Health Care Current: March 29 2016 | Deloitte US | Center for Health Solutions | Life Sciences has been added to your bookmarks.
Health Care Current: March 29, 2016
Provider-sponsored plans: The innovation health care needs
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.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Provider-sponsored plans: The innovation health care needs
By Mitch Morris, MD, Principal and Global Leader of Life Sciences and Health Care, Deloitte LLP
With the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the proliferation of alternative payment models looming on the horizon, many health systems are taking a fresh view of how to best manage financial risk and assure themselves of a steady or growing market share. Across the US, nearly 25 provider-sponsored health plans (PSPs) are operating with high margins, growing profitably and outperforming their competitors. Some of them have enrolled more than 100,000 lives. Many of these plans also consistently perform better than their peers in serving the most complex and challenging patients who often are enrolled in Medicare and Medicaid plans.1
Earlier this month, attendees at the America’s Health Insurance Plans 2016 National Health Policy Conference heard from several of these health plans. Leaders from each of the organizations spoke about their members and the innovative approaches they are using to care for them. Woven throughout each of their discussions were the themes of personalized and integrated care, interdisciplinary teams, and an understanding of the drivers behind why people make the health decisions they make.
Today PSPs cover nearly 10 percent of the US market.2 These organizations exemplify the convergence of financing and care innovation. They have discovered that integration can serve as a catalyst to improve the value chain and reduce costs.
Several transformative changes have combined to make the last few years an opportune time for providers interested in sponsoring a health plan to capture market share. For one, consumer-driven forces from other industries are beginning to awaken health care consumers’ needs for value and affordability. New technologies are also enabling clinical transformation across the system, allowing health care organizations to serve the needs of their entire patient population with new tools and systems of care. And finally, new regulatory forces by way of the Affordable Care Act (ACA) and more recently MACRA are disrupting the way that health care businesses have operated for decades, creating incentives for health care to shift away from volume and toward payments based on value.
Health systems are asking whether having their own health plans will help them successfully navigate these changes. PSPs have at their fingertips the very levers that are needed to be successful in the post-transformation world. These health care organizations that take on clinical and financial risk have several potential advantages.
For one, PSPs control key parts of the delivery system that traditional health plans do not. This incentive alignment allows PSPs to break the constraints of fee-for-service payment models, using premium and prepaid revenue to address patient needs more efficiently. They often have better and quicker access to claims and clinical data, which allows these organizations to quickly derive strategic operational insights from their past performance.
Most importantly, PSPs often have more engaged relationships with consumers – their past, present, and future patients. These organizations are founded in the communities they serve, which allows them to understand the unique needs that are facing their populations. PSPs may serve some of the most complex and hard-to-reach populations, and serving Medicare and Medicaid is turning out to be a priority. Often in need of physical and mental health services, these populations can benefit from services that are accessible, culturally sensitive, and, most of all, local. The individual care management and coordination needs of such populations often require solutions from community-driven organizations.
But, for all the potential upsides of PSPs, the road to success is not an easy one. Many underestimate the start-up capital required, which can be rate limiting. Achieving enough scale to deal with infrastructure costs is also a challenge. PSPs also need to consider the staffing and core competency challenges that come with running a health plan. Lack of actuarial expertise, little experience with health insurance marketing, and regulatory and legislative compliance challenges under Medicare and Medicaid have contributed to many of the past PSP failures.
Organizations that have overcome these challenges have discovered the success that comes from having customer expertise, population health capabilities, and strong physician alignment. But traditional health plans, many with deep pockets, are not simply standing by. Many are actively competing. So, while being a PSP can come with significant financial upside risk, these organizations also must face the potential of significant downside risk.
For a health care provider that is willing to take on the challenge, becoming a PSP may allow their organization to disrupt convention and stand out among their competitors. Those who do may be faced with key questions, such as, “What are the implications of PSPs on the broader market competition?” “How do you balance relationships with existing health plans?” “Do the traditional governance models work in a broad convergence strategy of financing and care delivery?” and “Should we build our own plan or create a joint venture or alliance with existing players?”
For now, we can look to a select few for answers. The 25 most successful PSPs continue to outperform their competitors, take on complex patient populations, and scale their solutions to reach new heights. This type of convergence is just the innovation that health care needs to enhance value and reduce costs across the system.
