Omni-channel Healthcare: The Future? Part 2

Omni-channel healthcare is a care system that allows users to access and receive care through technology. Aspects of this include texting with your doctor, video visits, and remote monitoring of a patient’s condition; electronic health records (EHRs) and artificial intelligence enabled decision making tools also compose vital aspects of this ecosystem. Proponents aim to “fix” American healthcare by making high quality services more convenient, personalized, and widely available while reducing the cost of care. According to some industry leaders, omni-channel services are the future of healthcare access. (Fierce Healthcare). 

Part 1 of this series makes the case that the healthcare industry’s focus on buzzy point solutions like those that enable omni-channel healthcare neglects the actual needs and desires of consumers, and that this is why omni-channel healthcare has yet to deliver on its potential. In Part 2, I’ll demonstrate why the misalignment of the business models among healthcare’s major players and consumers' needs preserves today’s dysfunctional status quo, in spite of well-intended mission/vision statements and billions of dollars poured into innovations like omni-channel healthcare. 

In healthcare, the U.S.continues to outspend its economic peers by approximately $7T annually, while remaining last in key health outcomes when compared to those same economic peers (Commonwealth Fund). Life expectancy at birth, death rates for treatable conditions, and maternal and infant mortality rates in the US are worse than countries like Sweden, Norway, Japan and Australia. The US has the highest infant mortality rate at  5.4 per 1000 live births, compared to Norway ‘s infant mortality rate is 1.6 per live birth. Becoming a mother in America is 3-fold deadlier according to this same survey.

At the local level, America’s ongoing challenges related to health inequity are striking. Researchers at New York University’s School of Medicine documented that residents of Chicago’s Englewood neighborhood have an average life expectancy of 60 years, compared to residents of Chicago’s Streeterville neighborhood with a life expectancy of 90 years. A 30 year gap, merely 14 km apart. More recent studies indicate that the COVID19 pandemic has made things worse for all of Chicago’s citizens but particularly for those in the City’s most under-resourced communities where economic, housing, food and health insecurity are widespread. Chicago is but one example of the many localities in the US—and frankly across the globe—where the minutiae of location has profound implications on health status and life expectancy. It’s confounding that higher healthcare spending has led to lesser outcomes, but a closer examination of the system indicates that, in some ways, it’s by “design”. 

Americans receive healthcare services in a fragmented system of disparate clinics, specialty care centers, and hospitals, grouped together under the moniker of “health systems”, which operate similarly to holding companies. (Agency for Healthcare Research and Quality). Two-thirds of Americans receive care from just ten large health systems. These systems own and operate hundreds of hospitals and thousands of clinics and specialty centers, employing tens of thousands of people. (Becker’s Hospital Review, Hospital Management)  Larger health systems report revenue (and losses) in the billions of dollars—not dissimilar to some publicly traded conglomerates. 

Health systems, with their scale and significant financial resources, have the potential to bring advanced services to underserved areas and provide a significant economic boost to local communities through job creation and community investment  For instance, health systems could partner with communities and schools to offer internships and apprenticeships for jobs that omni-channel healthcare and related technologies will create in their organizations. That said, consolidation amongst care delivery organizations has yet to deliver lower cost or even higher quality care. For many patients (“consumers”), there has been little difference in the experience of receiving care from non-profit and for-profit health systems. For example, some nonprofit hospitals reportedly forgo underserved and less profitable communities (“markets''), in favor of communities where the predominant form of health insurance is employer sponsored which often has more favorable reimbursement rates than Medicare and Medicaid. (A quick search of the New York Times or Wall Street Journal will yield several articles on this topic).

For health systems, omni-channel healthcare presents an opportunity to offer more convenient access, post-visit support, and expand to markets beyond their current geographies. The platforms that support omni-channel healthcare, combined with an electronic health record, would give health systems the opportunity to personalize services, predict and preempt complications, and improve diagnosis. 

In theory, this would lead to reduced costs, as patients avoid unnecessary use of costly brick and mortar based services. Additionally, health systems could create new service lines by expanding beyond the geographies they currently serve, while improving operational efficiencies to maximize revenue. Accomplishing this would not be an easy task. Health systems would need to significantly redesign their operations by embracing consumer-based business models, requiring upfront investments in technology, service design, and change management. Moreover, executives would need to “budget for failure”, in order to give their organizations the time, resources, and patience necessary for these monumental changes.

Paying for healthcare in the U.S.A. is just as, if not more, fragmented than the healthcare delivery system. Americans pay for health care out of their own pockets, by purchasing private health insurance or participating in a government health insurance program. There are approximately 900 companies that provide health insurance on the private market though, to the surprise of some, the U.S. federal government , serves as the country’s largest payer or “health insurance company” through Centers for Medicaid and Medicare (CMS). 

