The Cost of Care

"Everyone is concerned about medical costs, premiums, and affordability," asserts Deloitte Vice Chairman, US Life Sciences & Health Care Industry Leader Bill Copeland. 

Most healthcare consulting experts point to value-based care (through which providers are based on the outcomes, rather than the volume, of the services) as a lynchpin in any approach that effectively addresses healthcare's unstainable cost. However, the ongoing move to that model will take years – in part because so many of that litany of challenges from the past 10 years—interoperability, especially—still exist today. New challenges also exist.

This Time It's Serious

Vivid examples of at least one of these new challenges—what healthcare experts tend to refer to as consumerism—materialized in January. That's when CVS Health announced its intent to purchase Aetna for $69 billion. That's also when Amazon, JP Morgan Chase & Company, and Berkshire Hathaway announced plans to create a new organization dedicated to doing for a combined 1 million or so employees what the healthcare industry has yet to do: reduce costs and improve patient satisfaction.  

"Non-traditional payers and providers are getting into the game, trying to get closer to the consumer, and they may be starting to tip the scales," notes Cumberland Consulting Group CEO Brian Cahill.  He and part of his firm have discussed whether employers may become customers down the road. Cross-industry convergence tends to occur, Copeland notes, when "consumers are not getting what they need."

This dynamic is not entirely new. Copeland has pointed out that the care delivery sites Kaiser Steel Corporation opened near its mills helped pave the way for Kaiser Permanente. That said the way that healthcare consulting firms and practices are approaching today's overriding cost challenge feels markedly different than how they've approached industry challenges in the past for a couple of reasons. 

First, healthcare leaders acknowledge that the challenge is massive and immune to a readymade solution. While the move to value-based care is central, according to many veteran consultants, the shift requires a level of systems interoperability, data-sharing, cultural change and other foundational work that will take years to achieve. Healthcare organizations "know value-based care is where they want to go," says Porta. "What they want to do today is find a way to lower the cost while also finding ways to start taking micro steps on that value-based care journey. I don't think most organizations are going to be taking huge strides immediately."

Part of the reason small steps make sense is that any solution to runaway costs has to address a much bigger issue: the difficult reality that a breathtakingly small percentage of the U.S. population (2 to 4 percent)—those with chronic health issues, many of which were death sentences in the last century—are responsible for a staggeringly large percentage (70 to 85 percent) of total healthcare costs. 

Second, healthcare consultants have never sounded so sensitive or sincere about their work and its implications. Part of this reflects the industry's overdue focus on customer experience in response to the extreme dissatisfaction patients experience when triangulating between a team of providers and their insurer as their premiums and out-of-pocket costs march ever higher. But healthcare consulting leaders seem acutely aware of the high social and economic stakes of the country's healthcare-cost problem.

Copeland responded to the Amazon-Berkshire-JPMorgan Chase announcement with a thoughtful column spelling out "the root cause of our inefficiencies, and what is needed to change the overall performance of our health care delivery (and consequently financing) system." 

When discussing the industry's current state, one of the first points EY Americas Advisory Health Leader Kristen Vennum brings up is the general mood. "A consistent theme that we hear when we're talking with clients now is: This time it feels different," she reports. "It feels like we're actually going to change this time, instead of just fretting about the $3.4 trillion of healthcare spend, half of which is wasted in the value chain, and all of that other stuff we've been talking about for a decade."

To recap—The cost of care marks the top challenge that healthcare organizations face. 

"The question is why?" Vennum notes. "And beyond the unsustainable cost growth, why are there so many new entrants coming into the market? Why is there so much M&A activity? What it comes down to is that the healthcare value chain is not creating value, which creates tremendous opportunity and which represents a tremendous problem for the American people."

Addressing this value chain problem, and leveraging the opportunities posed by industry disruption, requires traditional healthcare organizations to address a number of related challenges, including:

• Data-sharing and inter-operability: Despite substantial time, money and hard work invested in the push for accountable care organizations (ACOs), these efforts have yet to achieve widespread success. Providing truly coordinated care requires truly coordinated systems and data-sharing. "There's still a tremendous need to ingrate healthcare information," Cahill says. This is the case because healthcare companies have historically behaved in a much more insular manner than, say, manufacturing companies (which have long needed their complex supply chains to operate efficiently), or financial services companies. "There wasn't a tremendous amount of sharing of data in the past [among healthcare organizations]," Copeland notes. "There was not a lot of exchanging of data between trading partners. That was the norm. Now, there is a high demand to be able to do so." Healthcare organizations need help—in the form of strategy, design, data management, system integration and the like—to share demographic information, data on social determinates of health, clinical data, performance data around cost and effectiveness, transaction data and more. 

• Patient relationship manage-ment: While all eyes were on the Congress and the President last summer as they dramatically flirted with a repeal of the Affordable Care Act, some large technology companies with powerful data management capabilities were weighing how they could enter the industry. "We thought the disruption was going to come from the East coast and Washington D.C. with potential regulatory repeals," says Vennum. "Now, the true disruption is coming from the West Coast from the big technology companies. Healthcare has started a digital race, and our hope is that the consumers ultimately will be the winners." That would be a dramatic turnaround. Relatively few healthcare organizations "have a very good relationship with their members," Porta notes. "So, they want to get closer to their members, and the digital channel is one way they're doing it."

