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Dynamics of Decline: The Truth About HMOs

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http://www.chcf.org/articles/2016/11/dynamics-decline-truth-hmos

California Commercial HMO Enrollment, Kaiser Foundation Health Plan ("Kaiser") vs. Non-Kaiser, 2004-2015

California’s commercial health maintenance organization population shrank from 11.9 million to 9.8 million enrollees between 2004 and 2015 (see figure below), a 17.5% decline. But the decline has not been consistent across all HMOs — Kaiser’s commercial enrollment has actually grown during this period.

Two new publications from CHCF take a closer look at how commercial managed care enrollment (including individual enrollment) and the public sector’s embrace of managed care are shifting the way physician organizations are paid — important trends that could affect California’s delivery system.

The first report, As Commercial Capitation Sinks, Can California’s Physician Organizations Stay Afloat?, by Laura Tollen uses quantitative data and findings from stakeholder interviews to shed light on the extent to which commercial capitation is losing ground in California.

A companion set of charts and graphics compiled by Katherine Wilson provides additional detail on health plan enrollment and changes in HMO participation over the past decade.

It is important to look separately at Kaiser and non-Kaiser enrollment. Kaiser is characterized by a mutually exclusive relationship between the health plan (Kaiser Foundation Health Plan) and its two associated Permanente Medical Groups in Northern and Southern California. While Kaiser is by far the largest HMO in California, the health plan offers capitated contracts only to these two medical groups.

Kaiser HMO enrollment increased from 5.6 million to 6.1 million in the last decade, while commercial HMO enrollment for all non-Kaiser plans plummeted, from 6.3 million in 2004 to the current 3.6 million — a loss of more than 40%.

Uncertain Future

The impact of these trends on the state’s non-Permanente physician organizations is uncertain. While declining commercial capitation has not yet had a big effect on their operations, medical group leaders suspect it will soon, according to interviews. The change in commercial payment methods has been slow enough that their organizations have been able to adapt, repurposing some of their HMO-based infrastructure (utilization management tools, for example) for value-oriented payment programs that are FFS-based, such as private accountable care organizations (ACOs).

Among the other findings from the interviews were:

  • Declining capitation and rising fee-for-service will not influence individual physicians’ clinical decisions. All interviewees noted that their organizations’ strong culture of providing high-value care would prevent them from fundamentally changing the way they practice, regardless of payment type.
  • Despite commercial trends, capitation from Medicare Advantage and Medi-Cal managed care plans is on the rise. However, neither of these types of capitation is seen as a substitute for commercial capitation in terms of supporting infrastructure. While the perception is that Medicare Advantage capitation rates are generous, there is also recognition that these patients are costly. Interviewees said Medi-Cal capitation rates are inadequate.
  • Along with the decline in commercial capitation, interviewees expressed alarm at the large increases they observed in patient cost-sharing requirements. All said they fear that patients will not obtain the care recommended by their providers because of high out-of-pocket costs, and some said they already see this happen frequently.

Why This Matters

As more employers shift coverage from HMOs to preferred provider organizations (PPOs) and other non-capitated plans to achieve lower premium rates, they are sacrificing quality and financial protection for employees in exchange for short-term premium savings.

A recent CHCF blog post by Jeff Rideout of the Integrated Healthcare Association highlights the patterns of higher quality / lower cost that distinguish HMO plans in the state (compared to PPOs and other plan types). Large multispecialty physician organizations, which have flourished in California, have a long history and significant expertise in managing risk and coordinating care. These are the very skills that health care purchasers demand from value-based payment programs. Without sufficient infrastructure — which is supported by capitation/prepayment — the foundation of high-value care could crumble.

Given these trends, are employers being penny-wise but pound-foolish in pursuing short-term savings at the expense of longer-term value?

 

In California, What’s Driving the Variation in Total Cost of Care — Volume or Price?

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http://www.chcf.org/articles/2017/02/variation-total-cost-care

Linking Hospital Utilization and Total Cost of Care for Commercially Insured Californians, by Product Type, 2013

As the “repeal and replace” debate continues in Washington over the future of the Affordable Care Act, policymakers considering new legislation should not lose sight of the key concept of the ACA — affordability. High and rising costs are among the most intractable health care issues facing consumers across California and the nation, and any discussion must keep underlying cost drivers at the forefront.

