There has been a lot of talk about the cost of care, but what really is the “cost of care,” and can it be reduced? I propose striving to reduce the cost of care is a misunderstood concept. As negative as that may seem, it is not. I believe focusing only on dollar signs is the more negative practice. Therefore, if we truly want to rationalize the price of health care, we should instead focus on keeping individuals healthier by encouraging better communication with them from the start of the relationship and providing improved care plans. The answer to ultimately reducing the cost of care is finding ways to optimize it.
How Can We Optimize the Cost of Care?
For most payer and value-based provider organizations, the cost of care is relatively fixed at a certain percentage of the MLR. Go much below that percentage, and the organization will fall subject to providing reimbursements. Go much above it, and leadership will soon be escorted out the door. The challenge is to stay in that “sweet spot” of 85%. To do that, payers must manage clinical risk within the population. Clinical risk is the variable that drives utilization of care; the better an organization can manage the clinical risk, the better it can predict the cost of care and manage resources.
Specifically, clinical risk is the cost of illness in the population. Population segmentation by chronic illness typically confirms what we’ve known all along: there are those in the population who have severe illness burden (or have even suffered a catastrophic event) and consume care at a high and fairly predictable level and those with disease burden and potentially rising risk who are actionable.
In a previous national payer organization, we determined we could not impactfully spend our resources on the top 5% of the population with the highest claims expense. Instead, we were better off shuttling those resources toward members with five or more chronic illnesses who also had a diagnosis of severe persistent mental illness. The point is, many of the high-cost members in the population, the ones to whom our attention was drawn, were the least actionable.
The Better Strategy: Improving the “Cost of Wellness”
Resources must instead be directed to the “cost of wellness.” This is where an organization has the greatest opportunity to make a difference in the cost of care. The “cost of wellness” is that portion of the MLR devoted to keeping the population as healthy as possible. Rather than jumping from one claim to the next and paying for the consequences of unmanaged chronic illness, investing in the cost of wellness is easy and has an ROI. “Cost of wellness” activities are predictable, replicable, and generalizable to large segments of the population. Automation is a key component of these actions, and Artificial Intelligence/Machine Learning (AI/ML) can play an enormous role in managing the organization while allocating resources. Rather than case managers scrambling from one urgent situation to the next, their time can be more efficiently managed, cutting down on administrative burden and costs. This presents a true opportunity to control the cost of care, optimize the organization, manage administrative expenses, and positively impact the margin.
To do this, you need an enterprise management platform that aggregates, cleans, normalizes, and intelligently orchestrates data while providing the ability to discover and visualize opportunities in the population—all while being agnostic to the source of the data. In part, your success relies on the platform’s ability to automate as many “cost of wellness” activities as possible to optimize resources. With a wealth of data available from electronic prior-authorization and adjudication (differentiated from auto-approval), tightly integrated evidence-based assessments, and automated workflows with internal referrals to , the platform should streamline a multitude of tasks in the organization. At its core, it should help administer healthcare benefits, manage the organization, and drive the business. Ideally, the platform will read from a single source of truth for all the organization’s functions. These functions should be natively integrated, providing a clear line of sight for all users, including Utilization Management, Appeals and Grievances, Care/Case Management, Quality/HEDIS®, Risk Adjustment, Compliance, SDOH and Health Equity, Member Engagement and omni-channel communication, Analytics and Reporting, and value-based network performance. The information available should not only be simple to understand in the form of a “read-out,” but must also provide strategic and actionable insights. For instance, if you’re only given a list of risks associated with social determinants in the population, you don’t have sufficient information to provide better care. Instead, you must be able to dissect those risks, identify sub-populations both by risk and geography, understand which risks are driving the organization’s experience, and provide strategic direction in terms of the organization’s core capabilities. The right enterprise management platform will do all of this for you AND provide metrics that guide your efforts and demonstrate success.
Whether payer or provider, organizations that are best equipped to manage the “cost of wellness” are those that will ultimately make the biggest difference in health care. Automation and optimization will support better member experiences while simultaneously enabling the desired outcomes for patients and the business. For any payer or provider organization seeking this type of success, the choice of an enterprise management platform is likely the most critical decision to be made. The ability to integrate with the healthcare ecosystem, intelligently orchestrate a myriad of data, and provide actionable and automated workflows along with strategic insight and guidance is more important now than ever.
