2016’s Surprising Driver of Healthcare Cost Containment

Stakeholders agree that healthcare spending must decrease to ensure sustainability. Most of the focus has been on the partnerships that have emerged between payers and providers to manage costs by establishing incentive-based payment models that pay for value rather than the volume of services delivered. Successful value-based care requires systems that manage electronic clinical and claims data combined with sophisticated analytics – both of which are becoming more widely adopted.

But payers and providers aren’t the only stakeholders in the healthcare sector seeking a better way to control costs. Purchasers – employers or other large groups that buy health insurance on behalf of their employees or members –ultimately fund the industry, and they, like payers, are starting to take advantage of electronic data and analytics to contain their healthcare expenditures.  Large companies are accustomed to analyzing transactions to optimize their supply chains and may be the best stakeholders to stimulate industry-wide cost reduction.

One of the consensus predictions for 2016 is that employers will begin to take action to reduce healthcare costs. There are signs that activity in this area is already underway.

 The Health Transformation Alliance (HTA), formed by 20 large employers, will pool data about its collective four million employees to examine costs, population health, and risks with an eye toward improving outcomes and negotiating with health plans and pharmaceutical companies.

HTA’s first effort will reportedly focus on lowering prescription drug costs. This is an area where it can be easy to spot patterns of inefficiency with enough data – for example, using name brand drugs when lower-priced generics are available or filling prescriptions at retail pharmacies when mail order discounts are available.

Optimizing prescription drug benefits is a good first step, but it’s only the tip of the iceberg. HTA hasn’t stated what it will tackle next, but it seems reasonable to imagine it would follow the lead of companies like Castlight and Welltok, which are merging different sets of public and private data to make predictions about the healthcare costs for groups of employees that match specific profiles. 

There are inherent privacy risks when employers try to influence the personal lives of their employees. Balancing privacy concerns against cost savings will be an important and difficult part of employer initiatives to control healthcare costs. Chances are there will be some missteps along the way.

The companies involved with HTA, as well as those using robust vendor solutions to collect and analyze employee data, are large enough to have a critical mass of employee data. They are also large enough to afford an investment in cost-reduction programs. But how can these initiatives scale down to accommodate smaller purchasers? Small companies that don’t have enough data or resources to copy these programs will have a much harder time taking control of their healthcare spending until tools and services become common enough that they’re able to participate in these types of initiatives.

For too long, health insurance purchasers have had few choices to control costs. They could change insurance providers, switch to plans with higher out-of-pocket costs, or stop providing coverage altogether. At least for large employers, 2016 will be the year where they use data to gain control over their healthcare costs and focus on employee wellness.