Co-opetition Sean Hartzell, Associate Principal, ECG September 22, 2017
Learning Objectives Today’s session will focus on the concept of co-opetition. By the end of the session, participants will be able to: » Define co-opetition. » Understand the market forces converging in healthcare in order to foster an environment conducive to co-opetition. » Describe examples of co-opetition in healthcare and other industries. » Discuss value-nets and how they help identify co-opetition opportunities. 1 0100.015\404086(pptx)-E2 DD 9-22-17
Increasing Role of Government in Healthcare Serving as the largest single-payor organization in the United States, the government continues to play an increasing role in healthcare by influencing care delivery transformation and driving new payment models. » ACA regulations on insurers: › Guaranteed coverage for enrollees Approximately › Mandate requiring individuals to be half of the U.S. insured population will › Regulations on premium pricing receive › Mandates on minimum levels of healthcare essential benefits 156 Million » Medicare Access and CHIP coverage through Reauthorization Act: a government › Physician legislation from 2015 tying program or payment amount to performance and exchange by value 2020. › Includes many of the same quality and reporting requirements as PQRS, VBM, and meaningful use Source: http://www.center-forward.org/wp-content/uploads/2012/04/Medicare-Medicaid-and-the-Military-04-12-update-2.pdf. 2 0100.015\404086(pptx)-E2 DD 9-22-17
Continued Push toward Value-Based Care Following the government’s lead, the highly consolidated private payor base is increasingly shifting to value-based payments and alternative payment models. Marquee Payors Are Placing Bets HHS announced concrete targets for Medicare reimbursement delivered through alternative of Medicare Advantage payment models . membership in value- 75% based models by 2017 Value-based care is coming quickly , and the pressure is on to adapt. of Medicare 50% payments by HHS Shift to Alternative Payment Models 2018 2014 2018 in payments tied to value-based models by $65 20% 50% Billion 2018 in payments tied to membership in value- 75% based models by 2020 Alternative Payment Models FFS with No Link to Quality 3 0100.015\404086(pptx)-E2 DD 9-22-17
Transitioning to New Payment Models Providers will need to operate under an evolving payor dynamic; care delivery transformation will need to be appropriately paced with the transition to financial risk. Leading with Care Delivery Transformation » Quickly invest resources into coordination and integration. » Implement rapid improvement cycles to prove the concept. » Quantify and capitalize on wins for value-based payments. Missed revenue Payment aligned Clinical Transformation Risks opportunity or with improvements » Payors benefit from the free-rider effect and have no financial loss from in quality and incentive to negotiate mutually beneficial terms. reduction in volume reductions in volume » Care delivery transformation reduces utilization, putting financial performance at risk. Leading with Payment Transformation No financial loss, but Financial loss limited preparedness » Analyze and estimate risk thresholds. through downside for movement to » Secure greater market share through risk-based contracts. risk value » Transform the care delivery model with cost targets based on the estimated risk thresholds. Risks Payment Transformation » Care delivery transformation efficiencies may not be realized, and the organization may suffer from the downside risk. 4 0100.015\404086(pptx)-E2 DD 9-22-17
Developing a Full Continuum of Care The future environment will require a delivery network that is reasonable in size, adequate in scope, and sufficiently coordinated for its defined populations. Comprehensive Physician Services » Distribution, scope, and size of a provider network » Level of access to providers across the continuum of Primary care (e.g., tertiary, subacute, post-acute care Ambulatory and Specialty providers) Care Care » Ability to provide additional access through contractual relationships (if necessary) Coordination of the Delivery Network » Utilization of multidisciplinary clinical teams to Tertiary provide comprehensive care (formal or informal) Post-Acute Care » Development of and compliance with standardized, Care evidence-based clinical protocols that span across care settings » Willingness to engage with other providers and transfer information and data to optimize patient care 5 0100.015\404086(pptx)-E2 DD 9-22-17
