Testing a new role for ambulance services


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On Thursday, the Center for Medicare & Medicaid Innovation (CMMI) announced the launch of a new payment pilot that would pay ambulance providers to deliver an expanded range of care services, and to transport patients to alternative care settings. Expected to launch next year, the Emergency Triage, Treat and Transport Model (ET3) is a five-year, voluntary payment model that would reimburse care such as onsite and telemedicine-enabled assessment, transport to an alternative care site, or treatment in place in response to a 911 call. The model will require ambulance providers and local governments responsible for 911 dispatch to cooperate on triage and care delivery and will provide funds to assist in integrating services. The agency also plans to invite state Medicaid programs and private insurers to collaborate in model adoption.
We’ve long been impressed by programs that use “community paramedics” to provide in-home assessment of homebound patients with complex care needs. As one participant told us, paramedics are ideally suited to assess a home situation; they have “seen everything” so nothing fazes them, and patients who frequently call 911 are comfortable with letting a paramedic in their home and are often willing to engage with them on broader care issues. Yet few of these programs have enjoyed sufficient funding to scale services. At first blush, the ET3 program could be one of the most innovative payment models CMMI has yet proposed, with the potential not only to eliminate thousands of unnecessary ED visits and provide more appropriate care in a lower-cost setting, but also to link at-risk patients with ongoing care management and social resources.



Sean Parker: Health care’s big breakthroughs aren’t going to come out of Google or Amazon


Sean Parker, the tech billionaire and cancer research philanthropist, may be a product of a Silicon Valley tech giant — but he’s skeptical about the impact those companies will have as they increasingly make a play in medicine.

“I just don’t think the innovations that are going to drive this revolution in health care and discovery are going to come out of Amazon or Google,” Parker said Tuesday at an event put on by the Washington Post. “Google has a big group that’s focused on this — they’re really smart, they’re not unsophisticated, they’re not naive — but I don’t think that’s where you’re going to see the big breakthroughs happening.”

Silicon Valley’s tech giants have invested significant resources in health care and science in recent years — and attracted big-name talent.

Amazon, along with JPMorgan and Berkshire Hathaway, has launched a new health care company aimed at developing solutions that could be implemented elsewhere in the U.S. health care system.

Alphabet, Google’s parent company, has been scooping up some of the biggest names in health care. Google just hired David Feinberg, the forward-thinking CEO of the Geisinger health system, the Pennsylvania health plan and hospital system confirmed last week. Dr. Toby Cosgrove, the longtime president and CEO of Cleveland Clinic, joined Google earlier this year. And Dr. Robert Califf, the former commissioner of the Food and Drug Administration, last year joined Verily, Alphabet’s unit working on solutions to disease.

While coders face their own formidable challenges, Parker said, “tech people coming from tech to biology so dramatically underestimate the complexity of the human body. It’s not designed by us. It doesn’t work in ways that make sense.”

Parker, the former president of Facebook, has since become a major funder of research into therapies that seek to fight cancer by harnessing the patient’s own immune system through his foundation Parker Institute for Cancer Immunotherapy, which he founded in 2016. It has funded prominent research scientists across the country, most notably James Allison, one of the recipients of this year’s Nobel Prize in medicine.



The Last Company You Would Expect Is Reinventing Health Benefits

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Frustrated with insurers, some large companies — including a certain cable behemoth — are shedding long-held practices and adopting a do-it-yourself approach.

It’s hard to think of a company that seems less likely to transform health care.

It isn’t headquartered in Silicon Valley, with all the venture-backed start-ups. It’s not among the corporate giants — Amazon, Berkshire Hathaway and JPMorgan Chase — that recently announced, with much fanfare, a plan to overhaul the medical-industrial complex for their employees.

And it is among the most hated companies in the United States, according to many surveys on customer satisfaction.

It’s Comcast. The nation’s largest cable company — the $169 billion Philadelphia-based behemoth that also controls Universal Parks & Resorts, “Sunday Night Football” and MSNBC — is among a handful of employers declaring progress in reaching a much-desired goal. In the last five years, the company says, its health care costs have stayed nearly flat. They are increasing by about 1 percent a year, well under the 3 percent average of other large employers and below general inflation.

