What’s Now and What’s Next
hfma
05.15.14
Here’s What We’re
Going to Cover Today
Trends in the Industry
Narrow Networks Are All the Rage
Health System Strategies
How to Successfully Deploy the Right Strategy
What Are Health Plans Doing?
IP, physician visits, and Rx usage are all down. Elective surgeries are way down. ER visits are up.
Utilization
Premium increases continue to outpace medical inflation (and have for more than 20 straight
years).
Premiums
2008 - 2013 is the single most profitable period in the history of the managed care industry. Stock
prices have surged, and now the ACA is requiring millions of new customers to purchase their
products.
Profit
Narrow and getting narrower by the day.
Networks
Risk
Payors have been shedding risk for a decade, shifting their books of business from 70-80% fully
insured to 70-80% self-insured, putting all the risk on the employer (to pay for care) and on the
hospital (to collect larger and larger financial responsibility from patients). They capitalized on the
“consumer-directed health care” trend and dramatically increased the financial risk carried by their
members.
What’s Happening
Across the Nation?
?
Exchanges are open for business. Network participation is a major strategic issue for providers.
Consumer marketing and brand strategies are suddenly critical. The world is suddenly upside down
on a number of fronts.
Exchanges
WALL STREET JOURNAL
Young Avoid New Health Plans
Early Buyers of Coverage Are Older Than Expected, Raising Expense Concerns
In Kentucky, nearly 40% of 4,631 enrollees in private health plans are over age 55,
while 24%, including children, fall under age 34. A much higher portion of young
people signed up for Medicaid plans.
WellPoint Inc., the largest insurer offering plans in Connecticut, said most of its
enrollees in that state were between 55 and 64 in a recent call with investors. The
insurer said it predicted an initial wave of enrollees might be older, but that it
would increase efforts to woo younger members.
Trends in the Industry
1. Payors becoming providers - limited but important
2. Payors demanding cuts - how do you tackle new
problems with fewer resources?
3. Health systems launching their own health plans
4. Taking risk
5. Direct contracting with employers
6. Narrow networks
7. Pushback on physician rates, non-hospital sites, implants
and stop loss
8. Major league payor/provider conflict
1. Payors Becoming Providers
Insurers across the nation are watching
Highmark, which became the first — and
so far only — insurer to take a major step
into the hospital business when it
purchased seven medical centers this year.
“Every insurer and Blue Cross plan in the
country is taking a close look” at what's
happening in Pittsburgh, said Ted Schwab,
partner at the health
and life sciences practice of Oliver Wyman,
a New York-based management consulting
firm.
“If this one is successful, you're going to
see activity at an unprecedented level,” he
said.
Hospitals and health insurers are
increasingly jittery about maintaining
revenue and profit as customers and the
government demand that the health care
system rein in costs and improve quality.
1. Payors Becoming Providers
Highmark and West Allegheny Health System (WPAHS)
Aims to offset UPMC’s alleged dominance in Pittsburgh market; announced during public and hostile
negotiations with UPMC.
Highmark assumes the mantle of hero – supposedly ensuring competition in the market by saving WPAHS and
maintaining choice (other than UPMC).
Deal would put Highmark back in the driver’s seat, playing a larger role in care delivery and quality.
WPAHS later said deal was off the table, but Highmark blocked them from pursuing other buyers, while
pressuring the system to declare bankruptcy. Settled with bondholders for $.85 on the dollar.
Other Highmark initiatives:
- In January, announced plans to build 10 ASCs in western Pennsylvania.
- Acquiring Jefferson Regional Medical Center and Saint Vincent Health System.
- Creating regional physicians network, recruiting 200+ physicians in past year; largest acquisition was
Premier Medical Associates, Pennsylvania’s largest independent physician practice.
1. Payors
Becoming
Providers
Macro
Payor Trends:
Vertical
Integration
2. Payors Demanding Cuts
- Demands for rate cuts increasingly common from Blues
and United
- Price leaders in each market particularly at risk
- Lower volumes, government cuts create huge price
pressures
- Population health, wellness strategies require resources for
investment - not starvation diet
3. Health Systems Launching
Their Own Plans
New provider-owned health plans.