1 Deloitte, Provider-sponsored health plans: Positioned to win the health insurance market shift
Popularity of urgent care centers continues to grow; one in five are owned by hospitals
Urgent care centers continue to grow in popularity. Visits to these clinics grew 89 percent between 2013 and 2014. In 2014, an estimated 87 percent of urgent care operators acquired or built a new location. According to the Wall Street Journal, the Urgent Care Association of America estimates that approximately 7,100 urgent care centers exist in the US today; more than one in five (22 percent) are owned by hospitals, and 15 percent are joint venture organizations with hospitals. Traditionally, hospitals have viewed urgent care centers as competitors; this could explain why many are beginning to purchase or build urgent care organizations.
Urgent care centers are typically designed to treat patients who have a serious medical condition that needs immediate attention but is not so serious to require emergency department (ED) care. Many patients report going to urgent care centers when they cannot get into their usual physician that same day or when their physician’s office is closed (after hours or on the weekend). While many say that urgent care centers can undermine the goals of primary care when patients seek services outside of their usual care setting, others say that urgent care centers have filled a gap in services that resulted from overburdened EDs.
For consumers, urgent care centers offer both shorter wait time and lower costs than an ED. The average cost for an urgent care visit is $150, while ED visits can cost more than $1,300.
Hospital-affiliated urgent care centers have benefits to care coordination and triage over freestanding centers. Patients who start at urgent care centers but have conditions that turn out to be very serious can relatively easily transfer to the ED or hospital for needed services. Hospitals may refer patients with less serious medical needs to their urgent care centers, which are often right down the street from the hospital.
As urgent care centers proliferate, hospitals and physicians may need to consider how to integrate them into their care planning. Providers that have strongly aligned relationships with urgent care centers may find they are better positioned to manage care transitions and referrals.
(Source: Laura Landro, Wall Street Journal, “Traditional Providers Get Into the Urgent-Care Game,” March 20, 2016)
Implementation & Adoption
Ransomware poses an increasing threat to health care
Ransomware attacks will grow in the health care industry in 2016, according to a recent report published by the Institute for Critical Infrastructure Technology (ICIT). Ransomware attacks are when malware software infects a network server or computer system and the attackers behind the incident demand payment to remove the malware. Often, organizations in the US pay ransoms of about $10,000 to regain access to their systems.
Some of the ransomware locks users out of computers to block access to crucial laboratory results, CT scans, and other medical records. For example, Locky ransomware attacked the essential computer systems at Hollywood Presbyterian Medical Center earlier this year. The hospital system paid the attackers a ransom of $17,000 to restore access to their systems after being infected.
The ICIT said that organizations can implement a comprehensive cybersecurity program to protect themselves against attacks even while criminals implement new pricing calculations and targeting methods.
The report comes shortly after the US Department of Health and Human Services (HHS) announced the members of the Health Care Industry Cybersecurity Task Force, which is expected to publish a report by the end of March 2017 on ways to prevent and strengthen responses to cyber attacks (see the March 22, 2016 Health Care Current).
(Source: Institute for Critical Infrastructure Technology, “The ICIT Ransomware Report,” 2016)
Employers are still the most common source for insurance coverage, but lower-income people have seen offer rates decline
Employer-sponsored insurance (ESI) remains the most common source of insurance for individuals aged 18 to 64, but fewer workers are offered and covered by health insurance from their employer than in previous years. These are the findings from the recent Kaiser Family Foundation (KFF) analysis of ESI trends from 1999 to 2014. The percentage of individuals covered by ESI has declined steadily over the past fifteen years, decreasing from 67 percent in 1999 to 56 percent in 2014. Offer rates also have declined, decreasing from 71 percent in 1999 to 66 percent in 2014.
Individuals are most likely to be offered ESI if they work full time and have higher incomes. Employees who work full time were more likely to be offered coverage in all years in the study than individuals who worked part time (72 percent vs. 21 percent).
Lower-income families are less likely to have ESI. Only 38 percent of individuals earning between 100 percent and 250 percent of FPL are covered by ESI, compared with 83 percent of households with incomes greater than four times the FPL. People with lower incomes may qualify for Medicaid and insurance subsidies on the health insurance exchanges and may be more likely to get coverage on the individual market. Only 12 percent of individuals making under 100 percent of FPL have ESI coverage.
Several factors have contributed to the overall decline in ESI coverage. Lower labor participation reduces this type of coverage. The ACA provides subsidies for some individuals to buy health insurance through the exchanges. While the Congressional Budget Office (CBO) projects that ESI will remain the most prominent form of health insurance, its prominence in the market depends on how employers respond to increasing costs and regulatory changes.
