Convergence is innovation for health care, but converge to what?
Health Care Current | April 10, 2018
This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.
Convergence is innovation for health care, but converge to what?
By Bill Copeland, Vice Chairman, US Life Sciences & Health Care Industry Leader, Deloitte LLP
Last month, Cigna Corp. said it had agreed to buy Express Scripts,1 the nation’s largest pharmacy benefit manager. Other major deals between large health plans and companies from other industries are being discussed.
These proposed deals represent distinct approaches to convergence—where a company merges its capabilities with another organization in an adjacent industry. Convergence is a form of innovation only if the combined company’s product or service offerings break the preexisting competitive and economic barriers and constraints to offer something that has greater value to the customer for less cost and complexity. Convergence is more than size and scale. It is an opportunity to build something that is much greater than a sum of the parts.
Historically, convergence occurs when an industry’s solutions are not comprehensive, compelling, or able to satisfy all of the consumer’s evolving needs. Convergence can create opportunities to offer something that fills a gap in what the customer wants, but is not able to obtain. I believe convergence in health care is driven by the simple fact that consumers are not satisfied with the value and the cost of what is available to them in today’s marketplace.
What is the job to be done in health care?
Getting the job to be done (JTBD) right is step one, and it often requires business leaders to think about the problem a customer is trying solve—rather than the services or products the company sells. JTBD is a business theory that predicts successful products and services are those that meet the customers where they are. This value proposition can address problems that customers can’t solve for themselves.
Health consumers are generally looking for an organization that can help them:
- Stay in good health.
- If not healthy, help restore their health to meet their goals.
- Help them remain financially secure while meeting their health goals.
Health care is the largest industry in the US,2 but there are no health care companies that can deliver on these three jobs to be done. Our health care industry is fragmented and organized in silos. While various sectors serve the same customer, there often is little connectivity, and the incentives typically are not aligned.
This isn’t just about a good doctor, drugs, hospital treatments, or copays and premiums. It is broader and more humanistic. It’s about transportation, well-being, good nutrition, loneliness, comfort, hassles and confusion with financial obligations, and having an advocate who helps ensure that the consumer’s goals are achieved. Many of these are described as the "social determinants" of health.
Can health care companies become platform companies?
Successful innovation though convergence is evident in some of the most successful consumer companies. Their offerings are typically based on a core platform that allows them to launch many different applications and products. These platform companies create their own marketplace by filling the unmet needs of consumers. They are businesses that are able to innovate and transform potent capabilities into a suite of integrated services that creates greater value for the customer and improved stickiness for the company. Typically, successful platform companies build a brand so strong that buyers look to that company for any JTBD that is remotely related to the company’s core competency.
Consider this: Just five platform companies, which include Amazon.com, Inc., Apple Inc., Facebook Inc., and Microsoft Corp., make up 15 percent of the S&P 500. Each one of these companies has gone far beyond its core competencies to meet the broader needs of its customers. Remember when Amazon was just an online book retailer?
Convergence could help break FFS constraints
Using a job-to-be-done lens, step back and consider what our health care industry offers to its customers—hospital stays, physician visits, drugs and devices, and insurance. In context to the consumer’s health needs, I call these point solutions. Even if they are excellent, these solutions typically fall well short of what most people want for their overall health care. There are disconnects, duplications, waste, lack of continuity, and gaps that could be eliminated through convergence. Convergence can provide an innovative, integrated, holistic solution that addresses health repair and restoration, preventive services, well-being, and financing. Can a holistic solution evolve to help consumers reach their health and financial goals? I don’t see how that can happen without some form of convergence.
Convergence in health care is most likely to succeed if it breaks the constraints of the fee-for-service (FFS) model, which can inhibit a holistic health care evolution. Convergence could help create something personal and precise. This might include greater access to a care team, virtual health visits, home care, nutrition, health coaching, emotional support, community-based services, wellness, transportation, and opportunities for active engagement of the consumer. Health care can be something specific for every consumer, which could be based on each person’s data. This could include insights into who they are, where they live, and what they need.
