Monika Blaumueller

September 12, 2019

In 2006, Harvard’s business and medical minds predicted that healthcare providers will eventually compete based on the value they deliver. A Healthcare Outcomes-as-a-Service model that uses cutting edge, secure, hybrid cloud, analytics, and IoT, will enable the requisite quantification of healthcare value and incentive alignment. It will begin with large scale reversal of chronic disease. 

Seventy to ninety percent of healthcare costs are attributable to chronic diseases, most of which can be reversed. Digital behavior change supports, or digiceuticals, hold disruptive potential, particularly for type II diabetes and pre-diabetes. The average annual cost to treat the condition is nearly $14,000 per patient. The average individual lifetime value potential for reversal exceeds $100,000. A specialty digiceutical company called Virta has reversed the condition for 60% of its patients in their first year. Virta charges six thousand per year, out of pocket. Payers and subscribers would benefit significantly if such supports were integrated into every point of care. Providers, however, would not. 

Under existing incentive systems, the large scale reversal of diabetes represents an existential threat to providers. A healthcare provider system treating 550,000 patients would create approximately $124 million in healthcare value per year by achieving reversal for 60% of it’s diabetics. The lifetime value of avoiding onset for 60% of it’s pre-diabetics would be $32B. If this provider were in a bundled reimbursement plan, it would lose up to 20% of its revenues, triggering an existential financial crisis, because 37,000 fewer patients would have billable events from one year to the next. 

New Math
Healthcare value potential varies radically by patient. In the United States, the top 5% of patients account for half the costs in the entire system. A diabetic in the this cohort will accrue around $96,000 of healthcare costs per year. One in the middle quintile will accrue $13,000. When a patient’s risk declines from the 95th percentile to the 80th, the savings are $57,000. By comparison, middle quintile patients who achieve and maintains remission contributes one-fifth the savings achieved by moving the highest risk patients to the 80th percentile. The new math of Healthcare Outcomes as a Service enables a disruptive precision in quantifying healthcare potential for each subscriber. They will be able to compare the likely cost trajectory for an individual patient in short, medium and long term and tie provider renumeration to the delta, the degree and duration of improvement achieved. The larger the number of patients and the longer these measures are tracked, the more profound the insights they will generate, which will result in ever evolving effectiveness and continuous acceleration of the rate of innovations and their adoption.   

Healthcare Outcomes as a Service will deliver actionable insights to each stakeholder (payer, provider, patient), streamline practitioner workloads and introduce new levels of evidence to decision making. They will quantify the responsiveness and the degree of thoroughness of healthcare practitioners, adherence to best practices, and patient satisfaction. Payers will refer each subscriber to the optimal medical home.

Providers will receive actionable insights generated by patient biomarkers for proactive intervention and prioritization which is demonstrated to minimize patient deterioration. 

Value Based Incentives

Under a value based payment plan, a provider system reversing a majority of it’s cases of diabetes that receives a 20% bonus would increase its total enterprise revenues by nearly 40%. This is in sharp contrast to the above example, which resulted in a catastrophic loss of 20% of revenues. In a high population density area such as the Baltimore-Washington corridor, Johns Hopkins, MedStar and Kaiser Permanente are among the integrated healthcare systems that compete for patients. If one were to offer successful, systematic diabetes reversal, it would free up capacity because healthier patients use the system less. It would be incentivised to keep those in remission as long as possible. Payers would be able to refer more diabetics away from the providers delivering lower value. The superior performers would have the capacity to treat more patients with the same physical and human resources. Eventually, competitive providers will establish partnerships in lower population density areas, similar to the Mayo and Cleveland Clinic models which disseminate best practices to other geographies for licensing fees.

Tens of Billions in Savings

Healthcare Outcomes as a Service will enable incentive alignments between payers, providers and subscribers. Large payers are positioned to save tens of billions of dollars per year while improving the quality of life and loyalty of their subscribers.  ◼︎