(Source: Long et al., Kaiser Family Foundation, “Trends in Employer-Sponsored Insurance Offer and Coverage Rates, 1999-2014,” March 21, 2016)
Twelve recommendations could increase social engagement among older adults and slow cognitive and physical changes
As people age, they risk losing social engagement and connectivity and cognitive and physical abilities. Advances in technologies may help to prevent or delay these risks for many older adults. The President’s Council of Advisors on Science and Technology (PCAST) reviewed these challenges and gathered recommendations from leading researchers in technology, biology, health, psychology, engineering, and more. PCAST’s recommendations span 12 areas:
As more care moves to self-care, consumers want to influence and control their own care and health information. Technology-enabled care at home can be one way to achieve this. Deloitte’s recent report, Technology-enabled home health: Are consumers ready?, explores this trend and discusses where consumers are on the spectrum of adoption and comfort with these technologies based on focus groups.
In general, consumers are optimistic: To them, the benefits of technology-enabled home health far outweigh the risks, and they are eager to try it. It is appealing to many different audiences.
- For individuals with chronic conditions, home health technology can help them manage their conditions and slow disease progression
- For caregivers, it may offer peace of mind
- For healthy individuals, it can provide the tools and support to maintain healthy behavior
Consumers expect to learn about new technologies and be actively involved in deciding which technologies are used for their care, how they are used, and what data will be disclosed and shared.
(Source: President’s Council of Advisors on Science and Technology, “Independence, Technology, and Connection in Older Age,” March 2016)
CMS may make changes to the risk adjustment program for the exchanges
Last week, CMS published a white paper that discusses changes it may make to the risk adjustment program for the public health insurance exchanges. Risk adjustment is intended to set payments to match the likely costs of enrollees to mitigate any incentive health plans might have to only enroll healthy individuals. The risk adjustment program for the exchanges is based on similar programs used in Medicare Parts C and D.
CMS is exploring several changes to the risk adjustment program in 2018:
- How to account for enrollees that only have coverage for part of the year (partial year enrollment); CMS discusses using a separate risk adjustment program or using interaction factors
- How to develop a prescription drug model that measures drug utilization among enrollees as an additional risk factor and predictor of disease severity
- How to include high-risk enrollees
The risk adjustment program is one of three premium stabilization programs for the exchanges. The risk adjustment program is permanent. The other two – risk corridors and reinsurance – expire after 2016.
On the Hill & In the Courts
CBO projects that Medicaid enrollment will grow over the next 10 years
The CBO published updated projections the ACA’s impact on the federal budget from 2016-2026. For 2016, CBO estimates that the ACA’s insurance coverage provisions will cost the federal government $110 billion, which is lower than the agency’s initial estimate before the law’s passage. However, longer-term projections over the 10-year period of 2016-2025 increased by $136 billion, mostly due to higher enrollment in Medicaid than originally projected.
Other key estimates include:
- Approximately 244 million noninstitutionalized US residents under age 65 will have health insurance each month in 2016; the insured rate is expected to remain at 90 percent during that period
- Approximately 19 million individuals are projected to be enrolled in the exchanges by 2019; this is lower than the 22 million that CBO projected last year
- The net costs to cover the newly insured are projected to be $1.4 trillion from 2017-2026
- Federal subsidies for people under age 65 will total more than $660 billion in 2016 and will rise by 5.4 percent annually through 2026.
(Source: Congressional Budget Office, “Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026,” March 2016)
Senate lawmakers introduce bill to support the Precision Medicine Initiative
Earlier this month, Senate leadership introduced legislation to promote data sharing and data diversity within the Precision Medicine Initiative, a research effort that launched in 2015. The bill, introduced by Senate health committee Chair Lamar Alexander, would require HHS to:
The bipartisan legislation aims to safely bring lifesaving drugs and medical devices to market more quickly. In addition to new requirements for HHS, the bill proposes that the network of scientists included in the Precision Medicine initiative take on new approaches for addressing scientific, medical, public health, and regulatory science issues and develop ideas for applying genomic technologies.
Analysis: Policies that support data-sharing partnerships and analysis could be a step toward medical innovation. As explained in “Delivering medical innovation in a value-based world,” the industry is shifting toward greater use of personalized and precision medicine, which identifies and targets populations through data sharing. The Senate’s support for the Precision Medicine Initiative could open the door for further discussion about policies to support the advancement of medical innovation more broadly among policymakers and the life sciences industry.
PCMHs in New York show modest utilization changes with similar quality outcomes
The patient-centered medical home (PCMH) model is associated with lower hospitalization but higher emergency room use, according to recent research published in the Annals of Internal Medicine. PCMHs use a team-based approach to deliver patient care. The researchers assessed the performance of three groups of physicians’ offices on eight quality measures and seven utilization measures and found patterns of quality to be similar across the groups.
