When the conversation fizzles, it’s often because of the way the company approaches the discussion rather than the opportunity they bring to the table.
Throughout my career, I’ve been on both sides of the relationship between payors and technology/service partners. I’ve seen the positive impact that start up and early-stage companies can make on a payor’s bottom line and quality of care, but I also understand what makes payors hesitate to pursue these opportunities.
When I supervised the P&L for individual health plans, I met with many companies who wanted to establish a partnership or vendor relationship. What I observed during that time is that when the conversation fizzles, it’s often because of the way the company approaches the discussion with the health plan rather than the opportunity they bring to the table.
In a post-COVID-19 world, payors are laser-focused on prioritizing initiatives that drive immediate results. And so, now more than ever, it is critically important to clearly tell your return on investment story from the very first discussion.
In this article, I’ll look at strategies that can help companies—even those without a strong track record—capture a payor’s attention and gain their trust.
Be specific about the problem you solve.
Companies often try to make the broadest possible case for their solution to show how versatile it is, but that’s often not the best approach. The companies that held my attention were ones that were laser focused on solving a specific, easily quantifiable problem.
If you position your technologies and services as a way to fully manage a population of 65- to 85-year-olds, for example, it’s hard for the payor to visualize what they’re actually buying into. But if you can show that you have profiled this age group, identified the top two or three primary drivers of healthcare spend and developed a solution that reduces those costs while improving outcomes, that’s more tangible and intriguing.
Take the example of a Fitbit. Theoretically, this type of wearable could be positioned as a cure for type 2 diabetes, since it encourages people to monitor and improve their activity levels. But realistically, that’s a bit of a stretch. Many healthcare technology companies are trying to make similarly broad claims for their solutions, but it’s unconvincing unless they can quantify the direct impact that their solution will contribute.
Many healthcare technology companies are trying to make broad claims for their solutions, but it’s unconvincing unless they can quantify the direct impact that their solution will contribute.
Reduce the level of risk for the payor.
When a health plan selects a new service or technology partner, they have much to gain—but they also take on considerable risk. Anything the company in pitch mode can do to reduce or remove that risk will make their proposal more attractive.
There are several ways to show the payor that you’re ready to protect their ROI and put skin in the game:
Put your fees at risk.
Offer a payment model where you agree to waive your fees when project milestones are not met.
In addition to putting your fees at risk, allow the payor to claw back more than your fees if you don’t achieve the ROI you have guaranteed.
Take on 100% of the risk.
Some companies are now offering to take full responsibility by delivering treatment for the fee established by the payor. It’s a bold move, but one that could work if you’re confident in your solution and need to find ways to attract interest from the health plans.
Use one of these proven playbooks to get a foot in the door.
If you have a strong value proposition and plan for minimizing risk, you’re in a good position, but it can still be a challenge to secure that first relationship with a payor. Here are three very effective playbooks that companies can use to help convince health plans to partner with them:
Offer an equity stake.
If you’re a start up with no track record, offer the payor an opportunity to become the lead customer to prove out the product or service that you’re developing. To entice them, you may have to work with them for free or invite them to take an equity stake in your business, but securing that anchor customer will give you the credibility needed to open doors to additional brand-name customers.
If you’re a start up with no track record, offer the payor an opportunity to become the lead customer to prove out the product or service that you’re developing.
Leverage early success metrics.
If you’re in growth mode and already have two or three reference clients, take the early data generated by those engagements and combine them with an ROI guarantee to convince the payor that the offer is credible and risk-free.
Analyze reference data.
Use reference data to demonstrate the impact that the solution or service model will have on the populations the payor serves. Doing it with the payor’s own data as the credibility point is ideal, but failing that, you may be able to use a dataset for a similar program in another state or from previous reference customers. Use the analysis to demonstrate the value of the service to the payor and then guarantee it by putting your fees at risk promising to return the money invested if the ROI isn’t met.
A real-life example: An early stage company once pitched me very successfully by promising to reduce spend by 20% and guaranteeing that ROI. The proposal included an analysis of a very specific dataset extracted from 10 years of service data for one of America’s largest integrated managed care consortiums. Despite their lack of experience, the combination of strong research and a no-risk guarantee convinced us to work with them, which gave them a huge foothold in the payor market.
Quantify ROI in terms the payor can visualize.
In order for your ROI statement to be credible and impactful, it needs to meet certain criteria: it follows a methodology you and the payor agree to, it’s based on the payor’s own data if at all possible, and it uses that data to tie your offering back to objective and quantifiable change. Anything less will be problematic. (And as a side note, if the payor won’t give you access to their data, that can be a huge red flag in terms of their overall interest and commitment level to adopting your solution).
In some cases, there simply isn’t enough data to support a specific ROI target, but if you have a compelling solution, you can still make a convincing case. Agree to a contract that sets a benchmark and establishes a specific point in the future when a target can be set based on the data collected during the first part of the engagement. From there, you can use some of the ideas I mentioned earlier to make your case based on this newly determined ROI.
Backing from a successful private equity firm indicates that your company has already been vetted and given a vote of confidence from a knowledgeable source.
Use private equity backing to improve credibility.
Even with the right data and a no-risk guarantee, it can still be difficult for a company without a solid track record to win a payor’s trust. One way to boost that credibility factor is to highlight backing from a successful private equity firm to indicate that your company has already been vetted and given a vote of confidence from a knowledgeable source.
Private equity involvement can also get you in front of potential anchor customers with a warm introduction or connect you to companies of similar size and scale and with complementary capabilities that could help you create a stronger offering overall.
Here’s the bottom line.
As a technology or service company, you have the potential to bring tremendous value to health plans, but first, you need to break down the resistance to change and risk. To convince payors to partner with you, make the value you bring tangible and quantifiable, find ways to reduce or eliminate the payor’s risk and establish trust using equity, early success metrics or reference data.