Payers Hold the Keys to Transforming the Healthcare Marketplace
January 11, 2024
It feels like eons ago that we placed calls from a landline rather than an iPhone, rented our movies from Blockbuster instead of streaming them from the comfort of our couch, and navigated a road trip with a map rather than a GPS. However, the reality is that these technologies – and countless others – have entirely transformed daily life over an astonishingly short period of time. So much so that it’s difficult to remember life without them.
Information technology continues to revolutionize almost every industry sector, from entertainment to transportation, at an accelerating rate. By comparison, the healthcare industry has been slow to adopt new information technologies.
For too long, healthcare payers have been forced to accept this reality. They continue to operate with decades-old technology, all while shouldering a tremendous amount of responsibility to enable doctors, nurses, and other clinical healthcare professionals to do their heroic work every day.
For playing such an instrumental role in America’s largest industry, payers deserve better – much better. They should have a large array of cutting-edge analytical tools and data to do their jobs effectively. However, professional health market managers are limited to using outdated or inadequate information feeds and software, often gathering and analyzing data with spreadsheets for lack of better tools.
The time for transformation has arrived – and payers, who sit at the heart of the healthcare industry, are uniquely positioned to be the catalyst for this innovation. This transformation is critical to the health marketplace and is possible with the right information technology within the hands of payers dedicated to bringing about structural change.
Traditional Technologies and Processes Aren’t A Sustainable Solution
As payers strive to address the mounting pressures from consumers, competitors, government entities, and within their organizations, they are realizing that their legacy technology, processes, and perspectives are explicitly impeding their ability to meet the competitive access, price, and service expectations of their customers. These challenges become apparent when trying to meet new government regulations for transparency or providing a customer-centric purchasing experience within existing ecosystems. All of this is occurring during unprecedented, accelerating change in our industry, requiring payers to take deliberate and focused actions.
The IT solutions that payers have relied upon for years to address their marketplace challenges are no longer sustainable and, in many cases, are adding unnecessary complexity to their operations. While the external pressures on payers are substantial and multifaceted, three significant and related challenges prevent every payer from buying healthcare optimally:
Confusing And Opaque Health Market Pricing
The first hurdle is healthcare’s perplexing and opaque pricing structure, ultimately leading to unsustainable medical loss ratios. With countless network and healthcare provider options available, payer organizations face the challenge of limited time, data, and analytical capabilities needed to evaluate these options and make optimal choices for their member populations. The absence of actionable pricing intelligence increases costs for payers, plan sponsors, and members.
Building A Competitive Provider Supply Chain
Second, payers must build out a provider supply chain that is customized and optimized for their unique member populations. To compete, payers must build out their provider supply chain from 1.8 million potential care sites. To organize so many sites of care, payers must choose amongst more than 11,000 intermediary provider networks, out-of-network solutions, reference-based pricing vendors, behavioral health networks, PBMs, dental, vision, reproductive services and myriad other point solutions and digital health vendors. Collectively it is difficult or even overwhelming for payer teams to thoroughly evaluate and configure so many options and ultimately select best-fit solutions for their member populations.
Inefficient Point-To-Point Connectivity
The third issue faced by healthcare payers is inefficient point-to-point system connectivity. Each payer must build and maintain custom-code connections with potentially dozens or hundreds of suppliers, continually adding more over time. These fragmented connections are inflexible, non-reusable, and typically impede data aggregation, analytics, and reporting capabilities. As a result of these structural inefficiencies, payer and industry administrative costs rise. The friction costs of these connections mean higher switching costs between vendors, leading to weaker negotiating positions with vendors.
The overall impact of these three barriers: Optimizing healthcare prices is challenging. Connecting partners is challenging. Healthcare prices and costs are higher, and administrative friction costs are higher. Governments, employer plan sponsors, and consumers lose.
Consumers want healthcare experiences that are convenient, real-time, and personalized – just like the experiences they expect in other aspects of their lives. Payers find themselves with the impossible task of delivering a caliber of experience similar to that of an Uber app with outdated systems that rely on four-decade old EDI connections and incomplete data.
How can healthcare business leaders overcome their marketplace challenges? The solution begins with a change in mindset and strategy. Industry pressures and marketplace challenges are compelling payers to shift away from claims-focused business models, where investment and activities are based on retroactively paying claims. Instead, industry leaders and analysts are evolving to ecosystem-based strategies – where they are proactively procuring healthcare services using sophisticated data and modern software platforms.
Payers have been working toward this for years by managing their own respective systems of providers, third-party provider networks, point solutions, and vendors- building their ecosystems for healthcare. However, to effectively compete now and in the changing environment ahead, they need to build out increasingly sophisticated, optimized, and connected provider supply chains – an intelligent marketplace ecosystem – to optimize the buying of healthcare services for their members and plan sponsors.
To do this, payers need data and interoperability. Unlike the legacy claims and clearinghouse technology used today, they need software built to optimize and connect their marketplace ecosystems. They need to create their own intelligent health market in order to:
- Reduce costs – With the entirety of the payer’s ecosystem – and opportunities – visible and accessible, payers can identify the optimal combination of provider networks and health market partners for their member populations. This means finding the best care for the best cost. The ultimate goal of an intelligent health market is to deliver actionable market insights in real-time.
- Innovate – The ability to identify cost-saving opportunities in real-time means payers can continuously analyze and optimize for their unique member populations. With the savings gained, they can reinvest in their business, innovating and driving organizational growth.
- Improve care for members – Intelligent health markets allow payers to discover and assess more combinations of provider networks and health market partners than previously possible – and at a lower cost. That means they can find healthcare that better aligns with the needs of their members.
When payers build their own intelligent health market to power their health marketplace ecosystem, they can begin leveraging actionable data to optimize and connect solutions that reduce costs while improving the overall quality of healthcare for everyone. They will receive a comprehensive view of provider networks and health market partners that was not possible before – enabling faster and more informed decision-making. It will deliver real-time analytics so the payer can continuously optimize and reduce costs without cutting down on care. These cost-savings and time-savings drive increased power to innovate and grow.
This article was originally published in Healthcare Business Today. To explore this topic further, read the full white paper: The Intelligent Future of Healthcare Markets: Exploring the Role of Healthcare Payers as Catalysts for Change.