What would Darwin say about contracting and health care?
Merrin Permut, LHP Executive Director
During a press conference to announce that Nokia was being acquired by Microsoft, Nokia CEO Stephen Elop ended his speech saying, “We didn’t do anything wrong, but somehow we lost.”
Nokia had been a respectable company. They didn’t necessarily do anything wrong in their business – no major scandals to mention, no major motion picture biopic focused on an eccentric CEO. However, the world changed and Nokia’s competitors responded differently to that change than they did.
What did Nokia miss? Nokia missed out on learning, they missed out on changing, and thus they missed their opportunity to evolve. Not only did they miss the opportunity to grow, they lost their chance at survival.
Adaptation, crucial in nature, is equally important in our field. If we are not willing to change, we will soon find our current way of operating irrelevant. LHP is working to ensure that does not happen.
LHP’s two-pronged approach to contracting
Within LHP, we find ourselves with a foot in two boats. Payors and employers in the Portland and Southwest Washington areas are looking for alternative product offerings and value-based payment models, but there is still a significant market for traditional models and broad networks. Given these market conditions, LHP is taking a two-pronged approach to contracting. This approach involves broad network shared savings arrangements and narrow network products.
1) Broad network shared savings arrangements:
The focus of these arrangements is existing products with payors. For these arrangements, LHP does not contract for provider rates and the practices are paid based on the contracts they already have with providers.
Instead, LHP contracts for shared savings and clinical integration (CI) funding. It works like this:
- In a shared savings arrangement, the network is incentivized and rewarded for better coordination and cooperation among providers that results in improved quality of care and a slower rate of growth in costs. Legacy Health Partners has aligned its performance standards and adoption of best practices to support these goals.
- Clinical integration (CI) funding is a separate payment by a payor to the network that acknowledges the extra work that clinically integrated networks must undertake to manage populations: measuring and monitoring enhancements in clinical outcomes, improving patient safety, adopting new clinical technology, increased efficiency, and improved patient satisfaction.
Any surplus from shared savings and the CI funding feed the LHP incentive pool for distribution to our membership.
An example of this type of contract is the current contract that LHP has with the Legacy Employee Health Plan (LEHP). The LEHP contract includes $1 million in CI funding and an upside-only shared savings contract based on medical and pharmacy per member per month (PMPM) cost targets.
LHP is contemplating several additional shared savings arrangements for 2017.
2) Narrow network products:
The focus of these arrangements is to offer Legacy and LHP-centric narrow network products to small and large group employers that are looking for products that are competitively priced below broad network products. Products like these leverage the integrated LHP care model to the fullest extent and are appealing to employers looking for more active management of their employees. There is a nationwide trend of insurers offering narrower network products priced between 11 and 20% below broad network products. For these products, LHP may negotiate the rates for practices within the network as well as the shared savings and CI funding components.
With Legacy’s new partnership with PacificSource, LHP has an opportunity to work with an innovative payor that is aligned with our goals of growing membership and developing progressive products. LHP is currently working with PacificSource on a several new narrow network products, which will take effect in 2017. Any rates that LHP negotiates will only apply to specific narrow network products; each practice will still be paid their current contracted rates for all other products.
Want to learn more?
Attend an in-person Clinical Integration Education session where you have the opportunity to ask questions. This newsletter will also carry additional articles about our contracting approach through the year.
As Darwin said, "In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed." Legacy Health Partners is well positioned to influence its own evolution.