Network-based Business Models in
Behavioral Healthcare-Horizontal and
Vertical Integration
June 7, 2012
Charles G. Ray
Why Network-based Business Models?
We’re Not Alone
Top 10 Issues:
Managed Care Executives Group
1.
2.
3.
4.
Administrative Mandates (HIPAA 5010, ICD-10, etc.)
Care Management, Data Analytics, and Informatics.
Health Insurance Exchanges and Individual Markets.
New Provider Payment & Delivery Systems (ACOs, PCMHs, etc.)
5.
6.
7.
8.
Bending the Cost Curve.
Medicare and Medicaid.
Health Information Exchanges and EMRs.
Consumer's Role in the Modernization of Healthcare (social networking,
incentives, CDHP, etc.)
9. Reform Uncertainties.
10. Payer/Provider Interoperability.
We’re Not Alone
10 Priorities:
National Academy for State Health Policy
1.
2.
3.
4.
Be Strategic with Health Insurance Exchanges
Regulate Commercial Health Insurance Market Effectively
Simplify and Integrate Eligibility Systems
Expand Provider and Health System Capacity
5. Attend to Benefit Design
6. Focus on the Dually Eligible
7. Use Data Meaningfully
8. Pursue Population Health Goals
9. Engage the Public in Policy Development and Implementation
10.Demand Quality and Efficiency from the Health Care System
What to Expect? More…
• Emphasis on mission-critical IT infrastructure, certified
systems, and Meaningful Use
• Aggressive contracting with commercial payers and
discounts
• Managed care and utilization review
• Medication assisted treatment (MAT)
• ACOs and Patient-Centered Medical Home (health
home) models (integration and consolidation)
• Care Coordination and Medical Case Mgmt
• Standardization of practice guidelines
More…
• Complex coding and electronic billing (EDI)
• Demand for data management and
reporting
• Competition
• Integration
• Merger & Acquisition
Demand for…
• Stronger business acumen
• Aggressive strategic planning
• Accelerated business modeling
• Subject Matter Expertise
• Affiliation, Joint Ventures and Mergers &
Acquisitions – Strength in Numbers!
• Resources and Capabilities to Execute
Integration
• Vertical Integration
– Unify the supply chain under one roof (single owner)
– Each “link” produces a market-specific service that satisfies a
common need, coming together for a single service experience
– Examples? Professional Education + Prevention + Treatment + Case
Mgmt + insurance
• Horizontal Integration
– Strategy for increasing market share by associating with, merging with
or acquiring like companies in adjacent or overlapping markets
– Unifying marketing capabilities to present a common brand image
What Problems
Should We be Solving?
1. Complexity and Variation: multiple payer systems,
enforcing disparate code-sets and applying different
business rules with varying approaches to
reimbursement
2. Changing business and regulatory environments
3. Increased competition and medicalization
4. Demand for integration and consolidation
5. Selecting and implementing IT
6. Access to sufficient subject matter expertise
7. Access to capital
Key Concepts for Today
• Discontinuity and Disruption (P. Druker)
• Instability (A. Toffler)
• Decay and Irrelevance (G. Hammel)
• Tipping Point (M. Gladwell)
• Strategic Inflection Point (A. Grove)
• Value Migration (A. Slywotzky)
• Disruptive Innovation (C. Christensen)
Provider Network Models

Independent Practice Association (IPA)

Management Services Organization (MSO)

Administrative Services Organization (ASO)

Technology Services Organization (TSO)

Community Behavioral Health Organization (CBHO)

Specialty Preferred Provider Networks
Definition
• Some business models assemble providers in selfdirected groups within a geographic region to invent and
implement healthcare solutions, form collaborative
efforts to implement these solutions, and to exert
political influence upward within the medical and payer
communities to effect positive change.
• Shared services can include facilities, personnel,
supplies, services, technology, and professional
services including credentialing, billing, marketing, legal
and accounting.
Definition
• IPA, MSO, TSO - Some network models are primarily concerned
with shared services, especially billing and IT. The entity’s revenues
come from its members.
• ASO, CBHO, IPA - Some are more concerned with managed care
contracting and may assume financial risk in capitation, sub-cap
and carve-out models
– These models develop additional centralized capacity for network
management, utilization review, quality assurance, claims re-pricing
and processing
– Revenues come from payers
• PPN - Others desire to contract at discounted fee-for-service rates
with many payers, owning as much of the market share as possible
while centralizing credentialing. Revenues also come from payers.
Getting Paid
By Payers
 Network Access Fees (“rental” or “lease” models) based on
numbers of “lives” served
Recurring administrative service fees
 Percent of savings
 Capitation profit model

