How many “lives” does a health plan need?

https://mailchi.mp/3e9af44fcab8/the-weekly-gist-march-26-2021?e=d1e747d2d8

A Dozen Facts About Medicare Advantage in 2019 | KFF

Doctors and health systems with a significant portion of risk-based contracts weathered the pandemic better than their peers still fully tethered to fee-for-service payment. Lower healthcare utilization translated into record profits, just as it did for insurers.

We’re now seeing an increasing number of health systems asking again whether they should enter the health plan business—levels of interest we haven’t seen since the “rush to risk” in the immediate aftermath of the passage of the Affordable Care Act a decade ago.

The discussions feel appreciably different this time around (which is a good thing, since many systems who launched plans in the prior wave had trouble growing and sustaining them). First, systems are approaching the market this time with a focus on Medicare Advantage, having seen that growing a base of covered lives with their networks is much easier than starting with the commercial market, where large insurers, particularly incumbent Blues plans, dominate the market, and many employers are still reticent to limit choice.

But foremost, there is new appreciation for the scale needed for a health plan to compete. In 2010, many executives set a goal of 100K covered lives as a target for sustainability; today, a plan with three times that number is considered small. Now many leaders posit that regional insurers need a plan to get to half a million lives, or more. (Somehow this doesn’t seem to hold for insurance startups: see the recent public offerings of Clover Health and Alignment Health, who have just 57K and 82K lives, respectively, nationwide.)

We’re watching for a coming wave of health system consolidation to gain the financial footing and geographic footprint needed to compete in the Medicare Advantage market, and would expect traditional payers to respond with regional consolidation of their own.
 

From insurer to diversified services business

https://mailchi.mp/3e9af44fcab8/the-weekly-gist-march-26-2021?e=d1e747d2d8

Large health insurers no longer just provide coverage, but are instead repositioning themselves as vertically integrated healthcare organizations that span the care continuum.

The graphic above shows five-year total revenue growth by segment for the top five health insurance companies.

Some, like Anthem and Humana, are still in the early stages of revenue diversification, leveraging partnerships and investments to fill service gaps—in Humana’s case, these are mainly centered on the Medicare Advantage population.

On the other hand, the insurance revenue of Cigna and CVS Health is already dwarfed by pharmacy benefit management (PBM) revenue (as well as retail clinic revenue for CVS).

UnitedHealth Group (UHG) is clearly leading the pack, with a robust revenue diversification and vertical integration strategy. 

Its Optum subsidiary grew 62 percent over the last five years, nearly double the rate of its UnitedHealthcare insurance business. Already the largest employer of physicians in the country, Optum recently announced plans to acquire Massachusetts-based 715-physician group, Atrius Health. It also announced its intent to acquire Change Healthcare, one of the largest providers of revenue and payment cycle management solutions.

Given the outsized role of the Optum division in driving UHG’s growth and profitability, it may soon face a dilemma that other publicly traded, diversified companies have had to confront: shareholder demands to unlock value by spinning off the business into a separate company.

Central to fending off that kind of activism by shareholders: demonstrable steps to integrate the myriad businesses the company has acquired into a functional whole. Just as Amazon’s hugely profitable Web Services business has become a target of spin-off demands, so too, eventually, may UHG’s Optum.

Back to “a deal for every doc”?

https://mailchi.mp/b0535f4b12b6/the-weekly-gist-march-12-2021?e=d1e747d2d8

Hospital Physician Partners and Lock Haven Hospital Announce New Emergency  Department Partnership

Many physician practices weathered 2020 better than they would have predicted last spring. We had anticipated many doctors would look to health systems or payers for support, but the Paycheck Protection Program (PPP) loans kept practices going until patient volume returned. But as they now see an end to the pandemic, many doctors are experiencing a new round of uncertainty about the future. Post-pandemic fatigue, coupled with a long-anticipated wave of retiring Baby Boomer partners, is leading many more independent practices to consider their options. And layered on top of this, private equity investors are injecting a ton of money into the physician market, extending offers that leave some doctors feeling, according to one doctor we spoke with, that “you’d have to be an idiot to say no to a deal this good”.
 
2021 is already shaping up to be a record year for physician practice deals. But some of our recent conversations made us wonder if we had time-traveled back to the early 2000s, when hospital-physician partnerships were dominated by bespoke financial arrangements aimed at securing call coverage and referrals. Some health system leaders are flustered by specialist practices wanting a quick response to an investor proposal. Hospitals worry the joint ventures or co-management agreements that seemed to work well for years may not be enough, and wonder if they should begin recruiting new doctors or courting competitors, “just in case” current partners might jump ship for a better deal. 

In contrast to other areas of strategy, where a ten-year vision can guide today’s decisions, it has always been hard for health systems to take the long view with physician partnerships.

