Payors are major stakeholders in the US healthcare system and shape patient access, health spending, and reimbursement. In this blog post, we will explore payors’ efforts to balance value and costs.
The United States healthcare system is a dynamic and evolving landscape. While patients receive care from providers, payors are the entities tasked with processing the expenses incurred for healthcare services. Sharing the cost of visits and procedures is a complex process that includes numerous stakeholders and payment methods such as premiums, copayments, and deductibles. Payors play a pivotal role in financing and facilitating access to healthcare by providing coverage to patients and ensuring appropriate reimbursement to medical providers.
A note about the term “payors” vs “payers” - these terms are often used interchangeably in common texts. In healthcare, both terms refer to an organization that is responsible for making payment for healthcare services rendered. For the purposes of this article, we stick to the term “payor,” as that is the term preferred by the American Medical Association (based on their Payer Contracting 101 toolkit); however, in our work for clients, we defer to what is consistent within their organization. In common vernacular, the term “payor” is often not as well recognized.
In the US, payors can be classified as public, private, or commercial. Public payors include government-funded insurance programs like Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). These programs act as a safety net for individuals and families who need medical care. Around one-third of Americans are covered by a public health insurance program. Commercial and private payors can be employer-sponsored or purchased through the health insurance marketplace. This includes companies such as Blue Cross Blue Shield, Aetna, and Kaiser Permanente. Over half of US citizens receive health coverage through commercial and employer-sponsored insurance.
The payor landscape and priorities are shifting as key trends emerge within the US healthcare system.
- Healthcare Cost: Health spending is quickly increasing in the US and accounts for one fifth of the country’s total expenditure. This increase in healthcare costs is proving to be a challenge for payors. The combination of provider shortages and increased patient demand grants medical professionals and institutions with incentives to negotiate with payors. Additionally, the upward trend in pharmaceutical costs puts pressure on payors to counteract high expenditures, as prescription drugs are often the top utilized benefit by beneficiaries
- Value-Based Care: Healthcare payors are embracing value-based care as a method of balancing quality and increased costs. Under value-based care, providers, institutions, and payors work together to improve care coordination and patient health outcomes. Medical professionals are incentivized to provide quality care and reduce unnecessary health service utilization, as reimbursement is based on certain quality metrics. For example, health plans are graded by consumers based on their experience utilizing benefits, while physicians are often assessed by patient death rates, quality of life or patient access to care
- Policy Changes: Laws such as the Affordable Care Act (ACA) and other federal or state mandates significantly impact payor processes. Compliance with these regulations necessitates significant adjustments to business practices, administrative burdens, and quality goals. For instance, the ACA introduced new requirements for minimum essential coverage, prohibited certain discriminatory practices, and established health insurance marketplaces. These changes not only impact the structure of insurance plans but also demand technological enhancements for efficient data management and reporting
- Technology: An influential trend for payers is the growing dependence on technology to boost efficiency and effectiveness. New technology can automate claims processing, visualize claims trends, and enhance customer service. From the consumer perspective, more patients are open to using tech-based care, and this can be a valuable method to improve efficiency for providers. However, the challenge lies in the integration of new technology into existing systems, posing a barrier to implementation
The US healthcare landscape presents both challenges and opportunities for payors. One significant challenge is the complex and fragmented nature of the healthcare system, leading to administrative inefficiencies and high operational costs. Navigating regulatory changes, such as evolving healthcare policies and compliance requirements, poses another obstacle for payors. Additionally, rising healthcare costs and the need for innovative payment models create financial pressures. However, these challenges also present opportunities for payors to innovate and optimize. Embracing technology and data analytics can enhance operational efficiency and streamline administrative processes. The growing focus on value-based care allows payors to shift from fee-for-service models to those that reward positive health outcomes.
When payors prioritize patient-centric care, they contribute to improved health outcomes by promoting patient satisfaction, adherence to treatment plans, and overall well-being. This involves incentivizing providers to improve metrics such as hospital readmissions, hospital-acquired infections, and mortality rates. Shifting the focus from a transactional approach to one that places patients at the core ensures a more personalized healthcare experience. By fostering open communication channels and incorporating patient feedback, payors can better understand the unique needs of individuals. Investing in technologies that empower patients to actively participate in their own care, such as telehealth solutions, can improve access to healthcare resources and promote timely interventions. Additionally, supporting care coordination and collaboration among different healthcare providers ensures a seamless and integrated approach to patient care.
Aside from these dynamic trends, it is vital for payors to consistently evaluate the needs of both patients and providers in order to remain competitive. Safeguarding patients from exorbitant service costs, while ensuring fair reimbursement for healthcare providers will likely be an ongoing challenge for payors. As regulatory frameworks continue to evolve, healthcare payors must remain proactive and strategic in navigating these changes to ensure relevance and effectiveness in the healthcare market.
At PFG MedComm, we continuously explore innovative approaches and can help you navigate the complexities of the healthcare payor landscape. Click here to download PFG MedComm’s Ultimate Guide to Market Access.
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