Scott Harrington, PhD is the healthcare department chair at Penn and his research focuses on healthcare economics and insurance markets. Pulse spoke with him to understand his perspective on how the trend in consumerism is affecting payers and providers.

How is consumerism affecting the interaction between patients, payers, and providers?

One key aspect of the consumerism movement is benefitting consumers by enabling them to become educated on their general health, ways to improve their health, diagnoses they receive, and treatment options. Patients have access to a multitude of free online information on symptoms, treatments, and guidance. However, sometimes the information is inaccurate, and patients still need to visit providers for actual diagnoses and treatment. Patients can also more easily interact with providers, including accessing reviews on providers, booking appointments online, accessing lab tests results, and following up with providers.

The increased availability of information enables patients to shop around for low cost, high quality care and make educated decisions to forgo low value care. This benefits the systems as a whole by reducing costs. These data can often be hard to find though. Efforts to increase price transparency are key. Some insurance companies and start-ups are working on making these data more accessible.

Even if relevant data are data are available, many consumers can’t act on it because they have restricted choice of providers due to their insurance plan having a limited network. In this case, consumers rely on the insurer to determine the highest quality, lowest cost care and in some cases encourage its consumption through tiering in the network. Patients would pay less out of pocket for this higher quality care and pay more for lower quality care. This model depends on the patient having adequate cost sharing incentives to seek care in the preferred tier and the patient being aware of these incentives.

What are some current barriers to improving patients’ experience with the healthcare system?

There is a paradox in the healthcare system in that health plans can be disincentived from encouraging the long-term health of a patient. In the US, it’s common for people to switch health plans every few years as their employer changes or plan offerings change. If an insurer/employer is only expecting to manage a patient for 3 years they are not incentivized to spend money ensuring that the patient doesn’t get a condition over a longer horizon.

Increased cost sharing for patients helps to drive increased efficiency of care. The direct costs of medical treatment are often very high, but the indirect costs (e.g., the burden of navigating the healthcare system) are also enormous. When patients have increased cost sharing they have an incentive to shop around for the highest quality, lowest cost care with the best experience. When patients can choose where they go, providers have incentive to improve the patient experience as much as possible to gain market share. Many institutions are beginning to pay more attention to the patient experience.

The patient experience is improving as pressure from employers to payers and providers to improve the patient experience is increasing. Patient satisfaction surveys are becoming the norm, and providers are using this information to improve care. For example, the Penn health system has improved the patient experience through a better online interface and streamlined lab processes.

Interoperability between health settings is essential to ensure consumers can act on their empowerment. For example, if a patient goes to an urgent care center instead of the emergency room, this could lead to large cost savings. However, if the urgent care center does not have the patient’s medical records the physicians may not have all the information needed to conduct an evaluation.

Where do you think this trend will go in the future?

We are in a period of enormous disruption in the next 5-10 years that will be spurred by advances in digital health. These advances could come in the form of better patient engagement, more automated processes and medical monitoring, and artificial intelligence driven diagnoses and treatment decisions. There are many companies trying to solve problems in the health system, and the capital markets are supporting this effort. There are substantial opportunities to fund these efforts in venture capital, growth equity, and industry M&A.

If the CVS / Aetna merger is allowed to go through it could potentially disrupt the PBM model and improve the way care is delivered. However, it is difficult to judge now what impact this will have. Amazon’s recently announced venture with JP Morgan and Berkshire Hathaway has too few details to truly understand it’s potential impact.