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Network Design, Formation, and Managed Care Partnerships

Contents © 1996 HMS Associates
All rights reserved

I. Networking Preparedness Assessment

As organizations seek to establish collaborative relationships with others, each needs to have a clear sense of how prepared both it and its partner organizations are to pursue the types of changes upon which the partnership will be based. The following sequence of activities can help organizations and networks develop a sense of their capacity to institute the programs they propose to pursue.

Step A - Compelling Need/Benefit. Each agency identifies the core issue that the networking venture will address.

Step B - Need for Joint Action. Each agency then identifies why joint action on the problem is necessary.

Step C - Leadership. Each agency then assesses the extent to which pivotal organizational and community leaders are prepared to promote or impede the attainment of the objective.

Step D - Resources. Each participant then assesses the resources that they are prepared to allocate to the programs, particularly sufficient financial capacities, staffing capacities, capital, and skills. Legal prerequisites, sufficient control over all the resources, and funding opportunities must also be examined.

Step E - Capacity to Compromise and Collaborate. Does the organization have a history of working with others? Does it show a capacity to openly address differences and resolve conflict through collaboration? Agencies must be able to answer these questions affirmatively in order to overcome the initial distrust and resistance to working in a group.

Step F - Commitment. Is the agency prepared to assign responsibilities based on skills rather than individual organizational preferences? Are they prepared to employ all elements of their organization that are required to bring about the change? Do they see the task as one of their top five priorities? If not, further work is required to prepare participants or to elect members.

Answers to these questions will provide organizations with a clear sense of their current likelihood of success, as well as areas which require significant rethinking or rebuttressing in order to ensure successful networking endeavors.

II Network Development Steps

Effective networks go through a six-step process which keeps them on track and assures continued membership participation. This six-step network development process generally begins with the recognition of similar perceptions of need on the part of network participants. The next step in the process involves a recognition of the respective strengths of network members and that each organization brings a unique capacity to the project without which the project's success would be more difficult and perhaps impossible.

HMS Associates views the third step to be most the important. Each organization must express what it views to be the clear-cut benefits of the project and networking process. Without the clear elicitation of benefits, networks will founder and participation will wax and wane because organizations and the networks themselves will not have a clear focus on where they should target energies and efforts. The identification of benefits is also the basis for assessing the ultimate success of the project to both the community and participating organizations.

The fourth step of the process involves a delineation of the expectations, roles and responsibilities of all key network members involved in a particular project. It is essential that the roles and responsibilities of participating organizations be nailed down and that such roles and responsibilities are clearly communicated within the organizations who are part of the networks, especially those individuals who would be responsible for carrying out the assignments central to the completion of the network objective.

The fifth step in the network development process is to actually implement the type of change that has been proposed. Participating organizations carry out the tasks and activities for which they are responsible and ultimately create new services or systems of services. The sixth and final phase of the network development process involves a routine monitoring of progress toward stated goals and objectives. In particular, the network and network members must routinely monitor and report on the benefits that members were expecting to accrue as a results of network participation.

An example of this network development process follows which helps to depict how organizations from varied backgrounds in the health care family can benefit from collaboration which ultimately results in healthier communities.

Step 1 - Need. A hypothetical network's service area has a high death rate for heart disease among people under 60 years of age. Improved access to advanced life support services will help to reverse this problem.

Step 2 - Respective roles. The network has three hospital members with 24-hour emergency rooms and several volunteer rescue squads with transport capacity, and advanced life support service in the service area is limited. A hospital in a neighboring area has an advanced life support (ALS) service and is interested in offering the service in that network's service area.

Step 3 - Benefits. Everybody can win in this scenario. The community is healthier, hospitals can provide better care because ER patients have better pre-hospital care, the LAS service has a new market and expanded role, and the rescue squads are not faced with unattended transport of acutely ill people. Everyone's role in the ER system is enhanced through the sharing of diverse talents and expertise. The risks to the participants are potential manipulation of the emergency room/admission market and preemption of the importance of local rescue squads. All agree that the benefits far outweigh the risks and agreed to implement a fly-car program operated by the neighboring hospital.

