RamaOnHealthcare November 16, 2023
Statistically Valid Healthcare Data Identifies the Landscape & Challenges
Today, RamaOnHealthcare talks with Dr. Sanjula Jain, the Chief Research Officer, and Senior Vice President of Market Strategy at Trilliant Health. She is a health economist who leverages data-driven insights to shape organization and market-specific strategies, and national health policy. Dr. Jain collaborates with C-suite and senior leadership teams, which include Fortune 500 life sciences companies, leading health systems, digital health providers, and health plans. Dr. Jain authored “The New Health Economy: Ground Rules for Leaders” and serves as faculty at The Johns Hopkins School of Medicine.
Trilliant Health enables evidence-based decision-making through predictive analytics, market research, and healthcare industry expertise.
RamaOnHealthcare (ROH): Welcome to RamaOnHealthcare! You recently released the 2023 Trends Shaping the Health Economy Report, a massive 147-page healthcare industry overview. Why did you create the report, and how do you hope it will positively impact the industry’s future?
Dr. Sanjula Jain (SJ): Healthcare plays a massive societal role. Improving the speed and quality of decision-making among every healthcare stakeholder has never been more critical. But in an economy defined by constant change, the challenges placed on healthcare executives, from hospital operators to policymakers, are even more acute. In my experience working with senior executives and board members ranging from the nation’s largest health systems and health plans to Fortune 500 healthcare companies, I have seen organizations lack the appropriate information needed to make effective decisions.
…organizations lack the appropriate information needed to make effective decisions.
The $4.3T health economy creates more data than any other part of the U.S. economy. New findings emerge daily, from MedPAC’s payment rate recommendations, Kaiser Family Foundation’s surveys, and Rock Health’s digital funding numbers, to name a few. The challenge for health economy stakeholders is synthesizing seemingly unrelated – and sometimes misconstrued – data to understand their strategic and tactical implications.
As an industry, executives are prone to gather and analyze data in silos – EMRs, Medicare vs. Medicaid, state-by-state, etc. – are satisfied with data that is “directionally correct” instead of demanding data that is “statistically valid” and have a habit of extrapolating a discrete data point, something that is true of 5-10% of the population, to 100% of the population.
I wanted to create a fact-based, data-driven national analysis of the trends that define the landscape and subsequent challenges for all players in the health economy. As a health economist and health services researcher, it was important to me to introduce healthcare executives to more rigorous research insights in an easy-to-consume format. Even though markets for healthcare goods and services deviate from what economists call the ideal market, the core principles of demand, supply, and yield offer a valuable framework for examining secular trends in the health economy. The study is the first to provide longitudinal and timely insights representative of the healthcare utilization patterns of ~300M American lives and more than 2.7M practicing healthcare providers.
I wanted to create a fact-based, data-driven national analysis of the trends that define the landscape and subsequent challenges for all players in the health economy.
I hope the Trends Shaping the Health Economy Report series will prompt leaders to reflect on the future of the U.S. health economy and think critically about what each trend means for their organizations. Despite significant investments and initiatives to “transform” the healthcare system, little has changed to date — even with newcomers like Amazon, Walmart, and Best Buy. The status quo is unsustainable for the health of Americans, and it is time for all health economy stakeholders to start playing by the immutable rules of a negative-sum game. While the report is not intended to provide all the answers, I hope leaders will recognize the status quo of our healthcare system is unsustainable and use the report as a tool to ask the right questions of their teams and organizations.
…I hope leaders will recognize the status quo of our healthcare system is unsustainable and use the report as a tool to ask the right questions of their teams and organizations.
ROH: Can you share more about the key findings? What trends are leaders not thinking about today that they should consider more carefully?
SJ: The U.S. health economy continues defying the economics laws — demand, supply, and yield. When supply exceeds demand or demand is flat or declining relative to supply, price (and therefore yield) decreases. The inverse has been true in healthcare for decades.
Our thesis is that any health economy stakeholder whose business depends on commercially insured patients must recognize these foundational economic principles. Why? Because the healthcare system is what game theorists call a “negative-sum game,” whereby the costs invested into the system largely outpace the actual value or benefits received by patients or consumers. Operating in a negative-sum game means that every stakeholder will still lose compared to what they currently have or need.
…the healthcare system is what game theorists call a “negative-sum game….”
In a health economy defined by reduced yield, the only way to “lose less” is to compete on value. Analyzing negotiated rates at the market level reveals the true “market price,” and providers whose rates or quality are outliers will likely be forced to meet that market price to maintain their market share. The combination of regression to the lower market price with other policy initiatives like site-neutral payments and price caps would further reduce yield.
Hence, health plan price transparency should catalyze unprecedented and frenzied competition to win the hearts and minds of the consumer and the payer that keeps the current U.S. healthcare system afloat: the employer. If it does, the winners in healthcare’s negative sum game will be those who deliver value for money.
