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Driving Health Care Costs Downward: Where the Rubber Meets the Road

By Ken Buchanan

I recently moved from a cold northern state to a warm, coastal southern state. One observation that stands out to me about my new location is the large number of vehicles that are abandoned roadside. I am unsure why I never saw this phenomenon in the colder climate. Perhaps automobile maintenance is taken more seriously when weather conditions can be life threatening. It would seem that a large percentage of automobile owners where I now live choose to delay or forego vehicle maintenance.

You might be wondering how automobile care is related to health care. When it comes to insurance models, our vehicles and our personal health are covered for catastrophic events. However, only our personal health is covered for maintenance and preventative care. Auto insurance does not typically cover maintenance care such as checkups, inspections, fluid and filter changes, etc.

Would there be fewer abandoned vehicles if auto insurance covered the costs for maintenance? Perhaps, though it is not likely that auto insurance will ever cover the costs for non-accident-related repairs. Nonetheless, imagine that the auto shops were rewarded for reducing repair costs by keeping our cars in good working condition. We could call that Value-Based Reimbursement, or VBR.

Driving Costs Downward

VBR is emerging in the healthcare industry as a promising approach to decreasing runaway healthcare costs. The analogy to the auto industry can prove insightful. For example, there would likely be fewer of us sidelined and unproductive due to health problems if our providers were incented to help keep us healthy. We’d also expect reduced health care costs if we spent less time getting ‘repaired’ and more time focusing on health and wellness.

Where the Rubber Meets the Road

Historically, insurance companies have taken on the financial risk and responsibility for helping manage our personal health and wellness. VBR is shifting that risk and responsibility to the service providers. Just like with vehicle repair, it makes more sense to work with your professional auto shop for service and maintenance than it does filtering all your conversations and decisions through your car insurance company. Your health care provider closer to your health situation in all aspects. They can be more proactive in working with you. Health care providers and mechanics are figuratively and literally positioned where “the rubber meets the road.”

Shifting Gears

It may be the future, but the success of the VBR model depends on seismic shits by both the insurance payers and the service providers. Payers are shifting the tasks of population health management to the providers, along with the financial risks and rewards for both costs and revenues. Providers are moving from Fee-For-Service (FFS) compensation to outcomes-based reimbursement. They must also shift their IT resources to enable the prediction, management and assessment of risk-based contracts, requiring infrastructure and information resources that have historically been associated with insurance payers.

The race is already underway to implement Value-Based Reimbursement models. The only sure way to not win in this race is to be left abandoned on the roadside. We can help you win the race. Let’s talk.