Top 5 Reasons Why Healthcare Payers Will Go More At Risk
In a recent blog about a new government extension to the Affordable Care Act, I touched on the impact that rewarding preventative care in between doctor visits can have for people with chronic diseases. While preventative care might be looked at as a costly new fee to add to the ever-growing cost of diabetes, the reality is that it can dramatically reduce costs (a 2014 study by the Health Care Cost Institute uncovered that spend on people with diabetes was $16,021 in 2014, $897 more than 2013, $10K higher than on people without). With so much money at stake (over $320 billion a year in the US alone spent on diabetes) and with the dramatic positive impacts that remote care can have for people with diabetes, it is worth it for health care organizations to try providing proactive care.
It’s intuitive that proactive care designed to prevent acute health issues and drive day-to-day patient improvement will pay-off for organizations getting hit hardest by the ever growing cost of chronic disease. An ideal way to offset the cost of offering preventative services, and encourage healthcare providers and the health systems they work for to be more proactive, is to enable them to share in the risk.
In a shared risk environment everyone wins.
Providers get paid for services that they don’t normally get paid for, work they are already doing like remote monitoring, phone support and post-op follow-up.
Patients get more proactive services and critical issues that result in ER visits will go down.
Payers ultimately reduce their overall costs, by shifting costs from more expensive acute situations to more frequent, less expensive preventative services.
The benefits to healthcare payers (mostly insurance companies and self-insured employers) to going more “at-risk” and sharing in the upside (and downside) for treating patients are many. Here are what I consider to be the top 5.
1 – Lower Costs – The cost of providing a proactive call or message in between clinic visits from a nurse, certified diabetes educator, pharmacist or doctor to a patient experiencing issues or with an acute case costs dramatically less than even paying for a fraction of the incidents prevented by doing so. The only cost to do this is for the people to have time allocated and access to a telephone and software to support it. These are controllable and known costs that when delivered as a service can eliminate the costs that typically come with an ER visit or an expensive procedure.
2 – Helps with Competition – Competition in the insurance space is fierce. The self-insured and private/ala carte healthcare market is getting larger, squeezing margin out of the competitive healthcare insurance space. Consumers have choice and can change plans every year, making the situation even more complex. Providing the option to put part or all of the contract at risk with a payer makes the provider more likely to keep the payer in network and gives the insured more options – which makes them happier and more loyal.
3 – Price Stabilization – Providers can and, trust me they do, charge more for visits, medications and procedures for people with insurance. If the provider contract has some component at risk they will inherently reduce expensive patient interactions because any leftover cash in a capitated program or savings from less acute care is all gravy for the provider. They might still charge more for insured patients, but they will be charging for less expensive interactions.
4 – Upside – Most fundamentally, if the provider is incented through risk based upside to prevent expensive interactions, they will. Payers will pay less and patients will get better. In a non-risk based relationship there is no incentive for the provider to offer preventative care, and it is more profitable for them to deliver more expensive services.
5 – Affordable Care Act – As mentioned earlier, the Affordable Care Act and overall government trend towards promotion of preventative care encourages and even incents payers to reimburse for preventive care. This, in turn, drives payers to offer reimbursement for these lower cost preventative services and to move towards at risk contracts to encourage providers to deliver these preventative services.
Taking contracts at-risk has been a trend that has come in and out of vogue across industries. CFOs and the Street don’t always like it, because it makes it harder to predict revenues or costs, depending on which side of the “risk” the organization falls. But if the “carrot” of sharing in the risk and the reward of improving overall care and outcomes can drive more preventative care – then the approach will benefit us all, while making insurance companies more competitive in the long run and enabling providers to focus on prevention versus fees to stay in business.