Abstract: Since its passage in 2010, the Patient Protection and Affordable Care Act (ACA) has caused widespread disruption in the US health care ecosystem. This has put a huge spotlight on the system’s shortcomings, from inefficiencies of care delivery to extreme variability in quality and patient experience—from region to region, and sometimes within the same facility. The uncertainty has been heightened by recent attempts to repeal the ACA, such as the successful passage of the American Health Care Act of 2017 in the House of Representatives. This paper captures the ongoing reactionary moves from key stakeholder groups as they jockey for control and dominance over care design and delivery activities and entities. Using principles of pathways, the paper explores a framework for a restructuring health care that aligns design, delivery, governance, and administration to reconnect providers, caregivers, and patients; improve quality and safety; and continue to lower cost of care. This framework has the potential to increase individual and provider accountability; reduce waste and abuse of taxpayer dollars; and ultimately build a healthier population.
Prior to the Affordable Care Act (ACA), health insurers and other third-party administrators (TPAs) facilitated and even controlled the delivery of care, as well as the coordination among providers1 in the health care ecosystem. In addition to its more familiar health insurance coverage reforms, the ACA contains numerous provisions that directly target how health care is organized, delivered, and paid for in the United States. These provisions take aim at the well-known shortcomings of the US health system, from the inefficiency and high cost of the predominantly fee-for-service system to the extreme variability in the quality of care patients receive from region to region. The ACA has pushed dynamic change into the health care ecosystem that has disrupted the traditional roles of insurers and providers, while also introducing new players who are retooling portions of the care continuum and payment models. The need for coordinated and integrated care across the provider spectrum, along with greater efficiencies and improved patient safety and outcomes, has never been greater. The ACA highlighted the importance of care design and care pathways2, based thinking in the form of pathways and bundled payment models. The first failed attempt by Congress to replace the ACA proves that a mere budget reconciliation strategy is not only insufficient, but also unacceptable to address the root causes of the breakdown in the system.
With the repeal of the ACA still on the horizon following the successful passage of the American Health Care Act (AHCA), stakeholders need to examine the lessons learned and use them to inform the next chapter in health care reform. This paper presents key moves of the incumbents, disruptions from new players, underlying disincentives, and a framework based on the principles of pathways that take in to consideration these activities to align the design, delivery, governance, and administration, of health care in pursuit of making high quality affordable faster.
The Incumbents
Providers, plans, and other stakeholder groups have responded to the changes brought on by the ACA with strategic responses that are motivated by traditional financial incentives and a need to rapidly retain or gain market power (Table 1). These responses are geared toward how care may be paid for in the future (payment reform). They do not include robust provisions for integrating and coordinating care across care settings that would consistently deliver desired clinical outcomes for the individual or the overall population. The failure to operationally integrate and coordinate care could impact outcomes and continued increase in total health care spending.
The Disruptors
Although many incumbents are reacting to the new landscape by redeploying their capital and operating assets to maintain or seek market power, emerging innovative entrepreneurs are disrupting the old ways of working. Below are some disruptions that play a significant role in pathway-based affordable health care.
Big-Data and Actuarial Analytics
Legacy risk analytics are based on historical claims data and a limited number of lifestyle factors. Innovative big-data analytics includes many additional sources of lifestyle-related data, and provide a better understanding of the social determinants of physical and mental health. With cloud-based computing lowering the huge upfront capital requirement for analytics platforms, the business case for incumbents to upgrade their legacy capabilities is comparable to the case for new entrants building the capabilities from the ground up. As providers begin to assume financial risk while transitioning from volume to value, they will have options to procure analytics from sources other than the traditional health insurance companies. Further, as high-speed computing becomes more affordable and security algorithms more robust, we could begin to see health and financial risk analysis performed at an individual level in near real-time.
Transaction Processing
As long as health care is administered via a three-way relationship between the service provider, the beneficiary, and the source of funds, the need for TPAs and their claims processing platforms will remain. With the shift in the ownership of financial risk from insurers to providers, employers, or even individuals, insurers will increasingly operate like TPAs. However, the legacy platforms are not ready for the transformation from volume to value. There is an opening for payment platform players to enter the markets, and small scale pilots are underway.
“Uberization” of Health Care and Concierge Services
As the demand for personalized care increases, some providers are engaging in direct-to-consumer services that may or may not be reimbursed by health insurance. Consumers who perceive they are receiving “better” care are willing to pay out-of-pocket for on-demand access to providers. Concierge care may complicate the portability and availability of health records across the continuum of care. However, these challenges may be short lived. As interoperability becomes mainstream, emerging capabilities to securely capture individual information from diverse sources in a standard format could add capacity to the ecosystem, and may also provide options to re-engineer care pathways.
Telemedicine and Telehealth
Telemedicine and telehealth will not only expand the access to care across geographies—especially areas without access to physical care delivery—but will also play a critical role in re-engineering the delivery of care pathways. Although the clinical and operational value proposition of telemedicine/telehealth is sound, key roadblocks to successful implementation include insufficient regulatory guidance and policies for reimbursement. These roadblocks will be overcome in time. Health insurance companies are rapidly incorporating telemedicine and/or telehealth strategies as part of benefit design and cost-of-care analysis.
