Should My Health System Launch a Health Insurance Plan?

Should My Health System Launch a Health Insurance Plan?

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Here are a few things providers whose vision and strategy include launching a health plan should consider

In 1929 the stock market crashed and the US collapsed into the Great Depression. Coincidentally, it was also in 1929 that Baylor Hospital in Dallas Texas devised a plan that would provide access to health care services to patients and give patients the ability to pay for their care so the hospital could remain viable.

In the nine decades since Baylor Hospital helped create what is known today as Blue Cross, hospitals, physicians and other providers of health care services have regularly asked themselves the questions: Should we develop and own a health insurance plan? Should we take financial risk for care we provide? Should we partner with physicians and/or with a health insurer?

Since the passage of the Affordable Care Act (ACA) in 2010, hospital and physician executives have considered these questions with new motivation. Several have jumped in, but only a few health system-sponsored plans launched in the ACA era are nearing profitability. Others have deferred, waiting to see what develops, wanting to digest lessons from Medicare’s ACO program, direct contracts with employers, and ACO arrangements with commercial payers. The latter has been difficult to achieve even for risk-motivated providers, as many dominant commercial plans are reticent to enable providers to manage risk—and in the long run, create a direct competitor. This has provided new motivation for health systems and large physician groups to evaluate a provider-owned plan.

Today’s mantra is “we are moving from volume to value!” Though the words are fresh, the concepts and concerns are much the same, as are the risks and rewards. Having served in executive roles in provider owned health plans for nearly 40 years, 19 years at Kaiser Permanente, and 21 years at Sentara Health Care, I have observed multiple cycles of providers rushing into the health plan business followed by the rapid exit of providers who fail in managing risk. Here are a few “Be’s…” providers whose vision and strategy include launching a health plan should consider:

Be cautious, but not cowardly

Be courageous, but not careless

Be cognizant, but not cocky

 

These “Be’s…” need some explanation.

Commentary:

A five-year business plan that anticipates start-up costs, operating losses and regulatorily required “risk-based capital” will give executives an “eyes-wide-open” going-in perspective. A Board-approved business plan that is both conservative and credible will plan on operating losses for several years.

When the first members are enrolled in the new health insurance plan, the operating losses will begin. Yes, every start-up health plan will experience losses for a period of time. Detailed preparation and thoughtful execution will not eliminate losses in the early years, but they will hasten the march to profitability.

Commentary:

Getting the right people, and the right number of people on this bus is imperative. Expert people are available, but they are probably not current members of your team. Inexperienced talent and under staffing this strategic initiative will result in disaster.

The total value of your health insurance plan includes much more than bottom line performance. Provider sponsored plans can lead the market in customer satisfaction, quality of care metrics and “total cost of care.” Table stakes for operating a health plan include enrollment, billing, claims processing and financial systems. These systems can be purchased or partnered. However, to maximize value, wise investment in population health IT should be implemented as soon as possible. State of the art population health tools will enable providers to close gaps in care and improve both health outcomes and financial performance. Later on, investing in consumer-centric digital health applications will optimize the customer experience and offer value a provider sponsored plan can bring to the market in a unique manner.

Growing the membership as fast as possible is vital. Without substantial membership, providers will have little reason to focus on changing the model of care. Rapid membership growth can occur in a variety of ways, but the best way is to win contracts for large populations. Securing a Medicaid contract, enrolling the provider’s employees and winning two or three large group commercial accounts, and Medicare Advantage/CMS ACO depending on the players in the MA space in a given market are all good strategies for rapid growth. The sequencing of membership type is less important than the rate of growth.

Commentary:

Given the losses suffered by providers who took risk in 1990’s, and the spotty performance of provider sponsored health plans in today’s CMS ACOs and commercial offerings, you are probably thinking, why do I think we can do better?  Being aware of other’s failures and successes will embolden Boards and CEOs to accept the risk because they recognize the rewards.

A few lessons to be learned from Kaiser include:

  • The imperative of physician leadership and commitment
  • The efficiency of integrated services
  • The clarity of the connection between quality of care and the cost of care

Lessons to be learned from provider sponsored health plans, both those that have succeeded and those that have failed, include:

  • The tolerance and patience for early losses
  • The balance between integration and separation of the health plan and the providers
  • The clarity of purpose and mission. Having a health plan to fill hospital beds is not a sustainable mission

Additional Considerations:

Beyond financial results, most provider sponsored health plans tout other benefits that speak to both the mission of the organization and the financial performance of the enterprise in total. Such benefits include, but are not limited to:

  1. Improved performance in quality, service and total cost of care
  2. Enhanced understanding of the consumer/customer
  3. Control of the premium dollar

Of these added benefits, perhaps the benefit derived from the control of the premium dollar is least intuitive and most important. Here is a simple way to think about this issue:

If XYZ Health Insurer brings in $100 of premium, they will pay a hospital about $40 for inpatient and outpatient services. If the hospital is well run, it will make 4% or $1.20 on the $40 of revenue.

