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Transform Care May 25, 2016

From Volume to Value: Unique Challenges in the New York Market

Partner, Health & Life Sciences, Oliver Wyman
Principal, Health & Life Sciences, Oliver Wyman
Key Takeaway
Payers and providers alike are looking for better information flows to enable value-based care #V2VNYC

Across the nation, we read about advancements in value-based care (VBC), and innovative progress made by both providers and payers. However, the New York City market is often perceived as being behind the curve. Is this really true, and if so, why? Last week Oliver Wyman, in collaboration with New York City Health Business Leaders, hosted an event to address these questions, exploring both the trials and bright spots in the local market’s transition to VBC. We were fortunate to host three thought-leading executives from payer and provider organizations for a panel discussion:

Our panelists highlighted some structural impediments common in NYC, but also identified a few keys to success. Here are four resonant takeaways:

1) NYC’s historical market structure and culture both contribute to its lagging the nation on VBC transition

Opening the discussion, our panellists were quick to agree on the slower than average pace of progression to value in NYC. At the same time, we heard a range of opinions as to the cause. Here are some identified by the panel:

  • Patients in NYC have been accustomed to a high-degree of choice and little has been done to curate that choice. This is partly enabled by the proliferation of open access PPO plan designs which in turn is supporting a high rate of self-referrals.
  • NYC has a low rate of legacy HMO business when compared to other parts of the country. For example, in Massachusetts, the upper Midwest, and California, providers were able to “cut their teeth over a long period of time.” These providers already have meaningful experience and scale in the value world and are better positioned to shift the remainder of their panels.
  • The lack of large dominant employers in NYC means that there is less focused pressure demanding VBC market transformation of both payers and providers. In addition, the largest private-sector NYC-based employers have significant portions of their workforce spread across the country and lack local critical mass.
  • Local market fragmentation requires each player to spend considerable efforts in negotiating value-based arrangements with multiple partners. Likewise, the lack of standardized VBC models also creates administrative hassles for payers and providers.
  • A provider market characterized by an absence of large medical groups and a high number of academic medical centers.
  • Finally, the diverse and heterogeneous nature of patient population and needs was also mentioned as a contributing factor.

2) Payers and providers alike are looking for better information flows to enable VBC

We asked our panellists what they need from their VBC partners, and surprisingly, we received very similar answers from both the payer and provider sides:

  • All of our panelists discussed the need for timely and efficient information flow between payers and providers to enable VBC. “Our movement to value is payer-agnostic,” said Gandhi of Mount Sinai, adding “and I need the workflow to be simple.”
  • The examples provided for these information flows included daily census reports that are used to alert providers to patients’ hospitalizations and metrics standardization across payers. “Out of the 60 metrics we have,” Dr. McGinty noted, “only two are identical, the rest vary.”
  • From the payer point of view, Fitzgibbon of EmblemHealth noted an information flow issue as well. “Payers are held accountable for the accuracy of physician directories,” he mentioned, but they are dependent on their provider partners for supply and accuracy.
  • Beyond information flows, our panelists agreed on the need for a roadmap for delegating functions from payers to providers. “If the right functions are delegated by the right payers to the right providers, you can actually take some cost out,” Gandhi said.

3) Managing a foot in each canoe? It can’t be done

Many provider organizations across the country are in the midst of shifting from the fee-for-service world to a value-based model. We asked our provider panelists how this in-between situation – a foot in each canoe – can be managed:

  • Dr. McGinty was quick to respond: “As a physician, I will not practice differently based on the patient’s insurance,” she said. What can be done, she offered, is to provide doctors with data about their patients so they can understand performance and act accordingly.
  • Commenting from the health system point of view, Gandhi agreed, saying “you can’t manage a foot in each canoe." He then referred to the economics of managing either volume- or value-based models: “The math on one end works, the math on the other end works, the math in the middle just doesn’t.”  He argued, “The only answer is to move fast.”
  • Slow and gradual transitions hold a number of inherent challenges such as having to manage the business using multiple sets of metrics and the difficulty in compensating physicians based on conflicting outcomes, such as productivity vs population management.

4) There is a difference between improvement, small-scale innovation, and large-scale transformation, and we need more of the latter

The panel also touched on approaches to innovation:

  • Gandhi described a number of new reimbursement arrangements soon to be launched, but then offered an analogy to demonstrate the difference between improvement, innovation, and large scale transformation: “Back in the 1800’s, it would take 15 days to ship goods from New York to London. If someone told you that delivery now had to occur in 6 hours, you wouldn’t try to build a faster boat, you’d build a plane.”
  • Gandhi recognized that some early innovators have developed successful VBC ‘planes,’ referring to innovative, but still small-scale providers such as Iora Health, Oak Street Health, and Qliance.
  • However, in order to revolutionize healthcare for millions of Americans, Gandhi called for large-scale transformation: “We are looking at how to turn an armada into an air force, but have discovered that when attempting to ‘flip’ a practice (from volume to value) there are steel cables that hold it down.” These ‘cables’ can be HR practices, P&L structures, and IT workflows, and providers should figure out how to overcome them.

Throughout the discussion, the impression in the audience was that after years of lagging the nation, the New York City market is finally poised for significant volume to value to transformation in the coming years. How exactly that transition will transpire and who will lead the pack is not yet clear.

More highlights below:

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