“They’re the most interesting and creative employer when it comes to health care benefits,” said Dr. Bob Kocher, a partner at Venrock, a venture capital firm whose portfolio companies have done business with Comcast. (The cable company declined over several months to provide executives for an interview on this topic.)

Comcast, which spends roughly $1.3 billion a year on health care for its 225,000 employees and families, has steered away from some of the traditional methods other companies impose to contain medical expenses. It rejected the popular corporate tack of getting employees to shoulder more of the rising costs — high-deductible plans, a mechanism that is notorious for discouraging people from seeking medical help.

Most employers now require their workers to pay a deductible before their insurance kicks in, with individuals on the hook for $1,500, on average, in upfront payouts, according to the Kaiser Family Foundation. Instead, Comcast lowered its deductible to $250 for most of its workers.

“We believe that no one should be required to be an expert in health care,” Shawn Leavitt, the executive overseeing benefits at Comcast, said in a 2015 interview with a consultant. “Our model is based on providing employees support and assistance in making the right decisions for themselves and their families. Employees should not feel alone, confused and overwhelmed when it comes to understanding and selecting their benefits.”

Cable TV subscribers who have felt confused and overwhelmed when dealing with Comcast customer service may be surprised to learn how nimbly the company has upgraded services for its employees. While Comcast continues to work with insurers, it has largely shunned them as a source of innovation. Instead, it has assembled its own portfolio of companies that it contracts with, and invests in some of them through a venture capital arm, Comcast Ventures.

Turning to health start-ups for new benefits

One such company is Accolade, in which Comcast is an investor, and which provides independent guides called navigators to help employees use their health benefits. Another, called Grand Rounds, offers second opinions and help in finding a doctor. Comcast was also among the first major employers to offer workers access to a doctor via cellphone through Doctor on Demand, a telehealth company.

“We see the start-up community as where the real disruption is taking place,” said Brian Marcotte, the chief executive of the National Business Group on Health, which represents large employers. “We weren’t seeing enough innovation.” The group now vets some of these companies for employers, including Comcast.

Comcast “is the tip of the spear,” Mr. Marcotte said.

The corporation, of course, is controlling costs and offering these unusual benefits out of self-interest. And these services are sometimes handed out at the expense of improving wages. In a tight labor market, Comcast also needs to remain competitive for not only highly skilled employees, but also lower-wage workers whose direct contact with customers has generated so much dissatisfaction over the years. “We do these things because it’s great for business,” Mr. Leavitt said.

But much of what sets Comcast apart is its willingness to directly tackle its medical costs rather than relying on others — insurers, consultants or associations. It’s a luxury only the largest companies can afford, and roughly a fifth of big companies continue to see annual cost increases of more than 10 percent, according to Mercer, a benefits consultant.

While fate may play a role — a single expensive medical claim can drive up a company’s costs in any given year — employers, like Comcast, that use a variety of strategies tend to have the lowest annual increases. “You attack this thing from different angles,” said Beth Umland, Mercer’s director of research for health and benefits. “The intensity of effort pays off.”

Some companies are shaking up hospitals and doctors

Other employers are focusing more attention on unsatisfying hospitals and doctors. Walmart has been at the forefront of efforts to direct employees to specific providers to get medical care, even if it means paying their travel to places like the Mayo Clinic.

The retailer said it had found, for example, that employees were being told they needed back surgery even when they would not benefit from the procedure. “Walmart isn’t going to stand for this,” said Marcus Osborne, a benefits executive, at a health business conference. “We aren’t going to sit around to try to build another coalition or bureaucracy.”

The majority of working-age Americans — some 155 million — get their health insurance through an employer, and most companies cover their own medical costs. The companies rely on insurers to handle the paperwork and to contract with hospitals and doctors. Insurers may also suggest programs like disease management or wellness to help companies control costs.

But employers, including that Amazon-Berkshire-JPMorgan alliance, are increasingly unhappy with the nation’s health care systems. Companies are paying more than they ever have. And their employees, saddled with escalating out-of-pocket costs and a confusing maze, aren’t well served, either. “The results haven’t been there,” said Jim Winkler, a senior executive at Aon, a benefits consultant. “There’s frustration.”

