On Performance Based Health Networks and Medical Cost Savings‏

Achieving Proper Healthcare Alignment

[Number 3 in a Series of 6]

By Sam Muppalla – Vice President, McKesson Health Solutions, Network Performance Management (NPM)

Last week, on this ME-P, I wrote about Health Plans and the Three Levers of Innovation for Affordable Care. We looked at a number of innovations taking place in the areas of products, care models, reimbursement, and network designs. It’s vitally important to be able to innovate in each of these areas, but even more important to be able to align these network elements properly. The key to affordable care is enabling every member to get the right care, at the right time, from the right provider, and for the right price. But, when you look at what it takes to deliver such care, the interdependencies of design of care models, payment, products and networks become apparent, as you can see in Figure 1 below:

 Figure 1: Affordable care requires alignment of product, network, care model, and payment design.

Steering the member to the right provider at the right setting is influenced by the member incentives built into the product design and the provider choice component of the network design. The right care is dependent on the care model design and the provider reimbursement design. Overall affordability of care is obviously tied to payment design. Not so obvious are the dependencies between product design and payment design. The member behavior targeted by product incentives should be reinforced by the provider engagement influenced by reimbursement design. All these interdependencies necessitate alignment between product, care model, reimbursement and network design. Alignment is fundamental to scaling innovation.

Network Design Drives Alignment

As shown in Figure 2, network design drives alignment between product, care model, and payment approaches. As an illustration, it facilitates the alignment of products and care models by enabling steerage of members to the appropriate care teams or sub-segments of the network. This steerage can only occur if member benefits and incentives (which are embodied in the product design) and the structure of care teams (which are described in the network design) are systematically matched. This systematic matching has to be governed by network-level guidelines for provider performance management.

Figure 2: Network design drives the alignment that delivers affordable, high-quality care.

Focusing on the alignment between products and payment, network design enables this by ensuring that the goals of member incentives are supported by the provider behavior driven by payment design. This enablement is achieved through network-level reimbursement guidelines being automatically enforced during provider contracting.

Finally, network design incorporates network-level reimbursement guidelines to drive alignment between care model and payment design by ensuring that provider behavior envisioned in the care model design is incented by payment design.

As health plans productize new care models and payment innovations, the complexity and the frequency of the abovementioned alignment efforts will mushroom. Customer segmentation and the need for tailored products to serve these customer segments will further amplify the alignment challenge.

The approach of using network design automation to efficiently operationalize alignment is a critical core competency for health plans. By innovating with this approach, it will be possible for health plans to strike the optimal balance between the value to their customers (competitive premiums, high-quality care) and the value to themselves (revenue enablement, reduced medical and administrative cost).


Are there barriers to operationalizing alignment? Of course! But stay tuned: Next week, I’ll be writing about the barriers to alignment — and after that, I’ll go into more detail about why it takes an integrated approach to remove these barriers. As before, if you don’t want to wait to read more, you can read the entire Unlocking Affordable Care by Aligning Products white paper now; it’s available on our website.


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Meet Dr. James Winston Phillips JD LLM MBA

Certified Medical Planner

Out Newest M E-P “Thought-Leader”

[By Ann Milller RN MHA]

James Winston Phillips, MD, MBA, JD, LLM is President and founder of: The OTHER Medical Education, Inc.

Academic Credentials

Dr. Phillips academic credentials include a B.A. and M.D. from the University of Louisville, a M.B.A. from Jacksonville University, a J.D. from Florida Coastal School of Law and a LL.M. from Thomas Jefferson School of Law in International Taxation with concentrations in 1) International Financial Services and 2) Wealth Management and Private Banking.

Additional course work was completed at Stetson University College of Law LL.M. program in Elder Law and the University of Alabama School of Law LL.M. program in U.S. Taxation. Course work has been completed for a Ph.D. with the thesis pending. Dr. Phillips completed a general surgery residency at University of Florida / Jacksonville, a plastic surgery fellowship at University of Florida / Gainesville and a Hand Fellowship at the University of Miami. Dr. Phillips clinical career includes positions in academic medicine, private practice and as an independent contractor.

Personal Philosophy

Jim believes that modern healthcare professionals receive the best medical education in the world, but receive little or no education in the business of medicine in medical or professional school or during clinical training.

According to Dr. Phillips: Medicine may be a calling – but – the practice of medicine is a business.


Dr. Phillips’s quest for higher education led to the founding of: The OTHER Medical Education, Inc., a place where health care professionals can obtain the business education they need. Clients include a wide variety of health care professionals including physicians, dentists, pharmacists, veterinarians, podiatrists, nurse practitioners, physician assistants, and others. These health care professionals may have their own practices, work within someone’s practice or be employed by a health care facility or company. They may or may not be involved in the decision making process of the practice. However, they recognize sound business practices even if not directly involved in the decision making process, and are involved in their own personal finances.

The OTHER Medical Education, Inc

Post Office Box 600284

Saint Johns, FL 32260-0284



Feel free to welcome Dr. Phillips to the Medical Executive-Post. We look forward to his insightful posts, comments and other contributions. Better yet! Give his site a click – or telephone call – and tell us what you think!


Foreword Phillips

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