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Peter Manoogian
Principal,
ZS

Shreesh_ Tiwari_headshot_small
Shreesh Tiwari 
Principal,
ZS

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Harbinder Raina 
Associate Principal,
ZS

Colin_Russi_headshot_small
Colin Russi 
Strategy Insights & Planning Manager,
ZS

Jeff_Traenkner_headshot_small
Jeff Traenkner 
Strategy Insights & Planning Manager,
ZS

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COVID-19’s long-term impact on US health organizations

Posted by Shreesh Tiwari on Thu, Apr 16, 2020

4333_NovelCoronavirusIimpactUSHealth_BlogAccess COVID-19 resources

While the phrase is starting to become cliché, it still rings true: These are truly unprecedented times. The past few weeks have been a period of immense change for all of us as consumers and practitioners of healthcare, and we’ve adapted our lives and businesses to deal with the coronavirus outbreak.

COVID-19 will certainly have far-reaching effects on the U.S. healthcare system. For healthcare leaders, managing care and related risks amid this global crisis is now the top priority. Going forward, it will be critical to ensure that the current COVID-19 crisis doesn’t translate into a “confidence crisis” for public health in the long term. While relief measures will certainly provide a much-needed respite in managing sudden spikes in costs and will ease cash flow disruptions, payers and providers will still face immense cost pressures and will exit the COVID-19 crisis even more focused on cost controls.

Yet despite the uncertainty, health plans can start to take steps to manage and sustain their long-term business. Here are four ways that COVID-19 is likely to affect health organizations, and what health plans can do as they begin to navigate uncharted territory:

1. Virtual care—or telehealth—will become universal. Technology is poised to flip healthcare from scarcity to abundance. That’s the power of shifting from in-person care to a digital- and cloud-based format. This dynamic has transformed industry after industry: media, retail, music, banking and education. Now it’s healthcare’s turn, and the coronavirus crisis looks like it could be a turning point. Members have begun to get used to the idea that care doesn’t have to start with a face-to-face appointment.

Regulators have relaxed some rules, which could become permanent. All Medicare beneficiaries can now receive telemedicine services. Medicare will provide payment for telehealth services provided in any healthcare facility, home, physician office, skilled nursing facility and hospital. Many states have waived the licensure requirements to allow doctors to perform telemedicine outside of their home states. This has always been a barrier for telemedicine access and costs.

In light of this shift, health plans need to align incentives for care providers to enhance virtual care adoption. Currently, virtual visits do not generate as much revenue for care providers on a per-visit basis. Payers should develop a long-term digital strategy to help implement business processes and integrate member data to enable a consistent, sustained digital experience throughout the care life cycle. Member-facing interfaces must be integrated with a triage workflow and front-end touch points (for example, a uniform process flow) to the back end (integrated data systems, IT backbone, and organizational design) to enable a seamless member experience. Providers will need to scale up their cloud-enabled IT infrastructure to support digital workflows with the highest level of data security and privacy. The coronavirus crisis push for telehealth is just the beginning.

2. Commercial employer-based health plans need a business retention strategy. The employer-based health insurance market will certainly undergo a structural change due to massive loss in employment. At the time of writing this blog, millions of members have already filed for unemployment benefits. We expect that a huge section of the member segment (workers and their families) who are receiving coverage through employers may lose coverage by the time we exit the COVID-19 crisis. This member segment will either move to Medicaid or to the public exchange, or they’ll become uninsured. Economists predict that we are headed into a recession. This will be the first economic downturn after the Affordable Care Act was enacted, so there’s significant uncertainty around how individuals will make their choices post job loss.

Health plans need to rethink their commercial business strategy to win back or try to retain this member segment. In the past, this has been an untapped opportunity from a sales and marketing spend standpoint. Broker distribution channels will become even more critical for health plans to manage in the long term to sustain business as brokers are at significant risk of losing revenue due to this crisis. Health plans should strengthen their broker distribution channels and invest in deepening their data and analytical capabilities to help brokers manage their business effectively. Health plans should start with integrating internal siloed sales and marketing data with external data sets to help brokers develop competitive insights and retain their current book of business.

3. There will be an increased focus on risk management functions and re-insurance. Full-risk providers and payers focused on Managed Medicaid and Medicare Advantage could be bearing more risk now than they had initially planned. ACOs with payers and providers and provider-led health plans will need better risk management expertise and re-insurance coverage. Recently, the trend toward self-funded plans appealed to smaller employers; plans have been trying to maintain relevancy by updating administrative services and offering new types of insurance to help manage risk. This is a huge accumulated exposure risk in the system and needs to be actively managed as a strategic initiative. Health plans with extensive exposure in this space require a renewed focus on actuarial science and risk management functions.

We recommend that payers undertake an initiative to reevaluate risk across products and restructure the risk exposure, especially for Medicare-Advantage-focused players. In the long term, they should focus on strengthening their risk-management-related functional capabilities and expand re-insurance coverage. 

4. The threat of big technology players will become more imminent. Large technology companies such as Amazon, Google, Facebook and Microsoft have been investing in the healthcare space, with the potential to utilize their core capabilities to disrupt the market (medical data management, care management, payments, etc.) and drive significant change. This evolving confluence of consumerism, digital, data and emerging technologies will further propel the business model of alternate, technology-led healthcare players.

Payers need to up their game on leveraging data and digital technologies to reduce the cost of care and bring growth back. Here’s what health plans can do to effectively combat large technology players in the years to come:

  • Accelerate digital health and emerging technologies, including AI and machine learning. Imagine if we all had an AI pre-primary care app in our pockets during today’s crisis. Most health plans already have a member-facing app. Even the non-hypochondriacs among us would check on their conditions constantly, at little cost to and no impact on the healthcare system. Plus, digital apps could help predict COVID-19 hot spots leveraging predictive analytics, which could be helpful if we see a second wave of this pandemic.
  • Reduce barriers to achieve data interoperability. Secure access to patient records is necessary for sharing electronic health records across providers. That will vastly improve patient services and outcomes, and could lead to intelligent network management and reduced physician burnout by leveraging predictive and advanced analytics.

Payers can effectively manage this threat by leveraging their ecosystem more effectively and establishing significant entry barriers for large technology players.

To put long-term priorities in place, we recommend that health organizations set up a dedicated task force. A senior business executive—let’s say a “chief worry officer”—should lead this initiative for your health organization. 

Unfortunately, it’s likely that we’ll exit this crisis with a renewed focus on cost containment in a negative economic environment. Over the long term, managing the COVID-19 crisis will not be a challenge of execution but rather one of innovation. Payers and providers can put the above imperatives in motion and help align incentives to deepen member centricity in the long term.

For more ZS insights on the impact of COVID-19, visit zs.com/COVID19.


RELATED CONTENT 

BLOG POST: Is Coronavirus the Spark That Telehealth Needs? 

BLOG POST: COVID-19 Could Significantly Alter the Contours of US Health Insurance for Years 


 

Topics: health plans, payers, digital health, health insurance, risk management, health plans and providers, health plan members, digital natives, coronavirus, covid-19, telehealth, pandemic, re-insurance

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