Health care continues to play a major role in the nation’s economy, both as a significant share of gross domestic product (GDP), as well as a contributor to employment and non-wage compensation. As we cautiously enter a post-pandemic period, it seems reasonable to prognosticate on how market forces and other dynamics within the health care economy might impact health spending. In doing so, we must acknowledge an environment that includes:
- record investments in digital health,
- uncertainty regarding whether the pre-pandemic slowing of health spending will continue,
- new types of mergers, acquisitions, and disruptions, and
- a continued emphasis on aligning costs with outcomes.
While most health spending reform efforts over the last decade have been focused on the demand or “patient side” of the equation, such as changes in coverage, higher deductibles, and price transparency, the next opportunity for meaningful change is likely to occur on the supply side of the equation. Namely, how might we reengineer a health care delivery system that addresses the long-standing issues of cost, experience, and quality? The COVID-19 pandemic and associated shift in health care delivery provides a unique opportunity to refocus our attention on higher value, more equitable health care, rather than only focusing on reducing known low-value care.
As consolidation and integration continue across health care, particularly among payers and providers, we are likely to see more effective cost controls on the clinical side, as well as movement in tackling issues related to administrative costs and waste. Despite the dramatic digitalization of health records across hospital and ambulatory settings, we are only beginning to make progress in reducing the costs and burden of paper records and payments through better information sharing, while also better understanding how we can fully liberate clinical data and design tools to address inefficiencies on the delivery side.
Diving a bit deeper on the topic of integration in health care, the movement from horizontal integration (companies buying similar companies) to vertical integration (companies merging across complimentary areas) may provide improved patient experience and coordination of care, or as others have termed, better ownership of the whole patient. This includes better patient handoffs, with improved delivery efficiencies and experiences for patients when they move from a primary care setting to a post-acute care setting to a recovery or rehabilitation setting within the same integration. Underpinning this hope for better coordination are the system-level incentives to reduce costs and burden, as well as the promise of true data interoperability within a system.
Vertical integration may also allow for improved visibility of clinical and claims data, potentially leading to better alignment of benefit design and clinical objectives. Additionally, as seen recently with the pandemic move to telehealth, integrated models may provide alternative ways to engage patients in a payment structure that is more focused on high-value, accessible interactions. At the same time, we should also acknowledge potential drawbacks of vertical integration related to overall competition, as well as challenges for patients to move across systems and providers outside of the integration.
Taking a broader view of the potential promise of data interoperability and analytics, more targeted applications of machine learning and artificial intelligence have great potential to improve provider decision-making, particularly for more complex conditions. This will require pulling in data from multiple sources, beyond electronic health records. By including data on external service use, social determinants, and social services (just to name a few) in a more standardized manner, there is high potential to both improve the targeting and early identification of resources, treatments, and other interventions. We should, however, proceed cautiously, given known concerns about algorithmic bias.
Lastly, risk is one area where vertical integration, data, and the “stickiness” of patients (defined here as utilizing the same health system, provider, or payer over a period of time) directly interact. This can be viewed in two parts. The first is how longer-term and higher-quality data can be used to design better disease management programs to avoid worsening of those conditions. A second is that more integrated payers and health systems should be more willing to invest in such programs, as they are more likely to see the downstream benefit and costs savings, rather than being realized by another provider or payer.
The true impact of vertical integration, more data, and further technological advancements on our health economy certainly remains to be seen. More important than the business case for any of these drivers, however, is the apparent strong desire for actions that change the way we pay for health care to better align value, outcomes, and the patient experience.