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The future of healthcare: Finding the opportunities that lie beneath the uncertainty

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Healthcare is a dynamic industry with significant opportunity, but cost concerns, uncertainty, and complexity can also make it an unnerving one. Substantial upside exists for players that can deliver value-creating solutions and thrive under uncertainty.

The intrinsic demand for healthcare services continues to rise in the United States, given population aging, the increasing prevalence of chronic disease, and the search for a higher quality of life. In addition to increasing demand, three other major factors make healthcare a dynamic industry with significant opportunity:

  • Consumers, employers, and the government continue to see the financial burden of healthcare grow faster than their incomes or revenues—a long-standing gap unlikely to change soon. Furthermore, new challenges, such as the ongoing opioid crisis, continue to emerge. The result has been a continuing search for fresh solutions and reforms,  which has kept—and will keep—the industry in a state of flux.
  • Major tectonic shifts are occurring, not only in regulations but also in three other areas: technology (both medical science and technology and the onward march of big data, advanced analytics, machine learning, and digital), industry orientation (the move toward B2C and rapidly rising consumer expectations), and reallocation of risk across the value chain. These forces are fundamentally altering the structure of the industry and basis of competition.
  • The available headroom for improvement in healthcare (by most estimates, over $500 billion within the $3 trillion US healthcare economy) provides significant opportunity for value creation.1

Industry growth, major changes, and strong value-creation potential make healthcare an exciting industry. At the same time, cost concerns, uncertainty, and complexity make it an unnerving one. Substantial upside exists for players that can deliver value-creating solutions and thrive under uncertainty. Indeed, our recent research into industry profit pools indicates that, on average, the industry is delivering value-creating solutions and consequently showing attractive profit growth. Between 2012 and 2016, total over-all healthcare industry profit pools (earnings before interest, taxes, depreciation, and amortization, or EBITDA) grew at a faster rate than the combined EBITDA of the top 1,000 US companies.

 

 

Hospital Impact—Medicaid on the chopping block in 2018

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https://www.fiercehealthcare.com/hospitals/hospital-impact-medicaid-chopping-block-2018?mkt_tok=eyJpIjoiTnpReE1EaGhZamt5TVRsbSIsInQiOiJ0UHBtVE1DclpRckhmUjVyMUF2ZWF1ZStSRE93QmtRYWM0ckdYXC9lalRYbERcL1E0R2o5S3g4blhTN2VZU1NsVkNndjRWZ1RRMnhJVXJHdmp6Z1liRWNXS2JyWHlrTyt6Y3hEeVVHZ0xxRWFUYmdjU2RsZWVhYzZmWWZxTCtBUjlcLyJ9&mrkid=959610

Filling out job application

Medicare and Medicaid have always been a “work in progress,” as they’ve evolved from entitlement programs for the elderly and the poor in the 1960s to the largest health insurers—public or private—in the nation.

Medicaid is the more controversial program of the two, as its original intent was to provide temporary, safety-net health coverage for the poor and not as a permanent entitlement. This issue has been politicized by both parties as of late with little attention paid to the impact that nonclinical determinants—such as genetics, socioeconomics, environment and lifestyle choices—have on healthcare outcomes and life expectancy.

Democrats support expanding Medicaid under the Affordable Care Act to every state for everyone within 138% of the federal poverty level. Republicans favor increasing beneficiary responsibilities to take greater control and responsibility over their own healthcare and are encouraging states to pursue waivers to experiment with different Medicaid models designed to optimize quality, drive down costs and enable beneficiaries to move toward greater economic self-sufficiency.

President Donald Trump’s proposed budget last May recommended $800 billion in Medicaid cuts as well as cuts in nutritional assistance ($192 billion) and welfare programs ($272 billion). With the passage of the Tax Cuts and Jobs Act adding $1 trillion to the federal deficit, Republicans are making cuts to Medicaid a priority for 2018.

