Traditionally, there hasn’t been a lot of love lost between payors and providers in the healthcare space. These opposing forces are often locked in heated battle over payments. As hospitals and physicians seek to maximize quality and payments, insurers work to minimize claims and costs. Yet as the healthcare industry has evolved, these foes are increasingly facing a common enemy – rising costs.
All types of players in the healthcare space today are faced with mounting pressures over reimbursements and the cost of care. Organizations are reacting by finding new ways to derive as much value as possible out of every dollar in the system. That’s created an environment where payors and providers are considering what was once unthinkable. They’re partnering up.
Over the last decade, payor-provider partnerships have been on the rise, reaching a record high in 2015, according to research by Oliver Wyman. Since then, the global consulting firm notes the market has matured as many existing partnerships have expanded in their scope and scale. For payors and providers interested in exploring such a partnership, here’s a high-level roadmap for finding common ground and structuring a deal.
Focus on Creating Shared Value
Payor-provider partnerships are rooted in identifying areas and initiatives that increase value for their patients and members. In many cases, the organizations already have significant overlap in their patient or member pools and geographic locations. They need to align on the most significant opportunities to drive value for those individuals or the community. One type of partnership may find common ground in improving quality of care, while another may prioritize access to care.
Partnerships enable payors and providers to approach value from a collaborative perspective rather than a combative one. Payors and providers are looking for innovative ways to invest in their communities to optimize individual health, increase access to care for those most in need, and reduce the overall cost of care. Organizations are aligning on where the most significant opportunities exist.
Collaborate on New Initiatives
Often, partnerships represent an opportunity to streamline the development and launch of new services. The two entities are able to collaborate around relevant data and established best practices. They’re also able to share startup and administrative costs.
For example, as patient interest in digital healthcare services rises, payors and providers may find an opportunity for shared value around venturing into telehealth. These services typically require significant upfront investment in new technology and negotiations around how various services will be priced and paid. An initiative fueled by a partnership may be better suited to address these challenges in a way that promotes quality, access to care, and convenience for the patient while achieving a balance between revenue and expense for both provider and payor.
In all partnerships, the key is to remain focused on value and the ultimate benefit to patients. In the telehealth example, access to care benefits patients in rural areas as well as providing greater convenience for all patients. Those improvements to healthcare access in turn increase the size of the potential patient/member network while reducing costs for both partnership organizations.
Utilize the Right Structure for the Partnership
As large organizations seek new partnership opportunities, there are multiple ways to structure an agreement. Each has its advantages and disadvantages with specific legal considerations. One option is to enter into a collaboration agreement. Such a contract can be useful in spelling out specific rights and obligations and guide established affiliated joint venture entities. However, the agreement is easier to break should one party wish to dissolve the partnership. This can create an underlying uncertainty among already tentative partners.
Another option is to create a joint venture entity to govern and manage the collaboration as well as serve as the primary operating entity. All collaboration activities occur within this joint venture entity. In some cases, this can streamline operations while creating a more substantial partnership up front. However, for initiatives existing in a larger geographic area, complying with a variety of different states’ regulations as utilizing a single entity can increase complexity.
A third option is to create individual joint venture entities for each initiative under the partnership. This can be beneficial for organizations that do not yet know the full scope of their partnership and what new projects may entail. This allows each new undertaking to be established and structured in the most beneficial way, ensuring greater flexibility.
Indeed, as existing payor-provider partnerships have expanded, more and more collaborations are taking a joint venture approach. In 2018, 70 percent of payor-provider product launches included co-branding and joint ventures, Oliver Wyman notes. These launches demonstrate the excitement and potential in the industry as payors and providers seek new ways to enhance and build on partnerships that are already working.
As these collaborations grow, they’re rewriting the traditional roles in the healthcare industry and how patients see and interact with the system. For payors and providers who can find common ground, the chance to team up and establish a partnership with a well thought out structure is a tremendous opportunity worth exploring.