Market Analysis

A major premise of the AF4Q initiative is that health care is local. Each market has unique factors that affect the health care industry and that can influence the level of collaboration and willingness of market stakeholders to transform health care. An analysis of these stakeholders, including employers, providers (hospitals and primary care), purchasers, health plans, and consumers, in combination with an understanding of market history and characteristics, provides insight into how a market can support delivery system changes through payment reform efforts.

Several Alliances applied a market assessment framework developed by Catalyst for Payment Reform (CPR) to provide stakeholders with a structured process to assess local dynamics and market conditions and create a common understanding of the market and best options for moving forward. [1] CPR’s framework allows Alliances to examine the interplay of local factors, such as provider organizations, health plan capacity, purchaser innovation, and state regulatory and legal environments. This structure is important in the context of payment reform in AF4Q given the cross-community approach, which necessitates thorough understanding of market dynamics. For example, awareness of the distribution of employers by size is one of the important insights into different players and forces at work in a region.[2] In addition to using CPR’s market assessment tool, Alliances held Payment Reform Summits in their markets to bring together stakeholders to assess market interests and determine viable options for payment reform efforts.

Provider, health plan, or purchaser market power can be an opportunity for or an obstacle to collaboration on multi-stakeholder payment reform. Opportunities and strategies for payment reform are influenced by the size and market power of stakeholders. Marketplaces with unsupportive provider groups or no dominant plans are not favorable to creating multi-payer, multi-provider payment efforts. In a number of AF4Q markets, there are examples of how overwhelming stakeholder market power can influence progress toward implementing payment reforms.