What is an At-Risk Relationship?

In these rapidly changing times, traditional fixed-price, transactional relationships between healthcare providers and vendors are of little value. When providers buy a discrete product or service, they do so with the intent of integrating it into their strategy, assigning it a specific role in achieving their goals. But if the market shifts, if regulations change, if their strategy runs into roadblocks, they are left with what they bought.

As a result, many organizations have turned to risk-sharing or risk-balanced relationships in which both sides — health care providers and vendors — take on specific accountabilities. In risk sharing, there are always two sides: the underlying assumption is that “you will be responsible for a, b and c” and “I will be responsible for x, y and z.”

In an environment as interdependent and complex as health care, someone is always left holding the bag if the original strategic assumptions do not prove out in the long run. Even with so-called risk sharing, most or all of the risk of achieving the goal falls on provider organizations. If they can’t effectively connect what they purchased — products, services or consulting — to the action they are trying to drive, they are often left to figure it out on their own.

Mutual Goals

Outcomes-aligned relationships represent the next order of value creation beyond fixed-price and risk-sharing models. In an outcomes relationship, the goals of the health system and the vendor are integrated and jointly aligned so success is defined by achieving the ultimate goal together. The partnership aspect enables true risk-sharing, in that the vendor aligns with the provider to deliver financial, quality and patient experience metrics that are mutually agreed upon. Sustainability and the need to pivot together over time based on market, environmental, and regulatory changes that impact strategy are bedrock components of these relationships.

In risk sharing, each side wins (or loses) based on a specific set of criteria. In outcomes alignment, the relationship is designed around value creation for the provider organization and the vendor. The two organizations are co-resourced and co-governed in a relationship structure that ensures both have skin in the game and both are rewarded for meeting goals.

Why is this Approach so Relevant Now?

The rapid transformations in health care are unprecedented. Ten or 15 years ago, it was different. A provider organization could define two-year objectives, and at the end of that period, if it succeeded, the outcomes typically would still be relevant. Today the environment is highly unstable, from political uncertainty to the emergence of disruptive technologies. Defining a path today to achieve goals two or five or seven years from now requires a strategy that can flex to accommodate or adapt to conditions that may not even exist today. For that reason, the path has to be comanaged and codependent.

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