Step 4 - Roles.

Volunteer squads:
Transport and engage ALS service fly-car to meet their ambulance en route to hospital ER.
Operate fly-car capacity.
Hospital ER:
Provide medical control and ER services.
Monitor utilization.

Step 5 - Implementation. Establish medical control and ALS activation protocols, educate all partners, operate.

Step 6 - Monitor Benefits. The benchmarks that provide a basis for the monitoring of risks and benefits include monitoring the amount of ALS services in the area - expected to increase and eventually, mortality rate of heart disease among people under 60 - expected to decrease. Geographic patterns of utilization of hospitals are expected to be unchanged: market shares will not vary; ER and hospital admissions will not vary. The parties agree to monitor utilization on a monthly basis to determine if benefits and risks are occurring as projected.

Networks must have a vision of where they are going, and must check landmarks along the way to ensure they are on the right track - or, that there isn't a better place to go.

III. Networking Principles

As networks and their members evolve and are enticed to pursue different objectives, it is worthwhile to keep key networking concepts in mind. These concepts can help to explain the varying levels of participation and the nature of evolving networks. These principles are represented in the illustration, Network Participation Concepts.


IV. Managed Care Considerations

As noted throughout this publication, most information addresses the formation of service networks or groups of providers interested in developing new programs or stabilizing existing programs rather than the development of insurance plans or managed care products. The networks which are initially formed to develop and promote the provision of joint services can provide an excellent base for the development of significant actors or players in managed care environments.

Rural communities seemed to be faced with a series of challenges relative to the increased influence of managed care. Unlike urban communities, significant excesses in health care providers do not exist and, as a consequence, managed care plans may have difficulty finding sufficient capacity to meet the needs of their members in rural areas. However, in many parts of the country and for many segments of the population, managed care is no longer a voluntary consideration but in fact, is mandatory and hence, rural providers must engage with managed care organizations more frequently as major financiers of health care services.

Numerous scenarios exist through which networks can become central participants in managed care relationships. Perhaps the most elaborate is a managed care insurance plan within which rural providers and communities join together to operate managed care insurance products which compete with other managed care insurance products in the marketplace. The development of such products is complicated, predicated on financial risk-sharing, and in effect represents the creation of a new insurance capacity in a rural community to meet managed care needs. It is clearly the most encompassing and challenging path that networks can take to integrating themselves within the context of managed care programs. However, over the long term it assures local control of local resources and the use and application of appropriate quality of care standards.

A second, less-encompassing scenario would occur when service providers form service networks which, in effect, broker with existing plans regarding the terms of participation as participating providers in managed care plans. Such networks, in effect, help to retain high quality services through promoting effective levels of reimbursement of such care. "Brokers" also may require significant involvement in quality assurance or utilization review processes to help to assure that patients are receiving needed services. Such activities need to place considerable attention on potential anti-trust implications.

A third form of managed care involvement - community provider organizations - is preferred provider organization relationships with local self-insured employers. Community provider organizations guarantee sufficient volumes of service at low costs and high quality, and are directly accountable to employers for their performance rather than plans/intermediaries. This third form also links health care providers to the local community and employers in a much closer fashion in which each is directly accountable to each other.

Prerequisites to successful efforts include highly cost-effective health care services, employers who are prepared to pursue self-insurance options and invest in local providers, and medical providers highly vested in maintaining control over utilization and quality assurance procedures.

Other forms of managed care initiatives can be pursued by rural health care networks. Past experience has dictated that successful ventures will be founded in local needs and capabilities.

Exhibits 1 and 2 present sequential considerations that organizations or networks should examine as they re-engineer for survival and growth in both fee for service and capitated markets.

Exhibit 1 - Managed Care Organization (MCO) Focus

Exhibit 2 - Provider Service Network (PSN) Focus


HMS AssociatesSuite B, Box 3742280 Millersport HighwayGetzville, NY 14068
Tel. (716) 688 - 8448Fax (716) 688 - 0395Toll Free (877) 889-6519


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