About half (50.3%) of the US population access healthcare services through health insurance purchased from private payers and subsidized in part by their employers. Another approximately 40% of Americans receive health insurance from a public source with nearly 20% of Americans enrolled in Medicaid and 18% in Medicare (Statista). Like health systems, the largest private health insurance companies (“payers”) are organized as holding companies, with state-based divisions providing insurance products to tens of millions of Americans. The largest four payers are for-profit entities with balance sheets in the tens of billions of dollars (Statista) and a combined headcount of half a million employees in the U.S.. Stated slightly differently, these companies directly employ millions Americans.

For payers, omni-channel healthcare presents an opportunity to create a new “digital” front door to the healthcare system. This would place the payer at the entry point of care, allowing them to more effectively guide healthcare decisions, steer their members to preferred providers and “manage” care. In theory, omni-channel care could reduce the need for services at costly brick and mortar settings, like hospitals and emergency departments, as well as support patients between visits. Data collected from virtual visits and remote monitoring could be added to claims data, giving a more comprehensive, real-time view of a patient's health status. A digital front door controlled by payers would transform payers from “middlemen claims adjudicators” to more comprehensive healthcare entities that serve as trusted partners in the healthcare journey.  

There are other actors in the US healthcare system. For example,  medications are bought and sold through a web of private companies, distributors, and sellers. Pricing controls are achieved through discounts negotiated on volume-based purchase agreements and formulary based gate-keeping strategies by pharmacy benefit managers—many of whom are owned by the same holding companies that own payers. While there are numerous ways omni-channel healthcare could impact these actors, for this post I’ll focus on two of the main actors in the US health system–payers and health systems. 

In a perfect world, payers make money when they enable efficient access to high quality, affordable treatments and services, ensure that patients, especially those with chronic conditions, stay healthy and those in need of care recover quickly with minimal complications– while minimizing the administrative expenses associated with running their businesses. A quick listen to any investor day call will find the “medical loss ratio (MLR)” (Healthcare.gov) of keen interest to shareholders as they seek to understand whether a payer is running its business efficiently.

Today, most health care services are reimbursed on a fee for service basis which means care delivery organizations (hospitals, clinics, etc...) make money on volume not the quality or value of the services provided. (Commonwealth Fund) Rates set by the federal government and/or negotiated with private payers are the primary tools for controlling healthcare costs generated by those who deliver care. Out-of-pocket costs (premiums, co-insurance, deductibles and copays), curated care networks and drug formularies are the most widely used “basic tools' employed to  manage consumer behavior. 

In this scheme, payers make money by enrolling more people and keeping the amounts of money paid for services low. Health systems make money by increasing the quantity of services they provide and maximizing what they are paid (reimbursements) for these services. All things being equal, price-sensitive consumers choose a cheaper service (physician, drug, hospital, insurance plan), go without (skip/delay care, avoid filling a medication, eschew insurance coverage), or go into debt when out-of-pocket costs become unaffordable. (Smith el al. Medical Decision Making) 

The result is a highly complex healthcare system where the key actors are “designed” to be in opposition to one another, instead of one where collaboratively solving the challenges faced by healthcare consumers (i.e. diabetes, cancer, access to care, infant mortality)  are the key business priorities (JAMA, 2021). To survive, payers and health systems must maintain and grow profit margins that are not designed to reward the value of the experience or outcomes consumers receive. Both payers and providers must choose to layer omni-channel healthcare and related tools on to their existing operating models to serve consumers in meaningful ways. Consumers also have very little incentive to adopt omni-channel healthcare in lieu of existing ways of accessing care. Absent a fundamental change to these business models, omni-channel healthcare, and related innovation investments are unlikely to be key drivers in “fixing healthcare”  (Mayo Clinic Proceedings). 

For omni-channel healthcare to deliver on its promise, health systems and payers will need to narrow the gap between their stated missions and their demonstrated practices. This requires that they move from sitting on opposite sides of  the table in heated transactional battles with one another, to sitting on the same side of the table to solve the problems each says are key to “fixing” healthcare.—like access, affordability, disease, etc… Only by aligning financial incentives, redesigning business models and delivery systems will omni-channel healthcare enable better, more affordable healthcare.

In Part 3 of this series, I’ll explore what payers and providers sitting on the same side of the table could look like. I’ll also offer a few examples of promising efforts that might very well change the status quo. Stay tuned. 

Author: Elif E. Oker. All Rights Reserved