One increasingly subtle but important theme in US healthcare is the shift to care allocated by payers rather than providers. Historically, decisions on what care to provide patients were made by physicians and hospitals – payer interventions were rare. Today that landscape is much different. The entire design of Medicare Advantage (now covering over 50% of Medicare patients) and managed Medicaid is to have payers manage care actively rather than simply paying for claims submitted by providers.
Over the years health maintenance organizations have emerged, with the most notable example being Kaiser. At Kaiser, allocation of care was really more of a joint decision with providers heavily involved. Today, while some Medicare Advantage organizations have providers on staff who are directly providing care, most care decisions are made by payers and are made using mechanisms of their own design such as prior authorization, narrowed networks, case management, and various forms of at-risk contracts.
The massive economic incentives on payers to reduce spend on care reflects the fundamental moral hazard of capitated care, which is to provide less care. There are, though, a number of countervailing policy pushbacks, including the ability of Medicare Advantage patients to move to other plans or potentially back to classic Medicare (though without guaranteed issue for supplemental plans and at higher cost). The STARS payment program closely ties payment to plan performance with multiple complex metrics. These differential payments have had documented effects on all the major Medicare Advantage participants.
As the industry embarks on this fundamental transformation, a few key questions must be answered:
How will payers navigate these contradictory incentives in the future?
Not surprisingly, in the modern world the answer will come from data and the software tools using that data. While there have been payer-side data analytics in healthcare, there has not been much to show for all the efforts involved. That is because US healthcare has not been able to combine clinical and financial data in a robust way. Clinical data sits in EMR pipelines on the provider side, and payer data sits in the revenue cycle pipeline and ultimately ends up in claims engines.
Patients, employers, and the American public want to shop for value in healthcare like we do in the rest of our lives. The calculation for value is straightforward – look at what you get and the price you pay. Without a computational way of combining what we get (clinical data) and what we pay (financial data), neither payers nor patients will be able to materially shop for value.
How do we combine clinical and claims data?
The healthcare industry finally has ways to join these data streams at enterprise scale, thanks to two core components. The first is the HL7 FHIR data standards, which include the US Core Dataset for Interoperability (USCDI), as well as the CARIN Alliance standards for claims data (Explanation of Benefits and Coverage FHIR Resources). The second is the families of APIs (Application Programming Interfaces) that allow software systems to exchange that data.
That is where the CMS Interoperability and Prior Authorization Rule (0057-F) plays a key role. This rule expands the Payer-side Access APIs beyond the currently required Payer-Patient API (for patient apps) with upcoming requirements for Payer-Provider and Payer-Payer (at insurance transitions) APIs. These APIs complement the 21st Century Cures Act API requirements for EMRs to expose patient data to patient-controlled apps, as well as the option for providers to enable population-level data with Bulk FHIR.
A sharp additional point for accountability is the CMS 0057 rule requirements for prior authorization. CMS-regulated payer plans will need to make prior authorization data available in each of the Access APIs and also in a transactional Prior Authorization API, and these need to be up and running January 1, 2027. Before that, plans will need to report extensive details on their prior authorization performance, including approvals and denials, and time for those decisions for both standard and expedited Prior Auth requests. Prior Authorization performance will need to be reported for calendar year 2025.
Step back for the big picture. CMS is doubling down on the APIs which require payers to organize their claims data and any clinical data they have into the FHIR standard. ONC has required core clinical data be made available in FHIR and through the Bulk FHIR standard. We now finally have clinical data and financial data in a unified format and publicly available under the protections of HIPAA for ourselves as patients and for the payer entities who buy care on our behalf.
How can payers operationalize being smart about combining clinical and financial data?
First, they have to get the clinical data, which means writing provider network contracts with adequate incentives to get clinical data. This should be doable as providers and payers increasingly have win-wins in data sharing. Second, payers have to rethink how they handle data. Over the decades they have built data pipelines centered on the claims engine. These systems were developed with bits and pieces of clinical data acquired as part of prior auth or similar workflow stored, but without generating a holistic clinical picture of the patient beneficiary.
Today, modern cloud architectures and modern data stores, such as the increasingly common “Lakehouse” data structures, are providing extraordinary compute abilities for anyone with “big data”. Merging clinical and claims information at scale is exactly the type of data transformation these blends of data lakes and classic relational stores are designed to enable.
What lies ahead?
The CMS rule provides the powerful FHIR glue needed to merge clinical and financial data together. The rule also lays out requirements to use the modern API styles that power the entire Internet economy, helping healthcare catch up and embrace the digital future.
With long overdue regulatory and technical foundations in place, we are entering an exciting new era for healthcare with payers at the forefront. Finally, payers are positioned to truly make care efficient and affordable for patients and all who pay for that care.
Photo: Feodora Chiosea, Getty Images
Donald Rucker, MD is Chief Strategy Officer for 1upHealth, where he is helping to set the direction for the company’s ongoing innovations in FHIR-enabled computing and bring these to customers to help them meet the evolving clinical, technical, and reimbursement demands for modern data. Prior to 1upHealth, Dr. Rucker was the National Coordinator for Health Information Technology at the U.S. Department of Health and Human Services, where he led the formulation of the federal health IT strategy and coordinates federal health IT policies, standards, programs, and investments. As part of his tenure with ONC, he led the development and issuance of the 21st Century Cures Act Final Rule, a pivotal mandate supporting patient access and interoperability of health data.
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