The health insurance industry can be thought of as a marketplace: on one side, customers pay for coverage of healthcare costs and seek a variety of providers. On the other side, providers look to the marketplace for patient volume and accept a discounted rate for services. Payers intermediate between the two, bearing risk and providing liquidity. Thus, for payers, the supply chain can be conceived of as streams of services and payments.
Figure 1. Illustration of payer supply chain
Source: Author’s diagram based on Bardey and Rochet, “Competition between HMO and PPO,” Journal of Economics and Management Strategy, 2010.
In the health insurance market, supply chain efficiencies are realized by increasing visibility into future demand (underwriting advantages) and/or reducing coverage costs. Digitization will reward payers who can deploy technologies to increase supply chain efficiency. Aetna, the third-largest health insurance payer in the U.S., has embraced digitization in order to realize supply chain benefits for patients, providers, and shareholders. Aetna has created current, near-term, and medium-term partnerships to encourage development and adoption of digital initiatives, including:
- Developing digital therapeutics to manage chronic conditions: A pilot study of a device-app combination providing mobile monitoring and coaching to patients with Type 2 diabetes aims to measure how digital health devices can improve patient outcomes and reduce care costs.,
- Partnering with providers to expand applications of telemedicine: Next year, Aetna members will receive behavioral health, dermatological, and caregiver telemedicine services. This expands patient access, enables clinicians to serve more patients, and reduces costs of clinical visits.
- Leveraging big data to predict treatment outcomes: A 2014 longitudinal study of members to predict pre-diabetes allowed Aetna to design and launch customized interventions and quantify returns on program investment. Today, Aetna’s business unit Healthagen Outcomes uses member data to validate new therapies, technologies, and care models.
- Offer discounted Apple Watches to members to predict risk and more: Aetna is betting that wearables can provide insight into coverage risk of members; in the future, wearables could also to facilitate proactive interventions before patients get sick, potentially avoiding dangerous and expensive complications. However, the type of data collected, the precision with which it is measured, and the security with which it is transmitted will all impact how and when these types of applications can occur.
From both the top line (expanding access) and bottom line (improving visibility and reducing costs), these potential improvements in supply chain efficiency can add value for all stakeholders. However, there are additional efficiencies that digitization can bring to the health insurance market. In the near-term, Aetna should incentivize partners to upgrade closed EMR systems to open, networked systems to facilitate claims submissions and remittances; this will reduce costs associated with billing and may facilitate provider adoption of existing digital innovations. With the industry move to value-based healthcare in the medium term, Aetna should also harness big data and predictive analytics to improve population health management.
Despite the innovations described above, there are many uncertainties in health insurance markets that may influence benefits or adoption of digitization: we will likely see regulatory changes in the next several years, as well as burgeoning issues of cybersecurity. How these trends impact supply chains of payers like Aetna remains to be seen.
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