The rise of work requirements

Last month, the Trump administration announced that it would grant states the right to impose work requirements for able-bodied Medicaid recipients. Pregnant women, full-time students, primary caretakers of children under 19, disabled adult dependents and frail elderly individuals would be exempt from these requirements.

There are many complex issues that arise from this proposal, including:

  • The likelihood that it will be challenged in federal court (as is already the case in Kentucky)
  • The impact that denial of coverage would have on healthcare costs with elimination of preventive healthcare services, treatment for opioid addiction and job restrictions for those with chronic addictions
  • The requirement that states would bear the burden of job training, child care, transportation to work sites and other administrative costs with limited resources.

Democrats responded that this proposal violates the Medicaid statute as well as the original intent of the state waiver program. They also pointed out that the majority of Medicaid beneficiaries who can work do work, and often carry more than one low-paying service job that does not permit them to afford commercial health insurance coverage.

Many Republican governors support the proposal, as they would like to see a greater number of Medicaid beneficiaries receive health insurance through an employer rather than through the state. Earlier this month, Kentucky became the first state to receive approval to impose job requirements as a part of its Medicaid program, followed in short order by Indiana.

Cost-sharing considerations

Another approach to reducing Medicaid costs is cost-sharing, which is already permitted under federal law. Like the job-requirement proposal, children, pregnant women and others are partially waived from this requirement with lower premiums and cost-sharing limits.

In addition, states may impose higher premiums and cost-sharing limits for the option to purchase brand as opposed to generic prescription drugs and the nonemergency use of emergency departments as determined by a medical screening exam under the Emergency Medical Treatment and Labor Act.

All about the execution

There is no question that the United States cannot sustain the current unfunded liabilities that include Medicaid, Medicare and Social Security. In addition, cuts to the Medicaid program are supported by a significant number of Americans. However, doing this successfully will be complicated by the fact that those receiving this coverage deeply appreciate its benefits and that many studies support the positive economic value of Medicaid expansion.

Imposing work requirements and cost-sharing on Medicaid beneficiaries will only work if the jobs available to them are not minimum-wage service jobs and provide employer-based insurance. Thus, the main question is: Can states invest in the infrastructure necessary to help get their most vulnerable populations on their feet in an economically meaningful way? Or is the intent to merely withhold healthcare services to compensate for federal and state budgets that have spiraled out of control?

 

New bill would mean more flexibility for high-deductible health plans

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Health insurance benefits form

 

A new bill aims to give health plans more flexibility to help enrollees treat and prevent chronic diseases.

The bill, called the Chronic Disease Management Act of 2018, would amend the IRS tax code so that high-deductible health plans paired with health savings accounts could cover chronic disease prevention and treatment on a pre-deductible basis.

Diane Black, R-Tenn., and Earl Blumenauer, D-Ore., introduced the bill in the House on Thursday, and John Thune, R-S.D., and Tom Carper, D-Del., did the same in the Senate, according to a release from the University of Michigan Center for Value-Based Insurance Design.

The existing IRS regulations, the center says in an accompanying fact sheet, permit a “safe harbor” that allows for the coverage of preventive services prior to satisfaction of the plan deductible. But that exception doesn’t include clinical services meant to treat an existing illness or condition, which narrows plan options and can stifle consumers’ ability to benefit from the financial advantages of a tax-free health savings account.

The new bill, on the other hand, would allow insurers to develop and implement “clinically nuanced” high-deductible health plans, the center says. The adoption of those type of policies, it adds, could make patients more likely to adhere to treatment plans, allow for lower premiums, enhance patient-centered outcomes and “substantially” reduce healthcare expenditures.

“This enhanced HDHP would provide millions of Americans a plan option that better meets their clinical and financial needs,” A. Mark Fendrick, M.D., the center’s director, said in a statement.

The idea of value-based insurance design (V-BID) has been gaining traction in recent years due to its potential to lower costs by allowing payers more leeway in how they design health plan benefits. Indeed, a 2016 study found that a VBID model tested in Connecticut was able to boost the use of preventive healthcare services among participants.