“Hospitals from Colorado to Virginia are exploring similar
strategies spurred by rising costs and incentives in the health
reform law. An estimated 20 percent of networks market an
insurance product, including MedStar Health, serving the
Washington-Baltimore region with Georgetown University
Hospital and eight other facilities.
Another 20 percent are exploring doing so, according to a survey
of 100 hospital leaders conducted last year by the Advisory Board.
Driving the change is the transition from FFS payment schemes,
which pay for each doctor’s visit, appendectomy or CT scan
separately, to one that pays providers a lump sum per person per
year. This will shift more of the financial risk of medical care from
insurers to providers.
Once hospital systems are paid this way, “they’re sort of halfway
toward being an insurance company,” said Chas Rhoads, chief
research officer for the Advisory Board. “The more hospitals take
on risk and manage the care, the more they look like insurance
companies. And ultimately you have to ask: why do we even
need an insurance company sitting between a health system and
an employer?”
3. Health Systems Launching
Their Own Plans
New provider-owned health plans.
3. Health Systems Launching
Their Own Plans
3. Health Systems Launching
Their Own Plans
• Forming or joining payors’ narrow networks was the most common strategy
currently in place.
• Population health strategies for employers and other groups were said to be
in preparation or in place by over half of respondents.
Health System Strategies by Stage in Hospital or Health System Implementation
N/A: Do not
have in place
and no plans
to in future
STAGE 1:
Talking about it,
but
not doing
anything yet
STAGE 2:
Planning and
preparing to
implement
STAGE 3:
Currently have
in the works
Don't know/
Unsure
Total
Participating in a capitation or
other global risk program/initiative
27%
25%
13%
29%
7%
100%
Population health for employers and
other groups
12%
24%
25%
31%
8%
100%
Starting your own health plan or
joining an existing provider-owned
health plan
38%
20%
7%
26%
8%
100%
Forming or joining one or more
payors' narrow networks
17%
17%
13%
47%
5%
100%
Strategy
Q: Different strategies that many health systems have begun to implement are listed below. Please indicate the stage, if any, that
appropriately describes where your hospital/health system stands in implementing the following strategies or programs.
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4. Taking Risk
Now, the payors are finishing their “hat trick” of shedding risk in their new contract
approaches.
- All the latest trends in payor/provider contracting point to providers taking on more risk
Risk
-
for the care they provide.
Providers are facing lower payments for fee-for-service care, quality-based payments that
may be complex or even impossible to manage or measure.
We face tiering and restricted networks that will drive up deductible and co-payment
collection problems even more. The contracts for participation in Exchange networks are
likely to shift even more risk onto providers.
Trust toward Payors (Behavioral Reliability)
This organization makes every effort to honor its commitments
• The average of all payor scores is 56.9 (on a 100-point scale).
• Cigna and Blue Cross / Blue Shield performed best with scores of 66.4 and
65.9 respectively.
• United Healthcare performed worst with a score nearly 14 points (24%)
below the average.
Trust Index Score (Reliability) by Payor*
70
60
50
40
30
20
10
0
66.4
65.9
61.8
60.0
55.3
53.3
49.2
43.1
Q. For each health plan below, indicate your level of agreement with this statement: This organization makes every effort to honor its
commitments.
15 disagree" to 100 for "Strongly agree" wherein "Neither" is valued at 50 and
*Trust Index Score values are calculated on a scale from 0 for "Strongly
"Don't know" responses are excluded from the analysis.
Trust toward Payors (Honesty)
This organization is accurate and honest in representing itself and its
intentions
• The average of all payor scores is 55.7.
• Cigna and Blue Cross / Blue Shield performed best with scores of 65.9 and
62 respectively.
• United Healthcare performed worst with a score 13 points (23%) below the
average.
Trust Index Score (Honesty) by Payor*
70
60
50
40
30
20
10
0
65.9
62.0
59.9
59.2
52.5
52.0
51.2
42.7
Q. For each health plan below, indicate your level of agreement with this statement: This organization is accurate and honest in representing
itself and its intentions.
16 disagree" to 100 for "Strongly agree" wherein "Neither" is valued at 50 and
*Trust Index Score values are calculated on a scale from 0 for "Strongly
"Don't know" responses are excluded from the analysis.
Trust toward Payors (Fairness)
This organization balances its interests with ours and doesn't routinely take advantage
of us.