However, if the hospital owns the health insurance plan, and the insurance plan is making a 2% margin on the premium of $100 ($2.00), then the enterprise will earn $3.20, 2% on the premium and 4% on the “inter-company” transfer between the owned health insurance company and the hospital. (NOTE: this is a simple example. The actual arrangements between the hospital, its owned health insurance plan, and the contract with the non-owned health insurance companies will determine the actual results, but the principle is demonstrated with the simple example.)

To be sure, the challenges in owning and operating a health insurance plan are both daunting and different from operating a hospital system. However, the rewards can be worth the effort.

One provider sponsor health insurance plan generated enough net income over a five-year period that the “dividend” to the sponsoring health care system was deployed by the system to build not just one new hospital, but three!

Nearly 90 years after Baylor created the first Blue Cross health insurance company, it merged with Scott & White Clinic, which owns a health insurance plan. Baylor Scott & White is well-positioned to thrive as a fully integrated delivery system. If your system is asking “Should we launch a health plan?” please reach out. I’d be happy to share more of the lessons I’ve learned in my decades as CEO of provider sponsored health plans and discuss your system’s opportunity.

 

 

Perceptions of Affordability Among Individual Market Enrollees in California in 2017

Perceptions of Affordability Among Individual Market Enrollees in California in 2017

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In 2017 researchers at The Mongan Institute, Massachusetts General Hospital, and Harvard Medical School sought to answer the following questions: How affordable do Californians in the individual health insurance market perceive their insurance to be? How affordable do they perceive their out-of-pocket costs for medical care to be? How frequently do they report delaying or avoiding medical care because of costs? How frequently do they report cutting back on other necessities (like food, rent, other basics) or borrowing money to pay for care?

Researchers surveyed adult (age 18+) individual market enrollees in 2017 who selected qualified health plans through Covered California or outside of the Covered California marketplace (N = 2,912). The survey was conducted in English and Spanish, and respondents could complete the survey by telephone, web, or paper. The survey was fielded between May and October 2017 with a response rate of 42%.

Key Findings

1. On average, 40% of enrollees reported having some difficulty paying their monthly insurance premiums. Sicker enrollees and African American enrollees were more likely to report having difficulty.

2. On average, 31% of enrollees reported difficulty paying out-of-pocket costs when using health care. Similar to premium affordability, sicker enrollees and African American enrollees were more likely to report having difficulty.

3. Almost one in four enrollees (24%) who reported needing care delayed/avoided care due to costs.

4. Close to one in three (32%) enrollees reported some sort of financial stress due to health care costs: They reported cutting necessities, borrowing money, or both. This was more common among lower-income enrollees, African American enrollees, and sicker enrollees.

 

KHN’s ‘What The Health?’ California Here We Come

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Health care is a big political issue, but no place more than in California. In San Francisco last week, voters overwhelmingly approved a ballot measure upholding a ban on flavored tobacco products — over the vehement objections of the tobacco industry.

And the state’s activist attorney general, Xavier Becerra, is leading a group of Democratic officials from more than a dozen states defending the Affordable Care Act in a case filed in Texas. That is important given that the Trump administration’s Justice Department decided not to defend the law in full from charges that changes made by Congress in last year’s tax law invalidates the health law.

This week’s panelists for KHN’s “What the Health?” are: Julie Rovner of Kaiser Health News, Anna Maria Barry-Jester of FiveThirtyEight.com, Carrie Feibel of KQED San Francisco and Joanne Kenen of Politico.

Among the takeaways from this week’s podcast:

  • Republicans and Democrats had been gearing up for a midterm election debate on who is responsible for higher health insurance costs. But that shifted last week to an argument over whether consumers with preexisting conditions should be guaranteed coverage following the Justice Department’s brief saying changes to the ACA invalidated those protections.
  • In California, there is widespread support among Democrats for a single-payer health system. But the term is somewhat amorphous. For some officials, it is a catch-all phrase that seems to suggest strong efforts with current programs to get the uninsured rate down to zero, while still keeping much of the current insurance system in place.
  • Becerra has filed a suit against Sutter Health, a giant in the hospital industry in Northern California, alleging that consolidation has resulted in anti-competitive pricing practices.
  • San Francisco’s adoption of a referendum to ban flavored tobacco products could lead other local governments to follow suit. The measure included not only products with flavors allegedly geared to young people, but also menthol cigarettes, which make up about 30 percent of the market.