But where should the focus be? At the most elementary level, total health care spending boils down to two main factors: how much care we use (volume, or utilization) and what we pay for that care (price). Teasing out how each factor — utilization or price — contributes to costs is important because cost-control solutions vary depending on the answer.

Across 19 regions in California, the annual risk-adjusted, per capita total cost of care for commercially insured people varies dramatically — from an average high of $5,400 in San Francisco to a low of $3,600 in Kern County, according to 2013 data in the California Regional Health Care Cost & Quality Atlas, a web-based interactive tool produced by the Integrated Healthcare Association (IHA) to monitor cost and quality trends across the state.

Adjusted to reflect differences in population health status, the atlas shows a clear geographic cost pattern. All Northern California regions have higher costs than the statewide average of $4,300, all Southern California regions have lower costs than the state average, and Central California regions have mixed costs.

Three Key Measures

What is driving these differences? Is it variation in per capita utilization, or is it price? While the atlas does not have unit price information, it does include three important hospital utilization measures: emergency department (ED) visits, all-cause readmissions, and inpatient bed days. This allows for basic comparisons of total cost per enrollee vs. three critical measures of utilization. If hospital utilization were driving the overall cost of care, there would be a positive correlation between the cost and utilization measures. However, an analysis of atlas information actually shows the opposite. When considering all commercial health maintenance organization (HMO) and preferred provider organization (PPO) products and regions, cost and volume tend to move moderately in opposite directions.

The quadrant chart below illustrates the relationship between total cost of care and hospital utilization, based on a composite score representing the three utilization metrics. Each orange circle represents a region’s PPO products, and each blue triangle represents a region’s HMO products. With the exception of one outlier region, the data show a moderate negative correlation between hospital utilization and cost. In other words, lower hospital utilization is associated with higher total costs of care.

In the atlas data, total cost of care includes both what the enrollee pays — for example, deductibles and coinsurance — as well as the insurance payments that go to providers. That means cost variation can’t be explained by differences in benefit design among commercial products. Because higher total costs are not driven by greater hospital utilization, and not accounted for by benefit design differences, price seems to be playing a strong role.

There is also an alternative but less likely explanation. Because the atlas only looks at hospital utilization, it’s possible that the total cost of care could be driven by nonhospital utilization as much as the price of care. But because hospital utilization accounts for almost one-third of overall spending on average, it is unlikely that utilization of other services, such as physician and other ambulatory care, has as great an impact on cost variation.

Much of the focus to date on making health care more affordable has involved transferring more financial responsibility to individual patients, the idea being that if consumers have “skin in the game” they will be more discriminating in their care purchases. But if the cost problem is primarily driven by price, which is related to market forces prevalent in a geographic region, is shopping really the solution?

The next version of the atlas, scheduled for release in 2017, will include additional utilization measures and cost information. These will offer a clearer picture of the roles of utilization and price in determining health care costs for commercially insured Californians. Until then the atlas findings stress the need for a better understanding of how pricing differences contribute to total cost variation and encourage us to search for more effective strategies to influence prices as well as utilization.

UCSF, Dignity to expand Bay Area accountable care network

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http://www.sfchronicle.com/business/article/UCSF-Dignity-to-expand-Bay-Area-accountable-care-11740465.php

St. Mary's Medical Center in San Francisco, Ca., on Mon. August 7, 2017. UCSF will be taking its resources and bringing it over to Dignity. Photo: Michael Macor, The Chronicle

Canopy Health, the Bay Area accountable care organization co-founded by UCSF in 2015, is adding three Dignity Health hospitals to its growing list of in-network providers.

With the new Dignity additions — St. Mary’s Medical Center and St. Francis Memorial Hospital in San Francisco, and Sequoia Hospital in Redwood City — the Canopy network will have 4,000 physicians, 16 hospitals and about 15,000 patients, or “members.”

This means that any Dignity patient who gets insurance through Health Net Blue & Gold HMO — the approved insurance plan for the Canopy network — will have access to UCSF doctors, and vice versa.

