Health Care’s Most Needed Next Step

Brian Klepper

First posted on 1/14/19 on the Validation Institute Blog.

BKlepper 102018It seems inevitable that, in the near future, an innovative health care organization is going to seize the market opportunity, gradually cobble all the pieces together, and demonstrate to organizational purchasers that it consistently delivers better health outcomes at significantly lower cost than has previously been available.

To manage risk and drive performance, it will embrace the best health care management lessons of the past decades: risk identification through data monitoring and analytics, how to drive the right care, quality management, care coordination, patient engagement, shared decision-making, and other mission-critical health care management approaches. It will practice conservative care and be outcomes-accountable.

It will appreciate that, in health care’s complex world, some specialized vendors have developed high subject matter expertise in managing certain kinds of clinical or financial risk. In the interests of optimal performance, they’ll understand that it often makes sense to partner with those experts rather than try to learn to manage that niche equally well. Furthermore, they’ll get that simplicity is a virtue, and that bundling specialized services under one umbrella is far easier for patients to negotiate and health plan sponsors to manage than an array of individual arrangements.

These organizations will start their approach to the market through offers to self-insured employers and unions, because they’re at risk and likely to be persuaded by a better deal. If they can outperform their conventional competitors, the upstarts might scale rapidly, sweeping the market. Traditional health care vendors could find themselves in a far more competitive marketplace than they’ve experienced in past decades.

The key here is that most US health care organizations are holding on to pricing that reflects what the market will bear and that is unrelated to cost, though excellent care can be delivered for far less. Legacy organizations have little interest in accepting reduced revenues and margins. (Nor will the market let them.) But the gap is large enough that an opportunity exists for business to transfer to upstarts that offer stronger value. What’s needed is an integration platform that facilitates an easy to use comprehensive framework of high performance, best of class specialty services.

In the health care value-focused community and through venues like The Validation Institute’s Health Value Awards, we’ve spotlighted many organizations that can demonstrate that they reliably produce better results, particularly in high value niches. We assume that most vendor organizations are eager to be publicly recognized as “high performance” vendors, and the Health Value Awards are structured to independently identify which organizations really deliver the goods.

Together, its reasonable to believe that a robust array of risk reduction mechanisms can conservatively reduce total health spend by 25 percent or more. That said, to our knowledge no one has yet tried to bring together all these approaches within a single health management organization. We’ve come across a few employer and health care organizations that are headed in this direction, but their efforts are typically limited relative to the high performance capabilities that are available and proven in the marketplace.

One organization to watch is Oscar Health, an upstart health insurance company. Google recently invested $375 million in them. While Oscar initially focused on a young population and technology to limit their risk, more recently they appear to have actively pursued risk management approaches of all types. At a minimum, their management model appears to leverage:

  • A young, tech-savvy population of enrollees that has low utilization patterns and that is amenable to virtual visits when they need to touch the system.
  • A narrow specialty network, identified and refined over time, based on provider performance.
  • A center-of-excellence network that steers patients to best in class providers within certain categories.

This focus on identifying and relying on higher performers is powerful and thoughtful, though it doesn’t seek to take advantage of new, better paradigms within high value niches, such as those available in musculoskeletal, cardio-metabolic and cancer care management. Oscar hasn’t yet shown an interest in or ability to offer much lower cost health care (without compromising quality), but its realization that significant performance differentials exist is admirable and suggests that their approach will continue to evolve.

Models like Oscar – or those that Amazon, Walmart or Costco might develop – that offer very high value could be hugely disruptive to the current US health system by eliminating the excessive services and cost that the legacy health care industry has come to depend on. Building a killer app health care management model by assembling and scaling the powerful capabilities of an array of high performers is an opportunity waiting to be exploited.

The fundamental tension within US health care is whether our health system will strive to optimize quality, cost and value, or strive to optimize revenues and margins. Responses to this question determine the approaches that characterize every aspect of health care, whether it’s the scientific evidence that guides a protocol, the interoperability of an electronic health record, or whether patients have access to information that can help them make better care choices.

For decades, the drive to optimize money has dominated health care. The question now is whether favoring high value can turn the tide and remake our health system in ways much more consistent with the values and welfare of health care’s patients and purchasers.

Brian Klepper is a health care analyst and EVP of The Validation Institute.

 

Brian Klepper is a health care analyst and EVP of The Validation Institute.

2 thoughts on “Health Care’s Most Needed Next Step

  1. Thank you for shedding light on such an important topic. Best health care management should be implemented at the earliest as it has become the main concern of the people of this country.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s