Guest Post: 2014 Expo Panelist Harry Glorikian on a Health Cost Turning Point—How Payers are Getting Creative

There is a transformational shift occurring in our healthcare system. The days of a fee-for-service structure are subsiding and we now see a movement to a value-based payment system that rewards good outcomes. This movement is not happening quickly enough, however, which is why the following tactics are being used by payers to innovate healthcare and accelerate this shift. 

One major tactic is reference-based pricing—a method where the payer determines a fair price for a procedure and the patient covers the difference if they prefer an operation that costs more. This strategy is a real game changer because it fosters competition among providers and encourages patients to find the most cost effective deals. Another tactic is setting standards of care, such as WellPoint’s recent initiative that convinces doctors to treat cancers according to evidence-based standards. This helps patients receive better quality care and often results in less expensive treatments. There has also been a surge in limited network health plans, which offer substantial appeal to small businesses or individuals because premiums for such plans are between 10 to 25 percent lower than traditional plans. 

What makes each of these tactics more likely to succeed than past attempts at moving toward a value-based system is that each promotes competition based on cost and value. Payers see the benefits of this focus, but now even patients are beginning to realize how this comes into play for healthcare decisions. Additionally, these strategies help eliminate unnecessary services that account for almost half the estimated $750 billion the U.S. wastes annually on healthcare. This increases efficiency and streamlines treatments, an important step in reaching the ultimate goal of healthcare reform: Improving patient outcomes. 

I recently explored these concepts in greater detail in “A Health Cost Turning Point? Payers Get Creative – The Reboot Part 2,” the full text of which you can find here.

Harry Glorikian is a healthcare consultant and a guest speaker at this year’s Healthcare Supply Chain Expo, presenting on “Innovation in Supply Chain Technology,” October 15, 2014 at 3:15 PM. Register here  for the Expo to see Harry’s presentation and many others.