It’s also being tested in privatized Medicare. In fact, the Trump administration announced in November that it would expand the existing Medicare Advantage value-based insurance design model to an additional 15 states and broaden the options available for participants.

 

Trump signs spending bill into law: Here are health IT’s biggest wins

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HIMSS Senior Director of Congressional Affairs broke down how the massive spending bill will boost telehealth, Medicaid and other crucial health IT.

Congressional leaders passed the spending bill last night, after a 5-hour government shutdown. Senate passed the spending bill around 1:45 a.m. with a 71-28 vote, while the House pushed through the legislation at about 5:30 this morning with a 240-186 vote.

The shutdown was caused by a one-man protest by Sen. Rand Paul, R-Kentucky, who opposed adding another $320 billion to the federal budget deficit. Indeed the massive spending bill adds hundreds of billions of dollars for the military, disaster relief and domestic programs.

While budget appropriators will have until Mar. 23 to determine how to specifically dole out the funding, there are a lot of wins for healthcare, according to Samantha Burch, senior director of congressional affairs for HIMSS.

The bipartisan agreement will raise the budget cap to allow the total budget allocation for defense, non-defense and non-discretionary items, which is “a big win for HIMSS priorities,” Burch said. Those caps will not only help federal agencies with military needs, but it will support health needs and threats for the country.

One of the biggest gains from the budget was the inclusion of the CHRONIC Care Act, which unanimously passed the Senate in September. HIMSS provided technical feedback on for developing the bill, which Burch said is aimed at modernizing Medicare to streamline care coordination and improve outcomes.

Not only will the bill expand telehealth to Medicare beneficiaries, it will also generate patient data on those beneficiaries.

“We’ve been huge supporters of the CHRONIC care act,” said Burch. “Getting that bill over the finish line is an important first step. There’s all of this momentum around health IT on Capitol Hill, but it’s been incredibly hard to get bills across the finish line and signed into law.”

“This is really the first time that we’re seeing a complete package that would expand telehealth access to Medicare beneficiaries,” she continued. “It’s an incredible step forward.”

The spending bill also included provisions for Community Health Centers, National Health Service Corps and Medicare programs that help rural area providers, said Burch. CHIP was also extended for a longer period than anticipated, which provides some stability and certainty to the industry as a whole.

The budget also provides at least $2 billion for the National Institutes of Health for two years and $6 billion for the opioid epidemic.

What’s incredibly valuable is that the two-year budget gives appropriators a “longer runway for the FY19 budget.”

“But there’s much more work to be done,” said Burch. “It’s never a silver bullet… like with the CHRONIC Care bill, we’re trying to bridge this major gap where technology and innovation is, and where regulation and policy is.”

“The bill takes us a little way there, but there’s certainly more to do,” she added.

HIMSS will be continuing to work on progressing these needs moving forward, while concentrating on cybersecurity, interoperability and infrastructure.

Although the industry has come a long way, cybersecurity continues to be a major issue for healthcare, said Burch. HIMSS played a major part of Sec. 405 of the Cybersecurity Act of 2015, which it developed with the Senate HELP committee.

“[That work] got the attention of the Department of Health and Human Servicesand got the ball rolling, which created a more active relationship between HHS and the private sector,” said Burch.

But one of the biggest needs — and perhaps the biggest push — will continue to be around infrastructure needs. Burch explained that while Congress continues to have these conversations around infrastructure and public and rural health, there’s a lot of work to be done.

“We’re still trying to impress upon lawmakers that yes, our roads and bridges may be crumbling, but we still have those with no access to broadband,” said Burch. And that has some of the best use cases for health IT and telehealth.

Senate poised to approve budget redistributing state Medicaid funding

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http://www.tampabay.com/florida-politics/buzz/2018/02/07/senate-poised-to-approve-budget-redistributing-state-medicaid-funding/

 

The Senate proposal, which would funnel away higher state Medicaid payments to hospitals with a large fraction of Medicaid patients, would need to be reconciled with the House’s budget preserving the current policy.