ROH: It’s clear that the U.S. healthcare system is not delivering “value for money,” as you say in the report. As leaders across the industry navigate these challenges, what qualities do you believe are necessary to be an effective leader in today’s health economy?
SJ: The reality is that the U.S. healthcare system is working the way it was designed. The incentives across stakeholder types do not align and are squarely at odds with one another. This dynamic, paired with the fact that healthcare is a negative-sum game, means that the way the industry has been trained to operate and make decisions will not cut it going forward. For decades, leaders have relied on the concept of “best practices,” but in the future, it will be more important to focus on evidence-based practices that consider the nuances of each patient population, organization, and/or market.
Effective leaders must be willing to pursue strategies and initiatives often as a “first mover” rather than follow the norm or wait for payment models or policies to incent a particular action. This means that leaders will have to challenge the status quo in every aspect of their decision-making and validate assumptions with facts rather than anecdotes. Instead of taking every constraint or circumstance at face value, leaders must be disciplined about applying first principles in their routine thinking.
…leaders will have to challenge the status quo in every aspect of their decision-making….
ROH: The report also examines a dataset that is new to the healthcare industry: the price transparency files posted by health plans. What do leaders need to know about price transparency?
SJ: Negotiated rates for in-network providers have long been the most closely guarded trade secret of health insurers, protected by confidentiality clauses and antitrust regulations. Historically, this information has been enforced by the Federal government, with the Sherman Act forbidding disclosure of negotiated rates for healthcare services, among other things. CMS’s Transparency in Coverage initiative is changing all of that.
The difference between hospital and health plan price transparency files needs to be better understood across the industry. Health plan price transparency is starkly different from hospital price transparency, for which requirements are limited to “standard charges” for 70 CMS-designated “shoppable services” and 230 hospital-selected items from chargemasters with more than 40,000 items. In contrast, health plan price transparency includes all covered items and services between the plan or issuer and in-network providers.
Hospital price transparency alone provides an incomplete picture. Beyond the uneven compliance by health systems with posting the data, the limited nature of the reported data—300 codes out of ~40,000 items on a typical hospital chargemaster—makes it clearly inadequate to inform consumers or health economy stakeholders. In contrast, the breadth and depth of the health plan rate data provide granular insight into the actual cost of specific healthcare services delivered by specific providers and entities.
Many commentators and analytics firms have publicly lamented the challenges of leveraging health plan price transparency data, and most data analytics experts would not consider the data to be “easily accessible.” The machine-readable file sizes alone present a barrier for standard computing power. Additionally, other limitations of health plan price transparency data are inherent to its self-reported nature and lack of an auditing process. The health plan price transparency files contain billions of “phantom rates,” meaning that health plans have posted thousands of negotiated rates for payment codes for every individual provider, regardless of whether they perform the service. For example, a health plan will post rates for cardiology services to the NPI of a physical therapist. The files also represent rate information for a point in time rather than longitudinally. Even so, these data offer insights that were neither possible nor legal until now.
An abundance of the research conducted thus far has been focused on hospital price transparency, primarily due to the accessibility of the files despite the incomplete nature of the data. What hospital price transparency cannot provide is an understanding of the total cost of care, whether for a market, a facility, a provider group, or a patient cohort. With health plan price transparency, the total cost of care is no longer conceptual. As a result, the robust availability of negotiated rates will allow for competition to rely more on value (i.e., quality relative to price).
With our ability to query and understand our health plan price transparency dataset, we have started to realize the vast discrepancies in price in comparison to limited differences in quality across the U.S. for comparable services. Many of these discrepancies and their implications (and opportunities) are discussed in the findings of the report… and these findings are just the tip of the iceberg.
…we have started to realize the vast discrepancies in price in comparison to limited differences in quality across the U.S. for comparable services.
ROH: What resources do you have for leaders who want to dig deeper into the trends outlined in the report?
SJ: Our weekly research publication, The Compass, will look more closely at each trend as part of our fall series. It’s publicly available, so anyone can join the distribution list to receive the next edition. After completing the series, we will publish new findings to track these trends and identify others throughout the year.
Our weekly research publication, The Compass, will look more closely at each trend….
Readers who want a deeper dive can join our Compass+ community with premium access to an expanded report with more detailed analyses (e.g., market views, condition specific) and ongoing data tracking. Compass+ is our all-access pass to access resources, in addition to those related to the 2023 Health Economy Trends Report that helps you discern the signal from the noise in how the health economy is evolving and what you should be thinking about. There is something in there for senior leaders across every sector of the health economy – health systems, payers, life sciences, investors, and more.
ROH: Thank you for sharing your insights and expertise with our Readers. We wish you all the very best in transforming healthcare!
About Dr. Jain
Dr. Jain is regularly published in academic journals and industry publications, including The Wall Street Journal, Harvard Business Review, POLITICO, STAT News, The Hill, Fast Company, JAMA, and CNN, among others.