Convergence in health care is not new. Provider-sponsored health plans, for example, have demonstrated that combining financing with care delivery can outperform open-panel health plans in both customer satisfaction and financial performance. The alignment of incentives between care delivery and financing in provider-sponsored plans encourages the kind of evolution in the approach to patient care that can create greater access, lower cost, and better outcomes.
Many national health plans have invested in clinical-delivery assets including physician practices and post-acute capabilities. This strategy can be especially effective in Medicare where it could help improve outcomes and reduce costs.
We are still a long way away from meeting the three main consumer health goals that I mentioned above. I think convergence in health care is here to stay until an innovator is able to address the health and well-being needs of each consumer. New entrants might not know how to restore health, but their focus will likely be to assemble the existing and new point solutions to help ensure the consumer is satisfied with the job they are looking to hire.
After all, it is now clear that you can be a transportation company without cars (e.g., transportation network companies such as Uber and Lyft), a vacation rental company without real estate (e.g., Airbnb, VRBO), or arrange dinners without cooks (e.g., Hello Fresh, Blue Apron).
For a hundred years, we thought it was enough to replace the hip, remove the cancer, fix the leaky valve, help the patient breathe, or control blood-sugar levels. Alas, the consumer really wants much more.
1 Cigna press release, March 8, 2018: https://www.cigna.com/newsroom/news-releases/2018/cigna-to-acquire-express-scripts-for-67-billion?WT.z_nav=personal;News-Area;Read%20the%20press%20release
2 CMS National Health Expenditure Data, 2018. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html
In the news
Federal and state exchanges enrolled 11.8 million, down 3 percent from 2017
About 11.8 million people signed up for 2018 health coverage through the public insurance exchanges, the US Centers for Medicare and Medicaid Services (CMS) reported April 3. This year’s enrollment is down about 3 percent from the 12.2 million people who signed up for coverage last year. The federally operated HealthCare.gov website, which is used in 39 states, enrolled 8.7 million people for 2018, and another 3 million found coverage through a state-based exchange. Eleven states and the District of Columbia operate their own insurance exchanges.
According to CMS, 27 percent of this year’s enrollees were new to the exchanges. While 24 percent of 2018 enrollees were automatically re-enrolled in coverage, 47 percent actively shopped for a health plan before signing up again. The vast majority of this year’s enrollees (83 percent) received federal premium tax credits, which brought the cost of premiums down to an average of $89 per month, according to CMS.
The open enrollment period for HealthCare.gov ran from November 1 through December 15, which was shorter than in past years. Some state-run exchanges extended their open enrollment periods into January. CMS also substantially reduced its spending on advertising and outreach for the 2018 plan year. The agency spent an average of $1 per HealthCare.gov enrollee—down from an average of $11 per enrollee one year earlier.
CMS releases Medicare payment rates for 2019
CMS has released a final rule that lists rates the agency will pay to Medicare Advantage (MA) and Part D health plans in 2019. The rule contains provisions intended to lower out-of-pocket costs for Medicare beneficiaries. It also expands the definition of “primarily health-related” benefits, which could allow MA health plans to cover products and services that might not be directly related to medical treatment.
Beginning next year, MA participants will be able to purchase drugs and biosimilars at discounted rates, and certain tiers of drugs will be eliminated. The rule also contains provisions that aim to stem the opioid crisis. Part D plans will be required to limit initial opioid prescriptions to seven days. Plan sponsors will also have the power to limit prescriptions for drugs that tend to be abused.
MA plans will also be able to offer supplemental benefits to their members, such as wheelchair ramps or nutrition assistance. CMS noted that offering additional benefits should be used to help improve beneficiary health, not induce individuals to sign up for plans. CMS is also updating its risk-adjustment model for plans to include mental health and kidney disorders. The agency will finalize this new model for 2020.