• Change management: Traditional healthcare organizations, especially on the provider side, are undergoing frequent and significant changes due to consolidation, new competition, new regulatory requirements, new customer expectations, internal process and technology changes and more. "As the healthcare industry continues to face disruption, providers are feeling pressure from both internal and external factors," notes Huron Executive Vice President, Chief Operating Officer and Healthcare Industry Leader Mark Hussey. "Internally, healthcare leaders must contend with burnt-out physicians and rising expectations around compensation and benefits, as well as the implementation of new technology to better run their business. Externally, healthcare leaders must meet the needs of consumers who want improved access and higher value care while also keeping an eye on rapid escalation of competition." 

• Regulatory requirements and repercussions: Although it receives scant attention outside the industry, the Medicare Access and Chip Reauthorization Act (MACRA) is "the most disruptive law since the Affordable Care Act was passed," according to Copeland. The law's two primary facets (measuring performance and payment arrangements) are creating major changes among many provider organizations and the health plans they contract (and now need to re-contract) with. "Any time Washington does something," Cahill adds, "it creates ripple effects of technology changes, process changes, reporting changes, and the like."

Strategy, Digital, Interoperability and CX

These challenges are driving demand for consulting services, of course. Firm and practice leaders familiar with these requests say that they frequently fall into one or more of the following categories: 

Strategy Work

Echoing some of his peers at other firms, Copeland notes that industry organizations are conducting "a great deal of strategy work, probably more so now than there's been in a long time." 

This work largely consists of scrutinizing the organization's existing value proposition and evaluating ways to improve it. Common improvements and changes center on establishing better customer experiences and transforming the payment model (from fee-for-service to outcome-based payments). 

Creating a digital capability also figures prominently in this strategic planning. "We're working with some providers on building out their digital strategy to ultimately engage patients more effectively, improve the patient experience, and lower costs," Porta says, emphasizing that it is important for this capability to reside within the provider's four walls. "The larger health systems recognize that this is a strategic capability. They need to be able to create and manage a digital environment and experience. We're not only helping them design it, but we're working with them to create the capability."

All of the value proposition improvement considerations, Cope-land adds, "generally require some deep thought in terms of what choices [healthcare organizations] should make. How are they going change their existing operating model? What does that mean for governance, operations, compensation, the talent model and so on?"

Creating Digital Channels

Payers and providers (as well as "pay-viders") are requesting help from consultants related to building new digital channels designed to enhance customer experience and lower operational costs. 

Many, if not most, healthcare organizations "are looking at that digital channel as a way to better connect and engage with their patients, starting with access and continuing through the whole care continuum," Porta says. Think of using a scheduling app on a smart phone when you get severely ill at 3 a.m. to make an appointment rather than dialing a (high-cost) call center when the doctor's office opens at 8 a.m. and being placed on hold. Or, imagine getting pesky but effective alerts on your phone to open that chip-equipped pill capsule and complete your antibiotics course.

"Building up that digital channel is something that organizations know they need to help with the longer-term move to a value-based care model," Porta says, "but it's also an excellent driver of more immediate ROI."

Copeland reports that enabling technologies—including "everything mobile," "anything that's digital" and data analytics—represent a major growth area within healthcare firms and practices.  "All of these enabling technologies are in very high demand and it's where the health plans and the health care delivery systems are investing heavily to be able to successfully address all of these new rules," he says. 

Driving Interoperability

A portion of the data-management and technology work specifically targets interoperability, which sometimes positions consultants as facilitators of connections (of different systems, data, processes and even cultures) among several different healthcare, life sciences and medical device organizations. 

"These are interesting oppor-tunities," says Cahill, who describes a project where Cumberland was brought in because of its understanding of the underlying technologies that needed to be integrated with a new device implementation. "This is a place where the life sciences, provider and payer worlds are coming together," he continues. "We now have a couple of these [projects], and I think the lines are going to continue to blur as technology solutions bring a larger number of different organizations together."

Customer Experience

Healthcare providers have long focused on improving the clinician's experience with digital tools and using analytics to improve hospital outcomes. Today, it's becoming more important for organizations to "balance the digital experience for both the clinician and consumer," Hussey notes. "They must use metrics not just to focus on safety and efficiency but to engage with consumers. This requires leverag-ing digital platforms to create a more consumer-centric experience by extending the brand and enhancing access lead-ing to measured outcomes."

Customer experience-related services are in high demand among payers and providers, according to healthcare consulting leaders. 

Vennum describes a recent project with an insurer in which EY used advanced analytics to enable real-time customer journey analytics. 

"Imagine every single customer as a dot on a line," she relays. "Every digital interaction they have, whether it's logging into a portal, making a call to a call center, submitting a claim, having a care encounter—anything they do that can be quantified digitally, we can now see that in real time."

