Catalyst for Payment Reform

Throwback Thursday: Tailoring Reforms to Local Market Dynamics

Throwback Thursday: Tailoring Reforms to Local Market Dynamics

One year ago, CPR highlighted the importance of shaping health care payment and delivery reforms to the local market based, in part, on the relative position of key stakeholders—health plans, providers, and employers or purchasers.

To date, health care reforms have largely been spurred by the Centers for Medicare and Medicaid Services (CMS).  While CMS’s efforts are incredibly important for propelling health care reform, these models, which are piloted across states, do not always account for the characteristics of each market in which they are implemented, which may be why some of these models have mixed results today. To understand the value that local market assessments can have on payment and delivery initiatives, let’s look back at our previous learnings about market dynamics.

  • What if the provider is dominant? If there is a dominant hospital or health system in a market, health plans and purchasers may have limited options. Both may need the health system to provide members with adequate access to care.  But when the provider is “market-shaping” and has the negotiating leverage to dictate the price of services and procedures, as well as other terms and conditions in their contracts, it can say, for example, “to heck with shared savings!” if such an arrangement does not seem favorable.
  • What if a purchaser or health plan has the most influence? Alternatively, purchasers or health plans can be market-shaping. Though it is rare for purchasers to be market-shapers, when a jumbo employer has a large presence in town it can happen. More typically, a health plan may be market-shaping, such as in markets where only one health plan offers insurance coverage. In both cases, providers must compete for the health plan’s or purchaser’s population. In this situation, providers may be more willing to appeal to the health plan’s or purchaser’s needs and to accept new forms of payment or change the way they deliver care. For example, when a large purchaser—in such a market—was interested in offering an accountable care organization to its population, the hospitals and health systems jumped at the chance to restructure.
  • The rare market may have a relatively equal balance of power among the stakeholders, which may make them all more willing to work together toward higher-value options—or not!

The truism that “health care is local” suggests that different communities will experience similar types of payment and delivery reform differently. Keeping local market dynamics in mind may lead to a greater likelihood of success. CPR has conducted six market assessments to date.  Read more here.

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