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Maximize Value June 19, 2019

What the Future Holds: Payer-Provider Partnership Trends to Watch

Partner, Health & Life Sciences, Oliver Wyman
Engagement Manager, Oliver Wyman
Associate, Health & Life Sciences, Oliver Wyman
Key Takeaway
Even as the number of product launches slows down, the market is approaching an exciting time of maturation. #OWHealth

Editor's Note: In January 2019, Oliver Wyman published the latest tracking infographics for payer-provider partnerships. Although the quantity of partnerships didn’t increase year-over-year, we continue to see deeper, expansive partnerships. Key questions need to be addressed for these partnership products going forward. Here’s more.

Payers and providers eager to get in the game have been recently jumping into product launches. Over the past five years, there were 196 product launches from a wide variety of both local and national players. However, the true value of these offerings is only just being realized. Players are recognizing truly innovative, game-changing products will require more investment, consideration and commitment from both sides. Last year’s launches alone demonstrated this realization – of twenty-seven new products that came on the market in 2018, nearly 3 in 4 – 70 percent – included co-branding and joint ventures. Although such offerings call for greater collaboration and interdependence between stakeholders, they have great potential to drive superior outcomes for organizations and consumers alike.

Of twenty-seven new products that came on the market in 2018, 70 percent included co-branding and joint ventures.

Fewer New Launches, More Emphasis on Expanding the Scope of Partnerships

There were nearly half as many product launches in 2018 than in 2015 – 27 versus 51. Even as the number of launches slows down, the market is approaching an exciting time of maturation. Ongoing vertical integration of payers and the explosion of healthcare’s “new front door” is “upping the stakes” of what product partnership models must deliver to remain relevant and competitive.

Some partnerships focus on experiences and outcomes. Humana’s partnership with the Cleveland Clinic represents one such example – they expanded their co-branded $0-premium Medicare product to five Ohio counties in 2019. The product was also enhanced with additional benefits like a personal emergency alert system and on-demand tele-visits for members.

Other partnerships aim to better serve employers. For instance, out in the Midwest, Robin Health has rolled-out a customizable product portfolio of pre-defined product designs, targeted at all employer sizes, including self-funded small employers.

Further East, City of New York is also supporting employees through such an initiative. Their partnership with Emblem Health has expanded access to the preventative and specialist benefits of the Hospital for Special Surgery and Memorial Sloan Kettering Cancer Center.

Out West, Premera has partnered with Microsoft to tailor coverage for 10,000 employees and their dependents. Enhancements include access to a dedicated service center, where clients receive guidance with choosing a primary care or specialist provider, confirm plan benefits, or address administrative needs.

Expanded partnerships like these and many others, along with new entrants like Blue Cross Blue Shield Rhode Island (with Lifespan on Public Exchange) signal initial success and continued interest in this space.

What’s Driving Deeper Partnerships?

As we predicted in our early coverage of these trends, narrow network discounts alone don’t enable partnerships to succeed in the market. Players must differentiate by leveraging close payer / provider integration to improve the customer experience, bolster care coordination, and tailor features for customers’ needs. Through this mindset, payers and providers are investing the time, resources, and management attention to enhance the competitiveness of current offerings, rather than launch new product after new product.

Many of these partnerships seek to better integrate patients’ data, to help patients see preferred primary care physicians faster and at their preferred appointment times, and to decrease the number of dropped balls overall. Payers and providers are using these new products’ first customers to fine-tune care delivery before rolling out another wave of partnerships. Similarly, from an operational perspective, payers and providers are working through how to best collaborate to coordinate care and create more affordability over time. An increasing number of players are improving their tracking and reporting on these first products to demonstrate these partnerships’ impact to employers.

In the absence of these differentiators, partnerships don’t automatically convince employers to add these products, however. Employers who often choose to retain a traditional broad coverage option, are generally hesitant to take on the additional complexity associated with also offering a local alternative. In addition, employee uptake varies significantly depending on the provider partner’s brand perception and price differential versus traditional broad coverage.

To overcome these challenges, existing partnerships are working to articulate their unique value proposition. Products are likely to see wider adoption once partnerships have established quantitative proof points, employer specific performance reporting, and local market track records.

Partnership exclusivity arrangements have also slowed new launches, as many provider systems remain “locked in” with particular payers. Although specific details aren’t always public, exclusivity arrangements typically last between five and seven years. The market may once again see an uptick in new launches once these agreements expire.

Finally, the management attention, investment and resources required for new launches is being diverted to respond to other recent industry developments. Mega mergers, like CVS-Aetna and Cigna-Express Scripts, coupled with other vertical integration plays, have been occupying health insurers’ attention. Simultaneously, healthcare’s “new front door” continues to evolve and expand. Both providers and payers are investing in unconventional front door assets (like retail clinics, urgent care, and digital) to influence consumers’ care decisions. These strategic priorities have been crowding out the launch of new partnered products.

There were nearly half as many product launches in 2018 than in 2015 – 27 versus 51.

Key Questions Moving Forward

In a future with vertically integrated payers and a very different front door of care, what’s the role of these partnerships? It’s too early to tell, but there are some likely possibilities:

If these partnerships can rapidly achieve deeper payer-provider integration and deliver on their promised differentiation, we could see these products gain momentum. Better access to physicians, improved care coordination, data integration, and seamless experiences will allow these products to consistently win against traditional network designs.

Even if the operational and infrastructural integration is slower to arrive, the alliances that formed because of these partnerships still carry weight. Payers looking to create a more locally oriented ecosystem may combine more unconventional front door assets like virtual primary care, telemedicine, and retail clinics with the traditional hospital / clinically integrated network assets. Such endeavors will enable a different kind of “closed loop” system — one that turbo-charges steerage and utilizes a greater variety of patient touch points to improve access and experiences.

Without enough differentiation, however, payers and providers may step back from the complexity of collaboration. Exclusivity may erode, and providers will become just preferred options, within more traditional looking networks. Payers will refocus on directing patients to centers of excellence through methods like navigation tools and referrals instead of relying on the brand and relationships of their provider partners. In this case, network restrictions become more relaxed and payers are creating value within the traditional model versus a standalone partnership.

There is significant promise in the potential of these partnerships. In the next few years, current initiatives will be tested and new models will launch, capitalizing on the evolution of front door dynamics and the accelerating race to capture share. We look forward to seeing how these unique strategic assets are leveraged and adapted in the future healthcare value chain.

For more information, check out our earlier 2019 analysis here.

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