Chief Healthcare Executive - Changing the Narrative

This article originally appeared on Chief Healthcare Executive.

This first part of this series explored the value revolution that is sweeping across the healthcare industry, one that promises to cut costs, create operational efficiencies, and ensure equality in access to care and health, regardless of social status. This transformation is the result of a shift from volume to value, where suppliers, healthcare systems and providers, pharma/medical device manufacturers, and payers look beyond their individual economics toward the outcomes they bring to the broader ecosystem, their communities, care teams, and patients.

Today, I will explore how those in the healthcare industry can effectively navigate this transformation in a stepwise way, eventually leading to the adoption of value-based agreements.

Trust in any relationship comes from shared understanding and transparency that demonstrate each party is aligned toward the achievement of mutual success. This starts with a culture and practice of asking questions and seeking to understand the goals, objectives and desired outcomes of the other parties in a commercial relationship.

Next, this understanding should be documented, validated and memorialized as the north star of the relationship, referring back to this shared definition of value as the guiding focus for how the relationship is managed. Treating this shared definition of value as a persistent artifact in the relationship conveys a commitment to the customer and helps to shift the dialogue from transactional to accretive, where the basis of the partnership is long term and measured on the basis of joint value creation.

Proving Value Creation in Healthcare Relationships

Once this definition of value is documented and validated, the various parties in the relationship can begin defining metrics and collecting data to track the performance of the relationship against these target goals. This helps to exercise the muscle of data-driven performance tracking, keeps all parties aligned to the truth, and provides the foundation for the next phase of joint value realization.

Rethinking the Structure of Commercial Relationships

Once shared value is defined and data collection mechanisms are in place, healthcare companies can start thinking about changing contract terms from transactional to outcomes-based with value-based agreements. Here, performance against target goals becomes the basis by which each party gets paid, ensuring that the contract terms are aligned to the creation of measurable value and giving each party incentives to unlock shared success.

A Graduated Path to Value-Based Agreements

Value-based agreements are often a challenge to administer and scale because of three key reasons:

• Difficulty of sharing data between parties to create an accurate picture of contract performance — as well as sensitivity about who controls the data in the relationship.
• Lack of lines of sight into contract performance to ensure that risk can be mitigated early and often throughout the performance period of the contract.
• The challenge of coordinating the planning and execution of programs and collaborative interventions and initiatives across supplier, provider and payer entities.

These challenges can be addressed with available tools and technologies that automate data collection, provide secure digital spaces for sharing and collaborating around performance data, and provide early indicators of outcome achievement to allow sufficient time for interventions during the performance period of a contract.

Shared digital spaces provide a secure workspace for documenting and aligning around the goals and target outcomes of the relationship and a place to “work the plan” in support of shared success.

Real-time performance data provides visibility into outcome achievement and supporting metrics that illustrate progress toward goals and target outcomes. This data can come from any combination of participants — supplier, provider, payer and third-party entities.

An independent third-party platform that mitigates sensitivity to data access and control, ensuring that no single participant in the contract has any real or perceived asymmetric advantage by virtue of data governance and control.

An early warning system to provide preemptive alerts about outcome achievement and a secure space for each party to collaborate around interventions and remediation.

Toward a More Equitable Future

Healthcare is unique in the sense that it is both a very large business and an important public service. While there are myriad politics and opinions associated with whether access to healthcare is a right, nobody can argue with the human and societal need for the service.

However, the business side of the equation can create imbalance in these interests unless and until mechanisms are in place to create mutual success in the pursuit of shared goals and outcomes that benefit all parties—suppliers, payers, providers and patients.

Value-based agreements are undoubtedly the future of healthcare, not only for pharmaceutical products alone but also with the increased promise of digital health platforms. The question for healthcare ecosystem partners is how they will step into this change — and do it in a way that’s collaborative, constructive and controlled. The solution to this and any other transformation

in business or life is making a plan and taking the first step on a graduated path that accrues benefits over time.