The Canopy network currently has health providers in six Bay Area counties and intends to be in all nine in the next two years. It plans to add a second insurance provider, Western Health Advantage, in January 2018. That is expected to expand the network to 200,000 members.

Accountable care organizations are groups of hospitals and doctors that coordinate patient care and assume shared financial responsibility for that care. They essentially join many independent doctor’s offices and hospital systems as part of one large network that can more easily share records, among other benefits. The model has been on the rise since the Affordable Care Act enacted new payment incentives, rewarding providers for improving overall quality of patient care rather than what’s known as “fee for service” — paying providers for each service they order for patients.

“We all realize the days of fee for service are over,” said Dr. Todd Strumwasser, senior vice president of operations for Dignity Health Bay Area. “We’re going to be paid for providing value, which means keeping a population healthy. To do that, you have to partner with the right groups to take care of entire populations.”

The expansion of the Canopy network is part of a broader push by providers to better compete with Kaiser Permanente and Sutter Health, the two dominant health systems in the Bay Area. Kaiser, an integrated network, has about 4 million members in Northern California. Sutter and its affiliates have about 3 million Northern California patients, and recently started introducing insurance products. Canopy is far smaller.

Nationally and in California, independent providers are moving toward the integrated Kaiser model, said Dan Mendelson of the health care consulting firm Avalere Health.

“The Bay Area market is much more evolved than most areas of the country,” Mendelson said. “The strong presence of Kaiser, where you have close integration between provider and payer, means that the physicians practicing in the Bay Area are probably more accustomed to the concept of taking accountability for quality.”

St. Mary’s Medical Center in San Francisco, Ca., on Mon. August 7, 2017. UCSF will be taking its resources and bringing it over to Dignity.

Shelby Decosta, senior vice president of UCSF Health, said Canopy’s model is distinct because, unlike Kaiser and Sutter, it is a network of independent providers.

As part of the agreement, UCSF doctors will work to bring some of the health system’s programs and practices — including robotic surgery, acute rehabilitation, vascular podiatry and cardiology — to Dignity hospitals.

Formerly called the Bay Area Accountable Care Network, Canopy Health was co-founded in 2015 by UCSF and John Muir Health, which operates hospitals in Contra Costa, Alameda and Solano counties.

The 16 hospitals that are now part of Canopy are: Alameda Hospital, Highland Hospital, John Muir Medical Centers in Concord and Walnut Creek, Marin General Hospital, San Leandro Hospital, San Ramon Regional Medical Center, Sequoia Hospital, Sonoma Valley Hospital, St. Francis Memorial Hospital, St. Mary’s Medical Center, UCSF Benioff Children’s Hospitals in San Francisco and Oakland, UCSF Medical Center at Mission Bay, UCSF Medical Center at Parnassus and Washington Hospital. The network also includes three medical groups: Meritage Medical Network, Hill Physicians and Muir Medical Group IPA.

Hospital Rankings by Specialty

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http://health.usnews.com/best-hospitals/rankings

Image result for hospital honor roll 2017-18

The top three hospitals in each of 16 specialties are listed below. For a list of the best hospitals overall, see the ones that made our 2017-18 Honor Roll.

 

2017-18 Best Hospitals Honor Roll and Overview

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http://health.usnews.com/health-care/best-hospitals/articles/best-hospitals-honor-roll-and-overview

Image result for hospital honor roll 2017-18

U.S. News ranks the top 20 hospitals in the nation, plus the best hospitals in each state and metro area.

Somewhere in America, at a pace of about once per second, a patient checks into a hospital. With more than 33 million hospitalizations a year and so many patients on whom to sharpen their skills, hospitals could be expected to meet the most demanding standards for quality and safety.

Yet too many hospitals fail even those whose medical needs are relatively straightforward – such as hip replacement, uncomplicated heart bypass surgery or removal of a cancerous section of colon. The hospital that makes treating patients like these its bread and butter is the very definition of a community hospital, and it should perform at a high standard.

Even fewer hospitals excel at caring for patients with especially challenging or complex diagnoses, for whom the stakes may be a matter of life or death. For those patients, venturing beyond a trusted community hospital to seek care at a truly exceptional medical center, even one farther from home, may be the wisest option.