• The average of all payor scores is 47; all scores were lower in this measure,
suggesting a disconnect between the interests of payors and providers.
• Cigna and Coventry performed best with scores of 57 and 52.6 respectively.
• United Healthcare again performed worst with a score nearly 11 points (23%)
below the average.
Trust Index Score (Fairness) by Payor*
70
60
50
40
30
20
10
0
57.0
52.6
50.3
48.7
45.1
44.2
41.5
36.4
Q. For each health plan below, indicate your level of agreement with this statement: This organization balances its interests with ours and
doesn't routinely take advantage of us.
17 disagree" to 100 for "Strongly agree" wherein "Neither" is valued at 50 and
*Trust Index Score values are calculated on a scale from 0 for "Strongly
"Don't know" responses are excluded from the analysis.
Trust toward Payors
Combined Trust Measures
• The average of all combined payor scores is 53.2.
• Cigna, Blue Cross / Blue Shield, Coventry and Aetna were all
above average.
• WellPoint / Anthem, Humana, BlueCard, and United Healthcare were all
below average.
Combined Trust Index Score by Payor†
70
60
50
40
30
20
10
0
†Composite
63.1
58.9
58.1
56.5
50.7
50.1
47.3
Trust Index Score values are calculated as an equally-weighted mean of all three individual Trust measures.
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40.7
Consumer Trust toward Payors
Combined Trust Measures
• 66% of respondents believed Blue Cross / Blue Shield to be the health plan
most trusted by consumers; only 6% believed the plan to be the least
trusted.
• 47% believed United Healthcare to be the health plan least trusted by
consumers; only 6% believed the plan to be most trusted.
Percent Indicating Plan is
Considered Most Trustworthy
by Consumers
Blue Cross/ Blue Shield
Percent Indicating Plan is
Considered Least Trustworthy
by Consumers
WellPoint/ Anthem
Cigna
66%
47%
UnitedHealthCare
13%
Aetna
Humana
6%
5%
0%
6%
6%
6%
10%
Coventry
BlueCard
16%
6%
1% 2%
6%
2%
Q. Thinking about the consumers and patients you serve, who do you think they regard as the MOST trustworthy health plan?
Q. Thinking about the consumers and patients you serve, who do you think they regard as the LEAST trustworthy health plan?
19
5. Direct Contracting
Please indicate what stage (if any) your hospital/health
system is at in terms of implementing the following
strategies/programs.
Stage 2: Planning
and preparing to
implement
2013
15%
28%
Stage 1: Talking
about it, but not
doing anything yet
26%
Stage 3:
Currently
have in the
works
21%
10%
Don’t
know
Do not have in
place and no plans
to in future
6. Narrow Networks
Narrow and getting narrower by the day.
Networks
Exchange networks started the trend, but challenge is much bigger.
6. Narrow Networks
Narrow and getting narrower by the day.
Networks
Exchange networks started the trend, but challenge is much bigger.
How do you protect (and grow) market share?
How much will you discount to participate in a payor’s exchange
network?
What are your competitors’ likely strategies?
How does your organization become “must have” for employers and
consumers alike?
How do you establish relevance with consumers, and preference?
6. Narrow Networks
“...but if there’s no agreement on which
hospitals and doctors deserve the best
or worst ratings, then how, asked Dr.
Bechta, can the insurers claim that
these plans are driving patients to
the lowest-cost, best-quality
providers?”
6. Narrow Networks
Thousands of employers … across the country are slashing
expensive doctors and hospitals from their insurance rosters in a
move to hold down rising healthcare costs — a trend that is
gaining favor with corporate bosses, if not the rank and file.
The availability of doctors varies by each narrow network.
Woodland Hills-based Health Net, one of the first to promote the
strategy in California, features 47,000 doctors in its full HMO
network but just 7,000 physicians in its Silver plan.
That network — available in 10 counties, including Los Angeles,
Orange, San Bernardino and Riverside — can save businesses as
much as 14% on insurance premiums, a spokesman said.
An even smaller network, Bronze, has 1,600 doctors in (three LA
counties), and can shave as much as 24% off insurance bills.
6. Narrow Networks
“What businesses say they want - and what
insurers are promising - are networks made
up of fewer but higher quality physicians.