The regulation also updates the “any willing pharmacy” provision, which allows beneficiaries to choose from additional pharmacies for their drug purchases.
New ONC guide helps patients and caregivers access health data
The Office of the National Coordinator on Health IT (ONC), part of the US Department of Health and Human Services (HHS), has released a new guide and website to help patients access their personal health information.
The guide includes information about patient rights, steps for accessing personal health records, and information about how to use the records. It also describes how to choose and use appropriate health apps. In a data brief, the ONC coordinator noted that more than half of individuals have been offered access to their health data, either by their health organization or a health plan. In addition, individuals are more likely to request their records if their physician encourages them to access the data.
The document and website, The ONC Guide to Getting and Using Your Health Records, is part of the 21st Century Cures Act mandate to provide patients and caregivers with better access to their health information. It also builds on CMS’s MyHealthEData initiative (see the March 13, 2018 Health Care Current).
MACPAC and NASHP report examines changes in DSRIP
A new report from the Medicaid and CHIP Payment and Access Commission (MACPAC) and the National Academy for State Health Policy (NASHP) examines Delivery System Reform Incentive Payments (DSRIP) programs and how they have evolved over time.
Under these programs, state Medicaid agencies can make incentive payments and invest in new provider-led programs. These are usually arranged through Section 1115 waivers, which allow the Secretary of HHS to give additional leeway to state Medicaid agencies on certain program requirements.
As of March 2018, 13 states had implemented DSRIP programs. Some changes to the DSRIP programs include:
- Additional partnerships, including between health organization types (e.g., hospitals and clinics)
- New statewide milestones
- Increased standardization and monitoring
- Additional requirements for improvements through value-based purchasing
- Shifts toward delivery reform, and away from only implementing managed care
- More outcomes-based than process-based measures.
DSRIP programs aim to improve care coordination, reduce avoidable hospitalizations, and better coordinate physical and mental health care. States and CMS negotiate funding for DSRIP programs.
NASHP conducted the study by surveying state Medicaid officials, as well as managed care organizations (see the Center for Health Solutions report, Medicaid alternative payment models).
New HHS advisors to tackle drug pricing, opioids
HHS Secretary Alex Azar appointed Daniel Best as senior advisor for drug pricing reform on March 29. Prior to this position, Best was vice president of industry relations for Medicare Part D drugs at CVS Health.
Azar also nominated Brett Giroir as an advisor on mental health and opioids. Giroir currently holds the position of assistant secretary for health at HHS. In his new role, he will coordinate the administration’s opioid and mental health response, while still serving as assistant secretary. Giroir is a four-star admiral in the Public Health Service Commissioned Corps, and previously served as the director of the Defense Advanced Research Projects Agency (DARPA).
Neither of these positions require congressional approval.
Related: The administration nominated Rear Admiral Ronny Jackson as secretary of Veterans Affairs on March 29. The Senate must confirm Jackson to the position.
Supply shortages in hospitals are widespread, affect care
Supply shortages, which are common in hospital systems, can negatively affect patient care, according to a recent survey of physicians and supply chain managers.
Source: Supply shortages can lead to canceled, delayed procedures, data from Third Annual Cardinal Health Hospital Supply Chain Survey, March 28, 2018.
Physicians stated that supply chain management was a burden due to manual counting in many organizations. Additionally, many physicians want to have more input in supply chain management and decisions. The study noted that improved supply chain management could help ease the shortages.
More than 300 physicians, supply chain decision-makers, and supply chain executives answered the online questionnaire about shortages. SERMO, a global social network for physicians, conducted the survey on behalf of Cardinal Health.
Telemedicine providers meeting objectives, but facing payment and parity problems
Telemedicine providers, including physicians, nurses, and health care executives, say they have met many of their main objectives, according to a survey by telemedicine software company REACH Health.
