How can businesses contain spiralling medical expenses?

In Turkey, spiralling medical expenses are being put down to a complex combination of factors that includes rising wage bills and cost of materials, as well more advanced IT systems. The growing medical needs of an ageing European population are having a massive impact too, said Dr Oktay Akkoyun, a Medical Cost Containment Specialist at marm assistance in Turkey. “This demographic shift pressures healthcare systems and drives up costs associated with long-term care and chronic disease management,” he said. Older people are more likely to have chronic diseases and complex medical conditions, including comorbidities, which increases demand for specialised and expensive healthcare services. “This demand can strain resources and drive up costs as patients require extensive treatments, medications, and ongoing management,” he added.

Globally the cost of medical care reached a historic high in 2023

In Turkey, Dr Akkoyun said, medical advancements also contribute to rising healthcare costs. New technologies, procedures, and treatments often come with hefty price tags. And of course, some price rises are related to unethical approaches or overcharging at some facilities in resort areas, he added. 

Others agree that this combination of factors is also affecting other countries in Europe, albeit to a slightly lesser extent. AON’s Global Medical Trend Rates Report 2024 pinpointed mental health as a rising problem in Europe particularly. 

Public vs private

Julie Remmington, a consultant to major European insurers who also runs her own assistance company, has noticed price rises because getting patients seen under the UK Global Health Insurance Card (GHIC) or European Health Insurance Card (EHIC) scheme is much harder these days. Traditionally those patients would have been seen within the public sector. “The public sector has lack of capacity and lack of staff, and its budgets are really squeezed,” she said. “So a lot of people automatically end up in the [more expensive] private sector.”

The Covid-19 effect must be factored in too, said Guskova. The severity of the outbreak, the effectiveness of public health measures, and the resilience of healthcare systems varied from country to country, with particular impacts in terms of cost. “We noticed that countries with weaker healthcare infrastructure or higher rates of infection may experience greater pressure on healthcare costs compared to those with more robust systems,” she explained. “Additionally, disparities in access to healthcare and socioeconomic factors can influence the impact of the pandemic on healthcare costs in different countries.”

Pandemic costs were higher within healthcare facilities because Covid-19 measures put in place (virus testing, masks, and separate sections for patients with Covid-19, for example) were expensive. Some measures are still in place.

However, rightly or wrongly, some healthcare facilities have raised prices to recoup revenues lost when scheduled treatments were cancelled and there was less inpatient-based healthcare during the pandemic, say commentators.

The public sector has lack of capacity and lack of staff and its budgets are really squeezed

Broderick said hospitals are under immense pressure to close the gap between financial needs and the funds available to them (state contributions and funds from private insurers). Everyone is tied up with the local system, even the private hospitals, he explained. “So, the only other alternative is to secure additional funding from the private insurers, and more from the international insurers/patients (no tariffs protections in place).”

Insurers and assistance companies are therefore putting in place strategies to mitigate against these costs. Echoing findings from the Aon survey, they say wellbeing programmes can be a good mitigation strategy because they can help prevent progression to serious illness.

But negotiating more favourable rates with healthcare providers to secure discounted services is crucial. “We have enhanced our negotiation efforts with healthcare providers to secure more favourable rates for medical services and treatments,” said Guskova. This includes establishing partnerships with preferred providers who offer high-quality care at reasonable prices so that clients receive the necessary treatment without experiencing an excessive financial burden. “Additionally, AP Companies has implemented more stringent cost containment strategies, such as stricter pre-authorisation requirements and utilisation reviews, to ensure that medical expenses are managed effectively,” she said. “By closely monitoring healthcare costs and trends, we can identify areas where costs are escalating and take proactive measures to mitigate their impact on our clients.”

The company is also expanding its network of healthcare facilities and professionals and exploring more partnerships with clinics and hospitals in regions where costs are lower (without compromising on quality, Guskova added). Patients are being followed up closely during their admission periods to prevent unnecessary – and not acute – treatment to reduce costs. “Referring patients to the right facility according to their medical condition also plays a major role,” she said.