Lead, Follow, or Get Out of the Way Healthcare leaders must be flexible, strategic, and constantly exploring new approaches to providing, paying for, and managing healthcare delivery. Competitive Advantage Explore New Market Capture Consumer Shape the Solutions Opportunities Preference of the Future Drive Competitive Develop Expertise to Capitalize on Potential to Be the Industry Leader Differentiation Manage Risk Hospitals/health systems and physicians will be challenged to take risks and explore new models that may completely shift how organizations look and operate. 6 0100.015\404086(pptx)-E2 DD 9-22-17
Co-opetition Co-opetition takes place when firms collaborate to increase the total value that they can then individually capture. An organization may be motivated toward co-opetition in order to: Increase the size of the current market or create totally new ones. Use fewer resources , or use current resources more efficiently, in serving the share of the market. Protect the share of the market they have been able to capture and to conquer a larger share of what remains. Source: Ritala, Paavo, "Coopetition strategy–when is it successful? Empirical evidence on innovation and market performance," British Journal of Management 23.3 (2012): 307–324. 7 0100.015\404086(pptx)-E2 DD 9-22-17
Co-opetition Can Yield Positive Outcomes Who are the players in my network? How can we collaborate with them to maximize value? Amazon and Microsoft announced they will cooperate in voice computing, allowing their digital assistants to work with each other. ( WSJ , August 31, 2017) Uber and Toyota announce new leasing options that will allow Uber drivers to lease their vehicles from Toyota and cover their payments through their generated earnings. ( Time , May 24, 2016) GE and Intel form a new healthcare joint venture, Care Innovations, focused on telehealth and independent living. (August 2, 2010) 8 0100.015\404086(pptx)-E2 DD 9-22-17
Co-opetition in Economics In macroeconomics, the production possibility frontier (PPF) represents the point at which a company’s economy is most efficiently producing goods and services. However, this may lead to an overall inefficient allocation of resources when factoring in the benefits of trade. Country B should specialize in producing trucks, When the PPF shifts outwards, we can imply leaving Country A to produce cars. that there has been growth in an economy. Source: http://www.investopedia.com/university/economics/economics2.asp. http://www.economicsonline.co.uk/Global_economics/Comparative_advantage.html. 9 0100.015\404086(pptx)-E2 DD 9-22-17
Value-Nets Are Ripe for Co-opetition Co-opetition uses competitors, complementors, and suppliers to improve a company’s position with customers. Customers Competitors Company Complementors Suppliers » Customers: These are the people who buy a product or service. » Competitors: Competitors take a share of a company’s target market by offering a similar product or service. » Suppliers: These provide your organization with the resources you need to produce a saleable product. (Keep in mind that suppliers can » Complementors: These are other players who provide a be outside organizations or a company’s own employees.) product or service that can be linked to the company’s in order to make both offerings more attractive to customers. Source: Porter, Michael, "The five competitive forces that shape strategy," Harvard business review 86.1 (2008): 25–40. 10 0100.015\404086(pptx)-E2 DD 9-22-17
Co-opetition in Healthcare With the passage of the Affordable Care Act and the adoption of value-based payment models, hospitals and healthcare systems are being challenged to improve the health of the communities they serve. Example Goal Clinically Integrated Networks To improve the overall health and well- being of the community. Accountable Care Organizations To deliver high-quality care and spend healthcare dollars more wisely Centers of Excellence To offer a comprehensive set of services, in response to need for disease-based management Everyone can make a bigger impact if they work collaboratively rather than independently. - Robert Wood Johnson Foundation, Community Partnerships to Build a Culture of Health Source: Ritala, Paavo, "Coopetition strategy–when is it successful? Empirical evidence on innovation and market performance," British Journal of Management 23.3 (2012): 307–324. http://www.hpoe.org/Reports-HPOE/2016/creating-effective-hospital-community-partnerships.pdf. 11 0100.015\404086(pptx)-E2 DD 9-22-17
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