Among the 411 people surveyed, 97 percent said they have had a high or moderate degree of success in using telehealth to help remote or rural patients connect with specialists. Similarly, a large number of respondents said telehealth has helped them improve convenience, increase patient engagement and satisfaction, and improve outcomes.
In another portion of the survey, respondents cited inadequate telemedicine parity laws and Medicare reimbursement as the top challenges for telemedicine programs. REACH Health noted that respondents have cited reimbursement as a main challenge since it began its annual survey in 2015. In a 2016 health policy brief, Deloitte similarly noted that Congress has been slow to move on telehealth. Lack of integration with electronic medical records was another oft-cited challenge in REACH Health’s survey.
Source: REACH Health, 2018 U.S. Telemedicine Industry Benchmark Survey, March 2018
NIH increases funding and resources for opioid research
The National Institutes of Health (NIH) is doubling its budget for research on opioid misuse/addiction and pain to $1.1 billion for fiscal year 2018 with increased congressional funding. The budget increase will support a new initiative, Helping to End Addiction Long-Term (HEAL). HEAL will focus its research on two objectives:
- Prevent addiction through enhanced pain management
- Improve treatments for opioid misuse disorder and addiction
In its prevention research, HEAL will include a longitudinal study to identify predictors of chronic pain. Additional research will advance the understanding of factors that increase patients’ risk of developing a substance-use disorder. The NIH also intends to pursue public-private partnerships to develop non-addictive pain medicines and to further interagency research on alternative pain management therapies.
Regarding treatment, HEAL will conduct research on the expansion of therapeutic options for the treatment of addiction. This includes exploring additional options for Medication Assisted Therapies (MAT) and the development of non-addictive pain medicines. Pilot projects will test the integration of multiple treatment and prevention options in health care and criminal justice settings in states that the opioid crisis has affected most.
CMS expands CMMI’s first preventive-care model
This month, CMS began covering the National Diabetes Prevention Program (National DPP) for qualifying Medicare beneficiaries in both fee-for-service Medicare and Medicare Advantage. The Center for Medicare and Medicaid Innovation (CMMI) tested the program over a 15-month period, and determined that it improved health and reduced health care spending by $2,650 per person.
The National DPP aims to prevent type 2 diabetes in people who have pre-diabetes. Pre-diabetes is a serious condition where blood-sugar levels are higher than normal, but not high enough for a type 2 diabetes diagnosis. According to the US Centers for Disease Control and Prevention (CDC) website, more than 1 out of 3 Americans, a staggering 84 million people, have prediabetes. Most don’t know they have it. Prediabetes puts people at risk for developing type 2 diabetes, heart disease, and stroke. Risk factors include being overweight, being 45 or older, having a family history of type 2 diabetes, and not being physically active.
The program can help to delay the onset of diabetes, or prevent it all together, in many participants. The program revolves around group sessions led by peer educators, or lifestyle coaches, who have undergone a training program and have earned certification through CDC. The lifestyle coaches can be health professionals, such as nurses, but they do not need to have a medical background. The sessions focus on strategies for healthy eating and integrating physical activity into the participant’s day. The program lasts about a year, with weekly sessions during the first six months that later taper to monthly sessions.
After the CMMI model demonstrated improved health outcomes and reduced costs for the Medicare population, CMS decided to include the program as a covered benefit. While CDC has certified some telehealth providers to offer the program virtually, Medicare—at least for now—will continue to pay only for in-person sessions. It will not cover the program as a telehealth service. CMS would like more evidence before expanding to virtual providers. The agency intends to run a pilot study to determine whether virtual programs can deliver health outcomes comparable to those in the traditional in-person program. Some stakeholders are optimistic that telehealth programs will be covered in the future so rural participants will have better access to the diabetes program.
Background: The ACA established CMMI as a way to test new payment and delivery systems. A model that is shown to improve health and is certified by CMS actuaries as saving money can be expanded into the full Medicare program.