2020 will likely be the year of the consumer for health plans and health systems

My Take

2020 will likely be the year of the consumer for health plans and health systems

by Steve Burrill, vice chairman, US Health Care Leader, Deloitte LLP

For health plans, hospitals, and health systems, 2020 will likely be the year of the consumer…or at a minimum, the year of greater consumer influence. While Congress and the administration have been pushing for more interoperability and greater price transparency for drugs and for hospital costs, these changes are actually being pushed by, or at least inspired by, consumers. Our Global Health Care Outlook paper notes that consumers are no longer passive participants in the health care process, but rather are demanding transparency, convenience, access, and personalized products and services.

The Deloitte Center for Health Solutions recently interviewed health plan and health system CEOs to determine which factors they thought would have the most significant impact on the health sector. While a variety of influences are pushing and pulling the sector, the vast majority of leaders we interviewed said consumers—who are becoming increasingly proactive—would be major change drivers during the next 10 years.

Five other factors likely to impact the health sector in 2020
There is a recognition among sector leaders that they need to navigate a changing landscape that has new rules and more and different competitors. In response, many of them said they are trying to determine how to improve convenience and access, reduce costs, and transition to more of a digital and actively engaged consumer experience. But the consumer isn’t the only factor that CEOs expect will have an influence on health plans, hospitals, and health systems in 2020 and beyond. Here are five more:

1. Value-based payment models: Seema Verma, administrator of the US Centers for Medicare and Medicaid Services (CMS), recently warned that business models focused solely on increasing volume—rather than improving health outcomes, coordinating care, and cutting waste—would not succeed in the changing health care environment.¹ However, many CEOs in our prior studies had predicted they would be much further along in adopting value-based payment models than they are today. Making the transition from the fee-for-service model to a model based on value has proven more complex than expected. As value-based payment models become more common, organizations that invest in consumer-engagement technologies, virtual health, and care coordination will likely be well-positioned. Even if value-based care only trudges along, those same organizations could wind up in a stronger competitive position with consumers. While the CEOs we interviewed recognize that CMS, Congress, and state legislators will likely help push the migration from volume to value, many of them told us they prefer to set the course themselves rather than be mandated by regulation.
2. The transition from inpatient to outpatient: The inpatient business has historically driven hospital revenue and results. In 1995, outpatient revenue accounted for about a third of hospital revenue, according to our Global Health Care Outlook. In 2017 (the most recent year for which data are available) US hospitals generated $472 billion in outpatient revenue and only slightly more—$498 billion—in inpatient revenue.² Outpatient business is on track to reach parity and surpass inpatient revenue in the next year or two. Moving care to less expensive settings could improve affordability and value. We expect more care will continue to migrate to outpatient settings in 2020, and the transition to value-based care could cause it to accelerate. Moreover, the more illnesses can be prevented or diagnosed earlier, fewer inpatient beds will be needed. Health plans are also influencing some of this change through their fee schedules and reimbursement schedules.
3. Consolidation and integration: Consolidation will continue, although I expect it will be at a slower pace than we’ve seen over the past few years. We might also see more vertical integration (e.g., consolidation, affiliation, collaborations, joint ventures). Some commercial health plans, for example, have acquired provider networks in an effort to reduce inpatient visits by encouraging regular check-ups, prevention, and home health care. On the provider side, while some health systems are getting bigger through consolidation, they are also becoming better connected vertically by affiliating with doctors, skilled nursing, rehab, and other types of clinical care.
4. Non-traditional players: CEOs acknowledge that large technology and consumer-focused companies are making inroads into the health sector. These companies have a deep understanding of consumers, data analytics, and virtual care capabilities that could disrupt traditional business models. While hospital and health system CEOs agree that the industry is ripe for disruption, many of them feel strongly that their core businesses will remain intact. Some of them are forging partnerships with these outside organizations. We expect this trend will continue in 2020 as health systems look for more secure ways to store data and as large technology companies move deeper into the health care space. Some technology companies are also working to make electronic health records (EHRs) and other patient data readily available to consumers. Readily available data could arm consumers with the tools they need to make better—and presumably less expensive—decisions about their care.
5. Interoperability: CMS and the Office of the National Coordinator for Health Information Technology (ONC) published proposed interoperability rules in early 2019. While final rules were expected before the end of the year, the release was recently delayed. Under the proposal, Medicaid, the Children’s Health Insurance Program (CHIP), Medicare Advantage (MA), and qualified health plans sold through public insurance exchanges would need to ensure patient data can be accessed via application programming interfaces (APIs). As I noted in a My Take last spring, many health plans and systems still have a long way to go in making their data interoperable. Despite the delay, organizations should continue their drive toward interoperability.

