Improving Liquidity in Healthcare Risk

By Michael Kopko, CEO and Co-founder, Pearl Health

2021 Alliance Sponsor Feature Article Courtesy of Pearl Health

(Healthcare) Risk Is Opportunity

The slogan for the Society of Actuaries is “Risk is Opportunity.” As providers consider managing healthcare risk through value-based models, they will convert risk into opportunities for themselves—opportunities to increase and stabilize their revenue, be more financially aligned to their patients’ health outcomes and the good work they got into medicine for, and the more elusive advantages of being on the vanguard of important change.

To be successful, they will need tools and information systems designed to manage that risk in real time; but what will also become obvious is that the more liquid — or cost-free — we can make getting access to healthcare risk, the better off we all will be.

A Brief History of Healthcare Risk

In our early modern history, patients predominantly bore their own healthcare risk.

Prior to the creation of religious institutions that bore some of the healthcare risk of their flock, patients were fully exposed to the financial implications of managing their own health conditions. In the 1900s, the emergence of capitation models structured by physicians to support corporations started to formalize the risk of healthcare and quantify it. Large companies offered it as a productivity and safety benefit for their laborers, and physicians priced it. The emergence of the health insurance industry was mostly a tax advantaged way to provide compensation in the form of healthcare to workers and, with scale, do that fairly affordably.

Fast forward to today, we see a complex system with most of the risk borne by large insurance companies — or the taxpayer, in the case of government health programs. This system is no longer cost efficient, but it is massive due mostly to the simple fact that managing risk historically has been done better at scale vs. a decentralized or distributed paradigm.

Expanding Access, Equity & Affordability in Healthcare Calls for Distributed Healthcare Risk

Click to expand. Image Credit: https://blockchainengineer.com/centralized-vs-decentralized-vs-distributed-network/

Centralized systems are inefficient: they’re slower and require greater reliance on monolithic actors than distributed systems.

As we continuously look to expand the access, equity, and affordability of the healthcare system, we will necessarily need to look to more efficient delivery systems. Josh Raskin from Nephron Research, a leading healthcare industry think tank, writes,

“The next era of healthcare will be defined by the trend of physician enablement. We see the management of health, with the physician at the center, as leading to the holy grail of healthcare: better outcomes, lower costs and higher patient and provider satisfaction.”

Josh Raskin, Nephron Research

This shift will see movement of risk from the centralized “big box retailer” of yesteryear to more distributed networks optimized to manage more localized, specific risk (think a single physician responsible for the outcomes of their own patient panel).

A catalyzing force toward this future is a new government model, Global and Professional Direct Contracting (GPDC), also known as “Direct Contracting“.

Not unlike government facilitation of other socially important markets like mortgages and credit, Direct Contracting brings resources, infrastructure and ultimately efficiency to managing healthcare risk and does that on the chassis of standardization and trust. As this standardization becomes more reliable and these types of structures proliferate, a large, liquid market emerges that supports investment in this critical policy area.

Supporting a Distributed Healthcare Delivery System through Primary Care

At Pearl, we see some tremendous opportunities in this transition.

We’re eager to help support a more distributed, mesh-networked healthcare delivery system through our platform—a system that is powered by primary care and allows for greater independence of providers. We see too many of our resources focused on beating the billing, authorization, and denials business of our current system and not enough on root cause analysis and patient need. This shift in focus will result in better quality and higher satisfaction on behalf of patients.

As more providers can participate in the first dollar in healthcare, we forecast that a democratization of access to healthcare risk will ensue. This will not only lead to more financial opportunity for primary care, but will also enable more clinical innovation as models that focus on special needs and situations emerge and can serve patients directly. With these changes a new world aligned around value versus expenditures will emerge.

Click table to expand.

More Primary Care Providers Bearing Risk in Healthcare = Positive Network Effects = More Overall Success in New Paradigm

As we add providers who can effectively bear risk in healthcare, a tremendous network potential will accumulate that ultimately enables more providers, payers, and consumers to adopt and succeed in this new paradigm. This will lead to greater comfort with providers bearing risk, a community of like-minded physicians who can cooperate in these models, focused on patient outcomes and the total cost of care.

We’ll also see primary care providers become more central in the value chain, helping manage complex cases and armed with the information and the authority to guide their patients throughout the system. Over time, this will mitigate unnecessary utilization, whether ER admissions, avoidable surgeries or preventable in-patient care.

Click image to expand.

At Pearl, we’re focused on — and somewhat obsessed with — getting these primary elements working together at increasing speeds and expanding scale. It’s a simple flywheel that starts with providers (or doctors) as our core element. We assist them in participating in risk-based models by providing them data, technology, and support.

As we gain additional providers to Pearl’s model, we expand our network of enabled providers who can cooperate in a value-based network. This enables us to invite more payers to our model who can then offer more risk based models for our physicians. We start with Medicare but, as our network expands and our doctors perform, we can enter different lines of business.

