What is a payer/insurer?
Typically, payer organizations collect premiums from employers and individuals, process claims, and engage in a variety of case management/disease management activities to encourage the appropriate use of medical resources. If they collect more premiums than claims paid, their medical loss ratio is less than 100% and they earn a profit.
In a world of accountable care organizations and healthcare reform, new reimbursement methods will include global payments to providers, which implies the risk of loss will shift from the payer to hospitals and clinicians. Payers will no longer need their large claims processing staff, nor create complex actuarial models. They'll become very different organizations.
My prediction is that payers will become the health information exchange and analytics organizations that help hospitals and clinicians manage risk in a world of capitation.
I've said before that ACO=HIE+Analytics.
The payers are already making strategic acquisitions to build these new business models
Aetna acquired Medicity to gain expertise in healthcare information exchange. Aetna had already acquired Active Health to gain access to its CareEngine analytics platform.
United acquired Axolotol to gain expertise in healthcare information . United already had a comprehensive suite of analytic capabilities via its Ingenix subsidiary. United rebranded the combination of HIE plus analytics as OptumInsight
Three of the nation's largest Blue Cross plans acquired Navinet for its real-time communication network that links physicians, hospitals, and health insurers.
Humana acquired AnvitaHealth for its real time analytics and decision support capabilities.
The next several years will be interesting to watch as the country gains experience from Pioneer ACOs (7 of the 32 are in New England and 5 in Massachusetts).
Watch the payers carefully. As they acquire more HIE and Analytics businesses, I believe you'll see a shift from claims processing to wellness management and cloud-based provider services.
Wednesday, March 14, 2012
Will Payers be the Business Intelligence Services of the Future?
Posted by John Halamka at 3:00 AM
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ACO=HIE+Analytics what an excellent and simplistic way to express the future of the US healthcare insurance model.
Right on target. Payer business models are much more clearly on a burning platform than are care provider business models (e.g., all the pushback against Medicare ACOs).
Consider an expansion of your formula for the 90%+ health care providers not yet in integrated systems:
ACO = HIE + Analytics + collaborative workflow
Thanks for adding this and it's been going on for a while with insurers building their business intelligence for sure and I have covered quite a few of these moves with tagging my posts as "subsidiary watches" in the titles.
From how this began with HIE with government system to how it has evolved is not maybe exactly as all of us saw it or planned but it is what it is.
Along with a lot of this too is the potential concerns of conflicts of interest as in addition to HIE, there's some other very interesting subsidiaries in there and it might be worth a mention that United (Optum) also has bank with over a billion on deposit to fund item as they see fit.
Again I go back to my coding days and having written an EMR, even though it was short lived, the ability to visualize the mechanics of queries as well as in another life having over 20 years in sales does make me a bit of a strange hybrid at time with my thoughts and how connect dots for sure. I did the old VB6 which was from the roots up versus today's methodologies of platforms where so much is already for one, so being able to dig back to the origin and rationale of a query to me is priceless.
We do have to remember that with commercial efforts there are share holders to pay as well and the balance between care and profits can be a little ruthless at times too.
I watch as my MD clients out here in California continue to be reduced in payment from their ends with the new contracts that come out and see how the conflicts arise with insurers owning IPAs now too. When you dig down as one of my clients pointed out to me is that when the entire bottom line is reached with some of the somewhat spun provisions, they end up being paid at a rate that is less the Medicare at times and sometimes I wonder how this fits with the "low bid" Medicare contract provisions, but I guess we have enough attorney's to sort that one out and in turn at some point that could be a real sore point for CMS maybe?
This will be interesting to watch as it moves along as some hospitals and doctors struggle to stay in business and the other big conglomerates flourish.
We already have lawsuits in the OC with insurers fighting each other with the purchase of IPAs, Blue Shield suit the IPA which is now owned by United. Add that on to ACOs and the mission gets even a little more complex to say the least. I would say at this point too that budgets for all the legal actions occurring will enter into the ACO realm as well...and who knows how those battles will turn out at this point.
Thanks for raising this topic.
Would like to get your perspective on hospital networks having increased motivation to initiate/expand their own health insurance plans. By doing this (though it's no small matter), they gain more control over their future, they allay consumer fears (and their own) about sharing data with private payers, and they lower healthcare system costs by removing an industry profit participant.
As the provider market consolidates (both historically and now due to the ACO requirements), it also seems to me that it becomes more and more feasible on a service depth and geographic coverage basis to offer a health plan in their local market.
From where you sit, do you see premiums generally flowing to the IDNs versus the private payers in the future? Or does all of this support the case that there is no real room for private insurance as we know it in the future, thus payers are buying HIE & Analytics firms now as their 'break glass' reinvention strategy?
Thanks for your thoughts.
So, if I understand the ACO reimbursement model correctly, the Physician practice or Hospital will need to determine a "flat fee" for the patient diagnosis/services/stay. This "flat fee" will be determined by the analytics that the Insurance Companies of the present model will provide.
Just going with the "follow the money" logic this formula makes complete sense.
Another trend that I have kept an eye on since late 2010 is the technology investment patterns by the payer. Understanding the payer is going to be critical. Gartner has a paper on this.
In short, Business Intelligence (MU, VBP is all rudimentary forms of BI) and other investments in new technologies that the payer is driving towards, within the area of care management, will certainly push IT and business transformation
Point made delicately by "anonymous" - "flat fee will be determined by...."
Payers have good insight from limited data, Providers have more data but limited insight.
Providers have recognized this information arbitrage and started using data more effectively to determine fair pricing, improving quality and efficiency.
Data tells a lot of stories, we need reason and the tools to listen to it.
Great points, Will Payer/providers own the market?
One note: Standard Business Intelligence software will not be able to handle the amount of BIG DATA the will be generated.
This concept is similar to the distributed/modular/open architecture. The key difference with SOA is the technologies used, where through an open-environment and standards, these services can connect with each other. In an ideal world, you can build different business applications, by choosing different sets of services from a central services repository.
Jeff Brandt has it right...this view of the future is dependent on the ability to handle data much differently than today. The infrastructure is being built out in some places but not in most...yet.
Beyond data, there needs to be a focus on complex events so that the ultimate goals of proactive monitoring and intervention can be realized.
The payors clearly have a leg up in getting this data and the analytics started.
Problem is one of trust: will the prvoiders trust them to be the repository and to have all the information when knowledge is key to running their business?
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