Healthcare providers and payers used to be on opposite sides of the fence—what was good for one was usually bad for the other. However, that relationship began to change with the introduction of the Affordable Care Act (ACA) and as value-based care entered the healthcare market. Payers and providers found that working together could bring financial benefits to both. Whether they do it through acquisitions or joint ventures, payers and providers are increasingly joining forces and becoming “payviders”.
What are payviders?
Although it has been around since the early 1990s, the “payvider” model never took significant hold in most healthcare markets due to high financial risk, noncompetitive prices, and soaring utilization costs. Organizations like Geisinger and Kaiser Permanente have successfully executed the model for quite some time, but only recently the market has seen a resurgence in payviders. Even considering the COVID-19 crisis, provider organizations are looking to collaborate—whether via partnership, investment, or acquisition—with health plans to help ensure a steady cash flow.
Payviders are created when payers and providers collaborate to meet joint goals of:
- Reducing financial risk
- Increasing profitability
- Providing high-quality medical care and excellent patient experience
- Improving health outcomes
Three payvider models:
- An insurance company shifting to a healthcare provider that offers insurance: Humana announced this strategic shift in 2019.
- Healthcare providers creating their own insurance plans: UPMC and Providence, for example, both have their own health plans. Currently, 300+ health systems have their own health plan.
- Joint ventures between payers and providers: Banner Health and Aetna, Aurora and Anthem, and Geisinger and Hallmark are 3 examples of existing joint ventures.
Payviders can take on a few different forms: provider-sponsored health plans, employment of physicians by national payers, or long-term risk–based payer/provider contracts. The rationale: payviders deliver more cost-effective healthcare because as the provider and the payer, they have increased control over the care they provide members and the many associated costs—from supply chain spending and contracts to the quality measures that affect reimbursement. When providers assume more financial risk, care is theoretically more cost effective.
Healthcare organizations, such as California-based Kaiser Permanente and Pennsylvania’s Geisinger Health System, have successfully operated as payviders for many years. More payers and providers have joined forces in recent years through acquisitions and mergers, joint ventures, or entry into new markets.
As value-based healthcare becomes more common, we will see more insurers and providers joining forces to increase the quality of care and minimize their financial risks. The emergence of the payvider model can help patients, providers, and payers.
In value-based healthcare, the amount of money that hospitals and physicians receive is based on patient health outcomes. Providers who help patients improve their overall health, reduce the incidence and effects of chronic disease, and live healthier lives are rewarded for those efforts, which differs from the traditional fee-for-service approach where providers are paid for each service they perform.
Insurers and providers start implementing the payvider approach
Humana, one of the country’s largest insurers, recently said it is changing its focus1 from being an insurance company that offers some healthcare services to becoming a healthcare provider that also offers insurance.
At the same time, the number of healthcare providers that have created their own insurance plans has increased by about 10% every year since 2014.2 In 2016, those plans covered more than 36 million members in 2016 according to Atlantic Information Services.2
Joint ventures between payers and providers are a third option. In 2012, Aetna and Inova Health in Falls Church, VA, created a joint venture called Innovation Health. Innovation used Aetna’s expertise to build an insurance plan built around Inova’s network of providers in Virginia.
Aetna and Texas Health Resources partnered 5 years later to form a joint venture named Texas Health Aetna. The 2 companies came together to, in their words, “help members save on cost while still receiving the highest quality care.” 3
A new Guidehouse analysis outlines several markets that should be prime targets for “payviders” or risk-based payer-provider collaborations. The Detroit, Miami, Phoenix, and Tampa, regions are among those most amenable to these collaborations, according to the report,4 as they represent significant growth potential based on local competition and demographics.
Payers and providers operating in these markets have the opportunity to “differentiate” their value-based care work through models such as provider-backed health plans or payers directly employing doctors according to the report. The report also identified Portland, San Francisco, and Minneapolis as markets where payviders are currently thriving the most.
