Research: The Evolving Health Care Payer Landscape

FrogDog conducts in-depth market research regularly for its clients. Here we highlight major trends we’ve discovered in the payer landscape.

To develop and implement effective business strategies and plans for its clients, FrogDog continually reviews industry trends. In our research articles, we share recent insights that affect key industry sectors.

Recent health care reform in the United States has led many companies in the health care industry to look for ways to succeed in the new and changing market landscape. Payers, especially, are experiencing a wealth of change as they adjust to challenges such as new benefits structures that require coverage of certain basic and preventative care and reimbursement models focused on health outcomes as opposed to fee-for-service.

As part of the strategy development process for several clients, FrogDog conducted in-depth research into a number of health care markets and identified four increasingly important areas of focus for players in the payer space. Movement toward improved patient outcomes, new cost control methods, transparency, and collaboration across the continuum of care are all trends that these companies must understand and address to remain competitive in the payer landscape.

Increased Focus on Patient Outcomes

One primary result of the Affordable Care Act (ACA) is the noticeable shift away from traditional fee-for-service models of reimbursement toward models focused on positive patient outcomes and experiences. In other words, it is no longer sufficient to simply provide treatment. Instead of focusing on the quantity of services provided to generate revenue, organizations must show the value and quality of treatment to preserve and optimize reimbursement levels.

However, to prove the positive value of care, providers must determine how to measure and demonstrate that value. Some common methods include tracking readmission rates, duration of hospital stays, and morbidity.

Commitment to improved patient outcomes is increasingly factored into payers’ decisions about whether to work with a given provider network. However, when evaluating the difference in outcomes between provider groups, it is imperative for payers to ensure that they are looking at comparable numbers. Outcomes data should be adjusted for risk before it is analyzed and the method of data collection should be taken into consideration when making final network decisions.

Patient outcomes are a key aspect of performance evaluation for payer-like organizations such as Accountable Care Organizations (ACOs) as well. For these groups, ensuring that patients receive the highest quality of care is an important driver of revenue, as they become eligible for bonuses when they hit quality benchmarks. Thus, ACOs are especially interested in reducing unnecessary testing and providing the most appropriate care at the right time.

New Methods for Controlling Costs and Driving Revenue

Another major change brought about by the ACA is the increase in power of choice given to patients. The opening of the health insurance marketplace made it easy for anyone to access coverage, but it also increased the level of competition between payers. Insurance companies now must compete on factors such as price and positive member experiences. To offer competitively low premiums and remain profitable, payers must look for ways to cut back on costs—without sacrificing experience. Toward this end, payers are increasingly refocusing their provider networks to work with provider groups that are willing to accept lower reimbursement rates and have high rankings from members.

While this may be a solution for payer groups, it puts more pressure on providers, who have less of a gap between the actual cost of providing care and the reimbursement they receive for providing care.

For ACOs, profitability is tied to delivering on their stated goal of increasing quality of care. On top of receiving bonuses for meeting specific outcomes goals, improved care also saves these groups money by eliminating redundant or unnecessary testing, reducing hospital stay length, and preventing readmissions. Extreme savings in these areas are important to offset the costs of investments made to improve care for patients, such as purchasing new equipment and hiring more staff. An additional motivating factor for ACOs is the threat of paying fees if quality levels aren’t met. These fees, plus a failure to save enough money to make up for up-front costs, pose a serious threat to new ACO groups.

Enabling Information Sharing and Transparency

Transparency is an increasingly important theme seen throughout all manner of health care organizations. There is a growing sentiment that the health care industry as a whole will benefit from more accessible information, including data from clinical trials, insights into patient outcomes, and details on financial relationships between entities.

This movement is having different effects on the various types of health care organizations. Hospitals and providers, for example, are being called upon to clearly state their prices for common procedures and to make their quality measurements easily available.

Similarly, payers are increasing their focus on providing price transparency tools to their members. Unlike provider groups, who are feeling the heat from the intense scrutiny brought on by increased transparency, payers actually benefit from making it easier for their customers to estimate cost of care. Not only do members appreciate access to the information, but their ability to select providers based on price forces hospital groups to compete in this area, contributing to lower claims costs for common procedures.

Collaboration across the Continuum of Care

Collaboration will be imperative to success in the new health care landscape. Organizations that encourage various groups to work together are already seeing success. ACOs provide a great example, as they facilitate collaboration between providers from different departments when caring for patients to improve outcomes and reduce costs.

Chief medical officers at large payer organizations, especially, have expressed interest in seeing hospitals, doctors, lawmakers, and other health care personnel do a better job of working together to achieve mutual health care goals, such as increasing access to provider care. The key to motivating disparate organizations to work together will be helping them realize that they have the same end goals: improving quality of care and reducing costs to create a sustainable health care system.

By focusing on these four primary areas, organizations within the health care industry will be able to adapt to and maintain their competitive edge in the evolving health care market landscape.

For further information about FrogDog’s recent research into payer trends, reach out to us directly.

For examples of how FrogDog has taken research like this and put it to work for our clients, review some of our case studies.

FrogDog continually researches and monitors industry trends for its clients. Does your business know what is happening in your industry and have strategies to complement it? If not, contact us.

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