Health care network maturity model: How mature is YOUR organization?

Time and tide wait for no man

At Philips, we have the opportunity to work with a large number of organizations across the country, and in order to help us better understand our clients (and our clients to better understand themselves!) we have developed a Network Maturity Model that I would like to introduce in this week’s Philips Blog.

Health systems and physician organizations across the country are working very hard these days to keep up with quickly changing reimbursement and care delivery models. Some of these organizations are very large and well staffed, but they may still be struggling to implement the programs, processes, and technology they need to meet these new challenges. Other organizations are just getting started aligning with physicians, establishing governance, and even finding office space for the teams they are building. Others are somewhere between these two extremes.

The following graphic is how we look at providers and their networks, and this image will be the basis for today’s discussion and subsequent related Philips blog posts.

The fundamental issue and driving force behind so many of the changes in health care these days is that our health care costs are out of control and the rate of rise in health care expenditure is unsustainable. This isn’t news. We’ve all seen the numbers like percentage of GDP spent on health care in the United States compared to other countries, but we can’t talk about what is driving Network Maturity without at least acknowledging that fundamental fact. Done.

Part of the reason health care costs so much is because it is often inefficient, and health care providers (physicians and health systems both) are still generally paid for volume – not outcomes. That means there hasn’t been much focus on providing high quality care, which in the end can save money for payers and employers (lower complication rates, better disease prevention, fewer readmissions, etc.), even though it tends to cost more for physicians and their organizations to deliver.

Realizing that physicians and their networks won’t devote the resources needed to improve outcomes and reduce costs unless those investments are covered, the federal government and commercial payers have started changing the reimbursement models to incent physicians and their organizations to adopt newer care delivery models, transform the way they care for patients, and focus on process improvement. Reimbursement drives so much in health care.

Let’s walk through some of these reimbursement models and discuss each one briefly. They are presented in increasing order of potential revenue and risk, although I purposefully left out Fee For Service and Full Capitation.

Bundled payments can be a great way for an organization to dip its toe in the Accountable Care waters. Agreeing to accept a set reimbursement for a defined service, such as a knee replacement, provides one or more specific opportunities to focus on, which can increase the chance for success. If the service that is included is provided efficiently and with a low complication rate, then there can be a nice upside.

(Note that I’m talking here and in the sections below about Accountable Care in general, not specifically about the Affordable Care Act and Medicare ACOs, although they are all related.)

Any given Network might participate with some or all of the above types of reimbursement models with different payers and/or employers. This means that physicians and their organizations are more likely to have what I like to call Reimbursement Critical Mass, which is that minimum percentage of revenue that is tied to improving clinical and financial outcomes independent of volume-based payments.

What is that number? Well, it varies. For the older physician who is planning to retire soon, that number might be quite high, whereas for the employed physician who isn’t directly responsible for his or her practice’s P&L that number might be a lot lower. In my experience, I generally put that number somewhere between 10 – 20%. Anything less than that, and the necessary investments in programs and transformation of care won’t likely happen.