Buy It vs Build It – Why Care Providers Should Stay Out of Tech Development

There are a number of seismic shifts underway within the US healthcare system. The two that we’ve had our eyes on are the rise of capitated provider networks and the subsequent focus on population health management and preventive care to drive operational cost savings. The reason we’ve followed these two so closely is that they so completely expose the lack of proper data infrastructure supporting chronic condition management – specifically weight-related chronic condition management.

A good measure of the overall success of the capitated reimbursement model is the performance data from the Medicare Shared Savings Program (MSSP). The recent Year 2 report released in late 2014 indicates that while overall, participating Accountable Care Organizations have done a respectable job increasing overall quality, they are struggling to achieve a similar level of cost savings across the board.

Figure 1 – Year 2 (2013) Reporting data from the MSSP


While the composite scores are moving in the right direction from Year 1, a closer inspection of some very specific quality measures tells a very different story.

Figure 2 – Year 2 (2013) Selected Average Quality Measure Scores


CMS Quality Measure*

Group with Both

Hospital Group

Physician Group

All ACOs

5 – Health Promotion and Education





6 – Shared Decision Making





16 – Adult Weight Screening and Follow-up





22 – 26 Diabetes Composite





28 – Percent of beneficiaries with hypertension





Some of the lowest average quality measure scores were in areas relevant to weight-related chronic condition management as well as patient engagement.

There are a few potential justifications for why these scores lag so far behind the average scores in across other measures.

  1. Legacy of event-driven, reactive practice means that there is plenty of infrastructure and evidence-based approaches for reducing prevalence and severity of highly acute diagnoses.
  2. Revenue traditionally has been driven by inpatient events (related to item 1), and so the bulk of a hospital’s operating budget has been dedicated to serving and supporting inpatient care activities. Long term outpatient preventive care brought in proportionally very little.
  3. Unhealthy weight gain happens very slowly, and takes years of mismanagement to result in the highly acute outcomes that traditionally get close attention

The MSSP and capitation in general turn the traditional finance model on its head. Under capitation, reimbursement risk is passed from the payer to the provider as the relationship between the payer and the patient shifts from event-based coverage to managed care. Providers are not just accountable for treating whatever a patient shows up with that day, but also for their long term health outcomes. In this context, extremely low quality scores across the board in items related to weight management and patient engagement/education are very problematic – especially in light of the fact that the nation is in the midst of a long-term obesity epidemic. It’s problematic because

  • effective preventive care is the key to long term cost savings
  • active patient participation is critical for preventive care to work
  • gradual gains in body fat drive a myriad of other chronic conditions that become difficult and expensive to treat if poor behaviors are entrenched

In short, ACO and managed care plan long term profitability depends on a highly motivated and engaged customer base, and robust preventive care services. Which is a major weakness of Medicare ACO’s across the board.

This is a problem that needs to be addressed within the time frame of 1 or 2 years, for MSSP or Pioneer ACO participants, in order to maintain shared savings eligibility. But given the historical rate of change within healthcare, it is not reasonable for robust, consumer-technology based programs that assist in preventive care services to be developed in-house. In comes the market and a sea of digital health technology vendors who can provide solutions off-the-shelf or customized to meet unique needs.

Healthcare technology firms that display a good understanding of the business dynamics in which provider networks operate will become the invaluable partner as these networks seek scalable preventive care frameworks that improve patient outcomes and boost the Customer Lifetime Value for patients within managed care plans. These technology firms have the flexibility of rapid development cycles and access to a level of technical talent that simply has not been attracted to work within traditional healthcare IT. Additional benefits include:

  • Driving innovation by exposing healthcare to tech infrastructure paradigms common in other spaces but unheard of in healthcare
  • A patient centered design focus for programs that leverage digital health technology to improve patient engagement and satisfaction

Look to see digital health technology firms become much more influential in driving new paradigms in how patients interact with providers and payers, and how providers can work together with patients to drive healthy outcomes and reduced cost of utilization.


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