Whereas tiered networks offer incentives to
patients who see “preferred” or “high
performing” physicians, or charge higher copays for visits to lower-tier doctors, narrow
networks don’t pay for care for anyone other
than those physicians deemed cost-efficient
and high quality. By definition, a network
can’t be narrow without leaving some doctors
out.
Where networks are supposedly quality
based, it’s unclear that all insurers are
offering physicians a chance to understand
why they’re included or excluded, or
disclosing the measures by which the
network is selected.”
6. Narrow Networks
“As the health care overhaul moves ahead,
the nation’s health insurers are scrambling
to reinvent themselves, hoping to boost
their image and entice millions of
Americans to enroll, some for the first time.
Blue Shield of California has opened
centers inside Lucky Supermarkets in San
Francisco.
Blues plans in Florida, Pennsylvania and
three other states have also opened storefront sales centers.
Customers going to H&R Block this tax
season will be asked if they want to learn
about health insurance options, part of a
partnership with Blue Cross Blue Shield
expected to expand to as many as 42
states by next spring.”
6. Narrow Networks
6. Narrow Networks
7. Pushback on Key
Revenue Items
Physician employment and rates
Non-hospital sites (OP, lab, Dx imaging)
Addition of new hospitals or entry into new markets
Implants, high cost drugs, and stop loss thresholds
Facility fees
8. Major League
Payor/Provider Conflict
Sources: Nooga,com, Pittsburgh Business Times, Public Broadcasting Atlanta, Beckers
Hospital Review, Durham-Middlefield Patch, The Post and Courier
Health System Strategies
ACO Strategy
Internal Wellness or
Population Health Strategy
Please indicate what stage (if any) your
hospital/health system is at in terms of implementing
the following strategies/programs.
Please indicate what stage (if any) your hospital/health
system is at in terms of implementing the following
strategies/programs.
2013
2013
Stage 2: Planning and
preparing to implement
Stage 3: Currently have
in the works
24%
Stage 1:
Talking about
it, but not
doing anything
yet
27%
29%
Stage 3: Currently
have in the works
11%
9%
Don’t know
Stage 2: Planning
and preparing to
implement
67%
11%
Stage 1: Talking about it,
but not doing anything
yet
Do not have in place and no
plans to in future
In 2012, about one-third of providers had an ACO strategy
in place or were making preparations. This year, over half of
providers have an ACO strategy in place or nearly in place.
12%
10%
Do not have in place
and no plans to in
future
Clinical Integration
Strategy
Please indicate what stage (if any) your
hospital/health system is at in terms of implementing
the following strategies/programs.
Direct Contracting
with Employers
Please indicate what stage (if any) your hospital/health
system is at in terms of implementing the following
strategies/programs.
Stage 2: Planning
and preparing to
implement
+11%
2013
Stage 2: Planning and
preparing to implement
15%
28%
29%
41%
Stage 1: Talking about
it, but not doing
anything yet
2013
Stage 3:
Currently have
in the works
Stage 1: Talking
about it, but not
doing anything yet
Stage 3:
Currently
have in the
works
26%
14%
21%
10%
11% 5%
Don’t know
Do not have in place
and no plans to in
future
Don’t
know
Do not have in
place and no plans
to in future
3. Health Systems Launching
Their Own Plans
• Forming or joining payors’ narrow networks was the most common strategy
currently in place.
• Population health strategies for employers and other groups were said to be
in preparation or in place by over half of respondents.
Health System Strategies by Stage in Hospital or Health System Implementation
N/A: Do not
have in place
and no plans
to in future
STAGE 1:
Talking about it,
but
not doing
anything yet
STAGE 2:
Planning and
preparing to
implement
STAGE 3:
Currently have
in the works
Don't know/
Unsure
Total
Participating in a capitation or
other global risk program/initiative
27%
25%
13%
29%
7%
100%
Population health for employers and
other groups
12%
24%
25%
31%
8%
100%
Starting your own health plan or
joining an existing provider-owned
health plan
38%
20%
7%
26%
8%
100%
Forming or joining one or more
payors' narrow networks
17%
17%
13%
47%
5%
100%
Strategy
Q: Different strategies that many health systems have begun to implement are listed below. Please indicate the stage, if any, that
appropriately describes where your hospital/health system stands in implementing the following strategies or programs.