When most “strategies” are really just responses to the fires of the day, health systems run the risk of relationships devolving to mere economic terms. Health systems may find themselves once again with a messy patchwork of doctors aligned by contractual relationships, rather than a tight network of physician partners who can work together to move care forward.

Kaiser’s net income more than doubles to $4.5B in Q2

https://www.beckershospitalreview.com/finance/kaiser-s-net-income-more-than-doubles-to-4-5b-in-q2.html?utm_medium=email

Gold Bricks | Gold bullion, Gold reserve, Fort knox gold

After reporting a $1.1 billion net loss in the first quarter, Kaiser Permanente’s revenue, operating income and net income for its nonprofit hospital and health plan units increased year over year in the second quarter of this year. 

The Oakland, Calif.-based healthcare giant reported operating revenues of $22.1 billion in the second quarter of 2020, up 3.3 percent from the same period a year earlier. Kaiser also saw expenses decline about 1.5 percent year over year to $20 billion.

“Deferred elective surgeries and procedures due to stay-at-home orders across the communities we serve contributed heavily to our second quarter results by temporarily reducing our operating expenses,” Executive Vice President and CFO Kathy Lancaster said in an earnings release.

Kaiser spent $907 million on capital projects in the second quarter, up from $710 million in the same period a year earlier. The system made investments in technology and infrastructure, including reconfiguring hospitals and building new clinical capacity to care for COVID-19 patients.

The 39-hospital system ended the second quarter of this year with operating income of $2.1 billion, up from $1.1 billion in the same quarter last year. 

Kaiser’s unique integrated model — it provides healthcare and health plans — makes it difficult to compare its financial results to those of other systems that do not receive member premiums. As of June 30, Kaiser had 12.4 million health plan members, 183,000 more than in December. Most of the growth occurred during open enrollment, which occurred pre-COVID-19, Kaiser Senior Vice President and Treasurer Tom Meier told Becker’s Hospital Review.

As a result of improved financial market conditions in the second quarter, the system reported strong growth in investment returns, Mr. Meier told Becker’s. That recovery pushed Kaiser’s net income to $4.5 billion in the second quarter of this year, up from $2 billion in the same period of 2019. In the first quarter of this year, Kaiser reported a nonoperating loss of $2.4 billion, generated largely by investment losses.

As the system continues to navigate the challenges of the COVID-19 pandemic, ensuring patients and health plan members have access to needed care and testing is a top priority, Chair and CEO Greg Adams said in an earnings release.

“We have now reintroduced care that was halted during the stay-at-home orders, expanded our services, especially virtual care, and are working with members to schedule care that may have been deferred,” Mr. Adams said. “Moreover, we are working to expand our testing capabilities by purchasing our own testing equipment and building Kaiser Permanente testing labs, partnering with state and local health departments to support robust contact tracing, helping to slow the spread of the virus through education and household prevention kits, and helping our customers maintain their health coverage through these difficult times.”

Looking at results for the first six months of this year, Kaiser reported net income of $3.4 billion on revenues of $44.7 billion. In the same period a year earlier, the system posted net income of $5.2 billion on revenues of $42.8 billion. 

 

 

Provider of the Year: Providence St. Joseph Health

https://www.healthcaredive.com/news/provider-providence-st-joseph-health-dive-awards/566477/

The 51-hospital system, which traces its roots back to the 1850s,​ has maintained a stable ratings outlook amid industry headwinds and pursued tech partnerships this year to bolster its portfolio.

Providence St. Joseph Health, the fourth-largest U.S. nonprofit health system by number of hospitals, marked a busy 2019 with multiple efforts to dive into the tech sector and seek out partnerships to tackle the industry’s biggest challenges.

The Catholic system now operates 51 hospitals in eight states as the result of a July 2016 merger of Providence Health and Services and St. Joseph Health. While the organization is the dominant inpatient provider in all its markets, no single area accounts for more than 30% of its net operating revenue, showing good portfolio diversification, ratings agency have noted.

The system, which can trace its roots back to the 1850s when the Sisters of Providence set up hospitals, schools and orphanages throughout the Northwest, posted $24 billion in operating revenue last year. That metric has shown year-over-year increases since the $18 billion posted in 2014.

Providence CEO Rod Hochman told Healthcare Dive the health system hasn’t shied away from seeking partnerships as the industry swings toward value based care and other systemic changes.

“I think the message is: ‘You can’t do it alone,'” he said. “You can’t go out there and just do it yourself — you don’t have the scale to do it.”

In that vein, the system (which is formally rebranding to Providence over the next few years) was one of the founding members of generic drug company Civica Rx, which opened its headquarters and made its first delivery this year. That’s a coalition of hospitals working to make their own drugs, starting with antibiotics.

It’s also grouping up with One Medical to increase access to primary care and teaming with Cedars-Sinai to build a patient tower in southern California. And in February, the organization launched the population health management company Ayin Health Solutions to provide benefits management as well as risk evaluation and care coordination tools.

