STRATEGY
EXECUTIVE SUMMARY
The United States has long ranked as the number one spender on healthcare while ranking last among its peers in quality.1,2 This loss of quality has not gone unnoticed, with most Americans dissatisfied with both the quality and their access to healthcare.3 The cost for this care? A quarter of households struggle to pay their medical bills.4 Employers are also being stressed by rising healthcare costs, with employers spending over $700 billion annually.5,6 This has become a pain point for the growing number of self-insured employers.7
In response, healthcare systems are being forced to become increasingly value oriented and develop innovative care strategies. One such strategy, the value-adding process business model (VAP), is designed around the delivery of high-quality cost-effective care by limiting itself to a set of predefined problems (i.e., Brain Tumor Center).8 This focused model permits prompter responses to emerging technologies, lower costs, and a much higher levels of quality care.9,10 Centers of Excellence (COE), advanced specialty care are examples of VAP models.
COEs can be structured to offer self-insured employers and patients high-quality bundled care that is value focused, delivering the best outcomes along with cost savings. Additionally, COEs excel at delivering care beyond their local area, a pain point for most traditional hospitals. COEs and their academic medical centers play an important role in the collaborative diagnostic and treatment process. Receiving the correct diagnosis and treatment is key to quality care and reducing medical costs.11 Referrals to academic medical centers often leads to important changes in diagnosis and treatment.12 These changes mean better outcomes for patients and for payers, the cost savings of the correct diagnosis and treatment can be massive. Unfortunately, due to payer cost-containment measures (i.e., in vs out-of-network) and geography, many patients are denied critical access to national leaders in care.
Remote second opinions (RSO) are the perfect complement to COEs, promoting access and further democratizing their high-quality care. RSO is a telehealth consult with advanced specialists on complex or high stakes care. It requires the assembly and review of healthcare records by a specialist and ultimately the delivery of their expert opinion. RSOs like COEs, are beneficial to patients and payers alike as they result in higher quality care and cost savings by avoiding spending on incorrect or ill-defined diagnoses. This in large returns-on-investment (ROI) and returns-on-health (ROH) for payers and patients, respectively. One academic RSO saved $65 million per 100,000 beneficiaries and improved health outcomes for patients.14
Despite individual COE’s reputation as national specialty leaders and having preexisting telehealth platforms, their RSO model remains in its infancy. The RSO market as a whole is relatively immature, but is undergoing rapid growth, forecasted to reach $10.73 billion by 2027, from $3.20 billion in 2019, growing at a CAGR of 16.8%.13 When compared to their private counterparts (e.g. 2nd.MD), academic medical centers’ (AMCs) COEs are self-assessed as being “back of the pack.” Within the AMC segment, there is also great variability, with some AMC monthly case volumes in the teens and others in the hundreds. Additionally, some AMCs limit their offerings to direct to consumer, while others have multiple B2B contracts with payers. In addition to case volumes, another important outcome measure is the conversion rate. Conversion rate represents the number of consumers that change to the AMC for follow on treatment. This is an important metric because these patients represent “high value” patients and considerable revenue.
AMC RSOs have the necessary specialist expertise and reputation, but are lacking in consumer awareness, vertical integration, speed, technology platform, self-insured employer interface, and follow-on care coordination. The value proposition should be the democratization of high-quality care, while offering cost savings to payers and better outcomes and access to patients. Therefore, AMCs should be exploring different RSO business models, particularly expanding from direct to consumer to B2B contracts with payers. Additionally, they should invest in dedicated RSO technology platforms, improve follow on care coordination services, and vertical integration with COEs. Finally, AMCs must improve on pricing competitiveness, consumer experience, and timeliness if they wish to increase their market share.
References:
[1] CMS. National Health Expenditure Historical. CMS. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical. Published December 16, 2020. Accessed January 5, 2023.
[2] OECD (2021), Health spending (indicator). doi: 10.1787/8643de7e-en. January 5, 2023
[3] Levine S. More dissatisfaction with U.S. Health Care Quality, access by Steve Levine. Texmed. https://www.texmed.org/Template.aspx?id=49783. Published February 5, 2019. Accessed January 5, 2023.
[4] Hamel L, Norton M, Pollitz K, Levitt L, Claxton G, Brodie M. The burden of medical debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey. KFF. https://www.kff.org/health-costs/report/the-burden-of-medical-debt-results-from-the-kaiser-family-foundationnew-york-times-medical-bills-survey/view/print/. Published April 12, 2016. Accessed January 5, 2023.
[5] CMS. NHE fact sheet. CMS. Retrieved January 5, 2023, from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
[6] Shrank WH, Rogstad TL, Parekh N. Waste in the US Health Care System: Estimated Costs and Potential for Savings. JAMA. 2019;322(15):1501–1509. doi:10.1001/jama.2019.13978
[7] Department of Labor. (2019, January 7). Report to Congress – Annual Report on self-insured Group Health Plans – dol. DOL. Retrieved January 5, 2023, from https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement-bulletins/annual-report-on-self-insured-group-health-plans-2022.pdf
[8] Bean D. Fast, affordable, accessible care: Leveraging the value-adding process business model. Christensen Institute. https://www.christenseninstitute.org/blog/leveraging-the-value-adding-process-business-model/. Published March 22, 2017. Accessed January 5, 2023.
[9] Christensen CM, Grossman JH, Hwang J. In: The Innovator’s Prescription: A Disruptive Solution for Health Care. New York, NY: Mcgraw-Hill Education; 2017:74-110.
[10] HBR consulting. Centers of Excellence. Harvard Business Review Consulting. https://www.hbrconsulting.com/wp-content/uploads/2019/03/HBR-Centers-of-Excellence-White-Paper-1903.pdf. Published 2019. Accessed January 6, 2023.
[11] Balogh EP, Miller BT, Ball JR, Committee on Diagnostic Error in Health Care; Board on Health Care Services; Institute of Medicine; Improving Diagnosis in Health Care. Washington (DC): National Academies Press (US); December 29, 2015.
[12] Van Such M, Lohr R, Beckman T, Naessens JM. Extent of diagnostic agreement among medical referrals. J Eval Clin Pract. 2017;23(4):870-874. doi:10.1111/jep.12747
[13] Yahoo. Medical second opinion market worth $10.73 billion by 2027 at 16.8% CAGR lead by orthopedic diseases, global analysis by the insight partners. Yahoo Finance. https://finance.yahoo.com/news/medical-second-opinion-market-worth-103000920.html. Published July 11, 2022. Accessed January 12, 2023.
[14] Morse S. Cleveland Clinic’s Virtual Second Opinion Program saves $65 million annually. Healthcare Finance News. https://www.healthcarefinancenews.com/news/cleveland-clinics-virtual-second-opinion-program-saves-65-million-annually. Published June 7, 2022. Accessed January 12, 2023.
