Integrated Delivery Networks as “Payviders” Aim to Succeed at Value-Based Care

In response to skyrocketing healthcare costs and the shift to value-based care, healthcare organizations with formerly different missions are joining forces to become integrated delivery networks (IDNs) and/or “payviders.” Both aim to improve healthcare quality, safety, and patient outcomes while reducing costs—the ultimate imperatives in medicine today.

Defining IDNs and payviders 

Integrated delivery networks, or health systems, are organizations that own and operate a network of healthcare facilities in a defined geographic area. These vertically integrated health service networks include physicians, hospitals, post-acute services, and more. Within a single organization, IDNs provide a broad spectrum of coordinated inpatient and outpatient care. There are about 1,000 IDNs in the U.S.  

Some integrated delivery networks—such as California’s Kaiser Permanente and Pennsylvania’s Geisinger Health System—offer health insurance and thus are called payviders, meaning they serve as both a provider and as a payer or healthcare insurer, to achieve results such as:

  • Reduced financial risk
  • Increased profitability for both organizations
  • Higher quality medical care to patients

Payviders can take on a few different forms: provider-sponsored health plans, employment of physicians by national payers, or long-term risk-based payer/provider contracts. The rationale: payviders deliver more cost-effective healthcare because as the provider and the payer, they have increased control over the care they provide members and the many associated costs—from supply chain spend and contracts to the quality measures that affect reimbursement. When providers assume more financial risk, care is more cost effective, the theory goes.

Large IDNs often share five traits:

  1. Strong administration-provider alignment: Large IDNs have centralized control of physicians through employment and/or clinical integration, and common branding across facilities in the region.
  2. Service offering across the full continuum of care: IDNs provide a broad range of services for patients, including preventative care, scripts, acute and primary/urgent care, various therapies and treatments, and post-acute care. 
  3. Advanced clinical integration: Providers in the IDN communicate within a shared electronic health record system that is monitored to evaluate protocol adherence and patient outcomes. The biggest IDNs also often have their own formularies.
  4. Regional presence and market control: The biggest IDNs dominate their regional market, taking advantage of their size when negotiating with payers, drug manufacturers, suppliers, and more to reduce costs. Ascension Health, the largest IDN in 2020, has 2,143 facilities (145 hospitals and 1,944 outpatient centers) in the St. Louis, Missouri area, with 27,285 physicians and doctors of osteopathic medicine (DOs). That’s a lot of purchasing power!
  5. The ability to better control reimbursement: If they don’t have their own insurance plan, large IDNs often have payer contracts where they accept some risk with payers to push for better patient outcomes. 

To achieve economies of scale and holistic outcomes, these networks centralize and standardize clinical and operational decision making. Under one domain name, IDNs have significant control over issues related to formulary, treatments, health IT adoption, commercial access, drug sampling policies, new product uptake, and other protocols. They also have more control over credentialing of providers, which affects which practitioners are allowed on panels in the first place.

Designed to provide a wide variety of healthcare services across the care continuum, IDNs often contain several different types of inpatient and outpatient facilities, including:

Hospitals: Hospitals are the anchors of IDNs. Although hospitals can provide outpatient services, their main focus is on inpatient, acute care. They also must tightly manage a significant number of vendors in supply chain management.

Physician groups: The American Medical Association defines a physician group practice as “three or more physicians formally organized as a legal entity in which business, clinical, and administrative facilities are shared.” Because they are smaller than hospitals and usually focus on a single specialty or multiple associated specialties, physician groups have more flexibility regarding operating hours and service offerings. Their size also allows them to adapt quickly to shifting population health needs and new care guidelines from the Centers for Medicare and Medicaid Services (CMS) and other governing bodies.

Health clinics: These facilities, often associated with a hospital or medical school, typically provide non-emergency outpatient care that’s routine or preventive. Most health clinics provide primarily primary care services, but some clinics focus on specific areas of medicine.

Ambulatory surgery centers: ASCs are standalone healthcare facilities that provide outpatient, elective surgical care including diagnostic and preventive procedures. ASCs give patients a convenient alternative to hospital-based outpatient procedures.

Imaging centers: Outpatient imaging centers are medical facilities dedicated to performing imaging services. High-definition images—of bones, soft tissues, organs, blood vessels, and the nervous system—allow physicians to accurately diagnose a variety of conditions. Imaging centers offer a variety of services, including X-rays, ultrasounds, MRIs, CT scans, mammography, bone density scans, and nuclear medicine.

The importance of IDNs in healthcare

The prevalence of chronic diseases drives up U.S. healthcare costs. Sixty percent of U.S. adults have a chronic health condition, and 40% have two or more. Heart disease, cancer, and diabetes are the leading causes of death and disability in the U.S., accounting for our nation’s $3.8 trillion in annual health care costs. Heart disease and stroke kill 868,000 Americans every year and cost our U.S. healthcare system $218 billion per year. A whopping 47% of all healthcare costs go toward treating diabetes, hypertension, pulmonary conditions, heart conditions, and stroke. 

By providing integrated health services, IDNs organize and improve chronic disease care while reducing costs. IDNs aim to use their vast network of healthcare providers to deliver high-quality, coordinated patient care. Because many health systems offer a wide range of care services—from preventative to urgent/acute to post-acute care—providers can often meet most of their patients’ healthcare needs without referring patients to an out-of-network provider. This allows for greater communication, collaboration, and care coordination across the care continuum, while preventing revenue loss from network leakage.

