Risant Health, a New Disrupter on the Scene?
The Kaiser-Geisinger Partnership Enables Value-Based Care
Editor’s note: Joe Maher, Associate Principal, Sg2, contributed to this post.
The newly announced deal between Kaiser Permanente and Geisinger could turn out to be one of the most impactful health system partnerships in recent years. The deal is subject to regulatory review, but if it goes forward, Geisinger will join Risant Health, a new nonprofit formed by Kaiser Foundation Hospitals with an emphasis on value-based care (VBC). The advent of Risant Health is yet another indication that VBC will be core to the future of US health care delivery.
The timing makes sense. Operating under the fee-for-service model is likely to remain challenging for many health systems for years to come. Reimbursement pressures may be compounded, particularly as payers and employers use price transparency data to seek savings in commercial rates. Financial margin opportunities will likely shift toward VBC arrangements; this is where Risant Health is aiming.
Risant Health unites unique competencies. One is building balance sheet strength. With about $5 billion tagged for investments in five years, according to an interview with Kaiser Permanente Chairman and CEO Greg A Adams with The New York Times, Risant Health could infuse its partners with VBC capabilities. A portion of these dollars could be treated as risk-based capital to firm up the cash positions of the partners, which will in turn allow health systems to focus more on the upside potential in shared upside and downside financial contracting. The uncertainty around downside risk and exposure has slowed progress in total-cost-of-care arrangements for many health systems. Optimizing VBC success requires participation in some shared contracts; having a stronger cash position will enhance organizational fortitude.
Risant Health also will allow technology-focused VBC enablers to scale. Some of these new entrants are partnering with health systems and medical groups to focus on VBC, but none have the resource scale potential of Risant Health. Risant will be able to embed technology for success across multiple health systems, which likely will still balance traditional fee-for-service delivery. Its partner health systems will need to perform in VBC and fee-for-service while serving patients across all payer classes.
Additionally, Risant Health may be poised to activate specialists more effectively in VBC. This is especially true if the organization can deploy existing physician leadership to partner with peers in new Risant Health organizations to develop and implement best practices. These efforts, at scale, can reposition physician strategy, productivity and compensation models around VBC.
The new organization can couple investments with a more measured approach to return on investment in VBC. Sg2 estimates that achieving ROI in value-based care clinical delivery models takes two to three years—minimum. Those gains can continue to grow over time. With an aligned ownership structure, leadership and governance will be equipped to monitor progress and returns on technology and clinical investments with the appropriate patience needed to navigate the transition to VBC.
Provider-sponsored health plans (PSHPs) often struggle to scale and compete with large, national carriers, and Risant Health could be the inflection point for the necessary scale. As traditional health plans acquire and partner with primary care and other disrupters and post-acute providers, and as they engage in robust telehealth capabilities, they are equally becoming both a payer and a provider, encroaching on the value proposition of PSHPs and controlling the management of substantial patient lives, including how, when and where those patients seek care. Importantly, traditional plans can do this nationally and with scale. An organization such as Risant could position its participants as an alternative option and fierce competitor to the reframed and evolving “traditional health plans.”
What does this mean for US providers? A small number of community health systems will have the opportunity to evaluate becoming part of Risant Health. These health systems should overlay their existing position and competencies with Risant’s resources and value proposition to assess for fit.
Most health systems should consider the impact of Risant Health entering their markets over the next decade. Following are some initial recommendations:
- Revisit your organization’s VBC strategy and road map to ensure the organization can position competitively in VBC, especially if a new entrant can accelerate the transformation to value.
- Understand how your organization is positioned in the market from a total- and key episode–cost-of-care perspective as well as a quality/outcomes perspective.
- Strengthen the organization’s System of CARE alignment to deliver greater care coordination and drive stronger network integrity.
- Continue to build patient loyalty and activation through technology, access times and other patient engagement modalities.
- Understand commercial rate structure positioning within the market to identify likelihood of potential rate pressures from new commercial plan offerings aligned with VBC.
Risant Health likely will give the industry another model, one that places its bet on VBC on a grander scale. Health care providers can learn from its efforts and should consider how it might shape their markets, consumer expectations, the array of new entrants and the future of VBC.
As your organization evaluates VBC opportunities at stages from strategy and selection through evaluation, reach out to our Value-Based Care Strategy Consulting experts for help with your initiatives and goals.
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Sources: Kaiser Permanente. Fast facts. December 31, 2022; Kaiser Permanente. Annual Report. 2019, 2022. Accessed April 2023; Geisinger. Electronic Municipal Market Access disclosures. Accessed April 2023; Madden B. Executive summary: Geisinger + Kaiser Permanente form Risant Health. Hospitalogy. Accessed April 2023; Sg2 Analysis, 2023.