Oscar bets narrower provider networks constructed through data mining will lead to better patient outcomes.
When it comes to healthcare services, more isn’t necessarily better. Bucking the time-honored practice of offering enrollees a lengthy list of providers, health insurance startup Oscar set out to prove people want the best doctor for their particular ailment. To do that, the insurer winnowed down its provider network in New York City last year from 40,000 doctors to 20,000. Furthermore, they reduced their hospital contracts from 77 to 31.
It was a gamble, considering giant healthcare payers built their networks on having a massive catalog of doctors and hospitals for patients to choose from. So did Oscar subscribers flee when it slashed in-network providers? No, nearly all of its 50,000 members — about 20% of the New York City market — bought into its strategy of a narrow network of healthcare providers better able to treat its member’s maladies. Now Oscar is taking this tactic to a wider market in Southern California and Texas.
It’s All in the Data
Oscar executives characterize the company as more a tech enterprise than an insurance firm, which shouldn’t be surprising since its CEO, Mario Schlosser, trained at Stanford as a data scientist before launching Oscar in 2014. Using his background in data mining, Schlosser directed his team to dig deeper into its members’ and providers’ medical records.
The insights gleaned from that data uncovered which doctors were true — and unblemished — specialists in treating certain conditions. This runs counter to typical insurance networks where doctors are grouped into broad specialities without distinguishing the physician’s actual expertise. An orthpedist, for example, may be an expert in hip replacements, but not knee surgery. A patient seeking help would have no way to know that by simply searching a network’s specialist list.
In order to match the patient and specialist, Oscar then combs through patient records to draft a predictive model of treatments its members were likely to seek. Bringing the two data sets together, Oscar tightens its network to those providers able to deliver the therapy its members most needed, keeping them in network. So far this year, its out-of-network expenses have fallen to 0.6% from 2% of premium costs in 2016, when it oversaw a broader network.
Although Oscar’s business plan is rooted in data, Schlosser said it’s all about giving members optimum care through better coordination of treatment. “The novelty of the analytical framework is what sets this apart — to design a network around a patient’s journey through the health care system,” Schlosser told Wired.
Oscar’s future growth depends on how well it overcomes current headwinds in the healthcare market, chiefly, a potential dismantling of the Affordable Care Act. From its beginning, Oscar has depended on ACA enrollees, and according to Backchannel.com, its members skew younger — 26 to 35 — and are therefore healthier with less expensive healthcare costs. If the ACA dissolves, Oscar will have to target another audience. The company seemed to acknowledge that when it introduced its program geared toward small businesses last month.
Oscar isn’t the lone startup breaking into the healthcare field. Competitors like Zoom Healthcare and Harken Health have sprouted up, according to a report in CNBC. Even established giants like UnitedHealth and Blue Cross Blue Shield are experimenting with narrower, preferred provider networks and data-mining initiatives.
Small or large, healthcare payers still operate in an environment where rising costs have dented profits. CNBC reported Oscar racked up significant losses in 2015 and 2014. Yet Schlosser remains undaunted. Combining technology and focused patient care will ultimately transform the health insurance market, he told CNBC. “We build systems and teams whose DNA is that individuals be taken care of.”