The shift away from fee-for-service toward value-based care is fully underway, and the reason for this move is clear. Healthcare costs are skyrocketing. Currently, healthcare represents almost 20 percent of the gross domestic product (GDP), and those costs are growing faster than the economy can keep up. The biggest steps toward curtailing healthcare expenses including changing billing, and managing the patient journey are taking place in the Medicare population, but that may be about to change with profound changes coming to the commercial market.
In January, Berkshire Hathaway, Amazon, and JPMorgan Chase announced that these companies have formed a consortium to focus on improving healthcare for their hundreds of thousands of employees.
In a prepared statement, Warren Buffett, chairman and CEO of Berkshire Hathaway, stated, “The ballooning costs of (healthcare) act as a hungry tapeworm on the American economy. Our group does not come to this problem with answers. But we also do not accept it as inevitable.”
The mere fact of this announcement was enough to send stocks for health insurers and pharmacy-benefit managers plummeting. But why, when – by their own admission – this consortium is still in the very early stages without a plan to put in place.
“That consortium is a payer. Those organizations self-insure their employees, so they have always been a payer,” said Saqib Akhter, CEO of Post Acute Analytics, a company that helps health systems and providers monitor their patients in real time outside their four walls. “By combining these three organization’s employees, they are forming a larger payer that has more leverage.
“In markets where they have large concentrations of employees, this consortium will be able to implement changes modeled on CMS’s goals of value-based care.”
However, because these organizations are focused on the commercial population, the programs they institute may not exactly mimic CMS programs. The commercial population has different healthcare needs compared to the Medicare/Medicaid population.
So, as more value-based care programs are instituted for the commercial population, the healthcare organizations that have focused on ensuring positive outcomes while controlling cost of care will succeed.
“The ones that are going to be impacted negatively are the poor-quality providers – the ones that don’t see the benefit of tying payment to performance. Those people are not going to have a very good outcome, because they are going to get left out,” said Akhter.
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“I certainly don’t claim to know any specifics of this consortium’s plans,” said Akhter, “but in looking for ways to reduce healthcare expenditures at those companies, you have to focus on the high-cost areas.”
According to Akhter, there are four likely areas where the consortium will look to make changes:
- Employees that are at risk for an adverse healthcare event.
- Building in support services for patients experiencing a major healthcare event.
- Bring transparency to efficacy and cost.
- Preventing unnecessary utilization of care.
“What they would be smart in doing is making it a win-win, so these programs will work out in favor of the patients and in favor of the provider by sharing in the savings that are generated. If you layer on their volume leverage with building win-win contracts with providers, it will be a great outcome for all stakeholders involved: patients, providers, and the employer.”
According to Akhter, preventing at-risk employees from having an adverse healthcare event will likely be the top priority for the consortium.
“These three companies are very familiar with the lifestyles of their employees,” he said. “Today we have health screenings that tell you what lifestyle changes to make, but not how to integrate those changes into your day-to-day life. If these organizations can layer in different services that address the health of those at-risk employees in a way that fits their employees’ lifestyles, they could have a huge impact. Not only will they make their employees happier, by avoiding the stress and anxiety of having to deal with a healthcare event, they will also avoid the costs associated with a healthcare event.”
Another step may be creating services for patients that are currently experiencing a major healthcare event. The goal will be to discover ways to ensure that their health does not deteriorate further.
“Going back to the hospital is preventable with a comprehensive support system,” said Akhter, “whether that is support at home via family members or by having a third party monitor health across the continuum of care. They will need to be able to monitor patients that are going off track, easily identify inefficiencies in care pathways, and work seamlessly with all partners. Ensuring that physicians have the ability to know, in real time, what is happening with their patients once they’ve entered post-acute care, gone home, and are no longer within their four walls is crucial.
“Those services can keep a major healthcare event from becoming worse and more expensive.”
Transparency of Efficacy and Cost
Today, it is very difficult to know what a procedure is going to cost. Because that procedure is not one service, it’s a bundle of services each with a specific medical code and price (that may be different per patient based on insurance). There are a large number of variables, and they are all locked behind a closed system.
“In the ideal world,” said Akhter, “if a patient knew there are three places to get a procedure done, and here are their ratings and cost, then he or she could pick the one with the best rating and appropriate cost.
“That information exists nowhere today. However, Berkshire Hathaway, Amazon, and JPMorgan Chase together have enough data on the efficacy of their providers, and they certainly have the data on their cost – they’re paying them. So, they could figure out a way to display this in a way that’s actionable for their employees.
“There are challenges. Sometimes contracts with providers dictate that prices cannot be disclosed. But, I imagine the consortium will determine a way to do this as they relook at their agreements with providers.”
Utilization of Care
The second most likely area to improve is the utilization of care resources.
“Let’s say you’re having migraines. You went to see Dr. A, who performed an MRI. Now, you would like a second opinion from Dr. B. It’s very likely that the second doctor will request an MRI,” said Akhter.
“Even though you just had an MRI performed, you’re likely to comply because 1) it’s not easy to transfer an MRI from site 1 to site 2, 2) it’s easier for the doctor because it’s available in the same system that they are familiar using, and 3) you have likely met your deductible, so you are insensitive to the cost.
“But that is not the right thing for either the patient or the organization. So, to build workflow alerts and systems that make it easy for information to be available both to patients and providers while avoiding unnecessary use of the patient’s time and unnecessary use of healthcare services and costs will be essential.”
Expanding Beyond the Consortium
Buffett has said that he eventually expects other companies to adopt the strategies employed by this consortium.
“Our goal is really, not just for the three companies, our goal is something other people can pick up on,” Buffett said in an interview with CNBC.
“It’s going to take a couple of years from the point these programs are deployed until they generate enough results to see what’s successful and what’s not. Once there are public studies that show the efficacies of their programs – and frankly, I imagine a lot of their programs are going to be successful; not all, but a lot – other companies will look to deploy those same programs to foster the same savings,” said Akhter.