Providence has maintained a stable outlook from the three main ratings agencies even as other nonprofits struggled to stay above water. Kevin Holloran, senior director at Fitch Ratings, said the system has managed to think about margins the way a public company must while still adhering to the mission-driven thought process nonprofit organizations trumpet.

“Blending those two thoughts together sounds easy, but it’s not,” Holloran told Healthcare Dive. “It’s hard to do.”

Moody’s Investors Service issued a credit opinion recently on Providence, finding the system’s integrated structure that includes a health plan and 7,600 employed physicians creates “further cashflow diversification, and strengthens the organization’s competitive position.”

The analysts wrote they expect operating margins to continue to improve going into next year as it implements dozens of initiatives updating operating practices, cost structures and revenue systems. They note, however, the organization faces a challenge in transitioning disparate EHRs and its numerous joint ventures “may also entail a certain amount of execution and integration risk.”

Holloran pointed to two relatively recent hires as leading the way for Providence — both poaches from Microsoft. CFO Venkat Bhamidipati joined the organization two years ago and CIO B.J. Moore came on in January.

They migrated from the tech world to the traditionally loathe-to-change healthcare landscape, and have made a difference for Providence.

It puts the company in a strategic place for growth, Holloran said. “Now they’re sort of adding that missing piece, which is optimizing what they’ve got,” he said. “And a big piece of that is the technology, and they’re doing it in a unique and interesting way.”

This year, Providence acquired Lumedic, which uses blockchain tools for revenue cycle management, and Bluetree, an Epic consultancy. The health system also allows patients to schedule appointments through Amazon’s smart speaker Alexa.

In July, the health system announced an agreement with Microsoft to use the tech giant’s cloud and artificial intelligence tools in an effort to foster interoperability, improve outcomes and drive down costs.

The organization still has traditional struggles, however. Hochman, who is also the incoming chairman of the American Hospital Association, said the ongoing litigation surrounding the Affordable Care Act, coupled with payment changes and other CMS changes, creates a chaotic environment for providers.

“Every day they come up with something new, and it’s been the lack of predictability that’s been the biggest problem for us,” he said.

 

 

 

Behind insurer strategies to snag higher MA star ratings

https://www.healthcaredive.com/news/behind-insurer-strategies-to-snag-higher-ma-star-ratings/565715/

Each year billions of federal dollars are up for grabs as insurers compete to score a star rating high enough to earn a lucrative financial bonus in the Medicare Advantage program. Last year, more than $6 billion in bonuses were awarded to various types of privately run MA plans.

Obtaining a bonus is especially important as plans use that funding to sell supplemental benefits, or extra perks that can be enticing to shoppers and can attract more people to their rolls.

However, the bonus program is costly and has been pegged as an area ripe for trimming, according to a 2018 Congressional Budget Office report that suggested changes could help reduce the federal deficit.

Still, insurers take the stars program seriously and devise strategies to snag higher scores. It stokes competition among plans and promotes robust benefit offerings as issuers are forced to use some of those dollars on supplemental benefits such as dental or vision.

“There is not a silver bullet,” for a stars strategy, Dustin Grzeskowiak, an actuary for consulting firm Milliman, told Healthcare Dive.

However, highly rated plans often have a few characteristics in common, he said.

Top-rated plans tend to be part of a company with an overall culture of supporting and championing the stars program. Sophisticated data-driven strategies are also key, along with member outreach.

At Kaiser Permanente, there is a disciplined structure around star ratings, Agnes Strandberg, senior vice president of Kaiser’s Medicare program, told Healthcare Dive.

Her team is focused on reviewing data, key metrics and predictive analytics to understand emerging trends among members. The focus on analytics also helps identify best practices throughout the organization’s regions, which is a hallmark of integrated health systems, Strandberg said.

A core pillar for California-based Kaiser is ensuring a consistent member experience across all those regions, which requires a lot of training, she said.

Being an integrated health system provides an important foundation for these goals, Strandberg said.

For example, when a Kaiser member walks into a clinic for a visit, the receptionist may remind the patient they’re due for a mammogram and attempt to go ahead and schedule one. The pharmacist also is there not just to fill prescriptions but to play a role in advancing a member’s health. Staying current on screenings such as mammograms are an important metric that play into the star ratings.

The health plan and its clinicians are essentially playing for the same team and not at odds with one another, which can be the case for other non-affiliated payers and providers.

All told, Kaiser garnered five-star ratings for seven of its health plans in the most recent ranking, the most of any payer. Together the seven plans cover more than 1.5 million people.

Overall, only 23 plans out of 401 received the top grade, according to CMS.

Another top performer was Bloomfield, Connecticut-based Cigna.

Cigna’s Florida plan was one of 23 plans to earn a perfect score of five stars. The plan, Healthspring, covers more than 48,000 seniors throughout the sunshine state.