What’s the difference between ACOs and IDNs?

In an accountable care organization (ACO), a form of IDN, a network of doctors and hospitals voluntarily collaborate in a formalized agreement to share financial and medical responsibility to provide coordinated care to patients with the goal to limit unnecessary spending. Unlike an ACO, a healthcare IDN is a cohesive health system that offers a full range of preventative and acute care services as well as (sometimes) health insurance plans, rather than a loose collection of individual providers and payers.

What’s the difference between clinically integrated networks and IDNs?

A clinically integrated network (CIN) is commonly defined as “a health network working together, using proven protocols and measures, to improve patient care, decrease cost, and demonstrate value to the market.” Providers join CINs when they form an ACO. Recognized by the Federal Trade Commission (FTC), a clinically integrated network is a legal entity that engages in joint managed care contracting to accelerate improvements in healthcare delivery. A CIN designation allows the group to:

  • Negotiate better rates with payers
  • Share information about their patient populations
  • Collectively track a shared patient population to optimize quality and cost reduction goals

CINs emphasize:

  1. Provider responsibilities. Providers must actively participate in efforts to improve clinical quality and reduce costs.
  2. Provider accountability. There are negative consequences if providers are noncompliant in quality and cost reduction policies defined by the CIN.
  3. Clinical quality standardization. The healthcare organization must demonstrate that the CIN improves quality and efficiency over time.
  4. Resource use: The organization must make efforts to meet quality standardization and cost efficiency goals by implementing clinical improvement tactics (care management and care pathways) and investing in IT infrastructure.

A CIN designation can also protect a health system against antitrust laws. This is particularly important now, when a new executive order is challenging the rapid pace of healthcare consolidation. The “Executive Order on Promoting Competition in the American Economy,” underscores that hospital mergers can harm patients and encourages the Justice Department and FTC to review and revise their merger guidelines. The executive order instructed other agencies to address consolidation among other healthcare organizations, including pharmaceutical companies and payers, through future policy and regulation.

How IDNs reduce healthcare delivery costs

IDNs decrease care costs by appropriately reducing inpatient surgeries, post-acute care utilization, and hospitalizations. One study found that Medicare Shared Savings Program ACOs spent less on surgical care by reducing inpatient surgery, increasing outpatient surgery, and reducing spending on post-acute care after inpatient surgery. ACOs in the Medicare Shared Savings Program save money by spending less on expensive inpatient and post-acute care—such as skilling nursing facilities and home health. Instead, more services are delivered in the physician’s office. Medicare ACO savings hit a record high last year, collectively saving Medicare $4.1 billion in 2020. The ACOs achieved an average quality score of 97.8% in 2020, with 60 ACOs earning a perfect score of 100%.

Commercial ACOs are also realizing savings and care quality improvements. For example, Blue Cross Blue Shield Association’s network of ACOs and patient-centered medical homes decreased care costs by 32% during the first half of 2018.

Some large IDNs leverage their market influence for greater negotiating power—without group purchasing organization (GPO) affiliation. By doing this, IDNs can secure competitive supply chain prices and lower overall healthcare costs. For example, to get better pricing, many IDNs are negotiating directly with pharmaceutical manufacturers instead of working with GPOs. IDNs want manufacturers to partner with them on drug access and price so they can take care of their patients. IDNs cannot do that when, for instance, a limited-distribution contract for a drug means a prescription must be sent to an outside pharmacy even if a patient wants to fill it at the IDN pharmacy.

How IDNs improve patient outcomes and patient experience

To improve clinical outcomes, IDNs monitor population health (e.g., social determinants of health) in their regions to identify the most prevalent health issues, such as diabetes, heart disease, or other chronic conditions. Health clinics and other outpatient facilities take a holistic approach to preventing and managing these conditions to keep patients out of the hospital.

IDNs focus on standardizing healthcare delivery. Standardization can help reduce medical errors and liability and improve the patient experience. Reducing wait times, improving provider/patient communication, and enhancing patient education are effective ways to increase patient satisfaction and experience.

By keeping consultations and procedures within the provider network, integrated care delivery improves care coordination and reduces costs for patients. Patients are less likely to receive (and have to pay for) duplicative services. More office visits and better communication between providers and other healthcare personnel (HCP) reduce the chances of providers overlooking any factor of a patient’s medical condition.

Blue Cross Blue Shield of Texas, for example, cites that its members who see providers in ACOs experience:

  • 2.6% fewer emergency room (ER) visits
  • 8.0% fewer outpatient visits (made to a hospital outpatient department)
  • 4.1% more office visits, which are designed to discuss new or existing health issues, concerns, worries, or symptoms
  • $8.33 lower cost per member, per month

The future of IDNs

It’s likely that the number of IDNs and payviders will continue to grow as more health systems and payers merge and acquire new facilities, functions, and operations. Healthcare organizations that exist as fragmented or disorganized systems cannot meet the necessary goals of improved patient outcomes at lower costs. 

Operational healthcare solutions and technologies that drive better outcomes and help coordinate the astounding number of moving parts required to achieve healthcare reform are here, and will play a significant role. Still, healthcare providers and payers who keep patients at the heart of their mission will remain the foundation of any IDN and payvider. 

No matter how your organization interacts with providers and payers, symplr can help.

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