Lines are blurring. Health insurance providers are being forced to take a long hard look at whether they were ever really data driven. Tech incumbents are entering healthcare beyond building novel wearables and are building their own competitive systems. Simply paying for volume or the provision is slowly but surely being substituted by value based models. And the confusing labyrinth that is healthcare payments is finally becoming a genuinely patient centered service. A recent US survey of more than 2,000 health insurance consumers found only 4% could correctly define the terms deductible, co-pay, coinsurance, and out-of-pocket maximum. Inevitably this lack of transparency leads to poor decision making and unnecessary costs.

Healthcare payments, reimbursement and insurance are slowly evolving to a more consumer centered model with a little help from digital. While many are excited about this promise there are undeniable considerations around the challenges and potential push back that will inevitable ensue.

It seems as a sector we have a firm grasp on the core problems associated with mounting costs and antiquated reimbursement models, and also a set of potential solutions within reach - great. But not so fast. At the end of the day payers are interested in whether or not value is being added requiring evidence on reduced costs and wastage of services, increasing efficiencies and ultimately improving outcomes. This week’s HealthXL Blog, we explore some of the key areas of digital influence when it comes to reforming and revamping the current healthcare payment environment, innovators to keep on your radar and some food for thought as we wade into these largely unknown waters.

1. Value Based Payment - Myth or Magic?

The change from pay for service to pay for value is long overdue and something that is setting many in the healthcare sector abuzz as we start to see early potential of its ability to help in driving improvements to the delivery of care by mandating better care at a lower cost. The likes of electronic patient reported outcome measuring solutions (ePROs) such as Noona and uMotif, in addition to various other digital solutions, offer a way in which these unprecedented outcomes can be effectively, remotely and continuously tracked and leveraged.  

However, for providers and health systems that can’t achieve the required scores measured with with the help of emerging technologies, the financial penalties and lower reimbursements create a significant financial burden. In addition those who have historically see significant profits from a Fee for Service (FFS) model may also present as a roadblock to the scaling of this approach.

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‘’Basically, health choices now are made by two people in a room (doctor and patient) "conspiring" to spend someone else's money, who is not in the room. All this chatter about moving from volume to value sounds good, but I've been unimpressed that it actually inspires action’’ Dr Wayne Poll,  CEO at Enlyton, Practising Urologist at WVU

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Pharmaceutical companies who are serious about differentiating their offerings are moving into digital territories to facilitate a transition to more value based models. The Novartis, Aetna and Cigna risk sharing approach with the drug Entresto is one example of such efforts.  The vast majority of U.S States are now buying into value based care models. A recent study revealed that value based models are bending the cost curve, reducing unnecessary medical expenditure 5.6% on average while also improving care quality and patient engagement.

If the aim is to have healthcare entirely moved to a value based payment model, where are we now? In 2016 McKesson surveyed 465 payers and hospitals about their transition to value-based care models. Overall, payers reported they are now 58% along the continuum toward full value-based reimbursement, up from 48% reported in 2014. Payers reported that 59% of all payment models within the next five years will be a mix of capitation, pay for performance and episodic payment. They projected bundled payments to grow at a rate of around 6% during the same period. In the US context ACOs may also be seen to hold a key role in the effective scale of value based models. The same survey found that in 2016, 63% of hospitals surveyed said they are part of an ACO, an 18% increase from 2014. Among those that did not currently belong to an ACO, about 47% anticipated joining one within 5 years.

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For those invested in, or beginning their journey towards, VBC models digital solutions may offer a necessary toolkit allowing for unprecedented care coordination, integrated workflows, data collection and analytics. If done right VBC and pay for performance models supported by digital supports would allow for multi-stakeholder benefits:

• Payers can use these agreements to gain experience with a product, reducing uncertainty regarding clinical value, performance and financial impact
• Providers achieve efficiencies and greater patient satisfaction.
• Patients spend less money to achieve better health.
  
  

The long term outcomes appear to be promising but not without challenges. Some of which include reconciling value based payments in a fee for service environment, supporting processes around tracking and leveraging a wide variety of quality measures and also, importantly, acknowledging that for some of these organisations it may be likely to see short-term financial hits before longer-term costs decline and the scoresheet balances out.

