status quo players.

Payers and providers have historically approached the economics of health care as a zero-sum game, where one can only win at the other’s expense. Over time, this has translated to an unproductive focus on building scale for the sake of negotiating power rather than winning in the marketplace by increasing value for customers. It doesn’t have to be that way.

Creating real, differentiated value can be a shared objective of payers and providers when their fates are tied to the combined product they are delivering. Nearly every health care organization says it is busy these days forging partnerships. In reality, most of these arrangements are partnerships in name only. Everyone may start out with the best of intentions but aligning goals and economic incentives, sharing data and collaborating on analytics, coordinating investments in infrastructure—that’s a lot of hard work.

True partnership between payers and providers involves rethinking the traditional relationship on many levels, for example:

  • Customer relationships must be treated holistically and integrated across the partnership to drive enrollment and build loyalty—not competed for just to demonstrate “ownership.”
  • Data and analytics must be shared, bringing together clinical, financial, consumer, and claims information to improve the quality, timeliness, and cost of care—not withheld for leverage in rate negotiations.
  • Capabilities and assets must be optimized, with each partner contributing meaningfully and investing thoughtfully to best cover the waterfront—not duplicated in bids for incremental slices of the premium dollar.

Here’s a care management example to illustrate how partnership may look different from what you may be doing today:

Typical payer thinking: We invest heavily in utilization and disease management programs that are data-driven and proven to work. They are every bit as good as our competitors’, and our customers do not push back on us about them. The costs are real, distributed over our full membership base, and baked into our administrative structure.

Typical provider thinking: Care management is clinical in nature and belongs with us. We have invested heavily in recent years building capabilities that will improve quality and reduce the total cost of care. The payers will reap those benefits—at the very least, they need to transfer that portion of the premium dollar to us to cover our costs.

Partnership approach: Together, we’ve got all the data, analytics, and influence we need along key points of the patient journey and value chain to make transformative improvements to care management and coordination. Working as a team, we can design and roll out better programs than we could alone—programs that will improve outcomes and optimize value-based revenue for both of us.

Similar thinking can be applied to a broad range of payer–provider linkage points: network management, technology investments, and sales and marketing.

Partnerships like these will require bold thinking and significant investment, but the result can be a big win for both payers and providers. And when payers and providers are working together for high-quality, low-cost care, that’s a win for patients and all of American health care.

Zachary Hafner leads the Advisory Board’s strategy consulting practice.

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