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January 2, 2022
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When we talk about decentralized healthcare, we often speak in grandiose terms. We talk about increased access to care and readily available healthcare data. The reality is not so idealistic.
The start of decentralized healthcare will begin with a shift in power away from hospitals and healthcare delivery networks and towards payer networks. Healthcare will decentralize the same way the American economy deindustrialized – by emphasizing finance as the value driver.
In healthcare, financial value comes from lowering the cost of care. Hospitals have traditionally struggled to control costs in the past. That did not matter as long as hospitals served as the gateway for patient care. But the pandemic accelerated the trend of moving away from hospitals as the power nexus in healthcare. Now we are on a fast paced track towards decentralization.
Healthcare payers, with their behemoth insurance networks, are ready to take up the mantle. They prefer a decentralized model of healthcare because the cost of care is lower. They promote reimbursement models that emphasize outpatient care explicitly for the purposes of reducing unnecessary hospital admissions. They encourage patients to be actively engaged in low cost healthcare services.
For payers, profit comes from lowering costs, which is in contrast to hospitals where profit comes from increasing revenue. This shift in the business of healthcare – from revenue to cost – is the best way to understand the shift towards decentralized healthcare.
Cost control in healthcare means control of patients. The most profitable patient is someone who engages with their outpatient primary care physician and participates in care coordination services. This patient will inform his or her provider when blood pressure values start to trend upward and require a medication adjustment. This patient is controlled through data – whether the patient sees it that way or not.
Data, in that sense, is not a means of improving care directly, but of verifying engagement – a proxy for control. A well controlled patient is likely to be compliant and engaged, which the data has also shown to lead to better care.
And whatever cannot be controlled does not need to be covered – hence the rise in documentation requirements for healthcare providers. If a physician believes a patient requires an expensive imaging study or medication, then the payer will require additional documentation to justify that decision, often prompting the physician towards more cost-effective solutions, whether that is another imaging modality or a generic version of the medication.
Payers dictate what clinical services should be reimbursed and the medical necessity for those services – a proxy for medical decision-making. They effectively assume control of healthcare by controlling the behavior of patients and the decision-making of physicians.
They dictate the patient journey because they control the cash flow. And increasingly, this journey does not include large hospitals. We assume this means lower cost services like home health care, digital platforms, and telemedicine. But it means whatever is in the best interest of the payer’s bottom line.
Sometimes this means incentivizing in person visits and other times it means incentivizing telemedicine, depending on which is more cost-effective in the coverage area. Decentralized healthcare will be defined by payer networks emphasizing control as a means of controlling cost – justified through the pretense of patient care.
When you ask most healthcare leaders or innovators to define decentralized healthcare, they would speak in terms of quality of care, not cost of care – and certainly would not imply any sense of growing control.
Healthcare has long suffered from delusions of grandeur, in which the promises made stand in stark contrast with the realities seen. It may be true that decentralized healthcare will improve the quality of care, but that is not the primary intention of payers driving the move towards decentralization – that would be control.
This difference will prove significant long term. It will manifest as a new form of disparity in healthcare –those who embrace the added control and those who resist it – highlighting yet another difference between the ideal and the realities of modern healthcare.
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