By Providers
 Recurring administrative fees

Distinct service fees
Critical Success Factors
•
•
•
•
•
Credibility and reputation of participants
Trust and collegial relationships
Alignment of financial incentives
Adequate time for implementation
Professional management and access to
expertise
• Financial Plan and access to capital
• Deep understanding of market & niche
Core Functions
A. Centralized Practice Management Services
B. Marketing and Contracting (avoiding price
fixing!)
C. Technical Support, Training and Education
D. Billing Operations
E. Information Technology
F. Procurement
G. Professional Services (consultants, legal,
accounting)
Common Features

Provider owned and operated entities developed to
provide access to infrastructure and core capabilities
for the benefit of members.

Includes formal organizational structure, mission,
governance, management, staff, budget, policies,
procedures, infrastructure and core services
Common Benefits
Increases funding opportunities
 Enhances revenue management and cash flow
 Provides a centralized, reliable source of expertise and dedicated IT
support

Enhances purchasing power and allied representation
 Promotes industry standard operating procedures and Best Practices
 Improves capacity to respond to change
 Increases user satisfaction among clinic staff and providers


Creates economies of scale and strength in numbers – critical assets in the
new business environment
Markets
Self-insured employers
 Health plans
 Managed care organizations

Publicly-funded programs
 Medicaid managed care plans
 Managed behavioral health organizations

Performance Measures
Accreditation (NCQA, URAC)
 Claims throughput and accuracy
 Customer service

Access to services
 Network’s quality of care
 Outcomes
 Patient Satisfaction with network
 Overall savings accrued to payers (claims and admin)

Common Concerns

Insurance Laws (being careful not have to become a licensed HMO)

Anti-Kick-Back Laws (and anti-referral laws)

Anti-Trust Laws (observing price-fixing and monopolies)

Reimbursement (cannot bill for centralized services)

Discontinuing relationships (survivability of contracts)
Mission & Goals (PSO Sample)
•
Mission
– To provide members a foundation to continuously improve upon
their business practices, administrative efficiency, quality of
care, and clinical outcomes through enhanced deployment and
utilization of information technology
•
Goals
1. Enhance revenue through improved operational efficiencies
2. Capitalize on economies of scale and technical expertise
3. Achieve greater reliability and stability in data management and
information exchange
4. Assist providers in improving care and outcomes
Hosting Services
 Server Administration
 Operations
 Connectivity
 Disaster Recovery
 Hardware and Operating Systems
Upgrades
ASP Services
 Software Patches, Upgrades and
Maintenance
 User Support
 Training
 Implementation
 Reporting
Electronic Data Interchange (EDI) &
Health Info Exchange (HIE) Services
 Data Integration Mgmt
 Data Warehousing
 RHIO Participation
Transaction Processing
 Business Intelligence
Consulting Services
 Strategic Planning
 Process Improvement
 Help-Desk
 Email
 Office Automation
 Project Mgmt
PSO Model
PSO Model
NonMembers
Hosting Services
 Server Administration
 Operations
 Connectivity
 Disaster Recovery
 Hardware and Operating
Systems Upgrades
ASP Services
 Software Patches,
Upgrades and
Maintenance
 User Support
 Training
 Implementation
 Reporting
Electronic Data
Interchange (EDI) &
Health Info Exchange
(HIE) Services
 Data Integration Mgmt
 Data Warehousing
 RHIO Participation
Transaction Processing
 Business Intelligence
Consulting Services
 Strategic Planning
 Process Improvement
 Help-Desk
 Email
 Office Automation
 Project Mgmt
Members
Trading
Partners and
Payers
ASP Services
• Key benefits include expert applications support, system
configuration management, help desk management and software
upgrade support.
• Sample Services:
 Software Maintenance – Application configuration, DBMS management, management of
software patches and major software upgrades for hosted PSO-standard applications
 User Support – Problem resolution and vendor liaison support for hosted PSO-standard
applications
 Application Training – End user training for hosted PSO-standard applications
 Implementation Support – Project management associated with the installation and
implementation of hosted PSO-standard applications
 Report Development – Analysis, design and development of application based reports for
hosted PSO-standard applications
EDI/HIE Services
• Key benefits include access to a central technology and
support organization to implement and manage health
information exchange activities.
• Sample Services:

Data Integration Management – Planning, management, implementation and ongoing monitoring of interfaces and data integration tools including interface engines
and ETL tools

Data Warehousing – Development of data warehouse/repositories and associated
interfaces/extracts

RHIO Administration – Coordination and planning with data sharing partners

Transaction Processing – On-going operations, management, monitoring,
maintenance and problem resolution for EDI/HIE transactions

Business Intelligence– Analysis, design and development of reports, portals and BI
tools
Consulting Services
• Key benefits include access to more cost-effective IT
professionals on an as-needed basis to enhance members’
existing IT resources
• Sample Services:
 Planning – Strategic planning, needs assessment and product evaluation
 Operations Improvement – Business reengineering and operations improvement associated
with PSO-standard applications
 Help Desk Support – Receipt, triaging, logging, dispatch and tracking of service requests
 E-Mail Support – Administration and maintenance of email accounts
 Office Automation Support – Administration and end user support for hosted office
automation applications (e.g., word processing, spread sheets and publication software)
 Project Management – Planning and oversight of IT related projects (e.g., product selection
and implementation)
Examples
•
Community Health Access Network (CHAN)
–
–
•
Health Choice Network (HCN)
–
–
•
CHCs in San Diego and Imperial Counties
Project management, application hosting, network administration and various other IT services
Oregon Community Health Information Network (OCHIN)
–
–
•
Florida-based, CHCs and other providers in 10 states
Strategic Planning, application hosting, network administration and various other IT services.
Council of Community Clinics (CCC)
–
–
•
CHCs in New Hampshire
Technical and application support services for e-mail, Internet access and 3 software applications: EMR,
PMS, Finance
State of Oregon, CHCs in Oregon/California, CareOregon, and HRSA
ASP support for EPIC EMR and other IT services
Community Health Center Association of NY State (CHCANYS)
–
–
More than 50 CHCs throughout New York State
Funding advocacy, best practice collaboration, vendor coordination, and IT leadership and direction of New
York Health Choice Network (NY HCN)
Financial Models
•
•
•
•
•
For-Profit / Not-for-Profit
Subscription/Membership Monthly Dues
Access Fee
Transaction Fee
Joint Venture Ownership/Shared Cost of
Doing Business
Next Steps
1.
2.
Assess Level of Interest Among Allies
Assess Needs, Capabilities and Commitment



3.
4.
Gap Analysis
Cost/Benefit Analysis
Readiness and Capabilities Assessment
Conduct Regulatory Analysis
Conduct Market Analysis


5.
Determine size of potential market and demand for offering
Assess capacity to reach decision-makers and close deals
Develop a Multi-Year Financial Plan




Determine capital available and capital required
Determine ability to absorb risk
Determine ROI goals
Develop feasible and sustainable business model
Assessment
•
•
•
•
•
•
•
•
•
•
Market and demand
Business and Strategic Plans
Leadership Team
Board
Staffing
Performance
Financials
IT Infrastructure
Alliances
Regulations
Planning
•
•
•
•
•
•
•
•
•
Business Plan
Financial Plan
Strategic Plan
Marketing Plan
Contingency Plan
IT Plan
Implementation Plan
Product/Service Development
Staffing Plan (Recruitment & Retention)
Review
Key Business Decisions
 Feasible and Sustainable Market
 Type of Entity
 Ownership Structure and Governance
Models
 Meet Resource Requirements – personnel,
technology, professional, and financial
 Engage Subject Matter Experts
 Develop Implementation Plan
Thank You
Charles G. Ray
AHP Healthcare Solutions
craysail@aol.com
pgauthier@ahpnet.com
www.BehavioralHealthToday.com