At Comcast, some workers probably miss out on the new ventures altogether and others don’t have much choice but to go along. The company’s relationship with labor is often strained, and it has largely managed to fend off efforts by groups like the Communications Workers of America to organize its employees. Robert Speer, an official with a local of the International Brotherhood of Electrical Workers in New Jersey that represents about 180 workers, noted the company’s use of independent contractors to do much of its work, none of whom are eligible for benefits and can be paid by the job rather than hourly. “You are making no money,” he said.

And, like many other workers, many employees are being pinched by the rising cost of premiums, Mr. Speer said.

Comcast workers with company coverage are told to go to Accolade first. Its phone number appears on the back of their insurance cards and on the benefits website. “The key to Accolade’s success is being the one place to go,” said Tom Spann, a co-founder of the company.

Geoff Girardin, 27, used Accolade when he worked at Comcast a few years ago and he and his wife were expecting. “Our introduction to Accolade was our introduction to our first kid,” Mr. Girardin said. He credits Accolade for telling him his wife was eligible for a free breast pump and helping find a pediatrician when the family moved. “It was a huge, huge help to have somebody who knew the ins and outs” of the system, he said.

For employees like Jerry Kosturko, 63, who survived colon cancer, Accolade was helpful in steering him through complicated medical decisions. When he needed an M.R.I., his navigator recommended a free-standing imaging center to save money. “They will tell me what things will cost ahead of time,” Mr. Kosturko said.

A nurse at Accolade helped him manage symptoms after he had surgery for bladder cancer in 2014. He developed terrible spasms because, he said, he wasn’t warned to avoid caffeine. The Accolade nurse thought to ask him and quickly urged him to call his doctor for medicine to ease his symptoms.

Mr. Kosturko also turned to Grand Rounds when his doctor thought he might need to stay overnight in the hospital to be tested for sleep apnea. The second opinion convinced him he did not.

In complicated cases, Grand Rounds can serve as a check on the network assembled by the insurer. It pointed to the case of Ana Reyes, 39, who does not work for Comcast and had contacted Grand Rounds after treatment for cervical cancer. When she continued to have symptoms, she says, she was told to wait to see if they persisted.

“This is my life at stake,” she recalled in an interview. “I need to know what I’m doing is the best plan.” Grand Rounds asked a specialist at Duke University School of Medicine, Dr. Andrew Berchuck, to review her case.

“Grand Rounds was able to get all my medical records, which is over 1,000 pages,” Ms. Reyes said. Dr. Berchuck reviewed and wrote his opinion in one week, recommending a hysterectomy because she was likely to have some residual cancer. “The same day, my treating physician, she called me to schedule a hysterectomy,” Ms. Reyes said.

Insurers are usually none too pleased with the employers’ use of alternatives: They’re reluctant to share information with an outside company and poised to undercut a potential competitor by offering a cheaper price. They may even refuse to work with some of the companies.

The largest employers push back. Fidelity Investments insists on cooperation between insurers and outsiders, said Jennifer Hanson, an executive at Fidelity Investments. “Those who don’t will be fired,” she said at a health business conference.

For Comcast, the next frontier is the financial well-being of its employees, many of whom live paycheck to paycheck and may not be able to afford even a small co-payment toward a doctor’s visit. Employees who run into financial trouble have no independent source of information, Mr. Spann said.

After talking to hundreds of companies, Comcast Ventures could not find a financial services start-up that would help employees without trying to sell them a product or earning their money on commissions. So Comcast recruited Mr. Spann to serve as chief executive of a new company, Brightside, that it created and invested in.

Employees who are less worried about their finances may be less likely to miss work or suffer from health problems, Mr. Leavitt said. Ultimately, he said, “there is a productivity play for Comcast.”



Medicare Advantage Plans Cleared To Go Beyond Medical Coverage — Even Groceries

Medicare Advantage Plans Cleared To Go Beyond Medical Coverage — Even Groceries

Air conditioners for people with asthma, healthy groceriesrides to medical appointments and home-delivered meals may be among the new benefits offered to Medicare beneficiaries who choose private sector health plans, when new federal rules take effect next year.

On Monday, the Centers for Medicare & Medicaid Services (CMS) expanded how it defines the “primarily health-related” benefits that private insurers are allowed to include in their Medicare Advantage policies. And insurers would include these extras on top of providing the benefits traditional Medicare provides.