The Payvider model offers many benefits
A recent survey of 120 payers by Change Healthcare5 showed that increased use of value-based care has helped improve quality of care, increased patient engagement, and reduced costs. The survey found that under value-based care:
- The cost of unnecessary medical expenses was reduced by 5.6%, on average
- 80% of payers reported increases in the quality of medical care
- 64% of payers reported improved relationships with providers
- 73% of payers said that patient engagement had improved
Converged organizations will become more prevalent and result in increased patient engagement. The payer arms of converged organizations will leverage IT solutions, enabling improved management of chronic conditions with better health coaching from the provider arms to reduce total costs. A connected care framework keeps providers, payers, and patients connected. Extensive discussions have centered on whether claims data or clinical data are most useful in healthcare. Provider clinical data are very deep but often miss the bigger continuum of care picture that claims data can capture. As healthcare providers model out what value-based contracts make sense for them and determine where their process improvement teams need to focus, the combination of data becomes critical for healthcare issues.
The future of payviders
Much of the current growth of the payvider model has occurred because of the federal Centers for Medicare and Medicaid Services, emphasis on accountable care organizations (ACOs). In ACOs, all the providers who treat a patient during the year receive a single payment that they divide among themselves.
That growth should accelerate in the future as more employers begin to demand value-based healthcare6 in the insurance plans they offer to employees. At the same time, consumers are demanding a better patient experience that is more like what they get from Amazon and other online retailers.
Nearly 60% of health systems in a new survey plan to implement risk-based Medicare Advantage payment models in 2022, reflecting a growing trend of providers seeking to become “payviders” and have a greater role in risk management. The details were part of a survey conducted by the Healthcare Financial Management Association,7 which represents hospital executives. The survey of more than 100 health system chief financial officers and other executives was conducted between July and August of 2021.
The survey found that health systems are looking to diversify their risk-based payment strategies. For example, 52% of respondents plan to enter into commercial employer-based risk contracts, 49% into Medicare payment models, 36% into managed Medicaid, and 33% into direct-to-employer partnerships.
The number of payviders will likely continue to grow as more health systems and payers merge and acquire new facilities, functions, and operations. Healthcare organizations existing as fragmented or disorganized systems cannot meet the necessary goals of improved patient outcomes at lower costs.
Operational healthcare solutions and technologies that drive better outcomes and help coordinate the astounding number of moving parts required to achieve healthcare reform are here (eg, provider data management; workforce management; contract management; spend management; access management; compliance, quality, and safety management) and will play a significant role. Still, healthcare providers and payers who keep patients at the heart of their mission will remain the foundation of any payvider.
The next steps
Healthcare providers, including hospitals and physician practices, can help increase value by taking advantage of technology. For example, optimizing patient access with the use of advanced patient access platforms for health systems, health plans, and physician groups will achieve better care, reduced costs, and improved patient experience.
- Landi H. Humana’s chief strategy officer: Insurance giant is shifting to be a healthcare company. Fierce Healthcare. Published October 3, 2019. https://www.fiercehealthcare.com/payer/humana-strategy-leader-insurance-giant-shifting-to-be-a-healthcare-company
- Mattson-Hamilton M. March to value-based healthcare results in ‘payviders.’ TechTarget. Published November 1, 2018. https://searchhealthit.techtarget.com/opinion/March-to-value-based-healthcare-results-in-payviders
- Texas Health Aetna. Published 2021. https://www.texashealthaetna.com/en/about-us.html
- Guidehouse. Now Is the Time for Payvider Adoption & Growth. Published 2022. https://guidehouse.com/insights/healthcare/2021/payvider-market-index?utm_source=Press_Release&utm_medium=PR&utm_campaign=Payvider_Market_Index
- Change Healthcare. Finding the Value: The State of Value-Based Care in 2018. Healthcare Finance. Published 2018. https://inspire.changehealthcare.com/StateOfVBCReport
- Morse S. Value-based care requires payer and provider collaboration. Published June 27, 2019. https://www.healthcarefinancenews.com/news/value-based-care-requires-payer-and-provider-collaboration
- Guidehouse. 2021 Risk-Based Healthcare Market Trends. Published November 8, 2021. https://guidehouse.com/insights/healthcare/2021/2021-risk-based-healthcare-market-trends