Micro-Incentives and AI Inject Fresh Energy Into Value-Based Healthcare

Picture two opposing armies, loaded to the teeth with accounting software. On one side are healthcare providers and their billing teams. On the other bristles an army of insurers.

At stake is who ends up paying what. Like most conflicts it’s most problematic for the innocents caught in between, in this case, patients bombarded with confusing bills and explanations of benefits (EOBs), to say nothing of the high deductibles and copays increasingly shifted onto their shoulders.

That’s how Clarify Health CEO Jean Drouin described the situation to PYMNTS’ Karen Webster, as well as what he sees as remedies to the existing medical billing and payments mess.

Listing glaring inefficiencies of the predominant fee-for-service model, he said the better way is a promised land of value for service where financial incentives reward actual healthcare outcomes for patients, rather than amassing tests and procedures for maximum billings.

However, to pay based on value (outcomes), gains must be quantifiable.

That’s where platforms like Clarify Health are coming in, mapping and measuring patient journeys with data and analytics showing the manifold benefits of value-based care models.

Quipping that documentation is done as much for billing as for health, Drouin said, “Imagine a popup that said, ‘If these three things were done today, it would result in such good things happening from an outcome point of view that it’s worth $200 in bonuses for you today.’

“Instead of waiting until the two little armies have figured out whether you should get the $200 nine months later, we have good enough predictive analytics on that journey and analytics on how [a patient tends] to do historically that we say we’re willing to pay you today,” he said.

This may require someone big to make the first move, and that usually means the government.

“Most of the massive reforms in this country have come from the government, and from Medicare driving the payment models,” he said.

“Diagnosis-related groups [DRGs] came in for hospitals in the ’90s,” he said. “That came from the government. The biggest reform that’s stuck in payments in healthcare in the U.S. in the last 15 years is Medicare Advantage.”

Using that, Drouin said the one thing that could ignite a value-based care revolution is for “Medicare to dramatically accelerate the move to fee-for-value models by effectively doing what they thought of doing in 2015, which is to make bundled payments mandatory as a way to give sufficient encouragement to providers to switch to this kind of model.”

See also: Clarify Health Snags $150M for End-to-End Patient Intelligence

A Little Goes a Long Way

It’s interesting to see that much of the pressure to reform healthcare billing and payments processes is coming from commercial payers who know they’re working with a broken system.

Saying that payers “desperately” want to reduce friction, he said, “what’s been hard to find is an alternative to fee-for-service that, quite frankly, delights clinicians. There are pockets of experiments out there where physicians are rewarded for closing ‘smart care gaps’ … where doctors will absolutely do it, particularly if you’re connecting it with an immediate reward.”

However, the way it’s been tried prior “disconnected doing the right thing with a reward that was paid on an aggregate basis nine or 12 months later. At a very basic level, there’s no dopamine hit to reinforce the feedback loop of having done the right thing,” he said.

Mentioning a pilot Clarify is now running in a major U.S. metro with a group of 100 orthopedic surgeons that accept commercial insurance, he said the test group saved $4 million in a six-month period using value-based, micro-incentive payments.

“There’s a million physicians in the U.S.,” he said. “Not all of them are sitting on as much spend as orthopedic surgeons, but you’re talking about the ability to take out tens of billions in waste in a way that’s win-win-win.”

Those payments total $5,000 to $10,000 in extra income for physicians with average annual incomes in the $800,000 range, so why are they so moved by micro-incentives?

“From a behavioral economics incentive point of view, so long as it is seamless in the workflow, relatively modest incentives do encourage people to make the extra effort to do the right thing,” Drouin said.

“Most people want to do the right thing,” he added. “It’s just that often the information isn’t presented in the workflow in the right way.”

Read also: Value-Based and Accountable Healthcare Models Link Better Outcomes, Increased Revenues

Priming the Innovation Pump

As is often so in medicine, there are complications to be dealt with. Patients, for example, are known for not following post-op directions and skipping medications. Data helps there as well.

“It turns out that one can use information typically used by banks or consumer companies to understand the behavior of consumers, to have an idea … as to whether [someone] is likely to be the type of person to follow advice, as opposed to be a little more carefree,” he said.

Drouin said Clarify sees “a very good correlation between credit scores or certain types of buying patterns and the willingness to listen and follow the advice of your physician.”

That’s one of the areas where analytics can make a meaningful difference over time.

Conceding that we likely won’t see the end of overlapping EOBs and out-of-the-blue bills from medical providers, he said: “What I do see happening as a result of fewer interventions … and doctors being willing to effectively charge less because the good ones are getting more volume … you ought to get fewer of these missives” because we’re undergoing less treatment.

As value-based care proves itself in more pilots and perhaps possible government mandates, new payment models can be structured to “prime the pump on innovation and give providers an incentive to go into things.”

Were he advising Medicare executives, Drouin said he would would enlighten them to the fact that “by giving about 2% more to providers for trying something new, eventually you reach a new equilibrium.”

“There has to be an incentive in there for providers to move to a different payment model, and rather than deal with it on the back end with hospitals getting into trouble and needing bailouts, let’s fix it with a payment model that has a little top up in it for innovation,” he said.