Helen Stewart writes in Hospitals & Health Networks on the need in risk-sharing agreements to form relationships based on outcomes. She says:
“In these rapidly changing times, traditional fixed-price, transactional relationships between health care providers and vendors are of little value. When providers buy a discrete product or service, they do so with the intent of integrating it into their strategy, assigning it a specific role in achieving their goals. But if the market shifts, if regulations change, if their strategy runs into roadblocks, they are left with what they bought.”
She lists as the differentiating characteristics of an outcomes-based relationship:
“It focuses on long-term sustainability. Risk-sharing tends to be defined around specific components over short periods of time. Outcomes-based agreements are typically seven years or longer.
“It is aligned around macro-metrics. The agreement incentivizes both parties to promote value. Outcomes are aligned to macro-level metrics that are reflected in the provider’s bottom line — operational savings and patient volume, for example — rather than micro-level measures that can mask the overall impact and/or sustainability of the initiatives.
“Relational governance creates one team. Traditional governance, in which the provider unilaterally defines success or failure, is replaced with relational governance in an outcomes-based partnership. Leaders from both organizations work as a team: discussing their joint capabilities; aligning around intent, accountability and the appropriate business model; and replacing the traditional supply chain process with a roll-up-your-sleeves-together approach. Both organizations succeed together or fail together.
“Evolution is the only constant. Focused on outcomes that must be accomplished and sustained over many years, this relationship requires ongoing strategic and resource adjustments as conditions change. This is often not the case with risk-sharing arrangements, in which deliverables are more narrowly defined and sustainability can be measured in months. In our experience, many health leaders have been disappointed by such agreements, feeling they were left with a playbook that no longer worked in a fundamentally changed environment.
“Experimentation and innovation are encouraged. When health systems and vendors are aligned around outcomes rather than married to defined deliverables, innovative thinking and new approaches are encouraged. The organizations are open to leveraging breakthrough technologies and services — that may not even have existed when an agreement was signed — in the pursuit of desired outcomes.”
To read her whole piece, please hit this link.
