.Dave Duke is the co-founder and chief community officer at MetaCX.

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 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.

 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.

 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.

 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.

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

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.

Dave Duke is the co-founder and chief community officer at 

 which has pioneered a new value-based approach for achieving shared success in B2B ecosystems. Prior to MetaCX, Duke led customer success at Sigstr (acquired by Terminus) and held various customer management roles during his tenure at ExactTarget and Salesforce Marketing Cloud. Duke also is the host of 

, a podcast that showcases today’s best revenue and customer leaders and other big thinkers. 

Articles

How can stakeholders navigate the shift from volume to value in healthcare? Second of two parts.










Changing the Narrative: Looking Beyond Individual Economics Toward Community and Patient Outcomes

Due to rising costs, operational inefficiencies, and inequity in access to care, the healthcare industry is under tremendous pressure to find a new way forward. COVID-19 has put more light on these issues, making the need for transformation both urgent and inevitable.

At the center of this change is a punctuated shift from volume to value, where suppliers, health systems and providers, and payers look beyond their individual economics toward the outcomes they bring to the broader ecosystem, their communities, care teams, and patients. However, change doesn’t come easy in an industry as complex and regulated as healthcare. It requires a thoughtful strategy and a stepwise path, in which benefits accrue along the way. Most importantly, it requires collaboration and joint focus on value, a view that promises each stakeholder in the relationship — suppliers, providers, payers and, ultimately, patients — a collective win.

Value-based agreements (VBAs) reorient the economics of business relationships within healthcare based on mutually agreed on performance levels for upside and downside risk. Healthcare systems and providers, payers, pharma/medical device manufacturers, and other suppliers are steadily increasing their participation and the volume of these agreements. Yet, significant impact on outcomes is elusive for many. VBAs are often difficult to operationalize, administer and scale. Traditional risk/reward trade-offs often cause each party to maximize their own self-interest over the collective benefit of the whole. Additional challenges include:

Difficulty of sharing data between parties to create an accurate picture of contract performance.

Sensitivity about control of the data and trust in each parties’ data sources and accuracy.

Delay in data availability and data set variability.

Differences in terminology, nomenclature and definitions.

The challenge of coordinating the planning and execution of programs across supplier, health system and provider, and payer entities.

Whether or not your organization is ready to fully embrace VBAs today or will ultimately engage in shared risk contracts, there is little doubt that the value your service, product or offering delivers must be understood, measured and communicated with your partners and customers. As a supplier to the healthcare industry, it’s prudent to progressively engage in a stepwise path to address the challenges of building trust, addressing data sharing issues, and improving your ability to collaborate with your partners and customers by focusing on value in advance of contracting.

None of this happens without trust between the contracting parties in a relationship. This trust depends on a mutual understanding of the shared and individual goals of each party and transparency into whether these outcomes are being achieved over the course of a relationship. Trust, of course, isn’t established overnight — nor does it happen by chance. It requires a structured, intentional stepwise approach to collaboration. Three important steps are:

Alignment on a shared definition of value that becomes the north star for the relationship, ensuring that each party is speaking the same language in describing what success looks like. Understanding mutual readiness, experience with value management, data culture and competency, the track record in similar agreements, desired speed to value, and the like can go a long way in setting the stage. Is the eventual goal strategic in nature, impacting multiple aspects of value across the relationship? For example, is the partnership about reducing total cost of care across multiple clinical service lines, or is it narrowly focused on one product or offering, such as reducing blood glucose levels in a specific population cohort?

2. Next, a performance baseline should be defined. Each partner should consider:

What measures and milestones are most closely aligned with target outcomes?

What are the hypotheses regarding the potential impact of the product?

What research has been done to explore these hypotheses?

What data sources are available from each party?

What is the availability, quality and timeliness of the data?

How will progress in the relationship be measured?

3. Finally, once goals for the relationship and the performance base have been established, the parties in the relationship can — then and only then — start thinking about outcomes-based contracts. Initially, these relationships will focus on joint learning and collaboration; over time, they may become performance based with specific incentives or penalties for value realization and new value creation. Eventually, they may evolve to incorporate risk and qualify as a value-based agreement.

The center of the change in healthcare is a punctuated shift from volume to value. First of two parts.  

Dave Duke

Articles

Changing the Narrative: Looking Beyond Individual Economics Toward Community and Patient Outcomes

Prioritizing Value: A Step-By-Step Approach to Collaborative Supplier Agreements