And, rather than marketing through more traditional push offers to various customer segments, the insurer, Vennum says, "is now able to give every person exactly what they need, according to where they are in their journey." That may be nothing, in some cases, or it could be an offer for health coaching that needs to happen within a few days of a care encounter to help drive a better outcome. 

"It's just a completely different way of thinking about customer journeys…" Vennum adds. 

The phrase "completely different" doubles as an apt description of the current healthcare consulting environ-ment. Less than two years ago, a BCG healthcare leader said that client companies were  "learning how to operate in a period of uncertainty concerning just about everything." 

Today there seems to be great certainty concerning the industry's, and perhaps the country's, number-one challenge. 

Cybersecurity Strides

Healthcare IT News Senior Editor Jessica Davis keeps extremely busy. Cybersecurity is one of the primary topics she covers for her business trade publications, which has a dedicated a microsite featuring an ever-increasing collection of her reports on U.S. healthcare data breaches.  In May, Davis wrote about a U.S. Department of Defense Office of Inspector General report that "the electronic health records and security systems at the Defense Health Agency and some Navy and Air Force hospitals and clinics are riddled with serious vulnerabilities." 

Despite this and many other healthcare data breaches, the overall prognosis for the industry's cybersecurity capability is improving. Davis' coverage also shows that the issue is top of mind among healthcare technology executives and other leaders. 

"About three or four years ago, many healthcare organizations had not put sufficient  thought into their cybersecurity and what it meant to get hacked," says Deloitte Vice Chairman, U.S. Life Sciences & Health Care Industry Leader Bill Copeland. "I think given all the events that have occurred, cybersecurity has become a more fundamental competency for most of the healthcare players. That's not to say that some organizations are not still lagging behind. Given the fines, internal costs and brand damage that can occur after a major cyber-intrusion, more healthcare organizations have gotten a lot more serious about cybersecurity in recent years."    —E.K.

The Healthcare Industry's 'Cost-Plus' Challenge: Q&A with Huron's Mark Hussey

The soaring cost of healthcare tops the list of challenges the rapidly changing industry confronts, but it is hardly the only issue traditional companies and new entrants need help addressing. And while the ongoing move to value-based care is often portrayed as the primary lever for addressing rising costs, Huron Executive Vice President, Chief Operating Officer and Healthcare Industry Leader Mark Hussey notes that a number of other steps are needed to deliver substantial improvements to access, affordability and quality. Hussey recently discussed some of those additional steps along with other high-level industry insights via email: 

Consulting: What are the biggest disruptions to traditional healthcare right now?

Hussey: The healthcare industry continues to be impacted by several factors: rising costs, evolving payment models, industry consolidations, consumers taking control of their own medical decisions, a focus on transparency and regulatory uncertainty. While these challenges are apparent, they also give healthcare providers an opportunity to shape their organization's future.

Consulting: What are the biggest challenges and opportunities for healthcare providers?

Hussey: As the healthcare industry continues to face disruption, providers are feeling pressure from both internal and external factors. Internally, healthcare leaders must contend with burnt out physicians and rising expectations around compensation and benefits, as well as the implementation of new technology to better run their business. Externally, healthcare leaders must meet the needs of consumers who want improved access and higher value care while also keeping an eye on rapid escalation of competition. Leaders must make hard choices. Decisions focused on long-term financial and strategic sustainability involve big changes and significant risk. It comes down to balancing delivery of the best possible care with increased financial pressures, skyrocketing costs and declining revenue. Fortunately, challenges allow for opportunities. Organizations must look outside the box to make the most of their core business while finding growth in other ways. That includes looking outside of the industry at others' best practices and investing in technology that creates a more consumer-centric experience.

Consulting: What are the biggest challenges and opportunities for insurers?

Hussey: One of the biggest challenges facing insurers in the United States is the inefficient healthcare delivery system, focused on treating high utilizers. According to The Centers for Medicare and Medicaid Services (CMS), the US ranks near the bottom in healthcare efficiency and spends more per person to get a worse outcome than nearly every other country. Focusing on value-based care is just an incremental step in the existing healthcare delivery business model. It won't deliver the impact or changes we need to see in access, affordability and quality. Alternatively, as structured today, our healthcare delivery system impacts only 10 percent of an individual's health – individual behavior (40 percent), genetics (30 percent) and social and environmental factors (20 percent) are the primary factors. The greatest opportunity for insurers is to disrupt the way we see healthcare by looking at new models, new processes and new services that impact all the factors of an individual's health, delivering more value to the consumer at a lower cost.

Consulting: How do you expect the industry to evolve during the next five years?

Hussey: Over the next five years, there will be a growing trend of cross-industry collaboration and organizations looking outside the healthcare industry to find innovations to improve their business models. As care continues to move outside the four walls of the hospital, the rise of telehealth will impact the nature of care delivery and you will experience an increase in the use of a consumer-centric approach to the way healthcare is delivered. The use of precision medicine and using data analytics to make a more customized consumer experience will also grow in popularity.                                                                                                                     —E.K.