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  • Part 2/4: Strategies for Independent Practices During Changing Times: Value-Based Relationships with Health Plans

    By Jim Hoyme

    Strategy is doing new things. Doing new things that differentiate your organization from the competition.

    This is the 2nd in a series of blogs addressing how independent physical therapy practices can create strategies to deliver differentiating value in a changing health care market. In this blog we will explore strategies to build long term relationships with health plans in order to create a stronger position in your market.

    In our 1st blog we outlined 10 health care changes physical therapists must consider as you plan for present and long-term success – http://bit.ly/TPI10factors. Every one of these 10 factors is in some way dependent on or related to delivering tangible value. These factors bring real opportunities to physical therapists who embrace a need to measure, analyze, and manage value in the services they deliver. But YOUR VALUE only benefits YOUR practice if YOU can SELL your value proposition to the powerful decision makers in your market.

    Today we will focus on selling value to those at the top of the commercial health food chain – the health insurance companies.

    Your Foundation: A Mission and Culture for Success

    Value can be defined by a fairly simple equation:

    Value = Quality + Service + Access / Cost


    Increase the numerator, decrease the denominator. Real Value.

    The value equation is contained in the concept of health care’s Triple Aim


    Measurable Quality Outcomes . . . An Exceptional Patient Experience . . . Lower Total Cost of Care.


    The factors of the Triple Aim align tightly with the needs and wants of all health plans. Providers who deliver the Triple Aim reduce costs and improve population health. Any meaningful innovation that will appeal to these influential decision makers depends on delivering Triple Aim value. So how do you ensure your team can consistently do so? Well . . . you must start with your foundation – Mission, Culture, Strategy.

    Adopt a MISSION incorporating The Triple Aim

    This must become an expectation of every member of your clinic team, and they must be held accountable for Screen Shot 2016-03-12 at 12.38.44 PMdoing so. Create a plan to incorporate quality, service, and cost factors into your organization’s mission statement and mentor your colleagues on the meaning and importance of the Triple Aim.

    Build a CULTURE steeped in Value


    Your team will not deliver a mission across your whole practice unless you have a culture that supports that mission. The Triple Aim is built around taking steps to ensure value – measuring and managing outcomes, providing quick access and caring service, adopting patient centered collaboration with other providers, and managing your care efficiently and effectively must be a way of life in your practice. If you don’t yet measure your outcomes, select an outcomes tool and get started. We have used FOTO (www.fotoinc.com) for 10 years, and it is now an integral part of the culture of our member practices.

    Create a STRATEGY built around Innovation

    Think about the innovations can you bring to the market that differentiates your practice. Size of your practice? Types of value-added services? Delivering high-level patient outcomes? Collaborative care models? Total cost reduction? Risk sharing contractual models? Teamwork and accountability? Your strategies must distinguish your practice as one that truly delivers on measurable value.

    Screen Shot 2016-03-12 at 12.24.58 PM

    Now you are getting ready to start selling value to health plans because your mission, culture, and innovative strategies are well aligned and are important to their business as well as yours.


    Getting on the Same Page with Health Plans . . . Think ‘Win-Win’

    For years, physical therapy has been essentially viewed as a commodity where cost is the only factor; quality and service are not considered. In a commodity world, Value = Lower Cost.

    So how does a physical therapist overcome that barrier? Think of yourself as a problem-solver.

    Start by taking the time to find out what the health plan’s problems are. Seek their concerns. Listen. Analyze. In Screen Shot 2016-03-12 at 12.25.27 PMall likelihood their concerns relate to cost of care and health of their enrollees. Healthy, high functioning enrollees mean lower total costs to the health plan. Try to understand their problem better than they do as you prepare to solve that problem. The health plan is trying to solve their problems as well, but they are probably focused on finding ‘silo-based’ solutions. The primary interest of the people you are meeting with about your practice is probably the direct cost of physical therapy. Well . . . you must re-direct their problem-solving Interest away from the physical therapy silo to a bigger picture solution based on their real Needs – controlling and reducing the total cost of care (TCOC) related to musculoskeletal conditions.

    Once you shift their focus to TCOC, you and your health plan colleagues can start to look together for a solution to truly decrease their costs and improve the health of their enrollees with musculoskeletal problems. Come up with 2-3 potential options the health plan has never tried before. It’s time for innovation. Impress them with your solution and commitment to achieving greater value. Seek a ‘win-win’ for you and the health plan.   Offer to implement a value-based pilot with a financial reward paid to your practice when you achieve better patient functional outcomes and lower TCOC. Again . . . health plans are looking for innovative solutions from providers because they do not have all the answers.

