Senior Partner and Practice Leader, Commercial Healthcare Services
Healthcare Payers – Accelerators or Decelerators of Innovation?
By Shelly Carolan, Michael Castleman and Susan Snyder
Multiple disruptive trends continue to alter healthcare landscape
- Changing provider landscape
- Consumerization of Care
- Omnichannel Care
- Payer and Reimbursement
In previous installments of our ongoing series on the disruptive trends altering the healthcare landscape, we shared insights into the changing provider landscape, the consumerization of care, and how organizations are utilizing digital omnichannel approaches to care delivery. Each of these trends are part of a larger movement toward integrated care that focuses on cost-effective access, transparency, prevention and early intervention, and improved outcomes. This is the essence and promise of value-based care. In this article, we explore the role payers are playing, and can play, in this critical innovation movement.
Setting the Stage
As discussed in our previous article in this series, “The Rise of Omnichannel Care is Forcing Healthcare Evolution,” reimbursement models (both private and government) can be drivers or impediments to widespread adoption of new care models and services. The fundamental question is this: Will risk in pricing the unknown or unproven keep payers from pushing innovation forward, or will they use their influence and scale to facilitate – even force – disruption to introduce innovation faster?
As one example of this question, health benefits insurers are under criticism for flip-flopping on sustaining telehealth reimbursements post-pandemic or reimbursements for new in-home care models. Insurers argue that there is not enough data to determine the appropriate payment rate for telehealth and omnichannel healthcare services due to the lack of reliable mechanisms for measuring quality and effectiveness of such services. It remains unknown whether and how payers will reimburse for these services longer-term under either fee-for-service and value-based care paradigms.
Where We Are Today
“Insurers don’t have as much influence as most think they do. They see these trends happening but are ultimately caught in the middle and are beholden to a lot of different, but equally important, stakeholders; so, they typically have to take an incremental approach to change,” says Kyu Rhee, M.D., former Chief Medical Officer of Aetna and SVP at CVS Health. “The real payers in our U.S. health system are the employers for commercial, state and federal governments for Medicare and Medicaid, and members or consumers.”
As Dr. Rhee points out, the leverage to drive change ultimately rests with those who finally bear the cost of healthcare, the federal government being the largest. Accordingly, the progression toward value-based care, over many years, has depended on government Medicare rules and reimbursement standards.
However, that does not mean that managed care organizations do not have the ability to contribute meaningfully to, and grow in, a new healthcare paradigm. For payers, opportunities to partner with providers and retailers, for instance, can offer greater access to, and acceptance by, consumers of new care models. Consumer response rates to providers generally are greater than those to payers; therefore, partnering allows payers to capitalize on new opportunities in retail, in-home and digital health services. In turn, providers can access the scale, claims management and administrative processes, and multi-jurisdictional compliance capabilities of established payers that are virtually impossible to replicate.
A great example of the potential for partnership between payers, providers and retailers can be seen in the recent pairing of Walmart and UnitedHealth Group (UHG). Partnering with UHG provides Walmart with a share of the upside potential of getting into the insurance market without having to fully commit to entering that complex business. Given 90% of Americans live within 10 miles of a Walmart, and more than half of Americans visit a store every week, Walmart can provide consumers with unrivaled accessibility to low-cost care, a benefit that flows through to UHG through lower reimbursement outlays. In turn, Walmart provides UHG with low-cost healthcare access points all over the country.
The role of payers, though, extends well beyond these emerging partnerships and the low-hanging fruit cost reductions that come with retail-based care. Technology enables the changes in provider landscape and omnichannel care that push care access out of interventional acute care settings and closer to the consumer, and creates better connectivity (communications and data) among disparate providers. The resulting data provides additional fuel for consumerization that depends on transparency in cost, quality and outcomes to create better experiences. Payers can glue the pieces together by integrating data on healthcare consumption, delivered services and outcomes to create the potential for a new healthcare reward system to replace legacy reimbursement systems. This reward system can encompass incentives for both consumers and providers to behave differently – for example, as already demonstrated by healthcare plan credits related to exercise and non-smoking.
A transition from fee-for-service to value-based care can be led by payers or be forced on them by the final cost bearers, as has historically been the case. To date, the principal pricing mechanism for health insurance is actuarial analysis of service consumption, with control over service access. Without ill intent, this model results in incremental consumption of progressively more complex and costly interventional services to address health problems. Who hasn’t been on the “specialist merry-go-round”? In essence, the tension between insurance reimbursement and provider objectives inherently fosters an incrementalist strategy to healthcare. This is one downside of the existing reimbursement system.
