Bitcoin and episodes of care: What’s the connection?

March 17, 2021 / By Rick Kresinske

With Bitcoin’s price once again on the rise, I’m strangely reminded of the trajectory we’ve seen for episodes of care, the alternative payment method that covers health care costs for the care a patient receives within a specified timeframe for a specific medical condition—such as asthma or diabetes, or an event such as a hospitalization. Bear with me, because although you won’t see episodes of care discussed on CNBC or at your next dinner party, they’ve been a topic of many industry conversations I’ve had of late and the similarities with Bitcoin do exist:

  • Both entered the scene as promising methods to disrupt bedrock institutions (Bitcoin for currency; Episodes for health care payments)

  • Gained enough market attention to create competition in the space (Bitcoin: Ethereum, Litecoin, etc.; Episodes: CMS-BPCI, Prometheus, Optum, McKinsey, etc.)

  • Reached a peak in the late 2010s, only for the market to realize fundamental flaws in the implementation of both, which led them to go largely dormant (Bitcoin: not widely accepted for payment and long transaction times; Episodes: difficult to pay in a claims system, impossible to allocate costs by disease for complex patients with multiple comorbidities, main utility is for select orthopedic procedures that only make up a small fraction of health care expenditures)

  • 2020-2021, market forces bring about a revival and renewed interest in the methods (Bitcoin, due to the financial market impacts of COVID-19, and Episodes because of a stronger push to value-based care and alternatives to PCP-centric value-based payment models due to shortcomings of fee for service, magnified by COVID-19)

One important point to highlight about Bitcoin’s recent rise is that today it’s being viewed through a different lens. Institutional investors, the groups driving Bitcoin’s value increase, now view Bitcoin as a fixed asset to hedge against inflation, whereas in the past it was purchased mainly by retail investors as a new global currency that would replace government-issued currency like the U.S. Dollar or Euro. While I am not an investor in any form of cryptocurrency, this new perception of its utility indicates Bitcoin’s latest rally may last.

I fear that episodes of care, on the other hand, may experience history repeating itself unless the payment model is also viewed through a new lens. To expand on the point made previously, episodes have not been widely adopted due to the industry’s impossible expectation that episode methodologies allocate comorbid member health care claims expenses by each individual disease within an episode, to allow for the reconciliation of overall financial numbers. The need to reconcile the numbers at the macro level has led to undercounting and overcounting of costs within individual episodes, making it difficult for providers to manage episode cost targets.

Take for example a patient who has congestive heart failure, diabetes and renal failure, and is hospitalized for a complication of the diabetes. Many episode methodologies would attempt to allocate the patient’s expenses before, after and during the diabetes hospitalization by what was related to the hospitalization (diabetes) or one of the patient’s other comorbid conditions. In theory it makes sense to want numbers to reconcile, but how do you know which services before and after the hospitalization are related to the diabetes admission itself? If six days after discharge the patient visits the emergency department for syncope, it could very easily be related to heart failure rather than the diabetes.

According to an article from the U.S. National Institutes of Health’s National Library of Medicine (NIH/NLM), 65 percent of total U.S. health care expenses constitutes care for patients with multiple chronic conditions. If the goal of alternative payment models or value-based payment arrangements is to reduce costs and improve quality of care, then they should apply to the comorbid populations with the highest costs and poorest outcomes. Disease specific episode methodologies miss the mark and are potentially dangerous for our nation’s sickest patients, who as a result may be over or undertreated for one event or condition versus another.

If episodes of care are to have staying power for more than a select number of straightforward procedures, I believe they need a change in utility perception similar to Bitcoin. Viewing episodes as an accounting mechanism for sub-optimizing steps in patient care (i.e., care specific to diabetes for a patient with multiple comorbidities) must shift to an evaluation of whole-person treatment during an episode. With a whole-person or patient-focused approach to episodes, the patient’s total cost of care is evaluated during the episode, rendering any type of disease-based accounting and allocations irrelevant.

In practicality, again using the example of a diabetes hospitalization for the patient with congestive heart failure, diabetes and renal failure, a patient-focused approach may include the patient’s total cost of care in the leading and trailing episode periods, and not look to identify which services were tied specifically to the diabetes admission. From a cohort perspective, a patient-focused methodology would assign three cohort episodes of care, one for each condition, with each encompassing the patient’s total cost of care. Herein lies the paradigm shift. With a patient-focused approach the total cost of episodes may be higher than the patient’s actual total cost of care.

While this approach may displease an accountant, the full view of a patient’s interaction with the health care system provides great flexibility in any type of episode-based program as the multiple episodic views of a patient facilitate a wide range of profiling and payment alternatives. The patient-focused approach unlocks a wide variety of utility ranging from monitoring disease progression and analyzing provider practice patterns for program integrity, to including specialists (particularly behavioral health providers) in their own value-based payment arrangements outside of the classic primary care physician (PCP) model.

In summary, while I am extremely excited about the use cases of episodes of care, I believe there are practical limits when taking a disease specific view and that a patient-focused approach is the way to drive widespread adoption and improved patient outcomes. Here’s hoping health care’s version of Elon Musk makes a large investment in patient-focused episodes!

Rick Kresinske is a client engagement and strategy executive at 3M Health Information Systems.