Understanding Per Engaged Member Per Month (PEMPM) Billing

Another pricing model that digital health startups may consider is per engaged member per month (PEMPM) contracting. PEMPm contracting allows startups to be paid a fixed amount for each member of a health plan that engages with their platform or service per month, regardless of how much care they actually receive. This model can offer several benefits to startups, including:

1. Encourages Engagement: PEMPm contracting incentivizes digital health startups to create engaging platforms or services that keep members using their products, leading to better health outcomes.

2. Better Value Proposition: Because PEMPm contracting is based on engagement, startups must create value for members to increase engagement, which results in a better value proposition for health plans.

3. Improved Outcomes: Startups are incentivized to deliver better health outcomes through their platforms or services, leading to reduced healthcare costs.

4. Lower Risk: PEMPm contracting guarantees a fixed payment per engaged member per month, providing startups with a lower financial risk than fee-for-service models.

5. Scalability: PEMPm contracting can help digital health startups scale their businesses more quickly, as they can more easily forecast revenue and plan for growth.

What are the Benefits of PEMPm Contracting for Health Plans?

In addition to the benefits outlined above for digital health startups, PEMPm contracting can also offer several advantages to health plans, including:

1. Improved Health Outcomes: PEMPm contracting incentivizes digital health startups to deliver better health outcomes through their platforms or services, leading to reduced healthcare costs and better outcomes for members.

2. Cost Control: PEMPm contracting can help health plans control costs by shifting the financial risk of care delivery to digital health startups, who are incentivized to provide cost-effective care.

3. Predictable Budgeting: PEMPm contracting allows health plans to budget for and forecast expenses more accurately, as they know exactly how much they will be paying for each engaged member per month.

4. Reduced Administrative Burden: PEMPm contracting can reduce the administrative burden on health plans, as they do not need to process as many claims or negotiate individual payment rates with digital health startups.

5. Flexibility: PEMPm contracting can provide health plans with more flexibility to experiment with new care delivery models and partnerships with digital health startups.

What are Alternatives to Per Engaged Member Per Month Pricing?

While PEMPm contracting can offer several benefits to digital health startups and health plans alike, it is not the only pricing model available. Other pricing models that may be appropriate for digital health startups include:

1. Fee-for-Service: With fee-for-service pricing, digital health startups are paid for each service they provide to health plan members. This model can be appropriate for startups that offer more specialized or episodic care.

2. Value-Based Care: Value-based care models focus on rewarding providers for delivering high-quality care and achieving positive health outcomes. This model can be appropriate for digital health startups that are focused on population health management or chronic disease management.

3. Shared Savings: Shared savings models allow digital health startups to share in the cost savings they generate for health plans. This model can be appropriate for startups that are focused on improving care coordination or reducing unnecessary hospital readmissions.

4. Pay-for-Performance: Pay-for-performance models incentivize digital health startups to achieve specific health outcomes or quality measures, and are often used in conjunction with value-based care.

5. Bundled Payments: Bundled payments involve paying digital health startups a single payment for a bundle of services, rather than paying separately for each service provided.

6. Direct-to-Consumer: Direct-to-consumer pricing models involve charging health plan members directly for digital health solutions, rather than billing health plans.

How does Rocket Digital Health Help?

Rocket Digital Health is a healthcare consulting firm that specializes in helping digital health startups navigate the complex healthcare landscape. One area of expertise is in structuring the right PEMPm or PMPM model for startups and securing health plan buy-in on the model. Rocket Digital Health can also help startups identify and pursue other pricing models that may be appropriate for their business model.