I have worked in healthcare technology for over 10 years, and in the last year, I co-founded a new venture in this space, OODA Health, based in Silicon Valley with our tech hub in Salt Lake City.
During this time I’ve had the opportunity to observe the rapid changes that the healthcare industry has been facing. As I reflect on the trends I see around me and in my own experience as an entrepreneur in healthcare technology, I have put together three of my predictions for 2019.
Prediction #1:
We will finally see an acceleration of value-based care models in the marketplace. Although value-based payment – i.e., payment for value, rather than fee-for-service – has long been discussed as a desirable improvement to the healthcare system, actual adoption of value-based payments has materialized slowly. A key reason for such slowness is marketplace inertia. Providers have built their businesses on fee-for-service and introducing the necessary technology, people and process changes can be disruptive and costly in the near-term. Furthermore, taking on risk is a very different business model for providers, requiring new infrastructure and strategies. Payers face a similar issue, as their business model and underlying technology platforms have been oriented to fee-for-service. As a result, introducing new payment models is not a simple contractual challenge, but rather a complicated business problem encompassing an overhaul of systems and processes.
Another driver of slow adoption of value-based models is that payers and providers need to collaborate differently. Rather than seek to limit the overall reimbursement from payer to provider, now they need to work together and be successful together.
I believe 2019 is truly an inflection point that will see a meaningful acceleration of these models.
Here are a few reasons why:
1. Competitive pressures are prompting large payers to evolve quickly. Upstart health plans, particularly in the Medicare Advantage space where value-based models are most prevalent, are motivating incumbents to evolve their strategy to match the market need and fill the hole that startups are exploiting.
2. There has been a wave of new CEOs across large health plans, and many of them have ambitious visions for changing payment models. For example, Blue Cross and Blue Shield of North Carolina recently appointed a new CEO, Dr. Patrick Conway, and soon after announced a wave of new value-based contracts for 2019.
3. Provider consolidation has made it more cost-effective to adopt the technologies needed for value-based payments since such investments can scale to a broader base. From Independent Physician Associations and Health Systems, provider scale is leading to commitments to value-based strategies, with the resources needed to make the transition.
4. The political environment is creating more urgency for payers and providers to work together on new, innovative approaches to curbing the growth of medical spend. Calls for “Medicare for All” are no longer coming from a fringe group of far-left politicians, but may very well be a rallying call during the upcoming primary cycle. Healthcare leaders now recognize that healthcare must be priced as a utility, not a luxury good, or the government will price it for them.
With this wave of value-based models in the market, there will be a need for new administrative platforms oriented to these models and more emphasis among payers for resources that help providers succeed. The zero-sum paradigm of fee-for-service will be no longer.
Prediction #2:
High-deductible plans will face a reckoning. While traditionally seen as a mechanism to drive consumer engagement, the market will increasingly realize that high deductibles in and of themselves are not sufficient to motivate a strong consumer mindset. The payers create these plans, but then “outsource” the management of those plans to providers, who now must communicate and collect patient balances. Such fragmented management of high deductible plans has led to confusion, frustration, under-utilization of appropriate care, and bad debt. To be sure, cost-sharing is and will continue to be an important means to reduce
growth in healthcare costs, but going forward we could see some important changes to how healthcare leaders contemplate the patient responsibility. For example:
1. Payer leaders – including employers – may explore large copays in lieu of deductibles. Copays are simpler for the member to understand, yet preserve the incentive for the member to rationalize consumption of care.
2. Some payers and employers will choose to lower cost share for members that select narrow networks. Such network strategies are increasingly understood to be an alternative means to manage growth in healthcare costs. In other words, rather than manage healthcare costs through the cost-share, we will manage costs by ensuring a high value provider is working closely with a payer to deliver appropriate care and share risk on outcomes. In a model where network strategy is paramount, then the cost share should be little more than a steerage mechanism to motivate members to stay attributed to a particular network.
3. Some payers are rethinking the traditional “outsourcing” of patient liability management to providers. Providers are not eager to manage financial collections, and often do not have the ability to do this well. In addition, splintering the financial relationship with the member leads to mixed messaging, fragmentation and frustration. These leading payers are making bold moves to consolidate the financial experience within the payer and relieve the provider from this role, leading to a superior member experience and reduced bad debt.
Prediction #3:
As a Silicon Valley entrepreneur, I see innovative, virtual health solutions emerge almost weekly. While the prevalence of telehealth for basic primary care needs is well-known, there are now a spate of virtual care solutions across the care continuum, from diabetes to behavioral health to musculoskeletal pain. The expansion of these solutions to new care categories – and their integration into mainstream healthcare solutions – could lead to new, all-digital products that cater to younger generations that are relatively healthy and inclined to rely on technology. Key drivers of this prediction for 2019:
1. There is a greater focus on connecting consumers to these solutions at the right time. Healthcare leaders recognize that “just in time” engagement is critical, and accordingly are integrating these solutions in provider triage workflows, for example, as well as health plan websites and navigation solutions like Castlight Health and Accolade. Rather than rely on approaches like “build it and they will come,” solution providers now recognize that consumer engagement is as critical as the quality of the solution itself.
2. There is now a body of evidence to validate the use of digital approaches to a range of issues that did not exist before. Cognitive Behavioral Testing (e.g., CBT), the gold standard of psychotherapy, is proven to be equally effective online as in-person. Digital physical therapy has demonstrated improved outcomes for patients struggling with musculoskeletal pain. Finally, solutions like Virta, Omada and Livongo all rely on digital solutions to address diabetic issues. Given the need to reduce healthcare costs and pursue healthcare solutions outside of the traditional four physical walls of a medical office or hospital, the possibility of an all-digital plan is exciting.
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I look forward to seeing how these predictions play out over the next year and circling back to reflect next January. Tweet us at @OODAHealth and let me know
your own predictions or your thoughts on mine!
Seth Cohen is President and Co-Founder of OODA Health. Previous to OODA Health, Seth served as the Vice President of Sales and Alliances for Castlight
Health. Seth was one of the earliest employees at Castlight and served on the leadership team. Seth is currently a member of Castlight's board of directors.
Prior to Castlight, Seth was a management consultant at McKinsey & Company. At McKinsey, Seth was a member of the Healthcare Payer and Provider Practice and a founding member of McKinsey’s Center for Healthcare Reform. Seth earned an MBA from Harvard Business School as a Baker Scholar and an MPA from Harvard
Kennedy School, he also received his undergraduate degree from Stanford University.