In 2020, I expect consumers will continue to demand seamless, more personalized, and better integrated health care experiences. In the not-too-distant future, these capabilities will likely become table stakes for both health systems and health plans. Consumers are becoming an influential and driving force of change in the health sector—both directly and tangentially—and health plans and health systems should continue to work to meet or exceed their expectations.

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¹ Americans 'fed up' with high healthcare costs, surprise billing, Verma says, Modern Healthcare, September 10, 2019
² AHA data show hospitals' outpatient revenue nearing inpatient, Modern Healthcare, January 3, 2019

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In the News

Health care as a percentage of GDP dropped slightly in 2018, CMS says

Overall health care accounted for 17.7 percent of the US gross domestic product (GDP) in 2018, down slightly from 17.9 percent in 2017, according to an analysis from CMS’s Office of the Actuary. The study also determined that health care spending in the US topped $3.6 trillion in 2018 (about $11,172 per person). While health care spending increased 4.6 percent between 2017 and 2018, the growth was slower than the nation’s 5.4 percent overall economic growth. The spending increase was driven by higher premiums for private health insurance and the health insurance tax, which was reinstated last year after a one-year moratorium, according to the report.

Other highlights from the report include:

• Hospital spending accounted for about one-third of overall health care spending in 2018—up 4.4 percent from the prior year. However, the actuaries predict enrollment growth in Medicare and Medicaid will translate to a 5.1 percent spending increase in 2019.
• Nearly 31 million people lacked health coverage in 2018, about 1 million more than in the prior year, and 2 million more than in 2016.
• Consumers and employers spent $1.2 trillion on private health insurance in 2018—up 5.8 percent from the prior year.
• Physician and clinical services spending slowed to 4.1 percent in 2018, down from 4.7 percent in 2017.
• Consumers spent 2.5 percent more on retail prescription drugs in 2018 compared to the prior year. Prescription drugs accounted for 9 percent of total health care spending or $335 billion.

(Source: CMS Office of the Actuary Releases 218 National Health Expenditures, CMS press release, December 5)

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House Democrats, CBO say latest drug bill could save $500 billion over 10 years

Preliminary estimates from the Congressional Budget Office (CBO) and House Democrats indicate the latest drug-pricing bill would save $500 billion over the next decade. Those savings could pay for additional drug research at the National Institutes of Health, more Medicare benefits, and other Medicare and Medicaid policies that could reduce costs for beneficiaries of those programs, according to the bill’s Democratic sponsors. The latest version of the bill keeps the number of drugs for which Medicare might negotiate prices to 250 annually.

Previous versions of the bill did not include NIH drug-research funding. The latest version boosts funding by $10 billion. This inclusion could counter critics’ assertions that the bill would lead to fewer drugs being invented. The bill also gives $10 billion each to community health centers and initiatives to fight the opioid epidemic. In addition, it maintains the added vision, dental, and hearing benefits to Medicare policies from the earlier bill, and the out-of-pocket drug spending cap remains at $2,000. The updated bill also increases the number of seniors who qualify for financial support for prescription drugs and other health expenses by raising the income eligibility threshold for Medicare’s Low-Income Subsidy Program and Medicare Savings Program. It also fixes an issue in the preventive services provision of the Affordable Care Act, which has left some beneficiaries to foot an unexpected bill when polyps are removed during a colonoscopy.

(Source: House Democrats would use drug-pricing bill savings to expand Medicare benefits, Modern Healthcare, December 5, 2019)

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House introduces bipartisan ‘Cures 2.0’ call to action

On November 22, House members Diana DeGette (D-Colo.) and Fred Upton (R-Mich.) released a document calling for an expansion of the 21st Century Cures Act, a 2016 law addressing health technology, data sharing, medical research, and precision medicine. The document—titled “Cures 2.0” as a nod to the original law—outlines several goals, including:

• Recognizing certain digital health applications as medical services and reforming Medicare to help expand the use of digital health technologies. According to lawmakers, reducing the amount of time between a medical product’s approval and its coverage by a health plan could help improve patient access to life-saving therapies.
• Improving health literacy for families and caregivers. This includes training, providing community resources, and educating patients and caregivers about treatment and service options—and costs.

Lawmakers are seeking public input on Cures 2.0 and will accept feedback through December 16, 2019.

