Collaboration meets innovation

Health care executives make sense of PSP partnerships

PSPs are growing in importance. PSPs give health systems an opportunity to use health care financing as an enabler to create innovative clinical care models. Health care organizations that successfully innovate to reduce costs and improve quality should prosper under new performance-based financial models; in particular, those called for by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

Collaborations between health plans and health systems for PSPs also are growing in number. The relationships can give health systems access to health plans’ expertise and deep pockets. Such collaborations have generated innovative approaches in population health, member engagement, predictive analytics, and member retention.

Examples of collaborations for PSPs include Anthem’s partnership with Aurora Health Care in Wisconsin¹ and Aetna’s partnership with Texas Health Resources². These partnerships leverage the health plan’s capabilities and resources, and the hospital’s brand and care management skills, thereby helping to solve the challenges some health systems face in trying to build their own plans.

To better understand PSP opportunities, approaches, experiences, and potential concerns, Deloitte convened nine executives from health systems, health plans, PSPs, and other organizations to discuss what it might take to develop successful PSPs. Deloitte also interviewed four executives from health plans that have PSP partnerships to better understand the strategy behind their collaborations.

Executives agreed that more health systems are now interested in developing PSPs than in the past, and also concurred that:

• Collaborative models are attractive to both parties.
• Scale is important to be successful.
• Required health plan capabilities and competencies are usually not found inside a typical health system.
• Focus and leadership are required to align the hospital and health plan businesses.

MACRA may prove transformational in spurring innovative health system approaches in the marketplace. Organizations that improve quality and reduce costs under a PSP model are more likely to succeed under this new Medicare payment system. As the scope of MACRA expands to include other payers, innovative organizations that are generating superior outcomes may do well under multiple payment systems and payers.

¹Katherine Moody, “Anthem taps Wisconsin health system for new payer-provider venture,” FierceHealthPayer, April 21, 2016, http://www.fiercehealthpayer.com/story/anthem-taps-wisconsin-health-system-new-payer-provider-venture/2016-04-21, accessed June 6, 2016.

²Susan Morse, “Aetna, Texas Health Resources establish a jointly owned health plan,” Healthcare Finance News, May 27, 2016, http://www.healthcarefinancenews.com/news/aetna-texas-health-resources-establish-jointly-owned-health-plan, accessed June 6, 2016.

Executives share perspectives on successful PSPs

Health systems will likely pursue multiple strategies, including PSPs, as they navigate MACRA and other market pressures for providers to assume increased financial risk. Most executives agreed that PSPs will become more influential and the number of health system-health plan collaborations will grow. However, the required skills, knowledge, and capabilities to run a health plan are typically outside a health system’s typical core focus. “You cannot do it alone,” was a consistent message from the executives.

While health systems have opportunities to innovate, the challenges can be considerable. Fortunately, today’s successful PSPs show that challenges can be overcome. Executives who built their small PSPs into market innovators and success stories shared their suggestions:

• Start small but focus on gaining scale.
• Experiment in the market with various lines of business, including your own employees and their families.
• Determine whether to focus on Medicare and/or Medicaid.
• Create specific strategies for your own market – it is not “one size fits all” because of regional competition and population variations.
• Align incentives for both the health plan and hospital sides of the business and work collaboratively with the health plan leaders and clinicians.
• Prepare for major capital investments.
• Develop analytics-based operational capabilities.
• Seek partners with a similar culture, vision, and market position.
• Buy, rent, or collaborate for capabilities while gaining scale. 
• Share performance information frequently and be transparent in decision-making.

All executives agreed that developing a PSP can enable a health system to experiment and innovate in population health. Collaborating with a health plan can provide needed capabilities and capital, enabling a health system to enter the health insurance market more quickly and more prepared.