To help readers narrow their search for hospitals that best match their needs, U.S. News ranks hospital performance in 16 areas of complex specialty care and also rates hospitals in nine bellwether procedures and conditions such as heart bypass, hip and knee replacement, heart failure and lung cancer surgery.

The Best Hospitals Honor Roll takes both the specialty rankings and the procedure and condition ratings into account. Hospitals received points if they were nationally ranked in one of the 16 specialties – the more specialties and the higher their rank, the more points they got – and also if they were rated “high performing”in the nine procedures and conditions. The top 20 point-getters made up the Honor Roll, which has a maximum total of 480 points.

 

Hiring an Interim CFO

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https://www.linkedin.com/pulse/hiring-interim-cfo-joe-zuyus?trk=mp-reader-card

Image result for interim leadership

Hospitals are seeing increasing amounts of management turnover, especially in the C-Suite. Skilled and experienced healthcare executives are in short supply mostly due to an industry-wide talent drain, lack of mentoring, and minimal succession planning.

Realistically, filling executive positions takes time, even with the assistance of search firms. Meanwhile, management voids can be damaging: communications suffer, initiatives lose pace, and disruptions occur. Even during a brief transition, some organizations cannot afford vacant leadership positions.

Is interim management a viable option to the risk of absent leaders? Is it better to hire quickly to avoid a vacant role? Many organizations consider interim management solutions as a transitional step to permanent replacement of vacant positions, often in conjunction with the use of a search firm. Others may see the talent and skills within and be able to move quickly. Still, others may hire hastily and lose valuable time in the long run to identify the best candidate.

What tact should your organization take when leadership vacancies occur?

ADVANTAGES OF INTERIM MANAGEMENT

When openings occur in the senior leadership structure, interim management offers advantages over traditional alternatives.

1. Prevents work overloads. Spreading assignments among others causes work overloads. Temporary assignments add extra responsibilities to an incumbent’s already “full plate,” which can lead to work overload and compromised performance. However, a capable interim executive can devote full time and attention to the responsibilities of the vacant management role. A temporary appointment is a welcomed contrast to assigning extra responsibilities to incumbents when a resignation occurs.

2. Adds objectivity. A new set of eyes is beneficial to organizations in transition. Interim leaders usually are less affected by the internal politics of an organization, especially those related to a promotion or a permanent placement into the vacant role. By removing the “vested interest” from the leadership paradigm, the interim executive holds a unique perspective often unavailable to others within the organization. Simply, the temporary status allows the interim position-holder to make decisions unencumbered by career-driven aspirations.

3. Enthusiasm generates optimism. Seasoned healthcare leaders enjoy serving as interim executives and they bring their gratification to the assignment. Their extensive experience and relevant knowledge enables the interim manager to serve as a short- or medium-term replacement for a vacant position as well as a valuable consultant. The organization benefits from the interim’s experience and ability to address the ongoing challenges. When a national search to fill the position is concurrent with an interim assignment, the interim leader and the search consultant can work together to identify a candidate with the right cultural fit. Nuances unique to the operation, culture, and strategic initiatives otherwise unnoted are minimized as the two executives work in tandem.

DISADVANTAGES OF INTERIM SOLUTIONS

An interim management solution may not be the best option for every organization or with every vacancy. Quickly hiring and filling the position may be more expedient, especially if an internal candidate with the necessary skill set and personal attributes to succeed is available. Interim solutions may convey misconceptions among the senior managers.

1. Delay may cause unrest. Concerns about a delay should not lead to rushing to a decision or hurriedly identifying an individual to fill the vacated position. Other leaders and managers throughout the healthcare organization may become disillusioned when a vacancy is filled hastily with an internal interim solution.

2. Management perceived as indecisive. By engaging in a temporary solution, senior management may be perceived as indecisive and willing to “float along” for a period while the entity secures the right person with particular skills.

GUIDELINES FOR INTERIM MANAGEMENT

If you decide to engage an interim executive, follow proven guidelines to achieve success and to provide your organization with a value-added service beyond supplying a temporary workforce.