34
employer engagement
is not occ med
“Must Have” Hospitals
• Most respondents indicated their hospital or health system was a “must
have,” whether for all services (52%) or only certain services (22%).
Percent Respondent by Hospital Importance
Don't know
6%
A NICE TO HAVE Hospital
19%
52%
A MUST HAVE Hospital for certain
critical services (such as children's
services)
22%
A MUST HAVE Hospital (across the
board, all services)
Q: As you think about the reputation of your hospital or health system, which of the following best describes your hospital, in the eyes of the
major payors you work with?
36
Critical Audience: Employers
The future for health systems revolves around employers. How?
- Health systems launch their own health plans
- Pursue direct contracting strategies
- Launch new population health and wellness programs
- Begin to engage employers in conversation, understand their issues and
concerns, and explain how their needs will be met in the future.
Wild card is the employer response to private and state insurance exchange
options.
- If providers fail to price their services properly and demand commercial market
rates, the exchanges will incentivize employer “dumping”
- Research estimates that between 15% and 40% of small to midsize employers
will stop providing employer-sponsored coverage.
Providers could experience the largest “reverse cost shift” in history, the greatest
shift of high-margin commercial business into lower-margin exchange business.
On the other hand, what happens if you’re out of network?
Critical Audience: Employers
Business Opinions on Strategies to Contain Health Insurance Costs, 2010 and
2012
37%
34%
32%
24%
24%
2010
2012
30%
25%
2010
37%
29%
28%
16%
36%
25%
17%
15%
2012
Tighter Managed Care
Restrictions
13%
2010
2012
2010
2012
Consumer-Driven
Health Plans (HighDeductible Plan w/
HSA)
Higher Employee Cost
Sharing
Very Effective
Somewhat Effective
Disease
Management
Programs
Critical Audience: Employers
“This year, grocery giant Kroger Co. has flown nearly two
dozen workers to Hoag Orthopedic Institute in Irvine and
several other hospitals across the U.S. for hip, knee or spinal
fusion surgeries in an effort to save money and improve
care. Starting in January, Wal-Mart will offer employees and
dependents heart, spine, and transplant surgeries at no cost
at six major health systems across the nation, with free travel
and lodging.
It’s all part of a growing movement by employers fed up
with wildly different price tag for routine operations. In
response, businesses are showering workers with
generous incentives - including waiving deductibles and
handing out $2,500 bonuses - to steer them to these topperforming providers offering bargain prices.
At Kroger, employees may pay 10% out of pocket if they
choose one of the company’s 19 select hospitals, compared
to 25% to 50% out of pocket for other nearby medical
centers.”
Critical Audience: Employers
Several employer groups across the
country are calling on health plans and
healthcare providers to make healthcare
pricing more readily available to their
employees and consumers by 2014.
Catalyst for Payment Reform - a not-forprofit organization of large employers
and health care buyers that includes 3M,
Delta Airlines, Dow Chemical, the Walt
Disney Co., and Xerox Corp. - is
directing the effort.
How to Successfully
Deploy the Right Strategy
clarity
Roadblocks in Achieving Better Payment Terms
• Nearly 2 of every 3 respondents (65%) felt they need better benchmark data
to achieve better payment terms with payors.
• A majority (51%) believed improved public perception would eliminate
roadblocks as well.
Percent Respondent by Roadblock They Face
Reliable benchmark data about competitors and contracts
Knowledge on the part of your Board or C-suite executives
Resolve or buy-in on the part of your Board or C-suite
executives
The ability to effectively "tell your story" to critical audiences
Physician support
Public perception in your market
65%
16%
27%
31%
30%
51%
Q: Which of these roadblocks would you face, if any, when pushing for better payment terms with your largest payors? Select ALL that apply.
43
resolve
strategy
story
discipline
The Meek Submit,
The Bold Survive
More hospitals are engaging employers than ever before.
-
The “city on the hill” strategy.
Direct contracting with large employers.
Narrow network products with 2nd and 3rd tier payors.
Wellness and disease management programs.
Medical homes, ACOs, risk strategies.
Population health is the future - the question is what (exactly), when each
switch get flipped, and how margins are protected.
Hospitals are helping drive exchange enrollment, and trying to figure out
their consumer marketing strategies.
Bigger health systems are expanding margins and increasing leverage.
Deals abound, affiliations are everywhere, and scale is everyone’s goal.