This three-part series was jointly developed by Oliver Wyman and Sheares Healthcare, and serves as a guide for health ecosystem stakeholders, investors, and consumers offering a glimpse into the future of healthcare in Asia, as we envision it. In part 1, we explore the amplification of primary care and its new role. In part 2, we highlight the need for coordination and the next generation of enablement – functional capabilities and activities that support payers and/or providers in actively managing health. In part 3, we suggest the ingredients for value-based care in this region, and where Asia sits in its journey towards value.
THE MARCH TOWARDS VALUE
Value-based care (VBC) is an approach that aligns provider incentives with improving patient outcomes, resulting in risk-sharing and reduced overall costs to the system. While VBC is still an emerging paradigm in Asia, the rise of Universal Health Coverage (UHC), targeted interventions to select population cohorts, and capitation payment models are inevitable strides in the direction towards value. The shift from a fee-for-service model to other incentive types will have implications across the value chain, based on adjusted patient flow and business models.
Exhibit: Implications of value by subsector
INGREDIENTS FOR VALUE
Despite the intellectual case for value, why hasn’t this become the default model yet in our health systems? The simple answer is that the pre-requisites for value are not well-recognized or not yet in place in many of Asia’s health systems. Major steps towards universal healthcare have only emerged in the last decade for many key markets, such as China and Indonesia, and they have focused on immediate challenges around infrastructure and budgeting, with capabilities such as population health and reform for reimbursement considered longer-term ambitions.
Specifically, Oliver Wyman defines three pre-requisites for value:
A. Targeted population health management and holistic care delivery
Global benchmarks indicate that the riskiest 20% of the population contributes to 80% of healthcare spending. Today’s system is encounter-based, and patients choose whenever he or she wants that encounter, instead of active interventions by care-teams to steer patients at the right time to the right settings.
Targeted populations: In an ideal VBC world, health systems will understand the morbidity and risk profile of specific population cohorts and in turn tailor intervention to their needs and disease incidence. Instead of replicating the same breadth of services across providers, specific patient cohorts (for example, seniors, children, and/or diabetic patients) would be managed with more tailored services and at a different cost per capita than the overall population.
Prevention: There is a long-accepted study that with every US$1 invested in disease prevention, for example, via community-based programmes to increase physical activities, improve nutrition and reduce smoking, there was a saving of over US$5 in treatment costs. Providers will need to offer more services for early detection and prevention (such as screenings), and shift to a more holistic approach, rather than an encounter-based one. Technology serves as a bridge, for example, by enabling providers to do continuous patient monitoring and engagement for certain patients, such as those with chronic diseases or the elderly. To encourage uptake, payers could offer relevant coverage or regulators could offer subsidies. For instance, Singapore’s Health Promotion Board offers “Screen for Life” — a health screening program for at-risk patients to test for select diseases with the highest national incidence, at a cost of only US$3.50.
Revised reimbursement systems for incentive alignment
Reimbursements for providers need to encourage accountability for outcomes and encourage transitions to the right site of care.
First, this means current payer products need to move beyond an “as-charged” basis focusing on sick care towards a more integrated approach. Inpatient and outpatient coverage and products should not be disjointed, especially for patient cohorts for whom transitions between care sites are not only practical but critical. Product constructs thus needs to include coverage for these new front doors of care (such as ambulatory care, pharmacies) rather than singular coverage across either inpatient hospital or outpatient clinic settings only. More importantly, greater payer-provider coordination within Asian markets is necessary to align the incentives of stakeholders, so as to better allocate care resources and payer funding to channels where care is needed while creating a stronger push for preventive care and self-care. Such coordination, the focus of part 2, requires the build out of next-generation capabilities by enablement companies.
Second, reimbursement models need to consider total costs of care over time instead of based on one single encounter. In the United States, Iora Health charges a recurring membership fee for its whole-person approach to care delivery. Its extensivist care model blends clinical with social — its members have access to a coordinated care team with a clinical team manager, physician, nurse, and behavioral health coach as well as inhouse wellness classes (for example, yoga and diabetes management). This move away from a strictly clinical, fee-for-service model creates a strong incentive for the provider to proactively intervene and manage members’ holistic health.
Another reimbursement mechanism is the use of value-based bundles, charging a prospectively determined price for comprehensive care related to a specific procedure or at a more macro level. For instance, providers in Singapore offer value-based bundles for maternity care, charging a fixed price for delivery, regardless of complications.
Third, patients choosing a care option need to understand the trade-offs between cost and appropriate use of care. This is an important dimension to avoid the classic “free lunch” problem in healthcare. The cost differential between a primary care setting and hospital setting, after coverage, may be marginal, and thus the patient may make a choice based on emotional value rather than either clinical or economic value, attributed to the common misperception that hospitals are always the best site of care for any condition.
Exhibit: Health system evolution towards Value-based care
B. Data sharing and transparency of outcomes
In a VBC world, reimbursements tied to outcomes critically depend on the ability to use clinical metrics to reliably determine said outcomes. Traditionally, Asia Pacific has been slow as a region in the transition to VBC given a lack of heterogeneous technology infrastructure, although electronic health records (EHR) have gained traction in markets such as Singapore and Taiwan in the last decade, with national EHR programs in place. Technology is only the enabler, however, as this will also require consensus on metrics for outcome measurement, tracking of these metrics, and data sharing between payer and provider network systems, which remains very underdeveloped.
Together, these will allow for the appropriate setting of payments, rewards for outperformance, and quicker remediation of poor performance. Such metrics and sharing could also help patients self-steer to care sites based on cost and quality. We expect this will create a need for next generation enablement capabilities.
Where is Asia Pacific on its journey towards value?
To make progress on the above, not all of the aforementioned components need to be in place to start pushing towards value. For providers, in part 1, we highlighted how primary care will “amplify.” In part 2, we discussed “next-gen enablement capabilities” that support closer payer-provider collaboration, patient steerage, risk-sharing, and, over time, more effective population health management. This builds a solid foundation for the region to move towards VBC, but by no means is this the be-all, end-of this journey.
Of course, markets in Asia Pacific are at different levels of readiness to adopt VBC. The ability for VBC to become the default norm for delivering care will be constrained by each market’s progress against the pre-requisites and their transitions to amplified primary care and next generation enablement. Progress on the pre-requisites have been, and will continue to be, accelerated by countries that have the strongest burning platforms on cost. Healthcare remains a dynamic industry in any context, but many markets, such as China, Taiwan, South Korea, Singapore, and Australia, have specific policy initiatives and pilots in place, that support the move to VBC. While the road to value is a long journey, the cost problem faced by many markets will continue to be a key impetus for a system-wide paradigm shift towards all three aspects of amplified primary care, next-generation enablement, and value-based care reform.
Oliver Wyman takeaway
The shift to value has seen limited success across Asia Pacific, but COVID-19 may shakeup the system. To make value a default model, systems must:
- Create targeted & holistic care models
- Align incentives
- Implement data collection and system-wide sharing
While this may seem a tremendous challenge, the region’s continued rising utilization and cost will likely force VBC as an inevitable solution, at least for some targeted populations.
This report was also authored by T.K. Udairam, Chief Operating Officer, Sheares Healthcare and Khoo Ee Ping, Chief Corporate Development Officer, Sheares Healthcare.