Polishing the Crystal Ball: How Far Have We Really Come in 2018?

Zachary Hafner

For the December 2017 issue of Managed Care, I wrote a piece titled, “Better for Patients, or Better for Business—Do We Really Have To Choose?” I put forward several predictions related to key trends for 2018. Now that we have reached the midpoint of the year, it is a fitting time to check in and see how accurate those predictions have been.

Hyper-focus on managing economics

The first on my watchlist: a continued focus on tackling cost challenges and reducing the overall price of care. This prediction was spot on. For many years, there has been talk about “bending the cost curve,” and in 2018, this focus has intensified. How it is being approached, however, differs significantly between payers and providers.

Zachary Hafner

For payers, the focus has been on two key areas. First, continued use of the benefit-design lever to shift cost from the point of insurance purchase (i.e., premiums) to the point of consumption (i.e., deductibles and coinsurance). This is a bit of sleight of hand to some extent, but it does help manage premium trend, particularly for employers. Second, a clampdown on unit costs (reimbursement rates) through, among other things, narrow networks that steer volume to specific providers in exchange for material rate concessions.

Providers are focusing their cost-containment efforts on different areas. One is reducing operating expenses through benchmarking and process optimization (e.g., Six Sigma) to extend sustainability in an environment where reimbursement rates are not increasing as quickly as they once did. Another is streamlining transitions of care when there are economic implications associated with failure; for example, hospital discharge management to reduce avoidable readmissions.

The rise of consumerism

The second trend on my watchlist was the rise of consumerism and expansion of the consumer-driven marketplace. I’m giving myself a mixed review on this prediction. As with many revolutionary trends, the near-term impact of consumerism in health care has been overhyped but probably will be underestimated in its long-term implications and transformational value.

On one hand, big changes are underway related to how consumers interface with the health care ecosystem. Enhanced transparency, a proliferation of access points, and consumer-facing technology are enabling on-demand, informed decision making, primarily by healthier customers with less urgent or chronic issues.

On the other hand, consumers flexing these newfound muscles quickly change from lions to lambs when serious health issues emerge (think broken limbs, cancer diagnoses, heart attacks, and the like). Once people enter the territory of a serious health issue, particularly one with a sense of urgency, consumerism all but vanishes.

Outlook going forward

While this assessment paints a fairly incremental picture for 2018, there are indications that payers and providers are looking more at new collaboration models as mechanisms for tackling these issues. The number of joint venture and other payer–provider “partnered” product offerings is on the rise, with 22 in the first quarter of 2018 vs. 28 in all of 2017, according to an Oliver Wyman report on payer–provider partnerships. Such arrangements are typically punctuated by shared bottom-line economics and can be particularly useful in buoying market position for both the payer and provider alike. More importantly, they set the stage for future collaborative efforts to enhance integration and address such complex issues as activating and engaging targeted consumer segments, stamping out unwarranted clinical variation, and realizing the full value of costly IT investments. They are also a critical gateway to delivering true value-based care.

Half of 2018 still lies ahead, and a lot can happen during the rest of the year. To date, we have seen big headlines including the announcement of Amazon, JP Morgan, and Berkshire Hathaway teaming up to transform health care; Ascension and Ramsay Health forming a global supply chain venture; and Cigna’s purchase of Express Scripts.

Whatever news breaks next, let’s hope it helps accelerate the trends that make health care not just bigger, but better.

Zachary Hafner leads the strategy consulting practice at Optum.

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