Closer Payer/Provider Relationships Inevitable, but Evolutionary

After decades of business interactions that have ranged from politely cooperative to openly hostile, healthcare payers and providers appear destined for peaceful coexistence.

US healthcare reform efforts are fueling a drive to establish closer relationships between payers and providers, with a wide range of experimentation under way nationwide.

"I don't think it's going to be an easy change, but it's going to happen," Lynda Mischel, CEO of the newly formed Noble Health Alliance in suburban Philadelphia, told me recently. "Across the country, there are all kinds of examples of providers and payers offering joint products or providers opening health plans of their own."

Noble Health Alliance was established late last year when four health systems based in the Philadelphia area signed a cooperative agreement. Noble is researching potential payer partners to see whether the new cooperative organization can offer a "risk-bearing product" to provide insurance coverage to patients.

Finding a good payer partner is expected to be a key element in Noble's mission to offer a seamless continuum of care to patients throughout the new health system's provider network, says Mischel, who has a professional background in health insurance including managed care operations and employee assistance programs. "A payer/provider partnership is required to change the delivery of care," she said.

Mischel told me Noble has identified several qualities it desires in a payer partner, including technical capabilities and willingness to share data. "Our [existing] payer partners are looking at this as well," she said.

Data sharing is one of the prime benefits of closer payer/provider relationships, and several other healthcare industry executives who have broached the topic over the past two months.

"Our world has become so complex, we need to come together to look at data to make sure patients are getting the best care," Mischel explained, noting electronic medical records have shown great promise in reducing physician errors. "In the 21st century, data is going to drive our ability to provide quality care."

Mark Caron, senior VP and CIO at Pennsylvania-based Capital BlueCross, told me last week that providers are eager to gain access to claims information that provides the "whole picture" of a patient's medical history. "They're drowning in information, but they don't have that longitudinal record," he said of health systems, hospitals, and physicians.

Caron says data sharing between payers and providers has the potential to help educate patients about their health risks and to boost transparency in the healthcare delivery system. "The more we create an informed consumer, we'll all win as a society," he said. "Consumers have done a really good job in other industries to help them be the best they could be."

Mischel and Caron both told me there is no single dominant model that is likely to emerge from the ongoing evolution of the payer/provider relationship. "It will look different from market to market," the Noble CEO said. "We're really at the beginning of what the payer/provider relationship may look like."

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.