Home Perspectives & Insights Health Plan acquisitions of Provider Groups improve Value-based Care

Health Plan acquisitions of Provider Groups improve Value-based Care

Perspectives & Insights · March 4, 2022 · Comments off

August 20, 2022
© 2022 – Don Gerdts. All rights reserved.

What should we make of the continuing trend of health plans acquiring provider practices, retail clinics and home-based/virtual care capabilities?

Consider some recent transactions:

  1. CVS acquires Signify Health, Target Pharmacy, Omnicare, etc. (10,000 providers + expand Rx).
  2. UnitedHealth Group (now 60,000 providers) acquires Healthcare Partners, Landmark Health, DaVita Health, etc.
  3. United Health Care partners with Walmart Health.
  4. Humana buys out Private Equity partner to expand CenterWell.
  5. Elevance Health acquires CareMore, CareBridge, Amwell, etc.

Let’s put this activity into the framework I’ve established in this series to evaluate healthcare value, which is really a mathematical perspective of the Triple Aim, where:

Value = E[Q+S] / [∑(P*U)] or Value = Effectiveness [Quality + Satisfaction] / Total Cost

While healthcare and population health certainly are not simple, one can simplify the healthcare value equation ( Value = E[Q+S] / [∑(P*U)] ) to its elemental values:  Value = Effectiveness / Cost.  In this view of healthcare value, effectiveness represents the combination of quality of care and patient satisfaction, and cost reflects the summation of the prices for utilization, care management, and administration.

So, to drive the discussion of how health plan acquisitions of providers affect value-based care, we’ll substitute the variables of the equation with the stakeholders of the healthcare ecosystem whose roles most affect the variables. 

For this discussion, the stakeholders in the healthcare ecosystem are:

People =             Patients and Policyholders
Providers =         Practitioners, clinics, hospitals, post-acute facilities, etc.
Producers =        Pharma and medical technology
Payers =              Health plans, government, employers
Policymakers = Federal and State HHS and Legislatures

Substituting the stakeholder roles for the variables in the healthcare value equation, the result is:

Value = (People + Policymakers) / (Providers + Producers + Payers)

Now, evaluating the VBC equation through the lens of the stakeholder roles, we can better understand the rationale for Payers acquiring Providers and Producers, like those I listed above.

While Providers, Payers and Producers (like Pharma) drive the denominator of cost, they have an inverse relationship with Provider and Producers driving cost trend up (especially with public and private equity owning an increasing share) and Payers attempting to drive cost trend down for similar reasons.

Conclusion?

I see two primary effects of Payers owning more Providers: 

  1. Better data sharing to the clinical workflow enabling value-based decisions (Cost Þ), and
  2. Reduced pricing pressure from Providers with more shifts to alternative provider compensation models, including risk sharing and salary + quality incentives (Cost Þ).

I believe that these two effects of Payers owning more Providers drive costs down, which, in terms  of the VBC equation, reduces the denominator and ultimately increases the value of V (Value)!

Next Steps

I’d love to hear your thoughts on this topic!  Do payer acquisitions of providers and producers advance value-based care?

TripleAim Strategy Advisors can help stakeholders in the healthcare ecosystem as a consultant or advisor to provide insights and develop strategies to advance equitable, value-based care.

Contact us to discuss this important topic or see additional ways we can help!

Don

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