1. Use a reputable and qualified placement firm. Engage a reputable executive search firm to identify and vet candidates before placement. Using qualified professionals to fill interim assignments allows you to off-load the time-consuming, and often expensive, recruitment and screening process. Some firms have both a capable short-term bench and the capacity to conduct the search for the permanent placement. As a subject matter expert, the interim executive can collaborate with the search professional to produce the desired results.

2. Inform candidates of expectations. The candidates should be aware of the expectations that both the hiring organization and the placement firm will have for them. The acting executive needs to understand that their primary focus and allegiance is to the assigned organization. He or she should consider the provisional assignment as a full-time role and not just act as a placeholder. This ownership of the job responsibilities at hand will be a critical success factor for the interim executive. The placement firm should provide oversight to ensure the interim executive approaches the work in this manner, focusing on results. Other leaders within the organization must not perceive the interim as temporary, rather a part of their team.

3. Engage a multi-service search firm. The organization may be well-served by using executive search companies that have the bench strength to fill both short-term and permanent vacancies, as well as the resources to evaluate and even train interim executives in the leadership skills necessary to their new roles. Executive coaching of this type can be especially valuable with physician executives who may lack the management training and experience to succeed in their new non-clinical areas of responsibility.

4. Focus on alignment and avoid conflicts of interest. The organization and the placement firm should be transparent and focused on alignment to assure that the interim executive succeeds. They should identify any potential conflicts of interest and make all efforts to resolve these without involving the interim executive. The executive should be able to commit his or her full loyalty and attention to the hiring organization. He or she should not be in a position of having to choose between fidelity to the interim employer or their direct employer, i.e., the placement firm.

5. Compensate fairly. Executive search firms that know the market rate for high-level managers in healthcare organizations are best suited to handle interim placements. An acting role may demand a premium payment for travel expenses, dislocation of the candidate from his or her family, relocation to a geographically isolated facility or overseas location, and placement into an often chaotic and dysfunctional environment. However, the fees for the interim manager should be valued fairly, not exceeding the boundaries of fair-market-value or commercial reasonableness. This test is especially important when hiring physician executives into these roles, as Stark and anti-kickback laws may apply, especially if the physician continues to practice clinically.

CASE STUDY

In 2014, a large multi-specialty healthcare system engaged Coker Group to assist with the interim management of their Chief Financial Officer position. The assignment also included conducting a national search for filling the position permanently. Coker vetted several candidates and then agreed to place into the role a full-time Coker employee with extensive experience as a CFO and CEO of several healthcare organizations.

The interim CFO assignment was filled within a week of the discussions. The acting executive immediately faced several issues: declining revenues in several important service lines, and languishing growth and business development initiatives in critical service areas (cardiac services and orthopedics).

Over the next four months, the interim CFO was able to advance many of the stalled initiatives. By performing successfully as CFO, he was asked to assume the role of interim CEO for the system’s flagship hospital, upon the resignation of its CEO. Now, with the CFO position vacant, Coker provided another experienced interim candidate as CFO, again within a week.

Utilizing the skill set from many previous CFO and CEO assignments, the interim candidates quickly aligned with other members of the health system’s senior management team. They expeditiously identified and prioritized opportunities to align costs, increase reimbursement, challenge charge master assumptions, and analyze service line margin contributions. This engagement provided an example of collaboration to the other C-Suite members, as previously they had not worked with their peers and subordinates, creating a silo mentality regarding routine tasks and operational responsibilities.

This case denotes how interim executives can enter into an organization and guide it successfully through uncertain times. It also demonstrates how the right interim leader can take ownership of an acting role and consider it his or her full-time position. The successful leader is versatile and can work at many positions, often assuming greater responsibilities. Ultimately, the CFO and CEO positions were filled permanently as a result of the executive search, and the organization lost no momentum during its conduct.

CONCLUSION

Immediate replacement versus interim management is a consideration for every board and executive team that must fill a vacancy in its executive positions, with advantages and disadvantages for both options. Each vacancy in healthcare leadership offers a unique challenge. Consider the options, reflect on the personalities of the existing executive management, the political climate of the organization, and the skills and expertise needed before making a decision.