(Source: Cures 2.0 Call to Action Document, November 22, 2019)

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VA finds more veterans are embracing telehealth

More than 900,000 veterans used telehealth services in fiscal-year (FY) 2019—a 17 percent increase from FY 2018, the US Department of Veterans Affairs (VA) announced late last month. This increase coincides with the VA’s Anywhere to Anywhere initiative, which allows VA health providers to treat patients in any location, including across state lines.

During the same period, the VA said use of its VA Video Connect app—which helps veterans connect with their care teams via secure video session—increased by 235 percent. About two-thirds of the 294,000 Video Connect appointments were for virtual mental-health services, and more than 99,000 veterans were able to access care from their homes, according to the VA.

In October, VA launched the Accessing Telehealth through Local Areas Stations (ATLAS) initiative, which created dedicated sites to help veterans receive care closer to their homes if they have limited internet access (see the November 19, 2019 Health Care Current). The ATLAS program builds upon the MISSION Act to continue expanding convenient care options to veterans and their families.

(Source: US Department of Veterans Affairs, VA reports significant increase in Veteran use of telehealth services, November 22, 2019)

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FDA issues final guidance on adaptive trial designs

The FDA has released its final guidance on adaptive clinical-trial designs for drugs and biologics. The guidance, published November 29 in the Federal Register, outlines the agency’s recommendations for designing, conducting, and analyzing results from adaptive clinical trials. It also offers recommendations to sponsors on the types of information that should be submitted with applications for investigational new drugs and biologics licenses. In a prepared statement, the FDA said it expects to receive 240 documented plans for clinical trials with adaptive design components from 40 sponsors, and 20 marketing applications for drugs and biologics that rely on adaptive-study data from 15 sponsors each year.

(Source: FDA, Adaptive Design Clinical Trials for Drugs and Biologics Guidance for Industry, November 2019)

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ACOs saved CMS $755 million over five years

Accountable Care Organizations within the Medicare Shared Savings Program (MSSP) saved CMS approximately $3.53 billion from 2013 to 2017, according to a new report from the National Association of ACOs (NAACOs). The findings are being used by NAACOs to support its claim that the program is saving the federal government money, despite actions taken by the administration in late 2018 to overhaul the program based on suggested underperformance. After accounting for bonuses paid out to ACOs, total net savings to CMS was $755 million over the five-year span. A recent analysis by CMS determined a similar savings estimate.

(National Association of ACOs, 2017 Update: MSSP Savings Estimates, November 20, 2019)

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Breaking Boundaries

Could 5G help turn ambulances into hospitals on wheels?

Fifth-generation cellular wireless, or 5G, is the next iteration of mobile internet technology. The transformation to 5G is expected to have major impact on health care by helping to improve remote patient-monitoring and robot-assisted surgery, and the reliability of virtual-health visits. While the change from 3G to 4G nearly a decade ago was incremental, the shift from 4G to 5G is expected to be significant because it could make mobile speed 10-to-100 times faster than what we have today. Beyond speed, 5G will likely enable the transmission of far more data with far less lag.

5G is also expected to greatly transform connected ambulances. In November, University Hospitals Birmingham (UHB) in the United Kingdom performed a live demonstration in which a clinician based at a hospital workstation assessed and diagnosed a (fake) patient in an ambulance two miles away via the 5G network. A real patient wasn’t used because testing is ongoing. The demonstration involved a clinician who watched in real-time from his workstation and an ambulance fitted with a 180-degree camera. The vehicle is linked to, and shares, real-time clinical data including the patient's vital statistics as well as medical records. The ambulance also carries ultrasound technology so that doctors can perform remote scans. The clinician can use a joystick to control the hand of the paramedic in the vehicle. Through a robotic glove, the doctor can guide the paramedic using vibrations generated by the joystick.

Both the clinician and the paramedic can use virtual-reality headsets to see live videos and close-up images from inside the ambulance remotely. The clinician also can see real-time images of the patient's ultrasound scans, which can help determine if a hospital intervention is needed, or if the wound can be managed directly in the vehicle. If an operation is necessary, the clinician can alert a hospital surgical team to be ready when the ambulance arrives. Stakeholders agree that the technology is ready and not cost-prohibitive. However, hospitals might want to use pilots to test the 5G technology before rolling out 5G-connected ambulances more widely.

For many stakeholders, 5G offers potential to advance health care. However, security concerns and digital equity (ensuring access to digital technologies) likely still need to be addressed. The faster internet technology will also be a big change for the patients who will need to become comfortable with the idea of remote clinical teams assisting paramedics in the ambulance.

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