Broader digitization strategies needed

An estimated $750 billion goes to waste annually in the United States as a result of missing information, duplication and failure to implement existing knowledge, according to the Institute of Medicine. Despite all the iPad apps, e-health options and telehealth services available, digital innovations in healthcare are disconnected and scattershot. The sector is awash in information but lacks the means to operationalize it and create meaningful impact.

For digitization to actually change the business model of delivery and financing in healthcare as it has in other industries, health players need to adopt a broader digitization strategy. Payors and providers must find a way to marshal existing technologies in an adaptive, customer-specific value chain that meets targeted needs, and they must stop making digital land grabs for a one-size-fits-all platform that will be obsolete by implementation.

Surprisingly, a road map for creating this digitized value chain can be found by examining a population that is decidedly not wired and connected 24/7: the Medicare market.

The Medicare beneficiary market is expected to grow by 3% annually over the next 10 years. Additionally, the penetration of Medicare Advantage will likely continue at 4% annual growth, making this an attractive segment.

With Medicaid expansion and managed care penetration, dual coverage on managed care is expected to grow from a total market of $86 billion to $183 billion over the next five years. Consequently, commercial payors have recently acquired a number of Medicare plans.

Although payments are expected to decline, placing greater pressure on delivering the most cost-effective care, plans that maintain a high star rating on the basis of quality can realize a bonus that offsets these declining payments.

Digitization can impact virtually every star metric, including management of chronic illness, plan responsiveness and customer service. Plans that pull technologies together in a seamless operational model that emphasizes a few core elements will realize a significant return on investment via bonus payments.

Whether the focus is cost, innovation or both, a successful digitized business model will support: (1) continuous learning, (2) broadly shared information and (3) highly automated and routine products and services.

1. Creating a learning organization requires collaboration on clinical and financial analysis. 

• Back-office digital claims platforms generate data that allows for predictive modeling and longitudinal analysis of medical cost, utilization, quality data and outcomes data.

• Cloud-based decision-support algorithms integrate prescriptions, medical history, lab data, etc. in a rules engine that delivers evidence-based results.

• Payors may more fruitfully pursue such value-based incentives as pay-for-performance when simultaneously collaborating with physicians on treatment plans.

• Payors may balance network utilization by directing patients to appropriate and available providers, rewarding those providers that follow established protocols and rank high in quality measures.

Improved understanding of utilization becomes essential to addressing the specific needs of clinically complex senior populations with dual coverage. These patients typically have more than one condition, must juggle multiple specialists and pharmaceutical regimens, and have varied support structures and end-of-life preferences. This argues for strong, comprehensive clinical team approaches, incorporating the consumer’s voice and situation, and monitoring care outside medical care episodes.

2. To share and incorporate information broadly, refine incentives and create cloud-based tools that enable:

• Collation of multiple viewpoints and specialties, including the patient’s, in an assessment that is shared across a care team.

• Real-time access to medical history via personal health records or electronic medical records (EHRs) at lower cost, community-based facilities via gateway services and health information exchange infrastructure investments.

• Interaction with providers via telemedicine for both caregivers and patients, providing a medical home approach or triage care, which is especially critical to integrating the care required for managing “duals.”

• Expanded customer relationship management to increase accuracy of enrollment and eligibility. By using digital business process management or cloud technologies, plans can verify dual Medicare/Medicaid eligibility.

3. To transform patients into consumers, pursue automation and rethink obsolete processes. 

• From a back-office perspective, moving to a digital claims platform will consolidate legacy systems and facilitate lean, real-time adjudication. Looking ahead, if reimbursement products become more standardized, and eligibility and adjudication can be verified in real time at the point of service, claims themselves may become irrelevant, no more complicated than a debit card or Google wallet.

• By aligning directly with providers, payors can eliminate many of the redundant “utilization review” processes. Selling directly to consumers can eliminate complex sales channels and support processes.

• Digital primary care through sophisticated web-based programs or telemedicine, triaging for self-care or in-person follow-up, could coordinate care and dramatically reduce costs. Some 20% of Medicare patients are readmitted to the hospital within 30 days of discharge; and half of them are readmitted without seeing a primary care physician first. An estimated 3 million patients visit urgent care centers annually, and the number is growing; however, these visits fragment care and are disconnected from a patient’s health history. Digital primary care represents a rich opportunity to support patients outside the acute care setting.

Medicare patients require a smaller group of products. By rationalizing the reimbursement product set, players may eliminate complexity across the complete value chain-in functions such as product marketing, enrollment and back-end processing. This rationalization toward more consistent, less expensive and more effective products and services is an essential first step toward true consumerism.

Moving from Medicare to commercial populations

The same principles that inform a winning approach to the Medicare market apply to commercial populations. Synthesize a few core elements to generate tangible operational changes and direct financial rewards, rather than plunging into the full array of technologies without a clear sense of market returns.

Payors can build on this approach while also incorporating more sophisticated consumer tools and product development. A robust business model does not create a single platform through which all patients and members must be processed, but rather assembles value chains on the basis of demographic needs.

• Benefits and products may be customized to the needs of large groups; this may also enable better segmentation and engagement with direct individual consumers.

• Greater clinical support is possible via mobile applications that allow for expanded health monitoring, enhanced utilization of community resources and more creative interventions.

• Product marketing is enhanced by taking advantage of mobile users to identify mass influencers, empower consumers and amplify fans. Product development becomes more collaborative when patients can use behavioral data to modify their products.

• In collaboration with providers, payors have the means to tailor provider networks to customer segments. This will also enable adjustment of payments to providers based on their patient demographics and results.

Payors who take the radical steps of eliminating back-end claims, redundant clinical reviews and onerous selling processes will reduce costs dramatically. Cost modeling shows that a typical health plan administrative cost structure of $29 per-member per-month (PMPM) can be transformed to a model as low as $5 PMPM, with an 80% lower cost structure, by undertaking such a radical digital approach.

Digitization offers potential to collaborate in patient care, reduce information asymmetries and bring greater intelligence at lower cost to every healthcare encounter-that is, if players can sort through the avalanche of information to stake out a true proposition for survival. Successful payors and providers will look past the latest bells and whistles and develop a core competency in synthesizing key technologies to deliver tangible, focused results for specific populations.

Carl Dumont and Sundar Subramanian are partners in the health practice at Booz & Company.