Remodeling Digital Health Integration: A New Approach to Cost Management

Employers are grappling with an increasingly unsustainable system as healthcare costs continue to rise at a seemingly uncontrollable rate. Frustrated, many employers have turned to Point Solution Vendors (PSVs). These specialized programs – targeting a broad array of conditions like diabetes, mental health, and musculoskeletal disorders – seemed like the perfect answer. However, the unintended consequence has been a dramatic increase in administrative cost, as almost all PSVs charge employers on a per-member basis.  

This model isn’t working. To truly solve this issue, employers must rethink how they integrate PSVs — and create a comprehensive digital health strategy.  

The Problem with the Current Model  

Employers’ Perspective  

Employers have long been dissatisfied with their health plans’ approaches to chronic condition management, prompting them to explore direct contracting with PSVs. While these partnerships initially appeared promising, they shifted costs from medical budgets to administrative ones — an unsustainable tradeoff.  

Let’s put this in perspective. Consider a self-insured employer with 25 thousand employees. If they offer separate PSVs for mental health, diabetes, and MSK conditions, they could easily rack up $4.6 million in administrative fees, on top of $155 million in medical costs.  

For self-insured employers, the challenge is even more acute. Medical budgets are set annually, leaving little flexibility to accommodate these ballooning administrative fees. Worse, these fees compete with other critical initiatives, further limiting an employer’s ability to drive meaningful impact.  

Health Plans’ Perspective  

From the health plans’ side, integrating PSVs is equally problematic. These vendors often lack the infrastructure to bill through traditional medical benefits, meaning their fees cannot be incorporated into claims processes. Instead, costs are charged on a per-employee, per-month (PEPM) or per-member, per-month (PMPM) basis – models that conflict with medical benefit structures.  

Integration is another significant hurdle. According to a recent survey of decision makers at major health plans, each PSV implementation costs health plans anywhere from $500thousand to $3 million, with no standardized process to streamline these efforts. As more employers demand these integrations, the logistical and financial strain on health plans only grows.    

Without systemic change, this fragmented model leaves both employers and health plans financially strained and operationally overwhelmed.  

The Cost of Inaction  

The prevalence of chronic conditions continues to rise, and so do healthcare costs. Employers and health plans who fail to act face a mounting financial burden and growing dissatisfaction from their members. Simply put, the current system is unsustainable.  

A New Path Forward

To address these issues, employers and health plans must embrace a more integrated, scalable, and performance-driven approach.  

Step 1: Leverage Aggregation 

An aggregation approach can be a game-changer in this space. By ingesting data from multiple PSVs, standardizing it, and integrating it into a revenue cycle management system, aggregation enables billing through medical budgets rather than administrative ones. This alignment simplifies payment processes and ensures that costs are tied to healthcare claims.  

Step 2: Offer Broad, Impactful Services  

Limiting solutions to a narrow set of conditions, such as only diabetes or MSK, won’t create the systemic change needed to reduce costs. Employers should focus on building a comprehensive digital network that can influence medical claims across a broader range of conditions. A piecemeal approach simply cannot move the needle.  

Step 3: Adopt a Performance-Based Model  

Finally, it’s time to move away from static fee structures like PEPM and PMPM. By adopting a pay-for-performance model, employers and health plans can tie costs directly to value delivered. This includes clinically qualifying members for solutions to ensure that interventions are both effective and cost optimized.  

With all this in mind, it’s clear the current model for managing chronic conditions is broken. Administrative fees stack on top of already rising medical costs, leaving employers and health plans struggling to manage unsustainable financial burdens.  

But there is a better. more effective and more cost-efficient way forward. By leveraging aggregation, broadening digital networks, and adopting performance-based payment models, the industry can realign costs. The Solera HALO™ Platform exemplifies this approach by integrating multiple digital solutions into a single, scalable system, aligning costs with medical claims and simplifying the payment process. Collaboration between employers and health plans will be essential to the integration of these solutions and driving meaningful change in healthcare cost management.

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