Disrupting Health Care Models for Better Outcomes

Americans spend twice as much on health care than any other developed nation. In 2022, US health care spending grew 4.1%, reaching $4.5 trillion or $13,493 per person, according to data from the National Health Expenditure Accounts (NHEA). It accounts for 17.3% of the nation’s GDP.

Despite the high costs, US has worse health outcomes overall of any high-income nation. Americans have shorter life expectancy with some dying from avoidable causes, poor outcomes from treatment and patient safety measures, and patients unable to get care due to cost.

With these poor results, patients and employers are increasingly demanding changes to the health care models to lower costs and improve treatment and care.

At Goldman Sachs Research’s Heathruption conference held in New York on April 9, three industry disruptors discuss how they are helping to solve the health care spending conundrum for better outcomes.

Panelists included Kate Ryder, CEO of Maven Clinic – a company focused on women and family health; Sami Inkinen, CEO of Virta Health – a company focused on preventing and reversing metabolic diseases like diabetes and obesity; and AJ Loiacono, CEO of Capital Rx – a company focused on reducing drug costs. It was moderated by Nathan Rich, vice president of Goldman Sachs Research Health Care Services.

Throughout the discussion, the panelists were united on one solution: The health care model needs to move away from the fee-for-service model to one that is value-based and pays on outcome.

The pitfalls of the fee-for-service model

Ten years ago when Kate Ryder founded Maven Clinic, pregnancy was the only for-women condition recognized in most employer health plans. Fertility, miscarriages, menopause, didn’t even have billable claims codes. For Ryder, this didn’t make sense.

“Women drive 80% of health care decisions. Maternity accounts for one out of four hospitalizations in the US – it is the largest reason for hospitalizations,” she told the panel. Fortunately, employers took notice and now more health plans include fertility and other family planning options as part of their coverage.

Ryder has also seen improvements to financial inclusion – where patients can access treatment regardless of income. But the cost is steep due to the incentives the current care model tends to attract.

Fee-for-service is the most commonly used care model in health care, where providers are paid by service, drug, or product given. The pitfall in this model is how it drives quantity rather than quality of care. Health care providers could be financially incentivized to over-intervene, ordering unnecessary, costly services or treatments, when there are more affordable treatment options covered by insurance.

Incentives that drive quantity of care, not quality for patients

As employers are increasingly adding fertility and in vitro fertilization (IVF) to their plan coverage, it feeds into maternity as one of the top costs for Fortune 100 companies due to higher risk pregnancies. An IVF treatment could set a health care plan back $25,000 per member, and a pregnancy could cost $25,000-$40,000.

Some fertility vendors are incentivized to send patients to IVF treatment without trying alternatives, and this is where Ryder hopes to make a change. Her company created a fertility program to cover other methods before intervening with IVF, whether it be preconception counseling, prescribing a more affordable drug like Clomid or sending an ovulation kit. The results are telling.

“We have a 30% natural conception rate when someone enters in our fertility program, 70% goes on to IVF,” said Ryder. By focusing on outcomes rather than utilizing IVF interventions when they’re not needed, Ryder said her value-based model has helped save employers 14% per member – about $5,000 per member in direct hard claims cost – over three years.

Introduce an off-ramp from costly treatments

In other areas of care, pricey drugs are driving up costs for patients and employers. For instance, to treat diabetes or obesity, insulin and GLP-1 weight loss drugs are fast growing costs. Patients tend to pay out of pocket for anti-obesity drugs as many health plans do not cover them.

This is why Virta Health believes a value-based model can help. By providing personalized nutrition plans, 1:1 coaching, and healthcare provider support, Virta Health believes they can off-ramp, or de-prescribe, patients from GLP-1s like Ozempic with a program that provides a more sustainable lifestyle.

“We save $6,000 per patient over 24 months and we charge you less than half of it,” said Sami Inkinen, CEO of Virta Health. “[We achieved] 13% weight loss sustained for 2 years – an Ozempic-like result without Ozempic.” This result helped reduce the need for insulin.

“What’s cheaper than insulin prices? Not needing insulin,” he quipped.

All three panelists agreed that to lower costs in health care, compensation should be aligned with patient outcomes and deliver results.

They believe their businesses are proof that value-based models can be attractive to payors, which hopefully would incentivize the industry to prioritize a value-based model.