My perception is that there is a lot of talk about value based contracts but on the ground it is not easy to implement, even for larger organizations. Issues start with the drafting of the contracts. The terms of the contracts on outcomes need to be defined with a lot of precision but there is sometimes a lack of consensus on the choice of variables among organizations.

Uncertainties in the terms of the contracts create risks. This leads providers to push back on these arrangements because there are too many unknown variables and they don't understand why / how their performance move from year to year. Ultimately a lot of issues with value based contracts have to do with data. Without a high quality/ reliable data system using contracts and more generally making value based healthcare a reality will be challenging.

Camille Guinemer, Lead Investment PE/VC at AXA US

2. Data Beyond Claims & Empowering the Consumer

At its core digital health innovations are intended to truly transform healthcare and wellness from patriarchal to democratic. It has become clear that the need for providers, pharma and payors to demonstrate this dedication has gone well beyond being a nice-to-have.

These ever expanding VBC interventions carried out by Blue Cross Blue Shield (BCBS), Aetna and others, take into account data points such as remote patient monitoring and perceptions of treatment going well beyond the decaying reactive model of the past that primarily relied upon claims.

But beyond the integration of RWD and patient reported outcomes putting the consumer front-and-center, digital is acting as a catalyst for reform of healthcare payments by facilitating the introduction completely new incumbents laser-focused on user experience and understanding. Health Insurance new-kids such as Vitality and Oscar Health are two such examples. Rather than responding to claims these organisations are encouraging preventative care and healthy lifestyles, arming  their consumers with wearables, encouragement and support rooted in a behavioural economics model for change.

Vitality Insurance, founded in South Africa in 2004, claims it is the world’s first health insurer to use behavioral economics and data analytics to incentivize customers to live healthier. Vitality’s innovative approach to pay for wellness is changing the industry that in the past only really reacted to sickness. Sound too good to be true? It’s likely too soon to tell.

3. Embracing (evidence based) Digital Solutions

In a landmark move for the reimbursement of digital, The Centers for Medicare and Medicaid Services (CMS) recently issued a new set of virtual care codes on virtual check-ins, telemedicine and interprofessional virtual consultations and remote patient monitoring. This inclusion of the new care codes will ultimately pave the way for more meaningful, and hopefully more accessible, adoption of digital solutions.

A further notable example highlighting the growing maturity digital reimbursement is that of the digital therapeutic (DTx) solution Omada. Omada Healthcare is the largest federally-recognized provider of diabetes prevention programs in the U.S. boasting over 45,000 enrolled patients.

They essentially “bill-based-on-results” policy, so anyone who starts the program but fails won’t cost the company or insurer. For individuals, the program costs $130 per month for the first four months and then $12 per month for ongoing access.
65% of Omada Prevent program participants are still engaged with the program at 12 months (higher than the 6.6% avg for leading commercial weight loss programs). Participants lost 4.7% body weight, (more than the average 2.4% weight loss for in-person diabetes prevention programs).

So who pays? CMS will pay providers up to $450 per patient for the first year of a diabetes prevention program (Omada being just one of many similar offerings) and up to $180 per patient for each following year. Interestingly, CMS estimated that diabetes prevention programs can save nearly $2,650 per beneficiary over 15 months. As evidence mounts around DTx and other clinically validated digital solutions are slowly being considered for reimbursement as adjunct or alternative therapies, however this unprecedented move will take time to establish consensus around.

While we wait, the low hanging fruit may be found in the employer insurance market and private health insurance which may be regarded as slightly more primed for smoother digital adoption. Blue Cross Blue Shield Massachusetts have their understanding of the need for digital reimbursement support systems and this year announced the launch of their Emerging Solutions platform. This platform was introduced with the intention to curate market-leading health solutions and provide advice to employer customers on which solutions which could be most suited to address improvements of their employees' health.

The Health Payments Renaissance?

Rapidly proliferating evidence-based digital health solutions, bigger data sets, more advanced analytics tools and some of the areas discussed above are categorically changing the face of healthcare payments. However, when push comes to shove no single entity, whether it’s a payer, provider, care manager, retail pharmacy, is going to be able to transform healthcare by themselves - collaboration is key.

While there is a paradigm shift at play making the healthcare reimbursement landscape increasing more data driven and patient centered, there should be a substantial learning curve expected from various stakeholders, many of whom benefit hugely from the current fractured model. This could be big.

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