Joint venture health plans are still relatively new to providers and payers. It’s important for both side to engage a skilled actuary who can assess the potential risks and benefits of such a partnership. In this article, Milliman actuary Lynn Dong provides some perspective on the following questions that providers and payers must consider concerning joint venture arrangements.
• How much is the provider system’s volume likely to increase?
• What is the provider’s range of potential outcomes under the rate concession or risk-sharing arrangement? How does this compare with the current contractual reimbursement arrangements?
• What insurance risks are transferred from the payer to the provider, and how will these risks be managed?
• How will the responsibility for care management, ongoing data and financial reporting, and financial settlements be allocated? What additional resources will be needed from the provider and payer to perform these functions?
• What ongoing data and reports will be made available to the provider? What level of detail will be available, and how often will this information be provided?
• What are the key financial, strategic, and business risks for the provider and payer?
Healthcare providers can improve their financial performance under value-based contracts by implementing an effective contracting strategy. Milliman consultants David Williams, David Liner, and Colleen Norris discuss how providers can accomplish that by prioritizing and measuring operational and contractual elements against three core pillars: transparency, stability, and control. Here is an excerpt from their article “Building a successful value-based payer contracting strategy.”
Providers prioritize each pillar and attribute to create weights for each cell. Contractual elements are then evaluated against those pillars to produce a score for each cell. This can be either a subjective evaluation or a more rigorous analytic evaluation depending on the nature of the element. The weighted scores can be used to prioritize areas of administrative concentration and to compare payer contracts on a similar basis. This prioritization is a critical step to a successful contracting evaluation process….
…The exercise of scoring the grid identifies high-risk elements and compares contract structures from different payers that require revisions. When performed rigorously, this process brings focus that allows management to spend more time on contracts with the greatest risk and potential for improvement. Applying each pillar to specific payer contract elements identifies specific risks and creates areas of focus for providers during negotiation. However, this analysis alone does not enable providers to easily compare value-based contracts in their entirety.
The complex evaluation process is illustrated below in a simplified form. The intent of this illustration is to highlight important aspects of the decision-making process required to effectively manage complex payer relationships.
First, the contract is scored for each pillar and element cell in the scoring grid. Each contract is evaluated separately and may contain different elements. The provider may require independent help.
Second, the provider weights each cell in the grid based on priorities. These weights would likely be consistent across contracts. The provider may counsel with outside help to prioritize, but ultimately will be responsible for the focus of their efforts.
Finally, the total score is calculated by applying weights in each cell based on prioritization of the contracting elements. Figure 2 illustrates this contract-scoring approach.
Managing provider reimbursement levels is an important function for health plans. Provider reimbursement analytics can offer health plans the foundation they need to effectively manage reimbursements.
In their article “Provider reimbursement analytics,” Milliman consultants David Lewis and Charlie Mills highlight the advantages and disadvantages of the two primary analytical approaches for evaluating provider reimbursement levels. The authors also discuss the pros and cons of the three main baseline fee schedules used in provider contract benchmarking, one of which includes Milliman GlobalRVUsTM.