 

That ‘Living Will’ You Signed? At The ER, It Could Be Open To Interpretation.

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“Don’t resuscitate this patient; he has a living will,” the nurse told Dr. Monica Williams-Murphy, handing her a document.

Williams-Murphy looked at the sheet bearing the signature of the unconscious 78-year-old man, who’d been rushed from a nursing home to the emergency room. “Do everything possible,” it read, with a check approving cardiopulmonary resuscitation.

The nurse’s mistake was based on a misguided belief that living wills automatically include “do not resuscitate” (DNR) orders. Working quickly, Williams-Murphy revived the patient, who had a urinary tract infection and recovered after a few days in the hospital.

Unfortunately, misunderstandings involving documents meant to guide end-of-life decision-making are “surprisingly common,” said Williams-Murphy, medical director of advance-care planning and end-of-life education for Huntsville Hospital Health System in Alabama.

But health systems and state regulators don’t systematically track mix-ups of this kind, and they receive little attention amid the push to encourage older adults to document their end-of-life preferences, experts acknowledge. As a result, information about the potential for patient harm is scarce.

new report out of Pennsylvania, which has the nation’s most robust system for monitoring patient safety events, treats mix-ups involving end-of-life documents as medical errors — a novel approach. It found that in 2016, Pennsylvania health care facilities reported nearly 100 events relating to patients’ “code status” — their wish to be resuscitated or not, should their hearts stop beating and they stop breathing. In 29 cases, patients were resuscitated against their wishes. In two cases, patients weren’t resuscitated despite making it clear they wanted this to happen.

The rest of the cases were “near misses” — problems caught before they had a chance to cause permanent harm.

Most likely, this is an undercount, said Regina Hoffman, executive director of the Pennsylvania Patient Safety Authority, adding that she was unaware of similar data from any other state.

Asked to describe a near miss, Hoffman, co-author of the report, said: “Perhaps I’m a patient who’s come to the hospital for elective surgery and I have a DNR (do not resuscitate) order in my [medical] chart. After surgery, I develop a serious infection and a resident [physician] finds my DNR order. He assumes this means I’ve declined all kinds of treatment, until a colleague explains that this isn’t the case.”

The problem, Hoffman explained, is that doctors and nurses receive little, if any, training in understanding and interpreting living wills, DNR orders and Physician Orders for Life-Sustaining Treatment (POLST) forms, either on the job or in medical or nursing school.

Communication breakdowns and a pressure-cooker environment in emergency departments, where life-or-death decisions often have to be made within minutes, also contribute to misunderstandings, other experts said.

Research by Dr. Ferdinando Mirarchi, medical director of the department of emergency medicine at the University of Pittsburgh Medical Center Hamot in Erie, Pa., suggests that the potential for confusion surrounding end-of-life documents is widespread. In various studies, he has asked medical providers how they would respond to hypothetical situations involving patients with critical and terminal illnesses.

In one study, for instance, he described a 46-year-old woman brought to the ER with a heart attack and suddenly goes into cardiac arrest. Although she’s otherwise healthy, she has a living will refusing all potentially lifesaving medical interventions. What would you do, he asked more than 700 physicians in an internet survey?

Only 43 percent of those doctors said they would intervene to save her life — a troubling figure, Mirarchi said. Since this patient didn’t have a terminal condition, her living will didn’t apply to the situation at hand and every physician should have been willing to offer aggressive treatment, he explained.

In another study, Mirarchi described a 70-year-old man with diabetes and cardiac disease who had a POLST form indicating he didn’t want cardiopulmonary resuscitation but agreeing to a limited set of other medical interventions, including defibrillation (shocking his heart with an electrical current). Yet 75 percent of 223 emergency physicians surveyed said they wouldn’t have pursued defibrillation if the patient had a cardiac arrest.

One issue here: Physicians assumed that defibrillation is part of cardiopulmonary resuscitation. That’s a mistake: They’re separate interventions. Another issue: Physicians are often unsure what patients really want when one part of a POLST form says “do nothing” (declining CPR) and another part says “do something” (permitting other interventions).

Mirarchi’s work involves hypotheticals, not real-life situations. But it highlights significant practical confusion about end-of-life documents, said Dr. Scott Halpern, director of the Palliative and Advanced Illness Research Center at the University of Pennsylvania’s Perelman School of Medicine.

