Does Innovation Mean Cannibalization?

Philip Betbeze, for HealthLeaders Media , August 13, 2012
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To control that destiny, THR has recently made a big investment in acquiring those physicians and extenders. In 2011, it acquired Medical Edge, which immediately made about 2,300 employees—including 420 physicians, physician assistants, and nurse practitioners—employees of its captive Texas Health Physician Group. In April, THR signed a landmark 10-year contract with Healthways, the Nashville-based wellness company, to implement its population health strategy. Perhaps more important, Healthways will be "integrally involved" in developing risk-based contracts with payers going forward, says Long.

All of this investment, the leadership team is betting, will result in avoiding rate discounting as a way to attract patient volumes, which will ultimately protect margins, Long says. Instead, development of infrastructure, protocols, and IT systems in partnership with employed physicians will attract even private community-based physicians to work more closely with THR.

"We're concentrating much more on an attribution model with our physician partners in managing those populations that are defined by those attribution models," he says.

It's an approach to developing products in the marketplace that are physician-driven as opposed to trying to attract payers with lower rates, narrower panels, or "somehow restricting choice," according to Long.

Long is confident, at least in larger metro markets, that payers are going for the same type of strategy. He's not so sure about the smaller markets.

"Something has to be done, and it can't be based on the old game we all played," he says. "The physician component to this is so critical that the health systems or freestanding hospitals that have an organized physician component have an advantage."

For now, the smaller markets, he says, are not under the same pressure to undertake value-based reimbursement as are the larger markets—from large employers particularly. That drives the urgency in THR's case, he says, but it doesn't mean they will face deteriorating margins, or that they will have to cannibalize one type of reimbursement in order to fund a transition to the other.

"We think if we do this right, our margins should stay relatively intact."

This article appears in the August 2012 issue of HealthLeaders magazine.

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Philip Betbeze is senior leadership editor with HealthLeaders Media.
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