Navigating the changing waters of health care

The concept of managed episodes of care stands a better chance of success today

Health care providers and insurers are actively navigating the changing waters of the Affordable Care Act’s electronic medical records (EMR), bundled payments and meaningful use requirements. However, the idea of EOC or bundled payments, which seeks to bundle all providers treating a condition into a defined timeframe and a single “episode” payment that supports a shift from fee-for-service to value-based health care, was initially introduced by Jerry Solon in 1967. Several serious attempts at moving this idea forward happened again from 1989 to 1996.

In 1996, I led a team at Oxford Specialty Management (OSM), a subsidiary of Oxford Health Plans, in the development of an Episode Engine, a set of systems, procedures and contracting methods, to track clinical condition and the EOC, its costs and outcomes. Significant progress was made in defining the episode descriptions, the care pathways and the technology to support this revolutionary business model at scale. In fact, there were 800 providers onboard before OSM’s parent company was acquired and the driving force behind OSM’s episode engine dissolved.

The concept of managed episodes of care stands a better chance of success today and into the future for three key reasons.

Regulatory support
There’s no doubt the Affordable Care Act (ACA) has created the incentives in the health care industry by shifting from fee-for-service to a value-based model that adheres to standards of care for both acute and chronic conditions with measurable outcomes. This impacts all parties: providers, payers,  patients, employers and beyond to pharmaceutical and medical device companies. The ACA puts pressure on every one of these stakeholders to be accountable for an improved health experience, outcomes and cost reductions. Today, this pressure is driving the industry toward mandatory bundled payments versus the voluntary participation when the ACA was introduced. This requirement is crucial in moving EOC forward.

We have better technology now than we had in the prior attempts to measure and analyze the success of a managed episode-style health care program. Stakeholders can evaluate the risk before entering into an EOC or entering a contract for providers and payers. Today’s technology is also more than capable of crunching health care’s big data. A recent Forbes article covered the IBM Watson Health’s acquisition of Truven Health bolstering the amount of data from hospitals, employers and the government able to be analyzed and acted upon.There are also predictive analytics platforms available from companies like GNS Health care that can further refine population data to tailor treatments to the individual patient and further increasing treatment efficacy.

Data integration is a key strategy as well as a challenge for technology implementation. Data analytics is only as good as the data available to crunch. Payers lack the clinical data from providers to complete their risk profiles for managed EOC. Providers lack the global claims data to fine-tune their costs. Technology solution providers continue to consolidate and integrate capabilities into sophisticated solutions accelerating this revolutionary economic engagement model.

Data analytics has helped providers and payers fine-tune answers to business questions around common acute episodes like total joint replacement and chronic conditions such as asthma and diabetes. What are the patient outcomes by episode? In what timeframe?

  • What is the cost per episode and what factors impact that cost?
  • What external factors may be affecting patient health?
  • How many encounters should an episode include? What circumstances should that number be higher/lower?

Successes here serve to model the analysis for less common treatable conditions.

Collaboration and Trust amongst the key players

Value-based EOC will take committed collaboration and leadership to push the vision through layers of bureaucracy within and across organizations. Together they will need to ensure definitions, methods and implementation are thoroughly cross-populated and adopted.
It also means each stakeholder understands their collaborative role. Employers are taking on more financial risk for their employee population making their stake in ensuring their employees’ health. Medical device companies will demonstrate differentiation in their ability to reduce cost and improve outcomes if their device is used in a prescribed EOC, which could include pre- and post-op education as well as use of their device.

Physicians are also taking on a greater portion of the financial risk in their role as gatekeeper for the EOC and its bundled payment. Their stewardship of the care and costs will make or break them under this model. Payers may be able to release some of the administrative burden to providers, but they must manage the premium costs of providing health care to any and every individual despite their level of health.

The relationship between payers, providers and patients has long been mired by complexity and mistrust. EOC and bundled payments are a progressive, outcomes-based model that reduces low value transaction costs and focuses all stakeholders on doing the right thing, the right way and improving the economics and heath outcomes for everyone.  Combine these drivers with the increased power of data and technology, the seeds planted for episodes of care and value-based health care planted forty years ago, and the incentives from the ACA and value-based health care not only takes root, it is destined to become the dominant economic model in health care delivery.

Categories: Finance