The New Wild West

In the days of the Wild West, pioneers set out to discover a new frontier.  Ahead of them lay challenges, potential dangers and possible wrong turns. They pressed on, however, in the hope that they would find a better life, a new home or even gold at the end of their journey!  Today, healthcare payors also face a new frontier. Numerous challenges, dangers and possible wrong turns lay ahead, as the previously paved roads and the business-as-usual approaches of the last century are left behind. The rapidly evolving healthcare economy is shaping up in a way that is reminiscent of the Wild West. Payors that don’t join the caravan will find themselves left in the dust, unable to compete in this new world. 

What’s driving this new healthcare frontier? Out of control costs, the large number of uninsured and underinsured people in the United States and the realization that we need to do more to involve everyone in the process. The cost of healthcare as a percentage of the nation’s GDP is rising at an alarming rate.

According to the “U.S. Health Care Costs” report by the Kaiser Family Foundation, “expenditures in the United States on healthcare surpassed $2.3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980.” Chronic disease, an aging population and out-of-control administrative expenses are considered by many to be big drivers of the unprecedented cost of today’s healthcare.

As the annual cost of care continues to grow, it has become clear that our current healthcare model simply isn’t sustainable. As a result, similar to the pioneers that headed for the new frontier all those years ago, many payors are now beginning to explore other options as they too head in new directions.

New ideas – some novel approaches, some revamps of previous attempts to reduce costs while delivering higher quality care – are beginning to take shape as the twenty-first century healthcare caravan begins.

Last year’s passage of the healthcare reform bill has set in motion a series of sweeping changes that affect the way medical care will be delivered and paid for over the next decade and beyond. Funding and managing the new generation of healthcare services are fundamental challenges to achieving the bill’s goals of improved care access, quality and cost-efficiency.  The initiative calls on all parties – patients, providers, payors and the government – to ensure that maximum value is received from every dollar spent.

Let’s look at some of the changes that will help to shape what is sure to be a wild ride. Today’s static, one-size-fits-all healthcare model is being replaced by new models that stress individualization, personalization and customization, based upon the unique needs of each member. These new models will, in many cases, shift ownership, responsibility and risk to providers, employers and even the members themselves, as we finally begin to closely link everyone involved in the healthcare delivery cycle and have individuals take on a greater role in managing their care.

One option that is gaining significant traction and momentum is Value-Based Benefit Design (VBBD), now more commonly referred to as Value-Based Healthcare. This model is focused on the idea of having highly personalized benefits that incentivize specific healthy behaviors for individuals who have or are likely to develop chronic diseases. Using this new approach, for example, a value-based plan would offer people at high risk for a heart attack reduced or eliminated co-pays for certain prescribed medications and physician visits, and may even offer premium reductions or other incentives if certain health and wellness objectives are consistently met.  In some cases, physicians are also incented based on how well they perform.  This is a dramatic shift away from more traditional approaches, as it focuses on proactively managing the people that are most at risk as a way to create and maintain a happier and healthier patient population while keeping the overall cost of care in check. 

While still too new to fully determine their total return on investment, a number of early adopters of value-based health plans are already reporting lower or more stable costs, increased productivity and enhanced member satisfaction. One thing has become clear, however, when reviewing the results of these programs: payors that want to compete using these new options must first embrace next-generation technology platforms that will enable them to achieve increased levels of flexibility, agility, transparency and interoperability in order to ensure that they will be able to address the complexities that are associated with many of these offerings.

There are a number of other new models that are also appearing as part of the Wild West brigade, including Accountable Care Organizations (ACO), a new generation of Consumer-Directed Health Plans (CDHP) and Patient-Centered Medical Homes (PCMH). While each of these options also has important advantages, disadvantages and differences, most of them have at least one thing in common – a shift in risk. Using many of these new approaches, payors will now share risk with providers, employers and even members, as each of these groups takes on more responsibility for the quality and cost of care. 
One of the most crippling weaknesses of many of the legacy healthcare technology platforms is their inability to easily integrate with other systems in a way that enables the exchange of data both across and between organizations. While payors already collect a myriad of information from a wide variety of different sources, most of it resides in hard-to-access silos that were never intended to support the level of business transparency that is required to operate in the current healthcare environment. Payors need to be able to easily aggregate and analyze data, in real-time, and then convert it into actionable intelligence that will support optimal decision making by everyone involved in the healthcare delivery cycle.  They must also be able to provide members and providers with instant access to information related to benefits, provider networks, health conditions, and the current status of deductibles, limits and OOP maximums.

Changes related to healthcare reform and new regulations are also part of the Wild West journey. The move to the ICD-10 standard, for example, is quickly approaching and will introduce a level of complexity that most organizations are simply not ready to deal with given the fact that many of their existing platforms and applications were not designed with any of these items in mind. As we move from the 17,000 diagnosis and procedure codes of ICD-9, to the more than 155,000 codes that are now part of ICD-10, many payors are finding themselves in a situation that is reminiscent of Y2K. Hundreds or in some cases thousands of database fields, often in multiple systems, need to be expanded to accommodate the increased length and complexity of the new codes, and existing data needs to be migrated and merged to ensure that claims that are processed using the new standard will be paid correctly.  Many of the payors that have realized the importance of using modern technology platforms to address these twenty-first century healthcare business needs have already begun the transformation. Those that haven’t yet joined the caravan will continue to face enormous challenges, as the world of healthcare continues to increase in complexity and they find themselves unable to compete in the rapidly evolving healthcare marketplace.

Similar to the Wild West “showdowns” of the past, we are now seeing new showdowns between the old and the new healthcare technology platforms, and the old and the new healthcare business models. Today’s healthcare pioneers will use a new generation of tools to drive their success, as they move away from the antiquated, hard to maintain legacy platforms and the multitude of surround systems that are currently holding them back.  Payors that want to stake their claim in this new world must have systems that will allow them to quickly adapt to new models, easily address market changes, eliminate waste and manual processing, and offer significantly enhanced levels of transparency and support.
Like the days of the Wild West, opportunity is everywhere, especially for those who are willing to do what it takes to be successful. Changes are sure to bring challenges for everyone – providers will find new and more efficient ways to participate in the healthcare cycle, patients will play a more active role in keeping themselves healthy and managing the cost and quality of their care, and payors will offer new options that will help to further support reform. Reaching the “new world” of twenty-first century healthcare will not be easy, but it will offer unlimited benefits for those that can endure the challenge.

About The Author

Ray Desrochers, COO, HealthEdge

Ray Desrochers is a senior technology and business executive responsible for leading HealthEdge’s day-to-day operations and for ensuring the successful growth of the company. A graduate of the University of Massachusetts, Ray has been a frequent speaker at technology events and conferences around the world.