This all combines to create a simple outcome: reducing the cost of accessing healthcare risk and improving liquidity of the system. It breathes oxygen into a financially broken system and implies a structure that pushes toward efficiency and savings instead of volume and expenditures.

For more insights like these, sign up for our newsletter, or follow us on LinkedIn or Twitter.

Direct Contracting Model Strategies that Drive Innovative Healthcare

2021 Alliance sponsor feature article courtesy of Pearl Health

It’s no secret that the U.S. healthcare system could benefit from a healthy dose of creativity and innovation. Over the past several decades, healthcare costs have been rising at an unsustainable rate, while patient outcomes have been less than ideal. Efforts to create a more value-based healthcare system, which have featured an especially concerted effort over the last decade, have thus far not succeeded. In recognition of this reality, the Centers for Medicare/Medicaid Services (CMS) has recently introduced its Direct Contracting model. Specifically designed to encourage innovative healthcare ideas, Direct Contracting will hopefully lead us toward a more value-based healthcare system.

Many healthcare organizations and providers believe the Direct Contracting model has tremendous potential. While the model is currently being used only for Medicare beneficiaries, many hope that its central themes–provider capitation, quality measures with minimal administrative overhead for practices, and global risk sharing–may soon be adopted by private payers and providers furnishing care in the commercial sector. Such proliferation will depend on the model’s initial success in managing costs of the Medicare population and how well providers adapt. If the model works as planned, it will incentivize innovative healthcare strategies, leading to better outcomes and lower costs. With this in mind, it’s essential that healthcare professionals understand ways to innovate in this environment.

Innovative Healthcare Strategy #1 – Enhance Workflow Efficiencies

It is well known that many healthcare systems lack efficient operational workflows. This is especially true in coordinating care among different care settings in and out of various facilities. Therefore, innovative healthcare ideas are needed to streamline many of these more complex care activities. The Direct Contracting model accomplishes this by linking rewards to value-based outcomes. As a result, all stakeholders are motivated to develop more efficient and coordinated processes of care. Healthcare organizations can leverage the Direct Contracting model’s investment capital construct (i.e. the ‘enhanced cap’) to pursue better workflow efficiencies. Likewise, they can encourage the use of standardized workflows that are patient-centric in an effort to reduce care variations. Similar to Lean Six Sigma approaches, these efforts reduce waste while improving the capacity for predictable and reproducible results. This is an area of innovation needed for many healthcare systems today.

Innovative Healthcare Strategy #2 – Advance Digital Integrations

Advancing and streamlining digital integrations across the healthcare system may lead to more efficient healthcare delivery. Interoperability, the ability of different digital healthcare platforms to communicate, has been a barrier for efficient and effective healthcare. Healthcare systems can use the Direct Contracting model to encourage improved connectivity and interoperability by incentivizing such investment through outcomes alignment. This inherently reduces waste by limiting duplication services and increases access to information for better decision-making. Such connectivity can also improve the insight of analytics efforts, providing healthcare systems with better data to drive future changes. By investing in these types of activities, organizations can better thrive under the Direct Contracting model and reap the rewards.

Innovative Healthcare Strategy #3 – Effective Provider Incentives

Under CMS’s Direct Contracting model, Direct Contracting Entities (DCEs) have the ability to structure bespoke risk contracts with the providers that they engage. A DCE may choose different risk tracks, taking on 50% or 100% of the risk and shared savings benefits. While past ACO programs allowed for similar risk-sharing, DCEs are afforded greater freedom to create more targeted risk-based and capitated contracts with providers that incentivize them to develop innovative healthcare solutions. This is one of the major advantages of the Direct Contracting model that did not exist with prior CMS approaches to value-based healthcare.

Innovative Healthcare Strategy #4 – Engage and Involve Patients

The Direct Contracting model places the burden to develop innovative healthcare solutions on DCEs and member providers. Yet the involvement of patients is critical to the success of efforts to achieve performance improvement in value-based care. By empowering and incentivizing patients to engage in this manner, DCEs can make better, more informed choices about which strategies they will invest in and patients can contribute to self-care and self-monitoring. DCEs and providers should therefore invest resources in educating and training patients in these areas. In doing so, they are better able to utilize patient resources that reduce costs and lead to better results. These types of activities also broaden care coordination across additional care settings that include the patient’s home environments.

Embracing a Culture of Innovation in Healthcare

Each of the above strategies can help organizations and providers realize more innovative healthcare practices. The Direct Contracting model simply serves as a framework by which these efforts can be used. Over time, however, DCEs and providers alike can embrace a culture of value-based innovation to achieve healthcare goals.

1. Adams, K. (2021). 6 big ideas in healthcare innovation. Becker Hospital Review. Retrieved from https://www.beckershospitalreview.com/digital-transformation/6-big-ideas-in-healthcare-innovation-4.html

2. Ibid.

3. Ibid.

4. Ibid.