The longstanding walls that once clearly separated the roles between health providers and payers are crumbling as innovation and current market conditions give way to what many now call the “payer” model.
Although “payer” doesn’t exactly roll off the tongue particularly well, the trending term—a combination of the words payer and provider—captures the momentum with which large health systems are increasingly establishing their own health plans and acquiring or moving payers into care delivery.
The concept of a payment provider is not new; Kaiser Permanente, for example, has championed the model with great success for decades. In recent years, however, giant corporations like Amazon, CVS, Walgreens, and Walmart have aimed to disrupt health care and large payers, like Aetna and Humana, are moving into the primary care space. As a result, health systems are now looking with renewed rigor at the payer model as a way to remain competitive while providing improved quality, convenience, and lower-cost care to members.
The payer model has gained so much steam recently as a way to diversify financial risk while transitioning to value-based care that nearly 6 in 10 health systems have expressed an intention to start their own health plans, according to a 2021 survey. payvider movement is the emergence of new technologies that help smooth the transition by simplifying the linking of data repositories, health records, and administrative and care delivery workflows.
Major considerations for health systems
Health providers considering launching their own health plans will be positioned for greater success if they can resolve a series of infrastructure, technology and process questions upfront. Getting into the payer business while also running a complex health system is fraught with many obstacles, expected and unexpected, but those who seriously think through the following points will be better off navigating the challenging – yet rewarding – journey going to become a payer.
Calculate your risk
First, each health system must weigh the competitive and market dynamics to ensure that the payer model makes economic and business sense. Having your own health plan is best suited for health systems that want to double down on value-based care—either because they are philosophically committed to value-based care or because it will give them a competitive advantage.
Once a health system has decided to go the payer route, the next step is to select the risk profiles. There is a strong case for health systems to introduce Medicare Advantage plans, given the growing market size and margin potential; however, there is much to fix, from managing a population with increased medical attention to ensuring excellent customer service. I suggest that health systems consider the commercial, self-funded market as an entry point, serving employers who have a high concentration of employees in the local area.
Technical workflow and infrastructure
Just don’t underestimate how much work goes into the payer side of the business. One reason we don’t see every single health system starting a health plan is that it’s a daunting task. Payers require a different type of mindset, workforce and technology than a health system. Before diving headfirst into the payer business, I recommend that you develop a deeper understanding of the taxonomy of all the necessary jobs required to operate a health plan.
Technology has historically been a major barrier to entry into the payer space. There are data interoperability, communication with members, claims, billing, administrative and many other workflows that require the right technology to run smoothly. Thinking about processing claims and linking electronic health records has stopped many health systems in their tracks. Today, several digital health companies offer easy-to-use technology platforms that provide health systems with payer capabilities at a lower cost than building technology in-house or hiring a legacy third-party provider.
Adapt plans to patient/member needs
The benefits of a health plan really start to take shape once health systems connect their patient care pathways and their population health strategies to the benefit design in ways that actually drive better utilization, better behavior, and better care. This is where the rubber meets the road: Payviders can create plans that complement their medical care systems and meet the needs of their patient populations. By having control over the entire pipeline, not only can they personalize the flow of care delivery and benefits to meet their unique membership, payers now have access to so much more data that can be leveraged to improve in ways previously unseen was not
For example, I can imagine in competitive markets like Austin, Texas, a health system could attract new members by creating health plans geared toward young families that change as the family grows, including all reproductive, postnatal, and primary care needs.
The future of healthcare will continue to lead to a value-based model. To be successful and profitable, health systems will need access to more and more data and be able to align care delivery with health plan benefit designs. The payer model is a natural progression that will allow health systems to remain mature and flexible in the coming decades.
Richard Fu is Chief Growth Officer at Flume Health.
