Deep dive: 5 partnership models in commercial risk

This model is characterized by one-to-one risk-based contracts between a health plan and provider, with shared goals and investments.

One benefit of a custom risk-based contract is that it allows organizations to tailor their agreements—meaning organizations with multiple risk-based contracts don’t have to start from scratch on each one. Negotiations for these models typically last between 9 and 18 months, while contract length once implemented can run anywhere from 1 to 10 years. Longer-term agreements of 5 to 10 years (or more) are a sign of a strong partnership.

Business goals:

• Provider
  • Create a tailored risk-based payment agreement that shifts financial risk from payer to provider; the contractual agreement strengthens both partners’ specific value-based care and growth strategies.
• Payer
  • Same goals as provider

Benefits:

• Provider
  • Can customize the level of risk in the contract (such as upside-only risk, up- and downside risk, or capitation)
  • Can create a formalized structure for things like data sharing or utilization management
• Payer
  • Has the flexibility to determine the best contract for each specific provider

Trade-offs:

• Provider
  • Has financial uncertainty
  • May need to assume administrative burdens if quality measures or financial benchmarks end up being vastly different than other contracts
• Payer
  • May have to specialize metrics or benchmarks based on provider
• Both
  • Agreements can lead to a strictly contractual relationship rather than a partnership

Example:

Signed in 2019, Mayo Clinic and BCBS Minnesota’s five-year downside risk contract focuses on improving care management for complex patients through building a collaborative governance structure and targeting prior authorization barriers.

In this model, a dominant payer in the market adopts nonexclusive, risk-based contracts with multiple health systems, ACOs, physician groups, and/or specialty groups. These contracts are best suited for unconsolidated provider markets where the participating payer has market dominance. These models may take 12 to 18 months to develop on the payer side, and two years to implement with each participating provider.

Business goals:

• Provider
  • Opt-in to a preexisting value model
  • Cut down on contracting time and resources
• Payer
  • Market a high-value network to employers and brokers
  • Increase the number of lives under risk and/or downside risk
  • Develop a blueprint for value-based care in a certain market

Benefits:

• Provider
  • Can join a model with a proven track record, peer educational opportunities, and care management support
  • Increases number of lives under risk
• Payer
  • Can create a consistent model and quality metrics
  • Moves multiple provider partners further into risk
• Both
  • Create enough scale for population health initiatives and future investments

Trade-offs:

• Provider
  • Has financial uncertainty
  • May need to assume administrative burdens if quality measures or financial benchmarks are vastly different than other contracts
• Payer
  • May find that providers are not completely ready to take on downside risk
  • Can encounter varying levels of provider engagement in the model and partnership
  • May need to negotiate slightly different contracts for different providers

Example:

The Blue Premier program from Blue Cross Blue Shield of North Carolina (BCBSNC) has generated almost $500 million in savings since it was first launched in 2019. This payer-branded value model has agreements with 11 health systems and 870+ independent care practices in North Carolina and covers nearly 1.4 million lives. BCBSNC starts providers off in upside risk with a quality bonus structure, evolving toward downside risk over time so that providers can achieve quick wins and build confidence early. Participating providers earned $321 million in shared savings in the program’s first three years.

In this model, an intermediary organization (PHO, IPA, MSO, etc.) contracts with a payer on behalf of multiple provider groups. These arrangements are best suited for markets with small and independent physician groups that have limited resources. Contracts typically take around 9 to 12 months for contracting negotiations and another 9 to 12 months for launch.

Business goals:

• Provider
  • Move toward increased risk with minimal investment
• Payer
  • Penetrate a segment of the physician market
  • Achieve standardization in contracts and communications

Benefits:

• Provider
  • Can decrease administrative and resource burden by outsourcing time, expertise, and resources
  • May receive quality improvement, administrative, and population health support
• Payer
  • Creates scale for population health initiatives

Trade-offs:

• Provider
  • Has financial uncertainty
  • Has limited interaction with payer
  • May accrue outsourcing costs over time
• Payer
  • May find that contracts take longer to negotiate due to being joint contracts
  • Has limited interaction with provider

Example:

Founded in 2014, Aledade works with physician groups and practices nationwide to build partnered ACOs, optimize workflows, provide contracting support, and integrate and analyze claims data. Aledade currently contracts on behalf of hundreds of practices and is responsible for nearly 1.7 million patients across more than 37 states, with over 75% of their ACOs involved in downside risk. While the majority of Aledade’s partnered ACOs cover Medicare lives, the organization has evolved to cover commercial and Medicaid lives as well.

