How can plans respond to PwC analysis of future spend?

PwC’s Health Research Institute surveyed more than 20 health plans, representing more than 100 million lives covered by employer plans and more than 10 million lives covered by individual plans. Analyzing responses, PwC predicts that the cost of health insurance plans will increase between 7.5% and 8% in 2025, depending on plan type.

Cost increases are not new for the health care industry, but the COVID-19 pandemic shifted everyone’s attention away from that crisis to deal with the more immediate one. While everyone struggled to make sure members were safe and healthy, value-based care initiatives were put on hold or just maintained. Now that we are through the storm and getting back to normal, more elective procedures are being performed and it is time to return our attention to bending the cost curve. How can we meet the challenges PwC presents?

Hospitals are facing a higher inflation rate than the overall economy. This is not just because hospitals use supplies that have increased in cost, but many face staffing shortages. The pandemic exacerbated some of the staffing issues, including strikes, that had already been a problem.

The nursing shortage is one example of a challenge hospitals have been dealing with for years. There is a basic economic driver that says a low supply results in a higher rate of demand, which means higher salaries. With salaries and supply costs rising, hospitals need to increase income and efficiencies. Hospital income comes with higher prices and is therefore at the payers’ expense, but efficiency can help eliminate costs from the entire ecosystem.

One way technology can help find opportunities for higher quality care is by identifying services that can be reduced while also improving health and the patient experience. By comparing rates of risk-adjusted outcome measures to a benchmark value, a payer can see which providers perform better or worse than their peers.

For example, when we look at potentially preventable complications that occur during an inpatient stay, that data can be risk adjusted based on the services delivered and the severity level. A facility can then see where they are experiencing more complications and what services are less efficient. Not only would lower complication rates help reduce costs for both the facility and the payer, but a patient should have a better experience because they don’t have to experience complications.

Similarly, we can view rates for potentially preventable readmissions and emergency department (ED) visits. By reviewing post-discharge readmissions and ED visits that are not only risk adjusted, but clinically related to the discharge and potentially preventable, providers can focus on events that are truly a problem. For example, a cardiac patient who is discharged and is a passenger in a car accident that brings them back to the ED is not attributed to the cardiac stay.

Following similar returns will not show providers patterns for improvement opportunity. Reviewing actionable measures and taking steps toward improving them results in a reduction of ED overflow and saving bed capacity for patients with a higher acuity. Information from readmissions can be telling, but removing the noise of unnecessary or unrelated data, is even more valuable.

While an inpatient setting needs efficiency to bend the cost curve, many procedures are moving to an outpatient setting. The same clinical methodology for inpatient measures can also be applied to major elective outpatient procedures. Ambulatory potentially preventable complications measure rates of complications during a procedure and poor outcomes occurring once a patient has returned home. For example, if a patient leaves an ambulatory procedure but then is hospitalized for an infection caused by that procedure, that is an outcome measure that should be tracked and prevented for the next patient. If these complications are viewed in a risk-adjusted rate against a benchmark, action can be taken to reduce them.

Payers can use value-based programs to incentivize provider efficiency and reduce excess costs. Many of these savings are related to changes in provider performance. Payers report having already eliminated easy to deal with excess administrative costs from the system. This means thinking further along the continuum of care for savings that may not be as obvious. While looking for efficiency in care delivery is important, the industry will need to be creative and work to affect the rate of increase to system costs.

Shannon Garrison, MBA, MJ, is a health policy manager, clinical and economic research, at Solventum.