Safety net hospitals in Florida could see their state Medicaid payments decrease by $170 million under a proposal in the budget the state Senate is poised to approve Thursday. The proposal, which would target about $318 million in payments that currently go to 28 hospitals with a higher percentage of Medicaid patients, would funnel those funds into the base rates paid to all hospitals instead.
The reshuffling in the Senate budget would largely affect safety net hospitals, which include public and teaching hospitals, while for-profit hospitals could gain more than $63 million, according to the Safety Net Hospital Alliance of Florida.
Miami’s Jackson Memorial Hospital would lose $59 million, Broward Health would lose about $17 million and Tampa General would lose $14 million, according to Safety Net’s analysis. Nicklaus Children’s Hospital in Miami and Johns Hopkins All Children’s, which each see about 70 percent of patients covered by Medicaid, would lose $10.5 million and $5 million respectively. In contrast, for-profit chain HCA could see its reimbursements rise more than $40 million.
Senate Health and Human Services Appropriations Chairwoman Anitere Flores, R-Miami, said the new system would more fairly distribute funds to all hospitals, which she said also provide charity care like the 28 hospitals that currently meet the 25 percent threshold of Medicaid patients to receive automatic rate enhancements.
“We’re making sure that the dollars actually follow the patient that is being served,” she said.
Flores contended that the new proposal corrects an “arbitrary” formula that set the higher payment rates in past years, and that the hospitals that had been reimbursed at a higher rate would be able to recoup their losses through federal Low Income Pool funding, which reimburses hospitals for charity care serving the uninsured.
But Lindy Kennedy, vice president of the Safety Net Alliance, told the Senate Democratic Caucus that the policy is needed because Medicaid rates do not cover the cost of care. Those 28 hospitals, which largely comprise public or not-for-profit private institutions in the state, lose proportionately more money because a larger slice of their patients are covered by Medicaid, she said.
“If Medicaid would pay these costs and if didn’t go into the red for every Medicaid patient we had, we wouldn’t need this policy,” she said. “This puts us back to status quo.”
“These hospitals cannot afford this type of cut,” she added.

Lidia Amoretti, a spokeswoman for Jackson Health System, called the Senate’s plan “alarming,” though she added “it is still early in the process.”

“We trust that the Miami-Dade delegation will fight fiercely – as it always does – to protect the people who rely upon Jackson for world-class care,” she said in a statement. 
Sen. Jose Javier Rodriguez, D-Miami, proposed an amendment that would revert the Senate proposal to match the House’s version this year, though it was rejected on the floor.
Tony Carvalho, president of the Safety Net Hospital Alliance, said that the Senate plan would also cut $94 million from three of the four largest teaching hospitals — UF’s Shands in Gainesville, Jackson Memorial and Tampa General.
“All hospitals lose money, and I appreciate that, but the average annual margin for the three largest teaching hospitals is $57 million over the last five years…for the operation of in-patient out-patient services in hospitals,” he said. “The Senate bill would cut them $95 million — that’s $30 million more than their operating margin in the last five years.”
By contrast, he said, HCA makes an operating margin, on average over the last five years, of $868 million per year.
Carvalho said one of the biggest cuts to hospitals are employees and this would be “damaging some of your premier medical institutions.”
“Their slogan is the money follows the patient,” he said. “That would be pertinent if all hospitals were paid their cost of care or all hospitals did the same percentage of Medicaid. That’s not the case. If you are going to pay hospitals way below the cost of care, our position is — and it has been the legislative position for years — is that you make a special adjustment when one of four of their patients are in the Medicaid pool.”
The Senate is expected to pass its budget tomorrow, setting up a clash with the House, whose version of the budget preserves the higher reimbursement system. The Senate’s plan also includes $130 million in nursing home funding, which differs from the House plan.