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Three Types of Alignment for Better Payer-Provider Relations

Emad Rizk, MD, for HealthLeaders Media, April 1, 2009

HCPro recently published The New Era of Healthcare: Practical Strategies for Providers and Payer, written by Emad Rizk, MD, president of McKesson Health Solutions. In the book, Rizk writes about how collaboration between providers and managed care payers has the potential to reduce costs, improve processes, and enhance patient care. This is Chapter 2 of the book.

The fundamental need in today's healthcare system is for the two largest constituents—payers and providers—to work together in alignment. We need a change in thinking and actions to shift the dynamic of how payers and providers work and interact with each other.

From the payer's point of view, most costs—85%—are devoted to patient care and the administration that goes with it. My vision is to break the endless cycle of push-and-pull around those costs and to finally align payers and providers toward their common goals. This proposal is not altruistic, but practical. After decades of shifting the economic burden and risk, it makes sense for payers to align themselves with those who control 85% of costs. For providers, it makes sense to accept responsibility for the health and well-being of the patients they care for and share the risks and rewards of good outcomes. And for everyone involved, reducing bureaucracy and inefficiency makes sense.

It is easy to get overwhelmed by the magnitude of the problems we face in healthcare. But it is possible to break down the problems into smaller pieces, on which we can take action. I believe there are three key areas in which payers and providers must align:

  • Clinical. Identify the best treatments from evidence-based medicine (EBM) and mutually determine appropriate care.
  • Economic. Agree on costs in advance, in detail and with full transparency.
  • Administrative. Create and use tools to diminish the administrative burden for all parties and increase efficiency.

Granted, these are three large areas, but a lot can be done with each through a commitment to collaboration and business alignment. By alignment, I mean that payers and providers should agree on clearly defined goals in patient care, how costs will be paid, and what tools will be available to help reach those goals. This means bringing together resources, rather than using them to work around or against each other.

How alignment will work

Health plans and providers need each other. Payers have vast amounts of historical claims data, while providers have the clinical data. These are two very different kinds of information, both referring to the same patients. Combining the two could be powerful. Neither payers nor providers are there yet. Yes, both parties talk about collaborating and sharing information with each other, but neither is truly doing it. In fact, both groups use much of this information to check up on the other. So we are missing the opportunity to drive up efficiency and deliver better care to patients because of a lack of alignment and collaboration. It is time to move forward on this vast opportunity to bring this information together and use it to better our industry.

A key ingredient that is desperately missing to connect the care process between payers and providers is trust. Payers and providers just don't trust each other. A first step toward trust is for payers and providers to agree, up-front, what information they will share. And they must agree to share that data in a transparent way in order to engender trust. Transparency is a popular buzzword right now, applied to many industries and relationships. But it truly describes what is necessary to align payers and providers in a fruitful manner. For our purposes, transparency means that each constituency shares data that could be useful to the other. This means that payers make fully available and understandable to providers all the rules that govern what they are paid. This enables providers—both hospitals and physicians—to understand how their reimbursement is determined and what factors influence the payments they receive. This knowledge will become ever more crucial as providers are increasingly reimbursed for outcomes rather than for the interventions they deliver. Meanwhile, payers would fully learn from providers the clinical outcomes they are—or are not—achieving. This exchange would help to compensate providers appropriately and also enable payers to help identify patients who would benefit from greater efforts to reach them.

But this collaborative approach goes further, in ways that can help both payer and provider in a sort of feedback loop and, ultimately benefit the patient, too. For example, let's say that in this model, a physician is expected to identify all patients with a certain condition and put them on a care plan. The physician also would make available to the payer all clinical data relating to these patients. The payer would provide analytic support, using prescription and other data, to guide the physician toward patients who are most in need of attention so that their care can be prioritized. Ultimately, the physician gets paid to identify disease early, the payer truly optimizes its efforts toward managing the medical risk in its portfolio, and patients get better-quality, more cost-efficient care. The linchpin is the shared data—which ideally is stored in a common database that both groups could access. The payer and provider would be working toward a shared outcome. Along with sharing information, this model would enable payers and providers to share economic rewards.

The shared goal of payers and providers is to connect the care process, the economics that pay for and reward good care, and the administrative framework that makes it all happen. That is a broad-brush view of alignment. Now, let's break it down into the three key areas I mentioned earlier.

1. Clinical alignment

Today, we are fortunate to have at our disposal abundant EBM data that payers and providers can use to help implement clinical alignment. This success can then be used to achieve alignment where evidence is not readily available, but standards of medical care are.

It may be difficult to believe that as recently as the early 1970s, when the popular show Marcus Welby, MD, was on television, what we then called "modern medicine" in fact lacked hard evidence for many common practices. The acknowledgment that medical practice relied on experience and judgment, but not clear data, led to the increased development of EBM in the early 1970s.

Since then, researchers have conducted increasing numbers of randomized controlled studies to compare one therapeutic option with another or to measure the result of a specific therapy. EBM uses the data and analysis from these well-designed studies and applies the lessons learned to the decision-making for individual patients. Combined with a clear understanding of the patient's circumstances and good clinical judgment, EBM has had a powerful effect on patient outcomes and has been a critical component in setting standards for medical care.

Given that it's always easier to align people around evidence rather than opinions, you would expect that EBM would have been immediately and universally embraced. However, as used in a managed care setting, EBM initially created some waves and was sometimes misunderstood. Physicians often felt that payers overly relied on EBM to justify denying treatment outside the guidelines, when some individual patients in fact warranted a different, more customized approach. On the other hand, payers sometimes felt that doctors were resistant to change.

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