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Telemedicine and the Value-Based Model of Healthcare Delivery

Written by S.O.

Posted on June 16, 2015 at 3:33 pm

By James Stanell, Director of Market Strategy | DocChat

(New York, New York) The United States healthcare system has long delivered care through an inefficient “fee for service” payment model that gave little incentive towards efficient care and utilization, consequently limiting the system’s potential to deliver cost-effective quality health outcomes for consumers. As a result, barriers exist between the immense diagnostic and treatment capabilities of modern medicine, and the care that Americans rely on to stay healthy. Given the recent introduction of the value-based care model to the revenue structure of insurance providers and other payers of healthcare services, the market is slowly beginning to adapt towards maximizing cost-efficiency and creating healthier outcomes through preventative care practices. Telemedicine, as a direct result, has gained significant momentum in the market given its ability reach consumers and provide necessary care at a reduced cost. Judged not by the quantity of services provided, but rather by the effectiveness in achieving an efficient healthy outcome, the value-based care model has introduced a new level of financial accountability to a market where technology, such as telemedicine, can initiate significant gains in the cost efficiency of healthcare services throughout the market.

The historically dominant model of fee-for-service payment for healthcare services lacked the ability to incentivize efficiency and promote cost-effective service utilization. Absent of responsibility in regard to the value of services towards a healthy outcome, the system compensated providers based on the number of services rendered, rather than the true effectiveness of the service on the patient’s health status. Consequently, the delivery mechanism for healthcare in the US was corrupted with inefficiencies in spending and utilization, ultimately allowing healthcare costs to grow uncontrollably for decades. With no mechanism, tools, or incentive to monitor and provide the most efficient care, the fee-for-service model consequently limited the immense potential that the US healthcare system holds.

Recently, the federal government (CMS) introduced a new era in the delivery of effective and efficient healthcare through the value-based payment model for insurers and healthcare providers alike. Given a set amount of money per individual, calculated by measures of their health status and demonstrated risk, insurance companies must rely on their abilities to construct efficient provider networks and delivery mechanisms in order to remain financially afloat. As the market continues to attack the margins, healthcare spending and premiums have begun to fall for the first time in decades, putting the pressure on providers to innovate or else leave the market entirely. As a result, the sector is beginning to experience heightened investment in technologies that enhance overall efficiency, creating tools to control even the smallest marginal gains in profitability. Telemedicine’s recent growth within the market can consequently be attributed directly to its feasible value to consumers and healthcare providers alike, ultimately holding significant power to provide cost-effective and healthy outcomes.

The implementation of telemedicine services is constrained, however, mostly due to the slow moving regulatory structure that ultimately determines viable tools for providing America’s healthcare. The healthcare industry itself is surrounded by one of the most complex legal and political structures in the entire US economy, which exists as a product of an old system that was dominated by political favoritism, ultimately fostering entrenchment of inefficient service providers. Moreover, widespread adoption of consumer cost-saving technology remains dependent on what the government determines are “payable procedures”. Currently only a handful of telemedicine service are billable at the government level, subsequently limiting the scale of investment and potential effectiveness of the immense potential the technology holds.

The inefficiency of the fee-for-service system arises from the extremely ineffective care delivery system, which lacks the proper tools to control some of the greatest high-cost utilization risks. Without a proper tool or advisor to access the complex healthcare system, consumers habitually receive treatment at over-qualified facilities compared to the level treatment they require. Avoidable emergency room visits, for example, account for billions of dollars in wasted spending every year for insurance providers and payers. While the tools to receive cost-effective services have already saturated many markets, such as Urgent Care facilities, many consumers remain uneducated and unaware of the value of these options that providing convenient and cost-effective care for non-critical situations. By realizing the potential cost savings in high-cost facility diversion, telemedicine could be the actor that repairs a broken system, cleaning up excess spending and expediting high-quality medical care.

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