Attention to these problems is important, but shouldn’t be overblown, cautioned Dr. Arthur Derse, director of the center for bioethics and medical humanities at the Medical College of Wisconsin. “Are there errors of misunderstanding or miscommunication? Yes. But you’re more likely to have your wishes followed with one of these documents than without one,” he said.

Make sure you have ongoing discussions about your end-of-life preferences with your physician, surrogate decision-maker, if you have one, and family, especially when your health status changes, Derse advised. Without these conversations, documents can be difficult to interpret.

Here are some basics about end-of-life documents:

Living wills. A living will expresses your preferences for end-of-life care but is not a binding medical order. Instead, medical staff will interpret it based on the situation at hand, with input from your family and your surrogate decision-maker.

Living wills become activated only when a person is terminally ill and unconscious or in a permanent vegetative state. A terminal illness is one from which a person is not expected to recover, even with treatment — for instance, advanced metastatic cancer.

Bouts of illness that can be treated — such as an exacerbation of heart failure — are “critical” not “terminal” illness and should not activate a living will. To be activated, one or two physicians have to certify that your living will should go into effect, depending on the state where you live.

DNRs. Do-not-resuscitate orders are binding medical orders, signed by a physician. A DNR order applies specifically to cardiopulmonary resuscitation (CPR) and directs medical personnel not to administer chest compressions, usually accompanied by mouth-to-mouth resuscitation, if someone stops breathing or their heart stops beating.

The section of a living will specifying that you don’t want CPR is a statement of a preference, not a DNR order.

A DNR order applies only to a person who has gone into cardiac arrest. It does not mean that this person has refused other types of medical assistance, such as mechanical ventilation, defibrillation following CPR, intubation (the insertion of a breathing tube down a patient’s throat), medical tests or intravenous antibiotics, among other measures.

Even so, DNR orders are often wrongly equated with “do not treat” at all, according to a 2011 review in the Journal of General Internal Medicine.

POLST forms. A POLST form is a set of medical orders for a seriously ill or frail patient who could die within a year, signed by a physician, physician assistant or nurse practitioner.

These forms, which vary by state, are meant to be prepared after a detailed conversation about a patient’s prognosis, goals and values, and the potential benefits and harms of various treatment options.

Problems have emerged with POLST’s increased use. Some nursing homes are asking all patients to sign POLST forms, even those admitted for short-term rehabilitation or whose probable life expectancy exceeds a year, according to a recent article authored by Charlie Sabatino, director of the American Bar Association Commission on Law and Aging. Also, medical providers’ conversations with patients can be cursory, not comprehensive, and forms often aren’t updated when a patient’s medical condition changes, as recommended.

“The POLST form is still relatively new and there’s education that needs to be done,” said Amy Vandenbroucke, executive director of the National POLST Paradigm, an organization that promotes the use of POLST forms across the U.S. In a policy statement issued last year and updated in April, it stated that completion of POLST forms should always be voluntary, made with a patient’s or surrogate decision-maker’s knowledge and consent, and offered only to people whose physician would not be surprised if they die within a year.

 

WHY HUMILITY DELIVERS MORE RESULTS THAN ARROGANCE

Why Humility Delivers More Results Than Arrogance

Courage and humility:

You’d be wrong if you said humility is kin to fear.

Courage is the willingness and ability to fail and try again.

Arrogance needs to appear perfect so it plays it safe. It won’t try unless success is certain. Arrogance fears and rejects failure.

Humility accepts responsible failure and keeps going.

Wisdom and humility:

The arrogant become fools.

Arrogance learns slowly, if at all. It won’t accept advice or guidance from others because it believes it already knows best.

Learning is hard for arrogance.

Arrogance knows. Humility knows there’s more to know.

Humility learns from failure, improves, and gains insight. Arrogance, on the other hand, repeats ineffective behaviors and blames others for failure.

Humility learns because it listens. Arrogance despises listening.

Arrogance points fingers.

Humility takes responsibility and grows.

There is no growth apart from taking responsibility.

Humility and results:

Humility respects and appreciates others. Teams work hard for leaders who appreciate their hard work.

Humility connects with others and honors their talent.

Arrogance stands aloof and feels threatened when others shine.

Five practices of humility:

  1. Learning.
  2. Listening.
  3. Courage.
  4. Connection.
  5. Responsibility.

Which of the five practices of humility are most relevant to you?

How are courage, learning, and results connected to humility?