    Once you get a value-based model in place, stay focused on getting the absolute best results possible. Keep improving. Exceed the plan’s expectations, and always show a sincere commitment to improving your care and service to your patients. This will build long-term relationships with these powerful decision makers.

    Screen Shot 2016-03-12 at 12.25.39 PM

    Value-Based Models

    So what are some model options you can bring to your new friends at the health plan? How can we effectively reduce total costs related to musculoskeletal conditions? My good friend Richard Zhao (@richardzhao on Twitter) is a former analyst at a large health plan, and he focused on the cost analytics of musculoskeletal conditions in his time with the plan. He summarized their findings by using a very simple concept –The Musculoskeletal Cost Funnel.

    Screen Shot 2016-03-12 at 12.26.27 PM

    Create options based on the facts of the cost funnel. Design model options that get patients to enter the low cost part of the funnel – primary care and physical therapy. Take measures to ensure a vast majority of those patients are feeling and functioning so well they don’t enter the high cost services in the wide part of the funnel. Take steps to ensure you and your physical therapy team members give patients information so they make good choices and avoid services they do not need.

    Although there are many possible value-based solutions, here are 3 to consider. The first two are good starting points but are still ‘silo-based’. The third is a TCOC model that depends on your ability to sell the health plan decision makers on the need to collect historical TCOC data for defined conditions and share savings with you.   If you are new at this game, it may be best for you to ‘get your feet wet’ with options 1 or 2 before diving into the TCOC world.


    1. Fee for Service or Per Diem Rate with a Bonus for Achieving Outcome Benchmarks – Shared Risk

    Seek a Per Diem model with a reasonable rate based on your average per visit payment from that plan. Payment per visit reduces the plan’s risk and makes a predictable payment for the practice. If the health plan does not have payment technology to handle per diem reimbursement, you can still use this model with fee for service. Establish outcomes benchmarks with a financial reward for achieving them. Convince the plan representatives “Better functional outcomes results in lower total costs.” You will need someone in your practice to lead your outcomes training and management process – a proactive leader who can hold team members accountable. If you can achieve impressive outcomes across your entire organization, this is a good starting point to build a strong relationship and achieve a real ‘win-win’ starting point with the health plan.


    1. Case Rate with a Bonus for Achieving Outcomes Benchmarks – Moderate Risk

    Propose a flat fee for each referral. This model puts more financial risk on your practice, and every one of your team members must be able to manage that risk effectively. Analyze your payment per case from the plan and propose a reasonable case rate. The rate should include a bonus for achieving established outcomes benchmarks along with baseline outcomes expectations to prevent under-utilization. Tight care management with defined outcomes and utilization expectations of therapists is absolutely critical. It will not happen by chance. You must have a leader who can and will hold everyone accountable. If you negotiate a good case rate, this model gives you a bigger opportunity for financial reward if your team can manage your care effectively and efficiently. If not, your practice bears a high risk of experiencing a financial downside, i.e. losing money.


    1. Shared Savings Model – Higher Risk

    This is a total cost of care model. It is more complicated and requires a willingness of the health plan to compile TCOC data from a previous year for all health care services related to defined conditions for 6-9 months prior to starting physical therapy and 12 months following the last physical therapy visit. Offer to help in the data analysis or see if a PhD faculty member at a local physical therapy school would be interested in helping. Negotiate a shared savings model in which the health plan shares a pre-determined percentage of the TCOC savings with your organization. Design a “PT 1st” care model with measured average total cost and functional outcomes per case. I think this model is best designed collaboratively with primary care physicians. Collect total cost and functional outcomes data for the conditions, and compare the average total cost per patient episode in your new care model to that of the previous time period. If your efforts result in savings, you will be rewarded. This model requires a higher level of innovation, tight management, accountability, and risk management. Therapists must design a creative care model with less expensive ways to deliver care while achieving functional outcomes benchmarks.

    Change Requires Great Leadership and Teamwork

    Change is never easy. William Bridges, in his book Managing Transitions, states that 5-10% of any group will hate change so much they try to make it fail. Another 15-20% will resist the change. 30-40% will ‘go with the flow’ but need lots of help fully engaging in the change. Wow! Over half of your organization will need lots of time, attention, and support to make your change work. 20-30% of your team will be excited about this change and must become the ‘Change Champions’ of these efforts.


    Designing, implementing, and selling value-based models require innovative thinking, engagement of all team members, and high performance teamwork. That requires great leadership. As you start to plan to build value-based models, don’t fail to prepare to lead these change efforts and fully inspire and engage your team members. It will be well worth it, selling our real value and building meaningful relationships with health plans is what we’ve sought for years.

    In Part 3 of this 4 Part series on strategically positioning your practice, we will explore how to create tight relationships with ACOs.

    Keep Learning . . . Keep LEADING!

    – Jim


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