We know the three basic ingredients are: patients, providers, and payers. From the providers’ perspective, the insurance carrier (a representative of the payer) is considered the middleman between the provider and the patient. Conversely, payers view the middleman as the provider systems (representatives of individual providers).
Payers see much of the existing provider side infrastructure as offering zero value to the provider in terms of the patients’ expectations - singularly helping them feel better.
Payers want to cut out the middlemen which they see as all the options that exist to keep physicians independent, such as management services organizations (MSOs), independent physician associations (IPAs), and physician hospital organizations (PHOs). Further expanding their position, many payers consider it wasteful to reimburse small practices for the services they provide. Payers feel they could just hire doctors themselves to see the members that they have and cut out all the existing middlemen. Within this there are many variations to accomplish that goal; however, it is, overall, the present situation we see with payer-provider convergence. So, let’s call this “Payer-Provider Convergence 1.0.”
In economic terms, Payer-Provider Convergence 1.0 is simple: the provider is on the supply side and employers (stay with me) are on the demand side. The provider is called only when the covered employee has a need. The goal is to eliminate everything in the middle (everything associated with the middlemen), however there is evidence this just opens the door for more middlemen.
The insurance company’s middlemen come in by way of product development: insurance plans and physician directories, sales (enrollment) and distribution (member welcoming), billing (premiums) and payments (to providers).
The provider side middlemen also do this through their own product development: rate negotiation (IPA or PHO) and billing (MSO or practice management company).
Now we need to ask ourselves, if we only cared about a direct patient-to-provider value chain, could these all be bundled together as representative of overly enterprising middlemen?