Payers and providers often find themselves at odds in today's fractured healthcare landscape, struggling over costs, coverage, and care standards. What if the key to resolving this conflict lies in greater healthcare personalization? This article explores how the industry can better align payer and provider priorities, reduce financial strain, and deliver better patient outcomes.
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You have a choice between two doctors: one is charming and attractive, possessing an excellent bedside manner. This doctor listens carefully to your concerns, readily prescribes the medications and tests you request, charges $400 (USD), and gets you better in three months.
The other doctor is rude, dismisses your requests, insists you are wrong, and sends you home with a set of exercises—no medications—charging you $50 (USD) but helping you recover in just one month.
Which physician would you rather see? Consider this question carefully; the answer reflects the heart of many difficulties plaguing the U.S. healthcare system and at the crux of healthcare reform.
Most Americans I've spoken to prefer the first doctor when presented with this scenario. Why? Because they appreciate being listened to and receive what they ask for, and they believe that higher costs equate to better care—a sentiment supported by research showing that a significant minority of patients often associate price with quality of care.
This preference underscores a major challenge in personalizing healthcare. Recently, I explored the lack of personalization in healthcare and its consequences, but I didn’t really get into the real reason personalization is so elusive: incentives. Many providers operate within systems that incentivize standardized care rather than personalized healthcare approaches.
This article will explore value-based care models and how these incentives create persistent tension between payers and providers navigating healthcare reform. This tension is not just a policy issue—it’s a patient experience issue, driving dissatisfaction and distrust and setting unreasonable expectations about healthcare delivery in a consumer-driven society.
Let’s dig in.
At its essence, the healthcare system operates under a paradox. Payers and providers have a shared interest in delivering great care and not upsetting patients—after all, patient satisfaction drives loyalty and outcomes. Yet, there’s a fundamental misalignment in how each defines “necessary care” and who should bear the financial risks.
For payers, the goal is to fund appropriate care—care that is evidence-based, effective, and necessary. For providers, the goal is the same. However, variation in quality, delivery, and outcomes leaves payers reluctant to approve all claims and providers scrambling to coordinate and deliver the care they know they need to.
To manage this, payers implement controls designed to filter out inappropriate care. However, these tools are often overly simplistic, leaving many cases inappropriately denied. Payers also must wrestle with patient-level adjustments that might not be best practice but are what the patient wants.
On the provider side, tooling to personalize and coordinate the delivery of care is only just emerging, leaving much care relying on judgment and opinion (often informed by the patient), which may not always align with the latest evidence or best practices. This complicates care and interventions so much so that accompanying documentation becomes burdensome, hindering efficient claims processing and patient billing.
The provider billing or Revenue Cycle is sadly yet another silo in itself—a silo that has an entire category of software providers that offer services such as billing maximization and upcoding to ensure that every documented nuance is billed to its maximum extent—none of which does much to help build trust with the payer.
From a patient’s perspective, the provider challenge is largely invisible, provided they get the service they expect. However, the controls on the payer side are highly visible, often seeming like hurdles designed to avoid paying for what they believe to be necessary interventions. But the truth is, defining, documenting, and billing for the right “necessary” personalized healthcare turns out to be more difficult than it should be, leading to frustration across all parties.
The way forward lies in creating governance frameworks that ensure every patient receives the right care at the right time for the right reasons. If payers could trust that all interventions adhere to this standard, they would have no reason to deny claims—or impose burdensome controls. But how can this trust be built? There are two primary approaches:
This value-based care model standardizes the cost of care for specific procedures, processes, or outcomes. It’s a method akin to Europe’s approach, where many healthcare services are priced predictably, even when covered by private insurers. We have seen this model introduced recently as ‘shoppable services’ and is now used in the U.S. for an increasing range of ambulatory procedures.
Advantages: This eliminates administrative friction and ensures payers always know the cost of care up front. It also promotes competition as prices are known and, therefore, likely publicly available, encouraging differentiation and public defense of variation.