The importance of data

Companies contacted by ITIJ said good data analytics and predictive modelling can also identify cost hotspots, forecast healthcare utilisation patterns, and optimise resource allocation. “By analysing claims data, utilisation trends, and patient demographics, insurers and assistance companies can make informed decisions to manage costs effectively,” said Dr Akkoyun. Healthcare organisations employing robust population health management strategies too can proactively identify and address the health needs of specific patient populations. 

Enhanced data analytics has become vital for insurers such as Allianz, because they can review and negotiate price increase requests from providers. Analytics help secure rates offered to the local insurers, both in public and private settings, explained Broderick. “For price/tariff increases requested by the provider, our medical network team is running general and tailored analytics to better understand the impact of a proposed increase based on our experience with the specific providers,” he said. This information allows the network teams within the regions to have detailed pricing negotiations with the providers. Tight controls and approval processes exist, he added: “And when the increase is found unreasonable or not aligned with local regulations, the relationship with the specific provider can be terminated and an in-line provider prioritised.” 

Allianz, like other companies, has also put in place a process between the network teams and medical teams to negotiate discounts for high-cost cases. They also steer patients to alternative providers with more competitive rates. Using commercial levers, such as consolidated buying, is a great way to reduce costs, Broderick added.

Digital solutions

Most of the companies said that telemedicine and digital health solutions have the potential to streamline healthcare delivery, reduce unnecessary medical visits and hospitalisations, and lower administrative costs. Remote consultations, monitoring, and chronic disease management, all honed during the pandemic, are already offering cost-effective alternatives to traditional care delivery models. AP said that integrating telemedicine into routine care delivery can enhance patient access to healthcare services, particularly in underserved areas. Other strategies to reduce costs include more patient-focused digital access to care – Allianz is using digital solutions to perform many functions from symptom-checking and appointments to pharmacy solutions. 

More could be done, however. More trust in relationships between healthcare facilities, assistance companies and insurers could yield greater cost reductions in future, said Remmington. In Europe, for example, insurers and assistance companies should not be using middlemen/agents (on the basis of language requirements). The nuances of individual cases and the potential for targeted cost reductions can be lost. “You really should have those relationships directly with bigger clinic groups. Then they can speak directly to you and they know what is expected of them,” she said.

More trust in relationships between healthcare facilities, assistance companies and insurers could yield greater cost reductions in future

Delaying payments (unnecessarily) does not engender trust between organisations either. When pre-existing conditions are not covered, GP checks must take place, and this takes time. But more information on exactly what’s happening would help allay any fears clinics may have. “They are worried that they are going to be treating a patient and won’t be paid. So, there is a lot we can do in the industry to make it clearer to everybody what we’re doing, such as feedback on the process,” Remmington added. “And just being fair and reasonable is important. When we have an invoice, people should just pay quickly  – don’t sit on the bill – because everybody has cash-flow issues. That’s not fair on the clinic.”

Of course, there are clinics that overcharge, and generally patients are directed away from these places as much as possible, she said. But sometimes, there is no choice. It’s then that invoices must be double-checked, negotiations started and more information requested. “It’s all down to information and partnerships,” she added.

Other ways in which industry may be able reduce costs is to stop incentivising unnecessary care through fee-for-service payment models and reimbursing healthcare providers based on the volume of services delivered, said Guskova. “Transitioning to alternative payment models, such as bundled payments or capitation, can align incentives with value-based care principles and promote cost-effective care delivery,” she said. “Value-based care models incentivise preventive care, care coordination, and patient engagement, leading to improved health outcomes and reduced costs.” Addressing overutilisation through evidence-based guidelines and provider education can help reduce unnecessary healthcare spending too.

Poor practices that raise costs should be eliminated as much as possible, Guskova added. Fragmented care delivery, where patients receive care from multiple providers lacking coordination, can lead to the duplication of services, medical errors, and higher costs. “Implementing care coordination mechanisms, such as care teams and electronic health records, can improve care continuity and efficiency,” she said.

As Broderick put it, all parties – providers, insurers, assistance companies - in the ecosystem need to work better together. “This will improve the overall experience for our shared clients,” he concluded. “We need to operate and co-exist together in a way that is collaborative and builds long-term partnerships.”