Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together

Health care is at a stalemate. Providers can't charge higher rates. Payers can't increase premiums. Employers can't shift more risk to employees. Nobody can afford a higher cost.

To uncover value and grow business, stakeholders must start to chip away at the total cost of care. One big piece of overall cost is administrative waste — estimated at $200 billion a year in the U.S.¹

On their own, providers and payers haven't been able to drive down administrative costs. The way forward is through collaboration in every phase of the payment process.

Dr. Mitch Morris, executive vice president at Optum, answers six questions on finding areas of alignment and the potential benefits of collaboration.

1. How can payers and providers work together to reduce administrative costs? 
   To begin collaborative work, payers and providers should define common goals, a common vision and common rewards. Agreement on risk tolerance and change management strategies is also a key component.
   
   A shared goal might be happy customers, measured through patient satisfaction surveys or Net Promoter Scores (NPS). Another might be business growth, accomplished through financial success and attracting more patients and members.
   
   Payers and providers can use enabling technology, workflow tools and analytics that drive good decision-making to share information. Each should be comfortable with what the other is doing.
    
2. What could be the biggest impact of greater payer-provider collaboration?
   I would say the potential to eliminate denials. As an industry, most systems are set up with significant infrastructure to deny and fight for authorizations. The patient (the consumer) gets caught in the middle. It delays care. It adds cost.
   
   We can get there by moving the focus of administrative work from post-service to pre-service or at service, and by sharing automated rules and data. It will take strategic relationships and open communication to determine financial responsibility and prior authorization at the point of care.
   
   This level of transparency should increase patient satisfaction. It helps reduce conflict between what the physician prescribes and what the payer covers.
    
3. Why is prior authorization a concern?
   Health care is one of the only industries where consumers buy something without knowing how much it is. It's typically not until a patient receives their bill that they know the real cost.
   
   Let's say a physician enters a prescription or orders a test in the electronic health record. Wouldn't it be great if the system interacted with the claims system and indicated whether the procedure is authorized right then and there?
   
   We've been working at Optum on that type of an approach to prior authorization. For example, if a physician ordered an MRI for back pain, clinical and claims systems would communicate directly. If the criteria were fulfilled for doing an MRI, then the authorization number would be generated.
   
   But what if the case doesn't fulfill the evidence-based criteria? For example, the patient has experienced the pain for less than three months or hasn't tried to address the issue with anti-inflammatory meds. The system would alert the provider who can then add additional documentation or choose another care path.
   
   The provider doesn't order an MRI only to have it denied. The payer isn't wasting time denying claims or defending those denials. The patient isn't left waiting for a resolution. The whole process is much more transparent and simplified.
   
   Doctors and nurses are able to make informed decisions — the first time at the point of care — and insurance companies pay right away because they have confidence in the process. That means you're able to reduce administrative costs. And when patients understand the cost of services ordered, they are empowered to ask about other available care options.
   
   We're getting ready to pilot this approach in clinical practices. We're excited about the impact on cost, quality of care, satisfaction and engagement among providers and their patients.
    
4. How will a transition to value-based care encourage more collaboration?
   In areas of the country that have made a switch to value-based care, you see more extensive collaboration between payers and providers. They're using good integration technologies. It's no longer about documenting things in the same way. It's more about documenting quality and outcomes.
   
   This kind of collaboration represents a shift away from strategies developed under traditional fee-for-service models. Stakeholders are progressively moving to value-based care. Working in partnership offers opportunities to remove friction and complexity from revenue cycle management and payment integrity.
   
   As providers begin to take on financial risk — and accountable care organizations are one of the first steps in that process — it opens the door to greater financial alignment. Then payers can comfortably delegate authority to providers to authorize care because they trust the process and because their incentives match.
    
5. How might payers and providers benefit from strategic partnerships aimed at modernizing the payment continuum?
   Payers can likely look forward to a reduced risk of claims overpayment and lower costs for payment integrity. They may also improve provider contract rates and influence utilization.
   
   For providers, a more coordinated approach holds the promise of accelerated payments, reduced denials and write-offs, and clarity on payment rules and regulations.
   
   Both groups may improve patient satisfaction and engagement. Patients may enjoy fewer delays in care and more transparency about coverage and financial responsibility.
    
6. Why should payers and providers tackle total cost of care together?
   There's little more any single group can do on its own to tackle the problem of administrative waste. It's really going to take alignment between different business interests. It means figuring out how the health care industry is going to solve this problem.
   
   With a set of leaders who are determined and have a shared vision, payers and providers can team up and partner with companies that support their collaboration. This strategy can help participants better leverage capital investments. It can help them enable technologies that link payment systems and clinical systems. This will include embedded alerts and reminders that help doctors and nurses make informed decisions. It allows for shared risk.
    

Companies like Optum can facilitate these changes, with technology, managed services, change management and people who can work in local markets with payers and providers. Strategies could include financial incentive changes around forming risk-bearing entities, managed services to lower total cost, or finding the right partners.

Shared pain points are at the heart of the opportunities for collaboration. Learn more about payment pain points felt by both payers and providers. Discover how collaboration can address each pain point. Explore the Optum Payment Nexus interactive infographic.

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