Avoiding failure requires strong payer-provider alliances

Avoiding failure

The increasingly assertive role of payers around the world is something we explored in our previous report, Something to Teach, Something to Learn. In PNA, the active participation of payers is a similarly important trend to factor into any long-term strategy.

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The importance of ‘activist payers’ is a vital consideration for future PNA activity as these frequently play a vital role as brokers of various kinds of collaboration:

  • convening players to review and reshape their markets
  • care system redesign
  • to create data, governance, safety and quality clusters.

Convening players to review and reshape their markets

A number of successful payer-provider collaborations involve the convening of local and regional players to make shared decisions at a system level.

These ‘information alliances’ are a key stage in the progress towards the free flow of data and the opportunity to convert this into useful information to be shared across a health system. While this has previously been thought of as a feature of largely public systems — Australia, Canada, New Zealand and the UK — other countries are now finding ways to make this happen, such as the creation of ACO- type arrangements in the US. These PNAs help bring academic and clinical expertise to key health problems and provide a means of balancing rather than denying commercial or financial imperatives.

One leading example of such payer- provider collaboration is the Optum Labs experiment — part of the United Healthcare group in the US.

The Labs provide a safe environment for groups of payers, providers, life sciences companies and academics to come together, pool identified data and contribute ideas for research and innovation. Certain rules ensure the management of commercial incentives – pharma companies are not permitted to research their own drugs for instance. Clusters of organizations with common ideas and interests can group together as semi- autonomous units to pursue specifi themes, such as congestive heart failure.

Optum Labs make joint agreements on intellectual property. They are beginning to contribute sponsorship to these initiatives. So the conditions are available to form a mini-health system process for research, development and innovation. Some of the conditions of their success are explained by Paul Bleicher, Optum Labs’ CEO:

“Academic institutions are bringing academic talent, research, etc. The non-academic providers bring the willingness to take some of the things we’ve found in the clinics and bring them into clinical transformation — the management of diabetes, chronic heart failure. You can build a program to see if it improves ... but all of this requires providers to put part of their organization into a test environment.”

This is not without challenge for the providers concerned. But in an environment without alternative means to experiment at scale on what works, for providers, a remarkable opportunity is available through the Optum Labs collaborations.Care system redesign

Care system redesign

Some payer-provider collaborations go further — focusing on large-scale redesign of care systems and services, in partnership with providers. In this report we mention Dutch insurer Menzis (see page 17 in the report), and the rebalancing of the roles of hospitals, primary and community care. There is also the work of DFZ in Friesland, Netherlands, to create a distribution of clinical services that is relevant to populations but also clinically safe. It has been the payer which has lead the provider change process and managed public and political opinion. Some of this — such as the reduction in scope of cancer services and the transfer of some obstetric and maternity services in several hospitals — has been highly contentious. But the relationship with provider effectiveness is clear and compelling.

Create data, governance, safety and quality clusters

In the Academic Health Science Networks (AHSNs) in England there is a strong push to level up service quality to that of the best hospital in the network. For example, with University College London (UCL) Partners there is a mandate to raise standards in outer London and Essex hospitals to that of the leading partner UCL Hospital. This complements the direct payer-to-provider relationship for those hospitals by exposing clinical collaborations in a way which addresses professional ambitions. If this is to work, UCL Partners and the other AHSNs will need to demonstrate governance which reconciles their strong excellence imperatives with the sovereignty of the individual member organizations. If they succeed, we have an exciting new organizational form.

Case: Contestability driving market diversity

Elsewhere in publicly funded health systems — such as Australia — we see a strong push to contestability, where historically publicly-provided services are market tested to give an opportunity for new entrants. State payers in Queensland, New South Wales and Western Australia are increasingly required to offer up a range of services to for-profit and not-for- profit providers. This creates two levels of opportunity: first, the potential to reduce cost through competitive tendering, and second, to stimulate all providers in the system to raise their game and become more efficient. This process of market pluralization is visible at the new Lady Cilento Children’s Hospital in Brisbane, the Sunshine Coast Public University Hospital in South East Queensland, and Sydney’s Western Health District, among others. But it comes with challenges. State providers have to learn to be part commissioners of services and effective contract managers — a new skill. It is too early to declare victory, but the concept of local hospital boards as mixed market managers is exciting.


  • Does your strategy map to payer strategy?
  • Can you create a safe environment with payers to consider PNA initiatives? 

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