GUIDE TO HEALTH CARE PARTNERSHIPS - HPOE

GUIDE TO HEALTH CARE PARTNERSHIPS

FOR POPULATION HEALTH MANAGEMENT AND VALUE-BASED CARE

July 2016

ACKNOWLEDGMENTS

The Kaufman Hall Author Team

Patrick M. Allen Managing Director, Mergers, Acquisitions and Partnerships (pallen@) Michael J. Finnerty Managing Director, Mergers, Acquisitions and Partnerships (mfinnerty@) Ryan S. Gish Managing Director, Strategic and Financial Planning (rgish@) Mark E. Grube Managing Director and National Strategy Leader (mgrube@) Kit A. Kamholz Managing Director, Mergers, Acquisitions and Partnerships (kkamholz@) Anu R. Singh Managing Director, Mergers, Acquisitions and Partnerships (asingh@) J. Patrick Smyth Senior Vice President, Strategic and Financial Planning (psmyth@) Rob W. York Senior Vice President, and Leader, Population Health Management division, Strategic and Financial Planning (ryork@)

Suggested Citation: Allen, P.M., Finnerty, M.J., Gish, R.S., et al. (2016, June). Guide to Health Care Partnerships for Population Health Management and Value-based Care. Chicago, IL: Health Research & Educational Trust and Kaufman, Hall & Associates, LLC. Accessed at Accessible at: healthcarepartnerships Contact: hpoe@ or (877) 243-0027 ? 2016 Health Research & Educational Trust and Kaufman, Hall & Associates, LLC. All rights reserved. All materials contained in this publication are available to anyone for download on , or for personal, noncommercial use only. No part of this publication may be reproduced and distributed in any form without permission of the publication or in the case of third-party materials, the owner of that content, except in the case of brief quotations followed by the above suggested citation. To request permission to reproduce any of these materials, please email hpoe@.

2 Guide to Health Care Partnerships for Population Health Management and Value-based Care

TABLE OF CONTENTS

Executive Summary

4

Introduction

6

?? A New Business Model for Health Care

6

?? Increasing Partnership Activity

6

Key Considerations in Partnering for Population Health Management

9

?? Strategic Intent

10

?? Network Development

10

?? Population Health Management Functions

11

?? Health Plan Operations and Risk

11

?? Products

12

?? Economic Integration and Provider Risk

12

?? Asset Contribution and Exit Provisions

13

Partnerships That Could Be Considered

14

?? Merger for Population Health Management: AtlantiCare and Geisinger Health System 14

?? NewCo Health System: Beaumont Health

16

?? Joint Venture Insurance Product: Vivity

18

?? Joint Venture Health Insurance Company: Tufts Health Freedom Plan

19

?? Joint Venture Geographic Network: Together Health Network

19

?? Management Services Agreement: Novant Health Shared Services

20

?? Brand/Expertise Extension: The Mayo Clinic Care Network

22

Process Recommended for Evaluating Potential Partnerships

24

?? Phase 1: Pre-Partnership Assessment and Planning

24

?? Phase 2: Making and Executing the Strategic Partnering Decision

30

Concluding Comments

36

Endnotes

37

About Kaufman Hall and About HPOE

40

Guide to Health Care Partnerships for Population Health Management and Value-based Care 3

EXECUTIVE SUMMARY

As the business model for U.S. health care transforms from a volume-driven model to a consumer-centric, value-driven model, new competencies are required of hospitals and health systems to effectively manage a population's health over the continuum of care needs, or a portion thereof. Many hospitals and health systems will need to partner with other organizations to gain the capabilities and efficiencies required to provide services under new care delivery and payment arrangements.

As might be expected, partnerships are proliferating nationwide, with a wide range in arrangement types spanning from lessintegrated contractual affiliations to highly integrated agreements.

Developed for hospitals, health systems, and other health care organizations, Guide to Health Care Partnerships for Population Health Management and Value-based Care is intended to help executive management and board teams understand key considerations for delivery system and health plan-related partnerships for population health management; partnership types; and the process recommended for partnership exploration and decision making.

To meet these objectives, this guide is organized around three sections:

?? Key considerations in partnering for population health management This section addresses seven considerations, including: strategic intent, namely what the organization wants to achieve and how its success will be measured; network development--i.e., the delivery elements that will be included within the partnership's scope; responsibility for

population health management (PHM) functions; health plan operations and risk, involving contracting arrangements, insurance license and health plan capabilities; responsibility for product development and management; economic integration and the level of risk to be assumed; and assets to be contributed to the venture and terms of exit provisions.

?? Partnerships that could be considered This section describes seven named partnership arrangements in various areas of the country, ranging from highly integrated partnerships to looser affiliation options. Partnership objectives and early initiatives are described, as available, using publicly accessible information.

?? Process recommended for evaluating potential partnerships Because achieving a best-fit partnership is more critical than ever for effective population health management, this section outlines an approach that can direct organizational resources to the most promising option(s) using strategicfinancial assessment and planning. The approach includes a pre-partnership phase, which covers service area assessment, organizational position assessment, development and testing of baseline projections for the partnership, and evaluation of strategic options. The second phase, which covers making and executing the strategic partnership decision, has five activities, including establishing partnership objectives, identifying and comparing options, selecting the likely best-fit partner and partnership structure, and executing the agreement and transition plans.

4 Guide to Health Care Partnerships for Population Health Management and Value-based Care

Partnerships are accelerating as participants in health care ready themselves for a value-based, population health-focused delivery system. This guide concludes with a description of the characteristics of successful strategic partnerships.

Outside this publication's scope are the many types of hospital-community partnerships with public health departments, chambers of commerce, community health centers, schools, social service agencies, city and county governments, faith-based entities, YMCA/YWCA and other entities to improve community health and build a culture of health. These partnerships are important and should be considered, along with the types of partnerships described in this

guide, as an integral part of an organization's population health strategy. Resources such as Leadership Toolkit for Redefining the H: Engaging Trustees and Communities1, Approaches to Population Health in 2015: A National Survey of Hospitals,2 and Hospital-based Strategies for Creating a Culture of Health3 address hospitalcommunity partnerships in detail and are available through .

The legal, taxation and regulatory issues surrounding partnerships are complex and subject to change. This guide does not provide information in these areas; providers should seek expert counsel.

Guide to Health Care Partnerships for Population Health Management and Value-based Care 5

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