The traditional healthcare business is fading into the sunset, along with its complex product structures, incomprehensible reimbursement models, and confusing industry jargon. A new day is dawning, and opportunities abound for the players that are prepared to pursue them.

Background

The U.S. healthcare system suffers from excessive costs and wasteful spending, and it is growing at an unsustainable rate. The Patient Protection and Affordable Care Act (PPACA, often shortened to ACA or Obamacare) holds payers accountable for controlling costs. While some costs are beyond the scope of what payers can solve, much of the spending is well within their control. With the spotlight on consumers (patients) and on reducing costs, the balance of power and risk is shifting — and it is calling into question the traditional roles of employers, payers, and providers (see figure).  

Figure: Today’s Complex Healthcare Landscape

s

As the days of business-to-business (B2B) healthcare come to an end and the market becomes more consumer-centric, the players that remain must evolve to stay afloat in this human-to-human (H2H) world. 

As introduced by the Triple Aim framework, the healthcare system requires all players to participate with shared incentives to drive change and help patients see healthier, more affordable outcomes. This requires deep analytic capabilities to integrate data across myriad sources (including providers, patients, and medical histories), to assess personalized risk based on demographics and treatments, and to create informed recommendations to control cost and improve care. Who will orchestrate this? How will shared incentives be structured?

The future of healthcare depends on an integrated, collaborative environment producing high quality at an optimized cost. It is unclear exactly how we will get there or who will win or lose. In this uncharted territory, there are still many unknowns — from the balance of risk and cost to the future of employer-sponsored care, the political landscape, and the bipartisan tug-of-war.

Capitalizing on data analytics 

With the post-ACA reimbursement model still taking shape, providers must focus on consumers. The ACA gives providers incentives to deliver healthier outcomes and quality performance metrics — in other words, by improving patients’ health. This requires the ability not only to identify at-risk patients, but also to monitor their progress and eliminate preventable episodic care and unnecessary emergency room visits. To meet those goals, providers will in effect be taking on a financial risk.

Predictive analytics — based on medical histories, basic demographics (such as education, age, race, and gender), and other predictors of evidence-based care — will certainly be a large part of the solution, but this will require scale and an abundance of rich, relevant data. Most providers have neither the scale nor the expertise to develop these analytic capabilities, especially since analytics depend on integration with so many other players.

Payers, however, are sitting on a treasure trove of data. Those that act now can help shape this new environment, ensuring that patients see healthier outcomes at a better price; further, as patients gain power vis-à-vis other healthcare channels, they will demand a better customer experience, including more transparency of costs, mobile services, clinical decision making, and behavior-based discounts.

Payers that hesitate to make a move risk losing a sizable chunk of their members, including the lowest-risk patients who will more easily be able to flee for efficient competitors offering discounts. We see two paths: one in which payers continue to focus on reducing costs and managing risk and another in which they create value in an outcomes-based marketplace where data is the currency and payers are the banks.

Forward-thinking payers have an opportunity to lead the ecosystem to its desired future state. Consider a couple of recent examples. Aetna teamed with analytics firm GNS Healthcare to assess detailed patient records, identifying patients at risk of metabolic syndrome. They can also offer patients guidance in terms of treatment and identifying the factors unique to them that increase their risk of disease. And WellPoint created analytic reports for providers in its Provider Care Management Solutions (PCMS) platform. PCMS reports are real-time, dynamic, based on current medical histories, and relevant to the provider.

Recognizing the importance of these developments and the looming threat on the horizon if drastic measures are not taken, some payers are taking unprecedented action. In California, competitors Anthem Blue Cross (a subsidiary of WellPoint) and Blue Shield of California have collaborated to create a health information exchange to analyze and share the data of more than 9 million patients. (A non-profit organization will govern the data.) In another example, Aetna, Humana, and United Healthcare have collaborated to standardize charge rates across most assigned services.

Thriving in the new landscape

Leading payers are making important strategic moves to prepare for a world dominated by analytics. Although they have mountains of data at their fingertips, what’s lacking is a dynamic, interconnected system of data stores. What will the healthcare system look like in 2020? What role will payers have? What will the dominant market players need to be good at, and how will they stay relevant? Who will bear the financial risk of healthcare costs?

If risk-sharing models such as accountable care organizations and patient-centered medical homes succeed, they will challenge the traditional roles of payers and providers by shifting the risk and calling into question the payer’s role as the middleman. Payers that act now can capitalize on this flux by embracing a new role and developing the capabilities necessary to thrive.