The study evaluated 438 primary care physicians in 226 practices in New York over five years. Researchers compared three study groups of physician practices: one group of practices that implemented the PCMH model (involving electronic health records and organizational changes), another that use electronic health records but did not implement a PCMH, and a third group of practices that use paper records. Clinicians at PCMHs practice to the top of their licenses, which can reduce costs, improve access, and better manage chronic medical conditions.
The practices that adopted the PCMH model used 2008 National Committee for Quality Assurance (NCQA) standards, and NCQA said that the practices’ performance aligned with those standards. NCQA updated PCMH standards in 2011 and 2014 and is currently working on 2017 PCMH standards, incorporating feedback and information gathered from the literature. NCQA’s 2011 standards strengthened the focus on access to care after hours, so the ER utilization rates would have been expected to be lower for the PCMHs. Despite the similar quality ratings NCQA said the study’s results are encouraging.
(Source: Lisa M. Kern, Alison Edwards, and Rainu Kaushal, Annals of Internal Medicine, “The Patient-Centered Medical Home and Associations With Health Care Quality and Utilization: A 5-Year Cohort Study,” 2016)
Around the Country
Report: More oversight of compounding needed at the state level
Two companion studies evaluated the oversight of compounding pharmacies and alternative compounding sites, like outsourcing facilities and physicians' offices, and found significant variation in oversight and enforcement. A Pew Charitable Trusts report examines state policy and regulation, while the second report provides suggestions and best practices for compounding oversight.
Since 2001, more than 25 compounding events caused patient harm or death. This includes a widely publicized incident where a compounding pharmacy spread fungal meningitis through contaminated injections. This incident was associated with 64 deaths and 753 fungal meningitis cases in 2012 and 2013. Researchers surveyed 43 states and found several trends:
Based on advisory committee recommendations, the second report highlighted best practices for states to improve patient safety:
- Enforce USP quality standards in compounding facilities
- Set specific training expectations in sterile compounding for pharmacists
- Conduct annual inspections of compounding facilities
- Use licensure to enforce specific standards for compounding facilities
- Align the definition of outsourcing facilities with federal law
- Harmonize policies on compounding without prescriptions with federal law
- Conduct oversight of sterile compounding that occurs in physicians’ offices
- Use available mechanisms to track the compounding activities conducted by pharmacies within the state
(Sources: Simon Pickard et al., “National assessment of state oversight of sterile drug compounding,” University of Illinois at Chicago, College of Pharmacy, Pew Charitable Trusts, February 2016; “Best practices for state oversight of drug compounding,” Pew Charitable Trusts, March 2016)
Connected medical devices can improve adherence and outcomes
Last month in Austin, Texas, the South by Southwest (SXSW) Conferences and Festival previewed many emerging health technologies, including connected health devices. The top prize in the Impact Pediatric Health Pitch went to the founder of Cohero Health, which developed a connected health device to help children with asthma and their parents manage medication adherence and reduce school absence. Cohero’s products include a medication inhaler sensor and a mobile spirometer that captures clinical lung function metrics. The company recently partnered with a national pharmacy benefit manager and information technology company to offer a medication management service.
Another winner, Babyscripts, is developing remote monitoring devices for obstetrics. Its device supports the patient-obstetrician relationship and is designed to be integrated in the clinical care workflow. Expectant mothers can measure weight and blood pressure and transmit this information using wireless devices to their care team. A prospective observational study out of The George Washington University’s Medical Center’s showed the devices can enhance patient adherence and improve patient satisfaction.
Analysis: Deloitte’s recent paper, “Accelerating the adoption of connected health,” describes connected health (cHealth) as technology-enabled integrated care delivery that allows for remote communication, diagnosis, treatment, and monitoring. Some stakeholders believe the cost-savings and care improvements of cHealth could be significant. Using the example of congestive heart failure (CHF), the paper shows that cHealth strategies such as remote patient monitoring (e.g., a device that monitors sudden weight gain in the case of CHF) can potentially save costs when implemented as part of certain value-based care model.
The potential for cHealth is exciting but remains far from being fully realized – mostly because the marketplace lacks strong incentives for providers, payers, and consumers to fully embrace cHealth technologies. Consumers want to know how their data is being used and that it is private and secure. Physicians want to see that the data produced by cHealth is meaningful and actionable and can be incorporated into their workflow.