Innovation
The increasing feasibility of personalized medicine to tailor treatments at an individual level not only provides the path to individual care design, but also increases the predictability of lifetime cost of care at an individual level. Although most conventional thinking fears the use of this information by health plans, disruptive thinking would leverage the power of this knowledge to decrease reliance on “health insurance” like products to manage funding for care, and begin to establish traditional financing solutions to plan for lifetime cost of care (just like planning for a home mortgage).
The Underlying Disincentives
According to National Healthcare Expenditures (NHE) tables published annually by the Department of Health and Human Services,5 only 5% (less than $154 billion of the total $3031 billion) are invested in research, design, and equipment (capital). A vast majority of care redesign efforts currently underway are driven by reimbursement dollars, and treat the reimbursement dollars as a proxy for the cost of care. This approach ignores—or at best significantly delays—the inclusion of insights from population and disease management, as well as clinical, technical, and other innovations. This myopic focus on reimbursement discourages and even creates barriers for innovation in everyday care design and delivery that may actually lower the true cost of care, and improve efficacy of treatment. Providers are motivated to maximize reimbursement opportunities, especially in the legacy fee-for-service world, by providing excess services and using codes that provide higher reimbursement. According to MEDPAC , in 2012, on average, Medicare paid 1.64 times in total inpatient rehabilitation facility payments compared with skilled nursing facility payments for the same preceding MS-DRG (Medicare Severity-Diagnosis Related Group) in-hospital stay. This illustrates the disparities in reimbursement for the same services across care settings, and that there is potential to re-engineer pathways to lower cost settings of care. The introduction of value-based payment (reimbursement) models for selective episodes (those that had a high national average reimbursement per episode and high variations in reimbursement for the same episodes across geographies) has forced providers to investigate alternate efficient care delivery models. Most small medical device innovators prefer to pursue products whose adoption does not require reimbursement codes, lest they get tangled in a long, arduous, and expensive approval process with insurance companies, Centers for Medicare and Medicaid Services, or state Medicaid agencies. The research on clinical care methods, protocols, and standards of care at each stage of the disease condition is mostly performed at academic medical centers which in turn depend on grants—part of the 5% of the NHE. Most health care investors are discouraged by the unpredictability of future revenues due to the unknowns regarding who will pay for the treatment, and what the ultimate costs will be.
Accountable Health Care Framework
The health care industry only exists to provide care and cure for all types of health conditions and keep the population healthy in a manner that is effective, safe, efficient, and sustainable in the long run. Most health care entities exist and activities occur to serve one of the following three purposes:
- Design of care
- Delivery of care
- Governance and administration of care
Each of these areas has undergone an evolution independent of the other two, resulting in fragmentation, inefficiencies, and to a large extent, loss of accountability for outcomes. Using the capabilities made affordable, speedier, and robust by the disruptive models, the conceptual framework for accountable health care revisits the interrelationships between the design, delivery, governance, and administration of care, to integrate and realign them based on pathways; bring transparency to the interdependencies between them; and provide the guardrails for making high quality health care affordable faster (Figure 1).
Accountable Care Design
Accountable care design proposes leveraging the speed of modern technology to access the depth and breadth of global resources to design end-to-end pathways for acute and chronic care, including lessons from population health, public health, and disease management. It then applies standards of care that optimize resource consumption while complying with United States safety and regulatory requirements, as well as public policy for each state of the disease continuum. The approach then uses activity-based analysis to design pathways for multiple price points that are inclusive of cost of compliance with standards, regulatory requirements, and meeting patient safety requirements. It is very similar to design approaches in other industries, in that it addresses the demographic segment need, designs pathways at different price points affordable for various income groups, and fully complies with the safety and quality standards. This will enable providers to design pathway-based care as close as possible to care delivery that most closely fits the need of the population, and one that follows the life of the patient for all types of health care needs.
As providers who choose to drive the accountable care design form and operate new networks, they must evaluate the inclusion of the following in their portfolio:
- Affordable access to validated insights from population and disease management; public health for relevant conditions; and comorbidities to locally decrease variability of care and increase predictability of outcomes.
- Ability to stimulate and access innovative ideas for care design, such as personalized medicine, telemedicine, medical tourism, life sciences, and med-tech innovation that are compliant with United States safety and quality standards.
- Local and global partners to optimize the cost of care across settings of care, with seamless transitions of care and thereby price services competitively in the market.
Accountable Care Delivery
Accountable care delivery is about effectively and efficiently operationalizing accountable care design. It will require public and private sector investments in infrastructure assets at the macro level and capabilities at the micro level for:
- Seamlessly facilitating interoperability of information technology solutions throughout the care settings, including concierge services, telemedicine, and telehealth consults that a pathway design may require a patient to transition through. This interoperability must also enable timely high quality hand-offs and integration of meaningful clinical, operational, and financial data across care settings and related transitions.
