Managed Care - January 2009 - (Page 28)

records. Physician practice groups could fracture, as government support for EMR implementation and interoperability would remove a large incentive for consolidation. Payers could become powerful coordinators of care. How can MCOs prosper? With such profound changes possible in the payer business model, how can managed care organizations prepare for the future? First, they need to examine their current set of mixed business models, blueprinting the four parts discussed above and their critical interrelationships. Through this process, they should ascertain which parts of the aggregate business model are like the body’s endocrinology — a highly interdependent system disturbed at great peril — and which are extremities that can be operated on with relative ease. Then, companies need to assess how that business model may need to shift in response to varying scenarios of change. This task sounds straightforward enough, but the reality is that most organizations approach it backward. Business schools teach that strategy starts from a dispassionate review of market opportunity, followed by strategic targeting of specific opportunities, which then drives financial models, structures, and processes. In reality, many organizations take their profit formulas, resources, and processes as fixed — thereby constraining the types of value propositions they can deliver — and then bemoan the fact that they cannot invent truly innovative offerings to complete the equation. Creating strategy this way is like driving by looking in the rearview mirror. It is not an approach suited to environments of rapid change. By driving business model innovation from a deep understanding of the marketplace — patients, physicians, and employers — payers can define what their stakeholders will demand under various scenarios. For instance, how would a vast expansion of the Federal Employee Health Benefits Program, as proposed by Sen. Tom Daschle, nominated to be secretary of health and human services, affect how these stakeholders define quality? How would a federal equivalent of the UK’s National Institute for Health and Clinical Excellence (NICE), also proposed by Daschle, affect differentiation among payers? Subsequently, payers can define the other parts of their business model needed to deliver value propositions suited to this changing strategic environment. By rooting themselves in a common view of the world — though one that paints varying scenarios of change — they can objectively assess how profit systems, resources, and processes may need to adapt. Like amending the law, shifting business models should be difficult. Dislocation creates inefficiency and uncertainty. Therefore, payers may wish to experiment with new business models on a small scale. Just as an entrepreneur would test varying approaches before raising a large amount of money to scale up, so too an established payer will need to adapt and learn. For instance, it may file new plans in just one state, or work with only one hospital system to pilot novel propositions. It is perilous to ask the people charged with delivering today’s business results to create tomorrow’s business model. The urgency of everyday tasks will often push decisions about the future to the back burner. Worse, executives can unwittingly transplant the unwritten rules governing decisionmaking in the core business to new ventures that must break rules to survive. A handful of organizations are pointing the way forward. By focusing business models and integrating with physicians, Geisinger Health System in Pennsylvania guarantees the price of a heart operation, no matter what complications might follow. Even the drug giant Pfizer has experimented with its business model to provide total health care products: In return for Florida putting all of Pfizer’s drugs on the state’s Medicaid formulary, Pfizer agreed to payment based on the results of an independent audit of systemwide cost savings from patients using their drugs. The strategy worked; Florida saved nearly $42 million and Pfizer avoided up-front discounts and back-end rebates. With health care under tremendous cost pressure, change must happen. Influence stems from following the money. Payers control the lifeblood of the health care economy, and have far more power than fragmented physicians, providers, employers, and patients to reshape the environment. Payers can play a critical role by coordinating care, enabling prevention, ensuring quality, and empowering consumers. The future of managed care organizations will be turbulent. If payers can let go of past business models to create new approaches, that future can also be bright. MC 28 MANAGED CARE / JANUARY 2009

Table of Contents Feed for the Digital Edition of Managed Care - January 2009

Managed Care - January 2009 Editor's Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor Health Care's Disruptive Innovations Q&A With Clayton Christensen 'Disruption' May Be Plans' Best Bet Avoid the PBM Rebate Trap HealthPartners Puts Diabetes on Notice Formulary Files Plan Watch Tomorrow's Medicine Ad Index Outlook Unmet Needs in the Management of Plaque Psoriasis Impact of RSV: Implications for Managed Care

Managed Care - January 2009

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