The benefits of digital platforms and experience in Medicare-focused healthcare enterprises

    Paddy Padmanabhan, Founder and CEO of Damo Consulting a digital health entrepreneur, author and host of The Big Unlock podcast.

    Never before have the competitive forces for the health care premium dollar gathered on the horizon as they have now. Digital-first companies, vertically integrated plans and integrated health systems compete aggressively for increased market share and profits, especially in the Medicare Advantage segment.

    Medicare Advantage plans, or MA plans, as they are commonly called, are offered by Medicare-approved private companies that must follow Medicare’s rules. The federal government pays Medicare Advantage insurers per capita for each covered member and sets out-of-pocket cost limits for covered services.

    With the growth of eligible membership due to an aging boomer population, MA is an attractive investment segment. National health plans have mainly served this segment, such as United Health Group (UHG), Anthem and Humana, as well as several regional health plans from Blue Cross Blue Shield (BCBS). But a new breed of digital healthcare startups, including insurtech companies and technology innovators offering point solutions, are now targeting MA.

    The federal government updates MA payments through a complex formula based on how spending fluctuates in the traditional Medicare program and other factors. With the Biden government Announcement of a substantial rate hike in 2023, the increased interest in the MA population segment is creating a highly competitive landscape.

    We see the rise of digital-first companies like Devoted Health almost $2 billion in venture capital, targeting the MA population. Hospitals are also trying to become insurers. Traditional health systems, including one of my clients, Prisma Health, are: launch brand new health plans targeting the MA population. The Healthcare Finance Management Association (HFMA) and consulting firm Guidehouse found that “nearly 60% of health systems plan to move to risk-based Medicare Advantage models in 2022.”

    MA company management

    The major focus for all players in the MA ecosystem has been on managing medical costs. Major health plans such as UHG and Humana have adopted a strategy of vertical integration to gain greater control over medical costs for their covered populations. In this spirit, UHG has bought 10,000 doctor’s practices in the last few years; Humana owns more than 200 clinics and has invested in home care. These organizations also build solid data and analytics foundations, leverage data on their member populations and, in some cases, acquire, as is the case with the current acquisition of Change Healthcare by UHG.

    New insurtech providers such as Oscar, Clover and Bright Health are approaching the market from a digital-first, data-enabled perspective. Because they have no heritage in healthcare, they also face challenges. Clover Health, which went public in a year SPAC transaction, more than lost $4,500 per member in 2021, which translates into a medical loss ratio of 100%. In other words, they spent all of their premium dollars on member medical expenses. Bright Health has withdrawn from various states citing high medical costs due to unexpected pandemic-related costs.

    The role of digital platforms and experiences

    The ability to deliver compelling digital experiences, underpinned and enabled by advanced data analytics to improve access and care, is emerging as the most critical strategic differentiator for health plans, especially those targeting the MA segment.

    Major health plans like Humana, UHG and Anthem have elevated the digital function to the face of strategic capabilities that define a vision for the future of enterprises. They focus on personalized consumer experiences, carrier engagement, and advanced analytics. Ten years ago I changed doctors because my PCP didn’t have any digital tolerance and he didn’t want to use the EHR system. Today, patient portals are table stakes, and more than 60% of respondents in a study by Experian Health and Pymnts indicated they would switch to a health care provider who has one. Visiting a doctor today can be an all-digital experience.

    Another reason for the increased focus on digital experiences is the Medicare rating program rewards health insurers that provide superior experiences. Members often use Medicare Star Ratings to select their health plans, and higher ratings translate directly into market share gains through new member acquisition. Consultancy firm McKinsey estimates that “with the latest changes … customer experience will make up about 57 percent of the total star rating by 2023.”

    At the other end of the spectrum, integrated health systems, also known as payviders (providers who also have a payer or health plan), are uniquely positioned to take advantage of the Medicare Advantage opportunity. My work with a payvider has provided deep insights into how to effectively target members and patients for healthcare services campaigns, health risk management and superior online experiences.

    Collaboration between payer and supplier as the way forward

    As healthcare advances, driven by consumerism and technology support, healthcare organizations must focus not only on getting the right experience, but also working with others in the ecosystem to improve risk management capabilities and control costs. Collaboration between payer and supplier is key. Leading healthcare organizations are forging unusual and creative partnerships with technology companies and other healthcare enterprises to achieve these goals.

    One example is using a common CRM platform for health plans and clinical enterprises to help you understand and engage with members within the integrated health system. Pooling data between companies is another method of embracing partnerships. Examples include Anthem’s partnership with EHR vendor Epic to deliver previous authorizations and other meaningful information directly into the provider’s workflows. There is also a 10-year Highmark Insurance partnership with ChristianaCare to use shared data to improve health outcomes. As competition for the MA premium dollar intensifies, it will be necessary to break boundaries to achieve groundbreaking performance. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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