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Closer Payer/Provider Relationships Inevitable, but Evolutionary

Christopher Cheney, for HealthLeaders Media, March 26, 2014

Caron says there is intense interest across the country in finding new ways for payers and providers to work together in a manner that fits their unique market circumstances.

"Both sides are coming together to leverage the other's competency," he said. "There's an openness to pilot and work together to try new things… It's not going to be a cookie-cutter approach."

Barbara Ladon, managing director at Denver-based Newpoint Healthcare Advisors, told me last week that size is an important consideration for providers seeking closer relationships with payers. Large health systems have more options because their larger scale allows them to take on increased risk and play a health plan role. "The smaller hospitals—150 to 200 beds—are looking for collaborative relationships," she told me.

Drawing payers and providers closer together should help to create a value-based healthcare delivery system. "It's all based on improving the health of the population," Ladon said. "Providers are incented to take on the responsibility for managing the care of the population."

In terms of increasing value, there also is a powerful logical reason to pursue closer payer/provider relationships: partners work together better than adversaries.


Christopher Cheney is health plans editor at HealthLeaders Media.
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1 comments on "Closer Payer/Provider Relationships Inevitable, but Evolutionary"


bob sigmond (3/26/2014 at 3:19 PM)
The most effective "closer payer/provider relationship" in the future does not have to evolve. It can be put in place immediately, but only after the two parties have developed the necessary degree of trust and a carefully designed, revised contract reflecting common goals. The new relationship requires two changes only involving the two contracting parties. First, the third party payer takes over the provider's complete pricing, billing and collection functions and staff. Second, the third party payer sends a single monthly check to the provider to pay for all of the services provided to all of the provider's patients, with the check based on a one month allocation of the entire operating income in a collaborative annual budget that is a reflection of a collaborative long range strategic plan to not only improve quality and access but also reduced expenditures; the well known triple goal. For the provider organization, this arrangement has all the advantages of eliminating operating deficits, doing away entirely with any fee-for-service billings, eliminating the negative management incentives associated with fees-for-service, and the often unpleasant dealing with numerous third party payers and difficult patients about fees-for-service and other billing problems, and the benefits of collaborating on the strategic plan and budget with a third party payer that is much more experienced in the necessary shift from volume to value. Truly, very much like a dream come true for provider CEOs and governing bodies. For the third party payer, it [1] assures a new key role for the organization at a time when traditional insurance marketing strategies will be losing effectiveness in comparison with influencing provider behavior, and [2] provides the opportunity to reduce the cost of collection while increasing the rate of collections. Of course, many details must be worked out and included in the contract between the two parties. Most important, the two parties should crete a fund to reward the provider organization in "good" financial years and to support the third party payer in "bad" financial years. One of the advantages of this arrangement is that it does not involve any change in the marketplace or in government relationships, though some government support could be helpful, though not necessary. I would be delighted to hear from anyone interested in exploring this idea in greater detail. Regards, Bob Sigmond 215-561-5730 web site: "sigmond papers.org" or .com