Healthcare, Industry, Disruption
April 1, 2022
Healthcare reform, health policy, health economics, managed healthcare, Medicare for all, universal health care... the list goes on and on. Each of these concepts represents a new or different perspective regarding the building blocks of our current health care delivery system. The “new” ideas for reform gradually become the “old” ideas, and the results are a system that has remained consistent in its structure for the past generation. Dramatic changes get watered down by the time they go into practice so, despite the recurring topics of reform and transformation, substantial changes remain out of reach. Amongst so many massive changes that have been precipitated by Covid, maybe now is the time for healthcare charges to really hit the accelerator – maybe now is the time for some disruption in our healthcare model.
While some of the installments of the Healing Healthcare series have already discussed potential changes that are being implemented (see Part 3, Changing healthcare payments: Transition from fee for service to value-based care), these alterations are relatively gradual. For instance, value-based payment systems have been implemented by many federal programs offering bonuses for outcome quality or similar metrics; however, change has not really been impactful for patients/consumers. While these more mainstream advancements are in the public eye, there are some more unique concepts that are swirling in this space as well. Should these “disruptors” find success in the health sector, true change might be sooner than some expect.
The economic design of healthcare in the U. S. functions quite differently than traditional markets - rather than a pure supply-demand balance, our healthcare system is typically a three-way economic tug-o-war between providers, patients, and payers. A quiet but avid spectator is the employer, whose HR department had the arduous task of choosing the appropriate health insurance options from which the patient/employee had to choose. An employer is rarely considered to be a part of the health coverage and reimbursement conversation; once a payer (insurance) plan is chosen, the employer passes off most health plan management to the payer. The payer then takes on the responsibility of contracting with providers, approving, or denying claims, and interacting with providers and patients on an as-needed basis. In the case of big businesses, claims that are approved by the insurance plans are commonly “self-funded” by the employer, with the payer collecting a fee for management. In the case of smaller businesses, the payer takes on the risk themselves, but the employer is typically charged even more.
In recognition of the confusion that is associated with such a system (try summarizing 100+ insurance coverage policies down into just one paragraph), new players have emerged in the market. These companies offer a unique service for employers but serve as an overall benefits consultant and often an advocate on behalf of employers and patients/employees alike. Companies such as OneDigital, Sana, and Imagine 360 are helping to pave a new path in this space, serving as third-party benefits managers that may make self-funded benefits plans more feasible for smaller companies. Their willingness to negotiate coverage and rates for care on a more individual level provides the employer with the comfort of a potentially better-valued health insurance plan for its employees. In reducing mass rate negotiations, they have found that there may be an opportunity to deliver high-quality care without breaking the bank for the employer. While many of these companies continue to scale rapidly, a continual rise in the percentage of US employees covered by self-funded plans seems to represent an expansion in this approach by smaller businesses. While time will tell whether these smaller third-party managers will supplant the big-time payer plans in the US, they are certainly beginning to shake up care coverage options.
Healthcare providers were previously divided between “private practice” and “system-based practice,” the former referring to individually or joint operated provider offices and the latter with hospital-driven structure. Over the past twenty years, this line has become blurred, with health systems acquiring many private practices. Many providers have welcomed these acquisitions to reduce administrative and overhead burden; however, not much has really changed for the consumer (although recent research has indicated that increased prices have followed, without increased quality – but this might be for a future blog). As these health systems seek to change delivery models by blending outpatient primary and specialty care with inpatient hospital services, new approaches are recognizing that the trend of “healthcare consumerism” is very real. These approaches are coming from outside the traditional healthcare sector, but from very recognizable names like Walmart, Amazon, Google, and others.
Walmart Health has taken one of the most unique and disruptive tactics to this altered care delivery model; bringing healthcare to the customer and making prices clear & easy. Walmart Health has begun to expand on its current in-store pharmacies and is piloting in-store health clinics. While this “all-in-one” locale presents one form of disruption, the more dramatic change comes in its price structure. The company promises “affordable and transparent pricing—with or without insurance” and clinics have something that no doctor’s office could currently provide – a clear price estimate provided at appointment registration. As described in Price Transparency, federal legislation now requires hospitals to provide “charges;” however, the actual cost to a patient is incredibly difficult to determine due to numerous insurance contracts and rate agreements. This combination of easily accessible care and affordable and transparent pricing represents a significant leap forward in care delivery models for the United States. If successful, Walmart Health may be poised to become one of the largest players in US healthcare; but even if the company falls short, this program may be the start of major change in our expectations of healthcare.
The above examples of healthcare disruptions are not alone in the market; there are others looking to bring change to pharmaceuticals, lab testing, imaging, telemedicine, and more. However, these two concepts represent a potential for a shift within the industry that may help to meet consumer demand. Our fall 2021 healthcare index indicated that more than 68% of respondents have been surprised by their coverage for a service being less than expected or not covered at all and more than 55% have skipped filling a prescription due to poor coverage. While many struggle with the balance of patient vs. consumer, it appears that those that are willing to meet these “consumer” demands not only may “disrupt” our healthcare delivery and coverage models but also may help to usher in improvements in quality and well-being.
The next step for these disruptors, or for more traditional healthcare companies that are seeking a more forward-thinking approach, is to identify the audiences that are most receptive to these more novel models. While a more convenient and transparent doctor’s visit may seem ideal for many, others may be reluctant to see a doctor at their local Walmart. For these new concepts to grow at scale, companies must appropriately use consumer data and analytics to identify those that make up the 68% of people surprised by their health insurance coverage and most likely to find the convenience and cost of a new clinic to be appealing – no matter the location.
Causeway Solutions utilizes its prescriptive modeling to find the best audiences for new opportunities and disruptive companies. Recognizing individuals who may find a new and more convenient health clinic to be appealing but may be hesitant to use the clinic if it is located in a non-traditional site would generate an “adoption” audience. These individuals find a concept or idea to be valuable; however, they require messaging to increase their likelihood to use the service. A separate audience of individuals would make up the “persuasion” audience; those that would be willing to use a clinic located in a non-traditional site but may not see the benefits of using Walmart Health versus others. Engaging these audiences presents the opportunity for a “disruptor” to become mainstream, but each requires a different approach. If this can be done successfully by any of these new players in the healthcare space, then the industry may soon see some significant changes.
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