Shift to value-based healthcare spurs business innovation
As insurance payers undertake digital transformation, sweeping changes throughout the healthcare industry are prompting business innovation.
Spawned by the Affordable Care Act (ACA) in 2010 and the subsequent establishment of accountable care organizations (ACOs), the US healthcare industry is shifting from volume-based, fee-for-service payment models to value-based care and payment models.
The challenge, now, for both healthcare providers and payers, is how to modify entire enterprises organized around fee-for-service to a system that rewards providers for keeping people healthy. The transition has forced providers to change the way they bill for care because now they are paid based on the value of care they deliver (value-based care).
This is why payers are exploring a range of alternative payment models (APMs). In fact, nearly a third of total US healthcare payments were tied to APMs in 2016, while 28% of spending was tied to pay-for-performance or care coordination fees.
Not surprisingly, value-based payment models require financial involvement from providers because their remuneration is based on quality benchmarks aimed at more fully aligning clinical quality and payment.
While certain models—such as shared-savings—reward providers for reserves achieved through greater care efficiency, models such as pay-for-performance, bundled-payments/episodes-of-care, shared-risk payments, and capitation-fee involve greater downside risk for providers.
In order to adapt and leverage new payment strategies, providers are exploring a variety of care-delivery strategies:
- Process improvements—Innovative processes can significantly improve efficiency. For example, the Mayo Clinic now verifies complete breast cancer removal during the surgery itself so that further excision can be addressed immediately. This has helped Mayo to considerably reduce repeat lumpectomies.
- Managed care organizations—In the United States, managed care is a healthcare delivery system organized to manage cost, utilization, and quality. Medicaid-managed care delivers Medicaid health benefits and additional services through contracted arrangements between state agencies and managed care organizations (MCOs) that accept a set per-member, per-month (capitation) payment for these services. Improvement in health plan performance, healthcare quality, and outcomes are key objectives of Medicaid-managed care.
- Telehealth and telemedicine—This is an increasingly popular technique that uses mobile communication and technology to provide clinical care at a distance while reducing healthcare expenditures. Telemedicine improves patients’ access to care and allows physicians and health facilities to expand their reach. Remote patient monitoring can reduce the need for outpatient visits and enable remote prescription verification and drug administration oversight, potentially reducing the overall cost of medical care.
- Preventive care and care intervention—InsurTech firms such as Clover Health use claims data to identify high-risk members and provide targeted care interventions, thus preventing potentially expensive treatments, which ultimately benefit all stakeholders. To encourage preventive care for patients, some payers also partner with fitness device manufacturers to help customers adhere to healthy behaviors. In fact, Aetna and Apple are collaborating through customer use of the Apple Watch.
States are taking different paths to value-based care. While Florida explores telemedicine, California’s PRIME initiative aims to have switched 60% of public hospital payments to an alternative payment model by 2020, and Massachusetts seeks to expand the use of ACOs and PCMHs. New Jersey’s statewide quality improvement model is paying returns, with hospitals reporting a reduction of more than $641 million between 2012 and 2016.
Changes empower customers
While back-end payment models can be a black box for the end customer, the new cost imperatives are driving consumers to seek greater control over their care and health plans, as well as lower costs.
More and more, consumers are looking for options with lower upfront premiums and higher deductibles that also give them a choice of plans and providers. Thus, there is a rise in the popularity of high-deductible health plans (HDHPs), with PPOs being the most popular HSA/HDHP product type in 2016.
There is also an increasing shift toward defined-contribution private exchanges because defined-contribution plans enable better cost control for employers and private exchanges give employees more choice. In fact, private exchanges are being viewed favorably by both employers and employees, according to a Willis Towers Watson survey.
Simply put, the new tide of products and models gives customers more control when it comes to lower healthcare costs, increased choice, and more significant motivation to take control of their own healthcare through reduced deductibles.
Robust technology is critical to efficient data exchange
These new healthcare business innovations must be built on powerful and innovative back-end technology because successful value-based care delivery relies heavily on dynamic data exchange and care coordination among all stakeholders involved in a member’s care.
This can be achieved through Integrated Care Platforms (ICPs) that leverage technologies such as Application Program Interfaces (APIs) for seamless data exchange and a unified platform to all stakeholders for every member’s care.
Blockchain is also a useful technology in the implementation of secure ICPs, patient data exchange and contracts with providers.
As mentioned previously, future-focused healthcare payers must commit to complete digital transformation versus siloed, one-off front-office initiatives or analytics.
While payers improve customer-centricity in the front office through innovative apps and omnichannel experiences, they must also empower other ecosystem stakeholders (such as providers) with useful apps or integrated platforms.
To translate this to back-end efficiency, APIs are the answer as they enable seamless information flow between diverse systems. These systems can then be maintained consistently with the help of DevOps and equipped to respond to the market with the help of Agile methodologies, finally rounding out with a sound foundation of automation, artificial intelligence, machine learning, and cloud in the back office.
 “More US healthcare payments are tied to alternative payment models,” Ilene MacDonald, Fierce Healthcare, October 30, 2017, accessed November 2017 at https://www.fiercehealthcare.com/finance/more-u-s-healthcare-payments-are-tied-to-alternative-payment-models
 “Models of Value-Based Reimbursement,” Valence Health, 2013
 “Turning Value-Based Health Care into a Real Business Model,” Thomas H. Lee, NEJM Catalyst, October 24, 2016, accessed November 2017 at https://catalyst.nejm.org/turning-value-based-health-care-into-a-real-business-model/
 “Clover Health, A Data-Driven Health Insurance Startup, Raises $100M,” Matthew Lynley, Tech Crunch, September 17, 2015, accessed November 2017 at https://techcrunch.com/2015/09/17/clover-health-a-data-driven-health-insurance-startup-raises-100m/#.jroymqc:0POJ
 “Value-Based Reimbursement State-by-State,” Change Healthcare, 2017
 “NJ Quality Improvement Model Lowers Healthcare Costs by $641M,” Jacqueline Belliveau, RevCycle Intelligence, March 27, 2017, accessed November 2017 at https://revcycleintelligence.com/news/nj-quality-improvement-model-lowers-healthcare-costs-by-641m
 “2016 Survey of Health Savings Account—High Deductible Health Plans,” AHIP, February 2017
 “Employers, employees like private health care exchanges,” Marlene Y. Satter, Benefits PRO, June 15, 2017, accessed November 2017 at http://www.benefitspro.com/2017/06/15/employers-employees-like-private-health-care-excha?slreturn=1511447415