Payer(s) and providers create a risk-bearing network (IDN, ACO, CIN, PHSO, etc.) for specific, existing insurance plans. These are best suited for competitive markets where it’s necessary to leverage existing plans, rather than create new health plan products. Provider organizations often have a history of collaboration. Partners aren’t market leaders but have a sizable market share (5% to 15%). Network timing to launch typically depends on the number of different products or plans being developed by the network.

Business goals:

• Providers
  • Gain a stable number of lives under risk due to network steerage from partnering payer
• Payer(s)
  • Increase member enrollment in their health plan
• Both
  • Disrupt the status quo
  • Create a more affordable network due to price concessions from providers

Benefits:

• Providers
  • Utilize payer’s existing insurance products
  • Can manage against more stable benchmarks due to greater number of lives
  • Decrease unnecessary utilization and increase necessary utilization
• Payer(s)
  • Gain competitive prices
  • Improve network affordability and efficiency
  • Delegate risk-bearing tasks
• Both
  • Create alignment around costs and volumes, control premium costs
  • Pool brands, capital, and resources
  • Integrate data sharing
  • Create scale for population health initiatives
  • Disrupt existing relationships between brokers, payers, and providers
  • Skip the typical health plan rollout period

Trade-offs:

• Providers
  • Give out price cuts
• Payer(s)
  • Give away network concessions
  • Grapple with delegating utilization management
• Both
  • Attempt a multi-organization branding strategy
  • Overcome the challenge of translating a new network to purchasers (broker hesitancy and lag)

Example:

Canopy Health was originally established in 2015 as an affiliation between UCSF Medical Center and John Muir Health, but has since grown into a clinically integrated provider network that partners with UnitedHealthcare and HealthNet to take on delegated risk on behalf of its providers. Canopy follows a global capitation model in which providers gain margin through delegated payments and savings. Its network spans five medical groups and 29 hospitals across nine counties, covering almost 60,000 lives. (Note: Advisory Board is a subsidiary of UnitedHealth Group, the parent company of UnitedHealthcare. All Advisory Board research, expert perspectives, and recommendations remain independent.)

In this model, a payer and provider create a new insurance product that is partially or jointly owned by both organizations. Joint venture insurance products are best suited for uncompetitive markets, typically suburban or rural, where there is ample room for new product development and growth. Joint venture insurance products are often the longest type of partnership—they may take up to five years to roll out due to state filing times and extensive legal and financial issues.

Business goals:

• Provider
  • Diversify revenue streams
  • Gain a stable number of lives under risk due to network steerage from payer
• Payer
  • Market a provider-sponsored or -branded product to employers and brokers
  • Create a more affordable product due to price concessions from providers
• Both
  • Increase member enrollments

Benefits:

• Provider
  • Utilizes payer’s existing credentials
  • Manages against more stable benchmarks due to greater number of lives
• Payer
  • Gains competitive prices
  • Improves network affordability and efficiency
  • Delegates risk-bearing tasks
  • Benefits from provider’s branding
• Both
  • Create alignment around costs and volumes, control premium costs
  • Pool brands, capital, and resources
  • Integrate data sharing
  • Create scale for population health initiatives
  • Disrupt existing relationships between brokers, payers, and providers

Trade-offs:

• Provider
  • Gives out price cuts
  • Moves away from provider identity
• Payer
  • Gives away network concessions
  • Grapples with delegating utilization management
• Both
  • May find tension with partners who have competing products
  • Overcome red tape (e.g., commercial plans take a 12- to 18-month lead time for state filing)
  • Overcome the challenge of translating new product to purchasers (broker hesitancy and lag)

Example:

Banner|Aetna is a joint venture formed in 2017, in which both organizations have a 50/50 stake in the insurance product. Since its creation, the product has grown to over 375,000 enrollees and is the fastest growing health insurer in Arizona. Banner|Aetna’s shared risk model has resulted in cost reductions of over $900 per member per month for members as part of its multidisciplinary care team approach.