- Electronic medical/health record solutions to accurately capture and retain clinical, operational, and financial data in a timely manner at the source when pathway events occurs.
- Tracking variations in outcomes, and respond with effective and efficient care interventions.
- Making available and deploying qualified resources at all levels that can use integrated data to make meaningful decisions for improved patient care.
- Flexible and secure billing and contract management that ensures high quality cost-effective health care, and minimizes waste and abuse opportunities.
By making such investments, providers will be better prepared to assume financial risk and support new funding models, while safely exchanging insights with innovators, investors, employers, government, and even consumers for continued improvement.
Governance and Administration
Health care is not a fundamental right in the United States, but government must have a role in the health of its citizens. It must foster the basic underpinnings that drive successful accountable health care via policies and guidance as part of effective governance and administration. This involves:
- Policymakers who understand the complexities of the evolving health care ecosystem, and recognize that the root causes of some of the challenges we face today may be due to decades-old regulatory strategies that are no longer relevant. Instead, they must support the industry transformation with meaningful legislation that reconciles disparities between federal and state policies, funding mechanisms (budgets), and protects taxpayer dollars only for the use of necessary safety-net programs.
- Independent agencies that establish standards of care, patient safety standards, and performance measures. The ecosystem of these bodies is also in need for some reconciliation and consolidation.
- Federal, state, and local health departments and planning agencies equipped to assess and plan for health care capacity based on the care needs of the community and local population health goals.
- Support for innovation at all levels, with efficient approval processes that accelerate adoption without compromising quality or safety.
- Infrastructure for secure, expeditious, and accurate exchange of information across the continuum of patient care, thus enabling access to rural and underserved populations who are currently reliant on safety-net providers, with limited resources funded by taxpayer dollars.
- Outreach activities to engage community resources, professional associations, and patient advocacy groups throughout the pathways.
- Collaboration with academic institutions to ensure the pipeline of human (clinical and nonclinical) resources is ready for the future.
- Support for financial products that shift the financial risk of health care, from the insurance underwriters to the provider and the consumer.
Conclusion
The jury is still out on what the new normal will/should look like for the United States health care ecosystem. The reality of constantly evolving market dynamics, changing regulations, emergence of new technologies, all-round innovation, changing social patterns and demographics, and rising expectations regarding quality, cost, and access leads to one conclusion: there is no panacea. In the near-term, there will be significant jockeying between health plans and providers for control and dominance over the key components of health care design, delivery, and funding for that care. Moving forward, multiple models will exist side by side. Fee-for-service will not disappear; in many cases, the fee-for-service model (with additional accountable care measures) will continue to be the only viable way to deliver health services, particularly in small markets and rural settings. Specific models may need to be defined on a case-by-case basis, depending largely on the demographics and regulations governing each state and community. Executives of health care organizations still need to contend with the everyday reality of running businesses that save lives and improve population wellness, as well as meeting investor expectations. These leaders need to spend less time worrying about what the “optimal” model will be and more time selecting and prioritizing their own portfolio to best serve their own constituents. This means better managing their assets and capabilities by taking a portfolio view of their service offerings with a goal to maximize return on investment. The accountable health care framework provides a pathway-based approach to re-engineer their operating models.
The need for welfare programs and catastrophic health insurance products will remain. The accountable health care framework can play a key role in matching the optimal care model with the health care needs of the population. It has the potential to increase individual accountability, reduce waste and abuse of taxpayer dollars, reinstate value and purpose to United States safety-net programs, serve individuals in need, and increase the health of the nation.
It is time to embrace the new normal. Those who learn to work with competing models and develop appropriate capabilities will find the next few years challenging but ultimately rewarding. Those who wait for the emergence of a single optimal model are likely to find themselves left behind. The pace of change is quickening, and market participants need to embrace the variety and capitalize on the opportunities that await. Health care organizations have some very important decisions to make in 2017.
References
1. This paper defines “pathway” as a set of end-to-end events and activities that take place across formal and informal care settings for the purpose of treating and curing human health related conditions.
2. Edwards HS. What happens when doctors only take cash. Time website. https://time.com/4649914/why-the-doctor-takes-only-cash/. Published January 26, 2017. Accessed April 10, 2017
3. What are defined contribution health plans? Zane Benefits website. https://www.zanebenefits.com/education/defined-contribution-health-plans-overview. Accessed January 16 2017.
4. National health expenditure accounts: methodology paper, 2015. Definition, sources, and methods. Centers for Medicare and Medicaid Services website. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/DSM-15.pdf. Accessed April 10, 2017.
5. Medicare’s post-acute care: trends and ways to rationalize payment. medPAC website. medpac.gov/docs/default-source/reports/chapter-7-online-only-appendixes-medicare-s-post-acute-care-trends-and-ways-to-rationalize-payments-.pdf?sfvrsn=0\. Accessed April, 11, 2017.
