UnitedHealth Is Lowering Costs With Value
The debate around medical costs and healthcare reform in the United States is an ever-evolving and convoluted conversation with no clear endpoint looming on the horizon.
As Congress and state governments continue to debate, or avoid debate, on these issues, private insurance companies are making their own strategic moves, plotting for an uncertain future.
UnitedHealth Group, the largest healthcare company in the world when measured by revenue, is spearheading its own revolution to grapple with soaring medical costs.
The Minnesota-based, for-profit insurer, led by CEO David Wichmann, is taking a three-pronged approach to steer the company towards innovative solutions. “We are not satisfied with the status quo,” Wichmann noted to investors at a conference in May.
UnitedHealth currently has 15 million customers receiving medical care under value-based agreements, and the company’s goal is for that number to cover 150 million members by the year 2025.
The idea behind value-based care, a concept that both governments and private companies are circling, is to replace the current, fee-for-service reimbursement model with a payment system based on quality of care.
Under the fee-for-service model, providers, both doctors and facilities, receive retroactive payment based on contractual agreements. They are in essence, paid for the quantity of medical services they provide.
The value-based plan that UnitedHealth is pursuing links provider reimbursements to the quality of the care and the outcomes that its customers receive. Payments under this model are heavily biased towards both efficiency and effectiveness.
The results, thus far, have been very encouraging. Wichmann reported that under the value-based contracts, the company has experienced a reduction in both hospital utilization and overall costs, with 17% fewer hospitalizations and an 8% cut in total spending.
Optimizing Optum Care
Alongside the growing value-based program, UnitedHealth is aiming to funnel its customers into more appropriate and cost-effective care. This goal is helped significantly by the fact that United already has its own medical services division, known as Optum Care.
The idea here is for United to keep its members out of the emergency room, where care is significantly more costly, and redirect them to more appropriate ambulatory settings. These outpatient facilities operated by Optum, Wichmann hopes, will become a cutting-edge, industry leader in ambulatory care provision, and work in synergy alongside United’s value-based payment programs.
The other step that UnitedHealth is taking towards, what it hopes, is a new and affordable healthcare model, is to create an array of digital tools that will harness the ubiquity of the web and empower customers to become wiser, more discerning users of medical services.
The primary tools in this digital arsenal are programs that help customers manage costly chronic diseases and provide transparency around pharmacy pricing. The pharmacy program also includes United’s recent offering of drug rebates to its customers, at the time of purchase.
Future Reform Effort
As for what UnitedHealth is thinking about ongoing federal reform efforts, Wichmann advised investors that he and United welcome any legislation that would increase coverage and access for the American people.
Wichmann even went so far as to extend this support towards the basic idea, at least, of a single-payer system. Single-payer systems, of course, are not all created equal.
The question for Wichmann then is what type of system Democratic politicians, most of whom now champion single-payer to some degree, hope to create.
UnitedHealth, understandably, would not support a government run insurance system, but if the funds are to be diverted to private insurance companies, then Wichmann is open to having that discussion.