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Picture of a map with pins thinking about the new frontier of healthcare cost management Picture of a map with pins thinking about the new frontier of healthcare cost management
Articles

Guidance: the next frontier in healthcare cost management

June 5, 2018
David Vivero

Why guidance is the missing piece in healthcare cost management strategies.

Healthcare has the fascinating paradox of being simultaneously overwhelming, but also limiting. Overwhelming in the sense that there are so many factors to take into consideration when choosing care, such as variation in cost, quality, location, doctor experience, and more. But limiting in that you have to operate within the very tight boundaries of choosing care that’s both in-network and not going to break the bank — keeping in mind that even in-network care can still be unnecessarily expensive!

These factors, combined with increasing healthcare spend each year, have led to a rise in cost management strategies — such as self-funding and reference-based pricing — being implemented by benefits teams as they struggle to navigate these murky waters. Unfortunately, few have seen success because of a key missing element that I believe is the next frontier in cost management: guidance.

What is guidance?

Imagine your employee as the “driver” of their healthcare experience. Your role, as the benefits manager, should be to hand the driver a map of the healthcare system  — which frequently has missing chunks of information given the opaque nature of the industry — so employees can navigate the best route to get from Point A to Point B. Here’s why this is problematic:

  1. On the employee side: there are an overwhelming number of routes that they, as the driver, could take to get from Point A to Point B. They also have to figure out for themselves what constitutes the “best” route. Is it the one that’s most fuel efficient? The safest? The one that avoids tolls? Of these factors, which should be the most heavily weighted? Too many have been forced to take the “scenic route” as we contend with new diagnoses. In short, there’s too much ambiguity for them to make an informed decision. Especially since behavioral economics literature has shown that people who face complex choices make poor decisions — a prime example of this being status quo bias, or people's tendency to stick with choices made previously regardless of whether or not they’re optimal. Hence why employees become fiercely attached to the PPO insurance plan they’ve had for years instead of exploring new options, even if there might be a better fit for them.

  2. On your side: since all your employees are going to take different paths and come up with their own definition of what the “best” route is, many terrible choices will be made that will affect both your company’s bottom line and the employee’s well being. We found in a recent ROI evaluation for a large employer that these poor micro-decisions quickly added up and led to several millions of dollars in annual overspend on healthcare alone. Despite this, you have almost no real-time insight into any of this decision making, and also have no way to intervene.  

That’s where guidance comes in. Guidance is handing the driver a sleek GPS instead of that spotty map. This way, the employees can input their personal preferences and have the GPS automatically select the best-fit route to get them where they need to be, with very little burden. And you, as the benefits manager, can rest a little easier knowing that your employees are being led in a safe, efficient direction.

Because the truth is that your employees aren’t going to shop for healthcare. This is a hopeful narrative the transparency business has been clinging onto for several years now, but it’s been proven time and time again that simply providing people with information simply isn’t enough. There is too much complexity, and too little guidance.  

Making guidance a reality

What would this metaphorical GPS look like in practice? My opinion is that guidance is a concept that should be captured in the actual tools and products your employees are using on a regular basis. Siloed educational programs can only do so much, and the true potential of guidance is revealed through hands-on use.

For instance, if one of your employee’s needs ACL surgery, the goal should be to get them to a specialist who has done that procedure thousands of times, operates at safe facilities, and is also affordable. The balance between cost and quality, especially since the two aren’t always positively correlated, being crucial. There should be a way for this employee to input their personal preferences, have a tool automatically take the most important factors into consideration, and curate a select number of options to choose from that meet this criteria. It saves the employee the headache of doing the research themselves, while still driving them toward the most high-value care and making them aware that variance exists — leading to cost savings for you, better care for them, and smarter decisions by everyone involved. Without the convenience of a simplified route, the difficult choice is daunting and stressful, enough for someone to put the whole thing off!

Looking ahead

The implications of guidance are huge. It’s a concept we’re constantly mulling over at Amino as we work hard to perfect the idea in our own product and make good on our promise of meeting people where they are. I’m confident that guidance will eventually extend beyond just being a cost management strategy and impact other significant aspects of the American healthcare experience as well, hopefully leading our industry into a much better place than it’s in today.


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