Increased speed to market Historically, a health insurance product has been composed of a set of benefits aligned against a suite of providers. Te net- work of “any willing provider” was able to support even wide network access without much concern. In today’s environment, however, without the ability to medically underwrite, payers need every tool at their disposal to create benefit plans that are cost efficient. In addition, with more regulations to implement in a very short window, speed to market can not only determine a payer’s share of market but also its profitability. As a result, the network itself becomes the strategic manage- ment infrastructure for delivering new products. For example, in a given market, a payer may retain some products under a fee-for-service model while shifting a number of specific pro- cedures to an episode-of-care model. If the right providers and relationships are in place, the payer can deliver that product to the market with confidence. If the product is financially attractive, it might gain market share among employee groups or members and even be brought to scale across markets.


Medical cost efficiencies Until now, few payers have used network design strategies to manage medical risk. Yet, doing so can have a major impact on medical costs. For example, a knee replacement may cost $20,000 in the market. However, a select group of providers able to deliver that service more efficiently may be willing to accept a price of $17,500 if the health plan promises to steer more patients its way, leading to medical cost savings of $2,500 per episode.


Tose cost savings are almost certainly driven by an im-


provement in care quality in terms of fewer complications and readmissions, reduced hospital time and better rehabilitation. Patients subscribing to that plan are encouraged toward optimal cost and quality services since they will be penalized for not using preferred providers. As health insurance exchanges and increased Medicaid


enrollment bring an influx of high-use, high-churn members, the need for a network structure that is highly efficient in the delivery of optimal care will be essential to manage medical risk. Benefits and providers must be administratively tight, economically aligned, and structured to encourage the type of performance — from providers, payers, and patients — that


improve outcomes. Te payer that has a data-backed ability to understand and manage its provider network will be in a better position to manage medical risk.


Ready and willing? Te advantages of an integrated network management


function are intuitive and flow logically in step. In determin- ing whether such a benefit structure can be delivered, a payer needs to consider readiness in line with those steps. If data can’t be accessed efficiently, a payer won’t be able to understand its providers sufficiently nor enroll and manage them efficiently. If that can’t be done, the other steps in turn can’t be accomplished. Te larger questions about readiness surround urgency and


leadership. In conversations with payers and providers, I often ask three questions: 1. Do you believe that in the next 3 to 5 years you will need to manage significant change in your care delivery framework or reimbursement designs?


2. Do you believe that a different relationship between payers and providers will be necessary to enable those changes in care delivery and reimbursement?


3. Do you believe that your current network, processes, and procedures are adequate to support those partnerships, and those changes?


If the answer to the first question is no, then there is little need for further work. However, if the first answer is yes and the answer to either of the subsequent questions is no, then much needs to be done. Even so, many organizations are hesitant to move forward. A high percentage of my customers and colleagues in the in- dustry are understandably overwhelmed by the extent of the change that has been coming at them in recent years. Tey are also experiencing what I have heard described as “compliance fatigue.” Te mindshare and financial resources devoted to mandated programs and requirements have diminished the sense of innovation and determination necessary to be an industry leader. Te urgency, however, is real. In that light, perhaps the most important question about


readiness should be: “Are you willing to be a relevant partici- pant in healthcare delivery in America three to five years from now?” If the answer is yes, it is time to begin.


HMT


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