HEALTHCARE REFORM WILL TALK SMAC
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1 HEALTHCARE REFORM WILL TALK SMAC Disruptive Technologies Key to Success of Outcome-Based Delivery By Al Denis, Director
2 INTRODUCTION The Affordable Care Act creates a powerful set of incentives to expose and eliminate inefficiency and drive a transition from the existing fee-for-services model to bundled payments and outcome-based service delivery across treatments and supply chains. In this emerging environment, insurers will transform into true wellness companies, with a financial stake in improving the health of their covered populations. For this model to succeed, payers and providers will have to collaborate to develop shared risk/reward delivery systems that can: Offer wellness programs targeted to individual needs and interests Analyze the health impact of wellness programs Quantify the financial impact of improved health and reduced demand for healthcare services The disruptive technologies of social media, mobility, analytics and big data and Cloud (SMAC) will play a crucial role in enabling delivery models with these characteristics. This ISG white paper describes each of the SMAC technologies in the context of their role in driving healthcare reform and enabling the transformation to a new model of delivering and managing healthcare. Future articles will examine the areas outlined here in greater detail. HEALTHCARE REFORM WILL TALK SMAC AL DENIS 1
3 THE WELLNESS IMPERATIVE The ACA offers a unique opportunity to dramatically improve the health of millions of Americans. It does so by creating a financial incentive to reduce the amount of healthcare individuals receive. While payers will achieve incremental savings from exposing administrative inefficiencies and optimizing processes and systems, the real savings will come from solving the 80/20 problem that is, reducing demand for healthcare among the 20 percent of patients that account for 80 percent of healthcare costs. Put simply, the ACA gives insurers a powerful profit motive to reduce childhood obesity, encourage smokers to quit and convince sedentary adults to get off their couches. SOCIAL MEDIA Payer organizations are increasingly focused on using social media to encourage, incentivize, cajole and even bully their customers into adopting healthier lifestyles. The simple reason, of course, is that a healthier customer base represents a healthier bottom line. The power of social media as a wellness tool lies in the fact that it s ubiquitous and accessible, it s fun, and it drives positive reinforcement and peer pressure. Social media platforms can be used to integrate goal definition and rewards, and allow members to make statements about healthy choices and to gain (and give) positive and consistent feedback. Healthcare organizations such as Blue Cross/Blue Shield of North Carolina recognize this potential and are developing a range of programs that incorporate social media tools. Moreover, payers are integrating social media with existing and emerging technologies. For example, chat, and web-based information and online programs can reduce sales cycle times and costs and gauge customer satisfaction. MOBILE Mobile technology enters the picture as the ubiquitous delivery vehicle that records patient activity, monitors data, provides feedback to the patient and communicates with the provider. Cigna, for example, is piloting a fitness app aimed at reducing the risk of diabetes through high-tech measurement, high-touch coaching and cool tools aimed at encouraging patients to stick with the program. Mobile applications make it increasingly easy to navigate plans, find physicians and even do first-level triage from a smartphone; they can also be a fitness aid, by recording vital signs during workouts and charting progress. ANALYTICS AND BIG DATA In October of 2014, all healthcare institutions affected by the ACA will be required to comply with the ICD-10 protocol for coding disease symptoms, diagnoses and procedures. The current system, comprising 14,400 codes, will be replaced by a system with more than 68,000 codes. While the transition will be difficult and painful, the outcome will produce a mother lode of data data that providers and insurers can leverage towards improved outcomes. ICD-10 will help insurers gain insight into how positive lifestyle changes affect healthcare requirements, and translate that impact into actuarial models tied to costs. For example, a patient who loses 20 pounds might be able to go from a bi-annual physical to an annual visit an outcome that reduces costs for the insurer. The challenge now becomes to track customers lifestyle programs and progress, and analyze and evaluate the impact of those programs on health outcomes and on costs over time. Specifically, insurers will have to securely integrate information such as a weight loss of 20 pounds or a 30 percent drop in bad cholesterol into a patient s Electronic Health Record (EHR), and calcuate how that reduced demand for healthcare services affects the payer s bottom line. Addressing these challenges starts with understanding the basic concept that insurance is about pooling for shared risk, and that wellness is about reducing risk through improving the health of the covered population. Improving health, meanwhile, requires in-depth knowledge of the covered population. ICD-10 is a powerful big data tool to do just that, by providing opportunities to identify risks, define elements of positive behavior and reinforcement, and initiate outreach to those who need help staying healthy. HEALTHCARE REFORM WILL TALK SMAC AL DENIS 2
4 Big data will also play a role in helping payers target wellness programs to individual preferences. The rewards and incentives payers offer to customer can t be generic a middle-aged man trying to quit smoking will want different rewards from a pre-adolescent battling obesity. Collecting customer data, analyzing that data and then developing tailored and automated programs based on that data will be key to connecting with member populations on an individual level. Gamification models are already being developed to engage patients with consistent reinforcement and feedback. In addition to making lifestyle changes a positive experience, such programs can offer customized material benefits. So, an avid fisherman who loses 20 pounds could be rewarded with a new set of dry flies. For a 12-year-old boy who loses 20 pounds, the reward could be a new bike. Big data and analytics will allow payers to tie social media applications that motivate people to exercise and eat right to improved outcomes. Ultimately, this will enable payers and providers to put a dollar value on the impact of lifestyle changes on their customers. CLOUD The healthcare sector faces a fundamental dilemma on cloud computing: on the one hand, security and privacy concerns have slowed adoption; on the other, growing storage demands, cost pressures and scalability requirements make cloud an increasingly attractive proposition. On-premise cloud solutions that address the massive data storage demands posed by electronic health records requirements and ICD-10 are especially intriguing, but even these are being carefully reviewed for span of control in security. Additionally, both healthcare payers and providers (particularly the latter) must address some critical questions around their internal processes for compliance to regulatory standards and access to and use of Protected Health Information (PHI). Only then should they think about aggressively pursuing cloud solutions. Cloud service vendors, meanwhile, are quick to tout their ability to comply with the new regulations, but the onus remains on buyers to get their internal houses in order, as well as to perform due diligence on suppliers, their sub-contractors and their compliance capabilities. FROM INCUBATION TO MAINSTREAM Today, healthcare companies and some IT service providers are developing new solutions in an incubatortype environment, and are producing viable applications. Such programs will quickly move beyond the pilot stage and become foundational to insurer strategy. Forwardlooking providers will develop outcome-based delivery models, whereby the savings derived from reduced demand for health services will be shared among buyers and suppliers. Service providers willing to share the expense and risk of developing and implementing scalable models will emerge as the winners. Against this backdrop, the HIPAA Omnibus rule, which defines compliance requirements and was finalized in September of 2013, provides some much-needed direction, and extends accountability for suppliers though their subcontractors. This additional extension of responsibility is driving more frequent reporting of exposure and security breaches. It should be stated that the majority of these breaches can be attributed to theft and hacking incidents, rather than the technology or storage model deployed. Nonetheless, they highlight the fact that sourcing transactions in the cloud require diligence and confirmation to ensure that the cloud that s purchased is the one that s audited. HEALTHCARE REFORM WILL TALK SMAC AL DENIS 3
5 LOOKING FOR A STRATEGIC PARTNER? Your operational excellence is our business. CONTACT US Visit the AccessISG Sourcing Portal for more sourcing information, insight and tools. Click the envelope to contact us or go to Information Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience and global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 850 employees and operates in 21 countries. For additional information, visit Copyright 2014 Information Services Group All Rights Reserved
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