Value-based care potentially turns that model on its head. Rather than govern service access until proven necessary, value-based care promotes more comprehensive prevention, monitoring, diagnostic, and treatment approaches up front, thereby eliminating or reducing need for – not access to – future services. This necessitates a fundamentally different actuarial model based on probability of outcomes versus probability of need. Furthermore, it moves the insurers’ investment to need reduction earlier into the care process – much like the classic J-curve in investing – before a return on that investment through better outcomes and cost avoidance is realized. No less a change is necessitated on the part of providers, particularly specialists, who have depended on fee-for-service. Such fundamental change to a new reward model will require extraordinary creativity and courage – perhaps, even, a leap of faith.
“Payers have the opportunity to leverage data and understand the systems landscape across different dimensions and stakeholders. They should be bringing awareness and transparency to value-based care and move towards advancing values-based care that these diverse stakeholders claim to be essential,” states Dr. Rhee. “If we value health equity, mental health, primary care and the prevention of disease, then it should be measured, communicated, invested in and action taken. Ultimately there needs to be a shift from managing cost to managing values.”
Already, insurers are exploring ways to use digital technology to better manage risk, improve patient outcomes and reduce costs. By leveraging data analytics and artificial intelligence, insurers can better identify high-risk patient populations and collaborate with providers to proactively approach them with more cost-effective interventions. Insurers also are a nexus point of care, cost, and outcome data that, when mined, can point to better value-based care protocols. Lastly, through vertical integration with care providers (e.g., retail-based omnichannel care) or in partnership with longer-term managed populations (e.g., government or large-scale employers), insurers can overcome the inherent added risk of value-based care models based on long-term outcomes in managed populations that otherwise change more rapidly.
While creativity and courage are essential early in the movement to value-based care, managing care value – more importantly, delivering care value – most certainly will force new risk and value sharing models between insurers and providers. These new sharing models ultimately will go beyond pay-for-performance, as true health outcomes are discoverable and measured over time. Achieving such a model in a system that is inherently fragmented will, in turn, depend even more completely on highly integrated omnichannel care and data sharing.
Insurers can play a significant role in disrupting healthcare in positive and necessary ways. The possibilities described above require a sea change in how insurers conceptualize their role: from reactive risk-avoiders to proactive risk-minimizers. Ironically, this leap of faith requires leaders in a traditionally risk-averse sector to shift their mindset about value, risk, and outcomes in order to behave in ways that shift the needle for us all.
Outstanding leadership requires multiple “lenses” on the world:
- Visionary leadership, which tends to focus outward in order to create a future quite different than today’s and draws on innovation, change and long-term strategic thinking. We call this the “telescope” lens of leadership.
- Operational leadership, which looks inward to ensure execution by bringing structure, systems and processes through which strategies can be implemented and goals achieved – think of this as the “microscope” lens of leadership.
- Relational leadership, which focuses on people to unleash their energy by winning hearts and minds, enlisting collective intelligence, and creating teams – within and beyond the organization’s walls – that can make the impossible possible. This is the “stethoscope” lens of leadership.
All of these lenses are underpinned and enabled by a leadership “Innerscope“ through which leaders draw on emotional intelligence to leverage their strengths and manage their shadows in order to lean into the lens most needed by their team, organization, and constituencies in the moment.
The business model, culture and training of insurance executives have reinforced the Operational lens most strongly. This moment calls on executives in insurance to draw heavily on their Innerscopes – because it is the Relational and Visionary lenses that are now most needed by the world. That does not mean the Operational lens can be lost – far from it. Instead, it means that more balance is needed.
Innovation requires courage – a key element of the Innerscope. Courage, however, is also found in community (the old “strength in numbers” adage) and should be nurtured in the executive team. Indeed, executive teams within insurers must become the nexus of the shift required. Boards and CEOs should look to team composition to ensure that a wider range of skills and perspectives are present – and the full spectrum of lenses described above. By building up the team in this way, CEOs can spend more time nurturing the external relationships required in this moment – focusing externally through the Relational and Visionary lenses to create possibilities for us all.
Shelly Carolan is a senior partner and practice leader in WittKieffer’s Commercial Healthcare Practice. Michael Castleman is a senior partner and WittKieffer’s chief growth & transformation officer. Susan Snyder is managing partner of WittKieffer’s Leadership Advisory.