Challenges: It shifts financial risk to providers, possibly incentivizing them to avoid complex or less-profitable patients. Without case-mix adjustments and screening protocols, this could exacerbate inequities in care access.
In this value-based care model, interventions are governed by pre-approved protocols. The price of care varies depending on the services delivered, but payers are assured that all interventions are evidence-based and within a structured and agreed decision framework.
Advantages: Providers are insulated from financial risk, and care becomes more evidence-driven and personalized. Over time, documented exceptions could improve protocols and advance the science of care delivery; providers could even negotiate their own protocols and set their own prices if they bring evidence of the efficacy of their approach.
Challenges: This approach risks reducing provider autonomy, as a significant portion of care is protocolized rather than judgment-based, though case variation would largely be expected and even encouraged as a source of new evidence for improvement.
The former represents two ways to begin delivering care that is predictable and evidence-based. But a third option is emerging as a potential middle ground that allows provider autonomy but promotes evidence transparency along the way.
One potential approach could involve mandating that providers disclose the certainty of the evidence supporting their treatment decisions at the time care is delivered. This could be simplified into a scoring system: if the evidence certainty is 80% or higher, the care would be covered immediately without any copayment. Conversely, if the certainty falls below 20%, a review process would be triggered.
Implementing this system would empower patients with greater knowledge about the quality of their care while significantly reducing the burden of utilization reviews for most treatments. If real-time assessment isn’t feasible, a retrospective analysis could still provide value by offering a transparent scoring system that indicates what percentage of care provided aligns with established evidence.
Advantages: Patients gain unprecedented transparency, understanding that the care they receive is based on ‘best practices’ and with guaranteed payment coverage. Providers adhering to evidence-based guidelines can provide a smoother experience for patients, making it clear which doctors are preferred and which may not be as reliable. In addition, we could anticipate a surge in published research as the industry rapidly seeks to demonstrate and evolve the best practices.
Challenges: Beyond the significant challenges of implementing this system at the point of care, a major concern is that the most complex cases often lack robust evidence. Cutting-edge research in novel fields may inadvertently alarm patients, even though actual risks in real-world clinical settings remain unchanged. Additionally, under a transparent scoring system, providers tackling these challenging cases might face penalties for venturing beyond established evidence, potentially discouraging innovation and exploration in treatment approaches.
While these value-based care models tend to work well for routine and procedural care, healthcare’s complexity extends far beyond these categories. Non-routine and unpredictable scenarios will always require another layer of protection, akin to catastrophic insurance.
Consider the analogy of car ownership: Routine maintenance and pre-purchased service plans cover predictable issues, but you also need collision insurance for rare but costly accidents. Similarly, in healthcare, routine care can be packaged and provided at a predictable cost, while true insurance covers unforeseen, high-cost events on a risk basis.
This kind of model is very hard today when patients change plans on a yearly basis, removing the ability for both the insurer and patient to benefit from any interventions that could reduce risk and premiums, such as exercise, diet, or preventive care.
The future of personalized healthcare hinges on one key principle: interventions must be appropriate, evidence-based, and personalized to the patient. Achieving healthcare reform requires upstream work to align incentives, reduce subjective decision-making, and foster trust between patients, payers, and providers.
For providers, it offers an opportunity to deliver consistent, high-quality care without bearing untenable financial risks. And for payers, it promises a system where every dollar spent drives value. For patients, this could mean fewer denials, better outcomes, and premiums that reflect the benefits of preventive care, provided that there is an acceptance that the role of the medical professional is to get them better, not to give them what they ask for just because they’ve seen it on TV or a friend has it.
Personalized healthcare involves understanding the individual and tailoring approaches to meet their unique needs, considering factors like adherence and social determinants of health (SDOH). However, this does not equate to simply giving patients everything they request.
Achieving true personalization is challenging and necessitates systemic changes across the board. By enhancing healthcare personalization while ensuring that each intervention is appropriate, we can improve outcomes for payers, providers, and patients alike, ultimately benefiting the entire healthcare system.
Would you like to learn about related topics? We suggest these three articles:
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