The U.S. Healthcare economic system must change. For too long, it’s been one long game of whack-a-mole trying to keep prices in check. That game can end if healthcare, particularly payers, look to mirror the success stories of other major industries.
In the late 20th century, when the fee-for-service version of healthcare grew in popularity, inpatient costs started increasing. To rectify this, the Centers for Medicare & Medicaid Services (CMS) introduced the Inpatient Prospective Payment System. This “solution” forced the pendulum to swing the other way, and outpatient costs became problematic. As efforts to control those prices ensued, yet other cost areas began to rise. Not too dissimilar to today’s greatly accelerated pharmacy costs.
This approach to making U.S. healthcare more affordable and accessible has had minimal impact. The most recent data indicates that healthcare costs will be in excess of $5 trillion by the end of 2024, comprising 18% of the U.S. GDP. Many experts predict healthcare costs in 2025 will be more than 50 percent higher than they were in 2017. The U.S. uninsured rate is currently 7.7 percent (or 26 million people), and projections indicate that it will increase to 8.9 percent by 2034.
Those predictions assume healthcare maintains the status quo, which I hope we can all agree, is not in anyone’s best interest. The status quo is broken, and industry players, specifically payers, must look to futurize marketplaces and improve technologies. Care can be more affordable and accessible; we only need to look at other industries, such as banking, transportation, and retail, to see how transformation is possible:
Banking
- With technology and marketplace dynamics, the financial industry adopted ATMs. Now, a connected ecosystem of banks worldwide has made it easier for consumers and businesses to access cash and capital.
Transportation
- Ridesharing companies leveraged real-time data to create an intelligent marketplace. This allowed for price transparency and an array of options for customers.
Retail
- Amazon created a technology platform and incorporated marketplace dynamics to help create a matchmaking function that allows consumers to compare prices in real-time and make purchases at their convenience.
These industries modernized themselves, solved common problems, and made life more convenient for their customers. They used the data that was available to them to help inform innovation. They created a technology platform that provided price transparency, easy access, and a better customer experience. They did this drawing on three fundamental modernization vehicles:
- Data standardization and liquidity. By making data consistent across the industry and more available and transparent across all players, these industries were able to communicate and collaborate across upstream, horizontal, and downstream partners and even competitors to ensure that consumer information and transaction history were easily shared.
- Modern technology architecture. To enable real-time (or near-real-time) transaction processing and enable collaboration across supply chain participants.
- Marketplace dynamics. Privately based or peer-to-peer based collaborations across industry participants to generate innovations and new business models to serve more customers in a cost-effective manner, thereby staving off the need for even greater government regulation.
Payers need to study these lessons from banking, transportation, and retail industries.Payers are in a unique position to truly drive positive change for patients, drive down costs and enhance access to care.
Payers have a tremendous responsibility to essentially serve as healthcare’s marketplace. They connect the people looking to buy healthcare services (employers and consumers) with the individuals and organizations that provide those healthcare services. Unfortunately, there are over 2.4 million sites of care and over 11,000 solutions, all claiming to provide healthcare at cost-effective pricing. Their marketplace options are many, and the industry is anything but optimized or connected. Payers have to help make that happen.
Payers have not had the technology and data available to enable that modernization until now. CMS’s Hospital Price Transparency and Transparency and Cover Acts, along with the decades of effort to standardize clinical data, make this modernization possible. Leveraging this data, payers will be able to move away from the reactive game of whack-a-mole, constantly chasing down the next cost-driving issue, to a proactive one. A global optimization approach must be implemented. One that examines all cost categories and leverages multiple data sources, including pricing transparency information. This enables payers to identify costs that deviate from marketplace norms at a national, regional, and even population-specific level to optimize their health care costs globally, across all cost areas.
Using this global cost optimization approach, payers can design more holistic solutions for cost containment. Using technology architectures, based on leveraging electronic data interchanges (EDI) and application program interfaces (API), payers can enable data and transaction interchange in a real-time manner. This enables collaboration across the healthcare ecosystem. Payers can use these technologies along with a modern data infrastructure to identify the providers, networks, sites of care, and health solutions that drive positive results for their member population, creating an ecosystem that supports the payers and their members’ cost, quality, and access needs.
Payers can be the industry’s innovation champions. They have the tools to leverage the data that flows back and forth between a connected ecosystem. This dynamic marketplace, characterized by ongoing collaboration, data-driven insights, price transparency, benchmarking, and real-time transactions, fosters the development of intelligent healthcare ecosystems. It mirrors the transformative impact that ATMs had on banking, Uber had on transportation, and Amazon had on retail, revolutionizing their respective industries.
This game of microeconomic whack-a-mole in healthcare must end. It’s time for healthcare, specifically payers, to learn from these other industries, and their macroeconomic tactics, to enact change. It is possible. The time is now.
About Aarti Karamchandani:
With over 30 years of experience in healthcare, Aarti has helped many health organizations innovate, transform and be prepared to respond to constant change. Aarti believes that data, analytics and technology solutions combined with appropriate operational models are critical to setting the foundation for innovation and differentiation.
Currently, Aarti is the Chief Growth Officer at MacroHealth, an industry leading health technology platform leveraging interoperability and data analytics to create a first of its kind Intelligent Health Marketplace as a Service platform. During her tenure, MacroHealth has seen 70% year over year growth and been recognized by Gartner as a leading player in the provider network optimization and price transparency space.