This article is part of Bain's report US Healthcare Trends 2020: Insights from the Front Line. Explore more insights from the report here.

As Covid-19 reshapes the healthcare landscape, successful payers are considering new strategies and approaches to capitalize on the favorable shift in care management and delivery to lower-cost settings to telehealth. Most prominently, payers are thinking about the best ways to deploy telehealth for their members, considering both cost and convenience. They are rethinking provider reimbursement to motivate a greater shift to lower-cost care settings. And payers are seeking to defend their roles as care managers through investments in innovative care management tools and, for some, primary care ventures. We explore each of these trends below.

Telehealth strategy. Before Covid-19, most payers offered telehealth services, but uptake was limited. In 2019, 80% of commercially insured employees had access to telehealth services, but fewer than 5% used them. The pandemic transformed patient behavior. In March, Teladoc reported a 201% increase in active telehealth users, and in April 2020, nearly half of all Medicare primary care visits were via telehealth, compared with fewer than 1% in February.

Prior to the pandemic, most patients using telehealth were willing to “see any doctor.” That allowed the payer (and its telehealth partner) to enable that care. During the pandemic, however, providers accelerated their move into telehealth, allowing patients to “see my doctor” for ongoing care and creating new engagement models between physicians and patients that deepened those relationships. For example, some primary care physicians began offering telehealth appointments during off hours and weekends, filling a role often played by urgent care clinics today. Many consumers prefer this “see my doctor” approach, calling into question payers’ prepandemic strategy.

To determine the right strategy going forward, leading payers start by segmenting telehealth visits into two categories: cost-related cases and convenience-related cases.

Cost-related cases are those that allow payers to reduce costs through telehealth, mainly by adjusting incentives to shift in-person care to digital visits. These include episodes of care where telehealth can successfully replace an emergency department visit (e.g., diverting Level 1 or Level 2 acuity care to telehealth), where a follow-up appointment can be conducted digitally, or where specialized services such as mental health assistance or difficult-to-access specialties for rural members can be delivered through telehealth. In these cases, telehealth can provide a similar quality of care at a significantly lower cost.

Convenience-related cases are those in which payers use telehealth services to generate loyalty even if the care is complementary and, therefore, increases costs. In fact, 82% of clinician respondents to Bain’s 2020 US Front Line of Healthcare Survey reported that telehealth will complement and not substitute for in-person care. Payers must be deliberate about where to make investments in convenience to foster member loyalty vs. where the increased convenience generates a low return on investment given the added cost. This is likely to differ across member segments.

A payer’s decision on the right mix of cost vs. convenience and members’ desire to “see a doctor” vs. “see my doctor” will help determine whether the company should buy or build telehealth services, or partner with an existing telehealth vendor. Payers that want to offer “see my doctor” telehealth options to members may consider partnering with local medical groups. Those that prefer to offer “see a doctor” are likely to build a platform or partner with a scale telehealth vendor.

Reimbursement innovation. Covid-19 has had a profound effect on patient behavior. Many patients decided to forgo care entirely, with visits to outpatient practices down by 60% in March and April according to some estimates; others have grown even more wary of inpatient settings.

Forward-looking payers are reacting to these shifts in three ways. They are adjusting reimbursement policies to further encourage use of lower-cost care settings. One example is site-neutral reimbursements (both fee-for-service and bundled). Payers are also seeking to shift reimbursement to value-based care. Historically, providers have been reticent to move to value-based care given profit pool compression. That may persist for many health systems, but our research found that 39% of primary care physicians are more willing than ever to consider value-based arrangements with payers. These models offer more predictable cash flows and limited risk of profit pool compression because value-based savings will come from outside the primary care physician sphere. Finally, payers are redoubling their efforts to educate members and providers on the value of moving down the care continuum where appropriate.

Expanded business models. To win in the postcrisis era, leading payers are making investments, building partnerships and exploring acquisitions that will further expand their business models. Two areas, in particular, stand out: innovative approaches and platforms for care management and increased participation in primary care. 

Digital pioneers in care management such as Omada Health and Quantum Health have filled gaps in the healthcare system by offering simple and customer-friendly interfaces allowing members to more easily navigate the system and manage care more proactively. Now, virtual health technology providers and digital third parties increasingly have their sights on owning relationships with chronic patients through a digital-first monitoring and care approach. One example is the recent announcement of a merger between Teladoc and Livongo. As these third parties build relationships with providers and self-insured employers, payers could be squeezed out of one of their most important roles.

To compete with third parties and preserve their historic care management role, leading payers are starting to play more active roles managing member relationships and make investments or acquisitions to reclaim these touchpoints. These investments could be a blend of navigation tools, disease-specific care management plays and digital engagement platforms.

Historically, primary care has been a fork in the road for payers: Some have invested heavily, while others have insisted they are staying away. But Covid-19 has changed the primary care market dynamics, forcing some payers to reconsider. First, continued cost pressure is convincing some payers that they need to control the front door of care. At the same time, increased financial pressure on primary care providers has made acquisitions attractive in some markets. Our research shows that 69% of physicians in independent primary care groups would consider acquisition, up from 29% in 2019

Finally, new business models allow payers to participate in primary care businesses without adding new business units. For example, fast-growing primary care providers Oak Street Health, ChenMed and Iora Health have grown substantially in the last 24 months and announced several partnerships with payers. Some of these primary care innovators have sought payers as investment partners up front to help manage care pathways efficiently and, when possible, eliminate the need for more expensive care in the future. Payers, in turn, help educate their members on the value of new care models. The goal for both payers and providers is providing high quality care at lower cost.

US Healthcare Trends 2020

Insights from the Front Line

From physician burnout to telehealth, the pandemic has reshaped the healthcare landscape. Bain's series, US Healthcare Trends 2022: Insights from the Front Line, examines how the industry is confronting current challenges, including patient and physician satisfaction, the transition to value-based care, and omnichannel care.