What is a payer/insurer?
Typically, payer organizations collect premiums from employers and individuals, process claims, and engage in a variety of case management/disease management activities to encourage the appropriate use of medical resources. If they collect more premiums than claims paid, their medical loss ratio is less than 100% and they earn a profit.
In a world of accountable care organizations and healthcare reform, new reimbursement methods will include global payments to providers, which implies the risk of loss will shift from the payer to hospitals and clinicians. Payers will no longer need their large claims processing staff, nor create complex actuarial models. They’ll become very different organizations.
How different?
My prediction is that payers will become the health information exchange and analytics organizations that help hospitals and clinicians manage risk in a world of capitation.
I’ve said before that ACO=HIE+Analytics.
The payers are already making strategic acquisitions to build these new business models
Aetna acquired Medicity to gain expertise in healthcare information exchange. Aetna had already acquired Active Health to gain access to its CareEngine analytics platform.
United acquired Axolotol to gain expertise in healthcare information . United already had a comprehensive suite of analytic capabilities via its Ingenix subsidiary. United rebranded the combination of HIE plus analytics as OptumInsight.
Three of the nation’s largest Blue Cross plans acquired Navinet for its real-time communication network that links physicians, hospitals, and health insurers.
Humana acquired AnvitaHealth for its real time analytics and decision support capabilities.
The next several years will be interesting to watch as the country gains experience from Pioneer ACOs (7 of the 32 are in New England and 5 in Massachusetts).
Watch the payers carefully. As they acquire more HIE and Analytics businesses, I believe you’ll see a shift from claims processing to wellness management and cloud-based provider services.
John D. Halamka, MD, MS, is Chief Information Officer of Beth Israel Deaconess Medical Center, Chief Information Officer at Harvard Medical School, Chairman of the New England Healthcare Exchange Network (NEHEN), Co-Chair of the HIT Standards Committee, a full Professor at Harvard Medical School, and a practicing Emergency Physician. He’s also the author of the popular Life as a Healthcare CIO blog.
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I agree with BobbyG… we will likely see and increase in cloud based provider services
Good post. First, a correction: insurers do not make a profit if MLR is below 100%. Typically, insurers need an MLR below 90% to make a profit, because they have admin expenses that are somewhere between 10% and 15% of premium. There are also a few other factors, like investment income and income from non-insurance sources, but we can put that aside.
The business model of insurers will shift, that is for sure. From my experience working for a payer (but speaking only for myself), I’d agree that analytics, business intelligence, HIE support, and Wellness and DM support will be more central to what managed care companies do. They will continue to manage risk, but the risk will be less their own, and more the risk of their provider clients, for those providers who don’t bring the risk management entirely in-house.
But there is another huge feature of managed care companies that I don’t see going away any time soon: they pool not just risk, but people. Either a provider has to join an ACO-like organization with its own insurer/payer, or a provider has to contract with insurer/payers to be brought into a network and get traffic directed their way. The number of providers who can go outside the grid, as it were, and be out-of-network for everyone is very small.
Integrated provider/insurer systems will grow over the next 10 years, but they won’t be 100% of the market. If they even make it to 50% that would be a huge achievement. For the rest, independent insurers will continue to play a pooling function to provide network discounts and other services. Will that eventually go away? Look at The Netherlands, Switzerland, Germany, even France and the UK. The answer is no. There is no place where single payer for all isn’t mandated (I’m looking at you, Canada!) that independent insurers disappear.
Indeed. We’re headed toward Moneyball medicine via accountable care, we’ll need to drive very carefully down this road: http://ideasarecheap.posterous.com/big-data-algorithms-and-moneyball-medicine-pa
It’s a very interesting question, and will bear watching. I recently wrote a similar blog (http://www.mcolblog.com/kcblog/2012/2/21/its-the-data-stupid.html) with a similar focus. The question may be if payors & providers can learn to trust each other with data & what it is telling them.
“Watch the payers carefully. As they acquire more HIE and Analytics businesses, I believe you’ll see a shift from claims processing to wellness management and cloud-based provider services.”
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Do you foresee any significant potential antitrust implications?