Tag: capitation

Why Value Generation Doesn’t Grow Your Risk-Bearing Medical Group: On Being Foiled by the Middleman

Imagine that you are an electronics manufacturer who has figured out how to build a superb stereo system at a far lower cost (20% less) than your competitors. Over time you’ve perfected the system, created a reputation for high quality and have a machine that sounds great.  Your manufacturing efficiencies position you to sell at ...

Spending Money to Save Money? Navigating Population Health “Hard-Dollar” Investments vs. Downstream “Unicorns and Rainbows” Medical Savings.

Most medical groups considering risk contracts usually understand that they’ll need to make significant investments in population health infrastructure for capitation to work out financially.  After all, capitation can only be profitable if the risk-bearing group has the ability to manage the use of expensive downstream healthcare services and minimize unneeded care. The problem is that the relationships between ...

Global Capitation: The Three Less-Obvious Vulnerabilities for Health Systems Considering Global Payments

I receive a fair number of emails and Linkedin messages from healthcare executives who are interested in global risk contracts and are looking for a some advice from the provider side. Here’s what I usually tell them: Global risk can be a very good thing for both patient care and for margins– but it’s a ...

Pricing Risk: What Margin Should Risk-Bearing Healthsystems Reasonably Expect?

There is an old adage in the business world: reward follows risk. In other words, in an ideal market, investors are supposed to balance the potential returns of an investment against the possibility that they’ll lose their money. I’ve thinking a lot about risk recently as our organization came to the end of our budget ...

Structure Follows Strategy: What’s the Best Organizational Model for Capitated Healthcare Systems?

“Structure follows strategy” is an old business motto coined by the business historian Alfred Chandler. The adage refers to Chandler’s observation that organizational structures should change to reflect an organization’s evolving corporate strategy. As strategy evolves, so too should the organizational structure.