By Patrick E. Riley M.B.A., M.H.A.
Principal Consultant, Transformational Health
Frost & Sullivan



The Payor – Provider Ecostyem Evolution
Those who were fortunate enough to attend the inaugural Collaborative Innovation in Healthcare: A Frost & Sullivan Executive MindXchange could not help but notice the refreshingly diverse and highly qualified list of participants. The event, which examined the emerging nexus for providers and payors in a value-based U.S. healthcare system, attracted thought leaders from Microsoft, Blue Cross Blue Shield, American Heart Association, Mayo Clinic, IBM, Humana, Owens & Minor, Walgreens, and Geisinger Health, to name a few. All the senior health leadership professionals in attendance were deeply committed to debating and exploring current payor and provider issues and were ready to begin defining a collective way forward for both interests. Historically, physicians and the health insurance industry have been at odds when it came to topics like reimbursement and authorization for care, and until recently have remained enmeshed in a deeply siloed and parochial healthcare industry profit -driven business model.

New Models of Health Insurance – What Must Providers and Payors Learn to Improve the Patient Experience? As doctors strive to do all they can to listen to their patients and reengineer delivery systems to be more patient centric, health insurers are seeking to provide more adaptive health insurance coverage for Millennials, that include a more preventative approach to achieving optimal health, rather than paying for treating chronic diseases. This includes provisions for environmental factors that impact health such as drinking water that has been compromised with industrial pollutants that result in disease. Presently, there are only a handful of Payors that are evolving to create policies that address individual treatment plans rather than one policy fits all thinking.

The key takeaway for payors and providers is that there is definitive evidence pointing to the immediate and long-term need for collaboration. As healthcare cascades towards total capitation, it makes sense that clinical and financial ecosystem participants push towards clarity and commonality in business model design. As presented, today the system is very fragmented, and the consumer experience in navigating through the healthcare coverage and treatment pathways is complex and not conducive to true preventive care models. Both payor and provider organizations at this event focused attention on the consumer/patient experience as a key area for innovation and culture change.

As many commented, the best direction moving forward is to find common ground that allows patients to secure customized treatment plans AND healthcare insurance that has extensions for individual lifestyle and economic means. Often these objectives are at odds with each other and plans and insurance are not affordable. This results in more health risks and costs than is ideal for a country with the level of medical technology and capability as the U.S. Many innovations in technology and approaches to care delivery were brought forward and discussed by the MindXchange participants.

Payors who participated acknowledged that a more consumer centric focus is the strategic intent being adopted by virtually all large health insurance carriers moving forward. Providers welcome this step and suggest a shared audience when prescribing treatment plans such that commercial health insurance brokers can participate and match their benefits with what are called adaptive health policies. Any opportunities to align more payors on the same value based care goals and measures would be welcome.

Artificial Intelligence – Is it Good, Bad, or Simply Too Soon for Healthcare? For all participants, there was an anticipated great interest in artificial intelligence (AI), based on the energy and excitement displayed by both the presenters and attendees. Yet, as we learned, AI for healthcare is still struggling for an identity in the breadth of the U.S. healthcare continuum. Surprisingly, AI today is being used in a vast array of applications, with more early success identified non-clinical applications. AI’s largest contribution to date appears to be in patient-workflow algorithms or nursing staff requirements. Nurse shift staffing is driven by cognitive learning machines that match both patient acuity and bed availability, proactively reducing the need for expensive agency nurses. This innovation has cut day-to-day operational costs by as much as 60% for some hospitals. AI machine learning is also decreasing operating room turn-around time and increasing the scheduling efficiency of surgical procedures by matching time with a surgeon’s historical operating room proficiency with a patient’s clinical diagnosis and medical equipment and staffing requirements.

The key takeaway for both payors and providers is that AI is making headway in influencing operational efficiencies and productivity for healthcare institutions. What remains to be determined is a definitive declaration of adoption of AI modalities for clinical disciplines, specifically for robotic surgical systems, which appear to be the next logical milestone for AI to conquer. We learned there are many start-ups in this space, so progress is being made. Expect more advancement for AI as it relates to both the operational and clinical hospital standards of care.

Healthcare Pricing – Is Transparency Valid in a Value-Based Business Model? For payors, price transparency is a mixed bag of tricks and treats. On the one-hand, pricing transparency provides patients with a full-disclosure of their charges, co-pays, and deductibles, which is a very good thing in terms of closing individual policy business. On the other hand, pricing transparency opens the health insurance industry to a tsunami of questions in regard to variance in charges between hospitals. In some municipalities, pricing between hospitals can vary by as much as 400%.

Consumers, as a result, and payors to some extent, are at the mercy of hospital master charge software programmers. In defense of hospital economic strategy, each facility has its own set of fiduciary challenges based on individual payor mix, patient acuity, patient co-morbidity, and number of procedures per year.

For providers, pricing becomes a challenge as most physicians do not want to be marketed or chosen by patients based on pricing. It runs in opposition to everything they have been taught and flies in the face of their Hippocratic Oath. For doctors, pricing is a no win proposition. Moreover, Physicians typically do not have any idea what they are reimbursed. And the majority of physicians have no idea what they charge for providing care.

The key takeaway is that efforts by the Centers for Medicare and Medicaid Services (CMS) and Payors should work towards eliminating the variance in charges by county, which is how Medicare aggregates costs. Pricing throughout the healthcare ecosystem would then stabilize and become more of a fixed cost. If billing can be reduced to adhering to just two standard deviations away from the norm, Payors and CMS could then decline reimbursement for charges outside of this target (which captures 68% of the population.) This is the preferred solution versus focusing just on price.

Final Thoughts. What Comes Next? The Collaborative Innovation in Healthcare: A Frost & Sullivan Executive MindXchange participants exhibited great interest in continuing this dialogue of collaborative effort between payors and providers. Many concerns were articulated and much was shared and learned. Participants look forward to moving these discussions forward through the relationships built over the two-day event.

Patrick E. Riley, M.B.A., M.H.A., C.H.E, is a Principal Analyst/Consultant Transformational Health, at Frost & Sullivan in San Antonio, Texas. In this role he is dedicated to providing actionable results for clients to achieve excellence in an era of constant political and technology-driven change. As a part of Frost & Sullivan’s Transformational Health team, he provides in depth analysis of emerging trends in advanced medical technology innovation and authors market insights and reports.

Patrick has over 30 years of healthcare industry experience including expertise in U.S. healthcare policy and transformational health regulations and legislation. He has held C-Suite positions in several leading for profit U.S. hospital firms including Vanguard Health System, Nashville, Tennessee, Valley Baptist Health System, Harlingen, Texas and Trinity-Mother Frances Health System, Tyler, Texas.

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