As the national health care landscape continues to shift towards value-based payment (VBP) models, the traditional approach by health systems and hospitals of measuring market share based on percent of admissions in a given market is putting them at a growing disadvantage. They must adopt the most telling measure for risk-bearing organizations, which is how much of the total health care spend in their market they can capture.

The New Math of Value-Based Market Share

Health systems need to look at their share of potential members in a given market not just as a share of population but as a proportion of all lives in that market. Further, they need to understand their share by:

• Major payer category—commercial, Medicare, Medicaid, etc.
• Insurance company
• Businesses covering their employees and families
• Individuals – the ultimate customers

The percent or number of beneficiaries that a provider assigns or attributes to a health system is a clear indication of its competitive position relative to other market players as well as how much the system is impacting the payer’s bottom line and growth strategy.

As VBP arrangements become more prevalent, the percent of health plan premium and total premium dollars in a market becomes a vital indicator of overall market share for provider organizations.

Growing Your Share of Premium Dollars

No matter where its starts with any given payer, a health system can raise its share of premium dollars and total spend by:

• Improving utilization associated with risk agreements and increase related pull-through business
  • For example, if contractual relationships require utilization to be channeled to the organization’s facilities, do the providers also channel utilization not associated with the agreement?
• Improving performance on quality, both within current arrangements and for the payer overall
• Increasing share of the total available premium dollars in the market by line of business and payer
  • Based on the level of managed care and VBP penetration in the market, what proportion of these dollars are aligned with the organization and affiliated providers?
  • How has this trended in the past three years, what new entrants are diluting the organization’s share and what is the strategic roadmap to maintain and increase share?
• Increasing dollars the organization retains through its contractual obligations defined by the agreements’ Division of Financial Responsibility (DOFR)
• Reducing leakage to competitors and other providers, such as specialty providers and quaternary hospitals
• Leveraging “premium plus” dollars, such as FQHC prospective payment, Medicare and Medicaid DSH, 340b, Medicaid Waiver dollars and related opportunities for infrastructure investment as the organization prepares to take on an increasing share of administrative and medical management responsibility

Another potent source of premium dollars: Take on some of the managed services, such as credentialing and care management. If payers are willing to delegate more administrative functions to health systems, they should carefully evaluate the percent of the total premium dollar available to the plan.

They also should evaluate whether to build or purchase the services. What are the benefits in terms of control and visibility into the medical spend? Also significant is the dollar impact doing so will have on the ultimate customers – will there be a beneficial or detrimental impact on sales?

Growing Premium Share Together

To grow, providers need to work with priority payers to build a plan to increase their share of each payer’s business while increasing the payer’s share of the overall market. The shared growth strategy should be mapped by the line of business and market to foster long-term strategic relationships and include a measurable set of objectives for increased shared membership and premium dollars through VBP arrangements.

Of course, developing a clear picture of current state and potential growth opportunities depends on gathering and using the right data.

Data availability varies by state and line of business. While premium rates may not be available at the local market level, it’s possible to develop regional data estimates coupled with third-party sources and actuarial advisory services. This combination can provide a reasonable approximation of the health plan’s total dollar premium and the dollars plans have for delegated providers.

Plan enrollment is generally easier to evaluate for government payers including Medicare and Medicaid lines of business. Market intelligence on commercial membership is limited because public reporting requirements are less rigorous and competition is fierce.

Medicare Advantage (MA) enrollment rates and penetration rates are available and enable health systems to understand the major payers in the market, their share of managed care beneficiaries, and membership assigned to the health system or RBO.

Transitioning to this new definition of market share will take time and effort. It will require new processes, tools and expertise for data analyses and for focusing on maximizing the health of the membership to avoid the cost of preventable care. Success in value-based care will increasingly be built on securing, controlling, and managing a more significant share of total health care spending.

For more information on the new market share definition and how to succeed in value-based payment arrangements with all payers, please contact us at info@copehealthsolutions.com.