“Medicare Advantage beneficiaries will have more supplemental benefits, making it easier for them to lead healthier, more independent lives,” said CMS Administrator Seema Verma.

Of the 61 million people enrolled in Medicare last year, 20 million opted for Medicare Advantage, the privately run alternative to the traditional government program. Advantage plans limit members to a network of providers, and similar restrictions may apply to the new benefits. In California, 40 percent of Medicare beneficiaries have joined Medicare Advantage.

Many Medicare Advantage plans already offer some health benefits not covered by traditional Medicare, such as eyeglasses, hearing aids, dental care and gym memberships. However, the new rules, which the industry sought, will expand that list significantly, adding more items and services that are not directly medical.

CMS said the insurers will be permitted to provide care and devices that prevent or treat illness or injuries, compensate for physical impairments, address the psychological effects of illness and injuries, or reduce the need for emergency medical care.

Addressing a patient’s health and social needs outside the doctor’s office isn’t a new concept. In California, for example, the Institute on Aging, a nonprofit, offers social, psychological and health-related services for seniors and adults with disabilities. It has helped people in San Francisco and Southern California move from nursing homes back to their own homes, and it provides a variety of services and goods — from kitchen supplies to wheelchair ramps — that help improve their quality of life.

“By taking a more integrated approach to address people’s social and health needs, we have seen up to a 30 percent savings in health care costs compared to the costs of the same individuals before they joined our program,” said Dustin Harper, the institute’s vice president for strategic partnerships. The agency serves 20,000 Californians a year, including former nursing home residents who qualify for Medicare, the federally funded health insurance program for seniors, or Medicaid, the federal-state program for low-income people — or both.

The institute also provides a number of other innovative services. Volunteers and staff members answer calls to its toll-free, ’round-the-clock Friendship Line (800-971-0016), which is intended to combat social isolation and loneliness. In partnership with the city and county of San Francisco, the institute also offers subsidized home care for a small group of low- and middle-income people who don’t qualify for other assistance and could not otherwise afford it.

The organization also runs one of California’s 38 Multipurpose Senior Service Program sites, providing Medicaid-funded, home-based care. Some 33 social service organizations are MSSP providers, including the Partners in Care Foundation in Los Angeles, which operates four sites. About 2 million older adults and people with disabilities rely on Medicaid for home-based services to live at home for as long as possible.

Although Medicare Advantage insurers are still in the early stages of designing their 2019 policies, some companies have ideas about what they might include. In addition to transportation to doctors’ offices or better food options, some health insurance experts said additional benefits could include simple modifications inside beneficiaries’ homes, such as installing grab bars in the bathroom, or aides to help with daily activities, including dressing, eating and other personal care needs.

“This will allow us to build off the existing benefits that we already have in place that are focused more on prevention of avoidable injuries or exacerbation of existing health conditions,” said Alicia Kelley, director of Medicare sales for Capital District Physicians’ Health Plan, a nonprofit serving 43,000 members in 24 upstate New York counties.

Although a physician’s order or prescription is not necessary, the new benefits must be “medically appropriate” and recommended by a licensed health care provider, according to the new rules.

Many beneficiaries have been attracted to Medicare Advantage because of its extra benefits and the limit on out-of-pocket expenses. However, CMS also cautioned that new supplemental benefits should not be items provided as an inducement to enroll.

The new rules “set the stage to continue to innovate and provide choice,” said Cathryn Donaldson, of America’s Health Insurance Plans, a trade group.

“CMS is catching up with the rest of the world in terms of its understanding of how we keep people healthy and well and living longer and independently, and those are all positive steps,” said Ceci Connolly, chief executive officer of the Alliance of Community Health Plans, which represents nonprofit health insurance plans. Some offer non-emergency medical transportation, low-cost hearing aids, a mobile dental clinic and a “grocery on wheels,” to make shopping more convenient, she said.

UnitedHealthcare, the largest health insurer in the U.S., also welcomes the opportunity to expand benefits, said Matt Burns, a company spokesman. “Medicare benefits should not be one-size-fits-all, and continued rate stability and greater benefit design flexibility enable health plans to provide a more personalized health care experience,” he said.

This is one of several vans that provides door-to-door service for seniors and adults with disabilities going to medical appointments and programs at the Institute on Aging in San Francisco.

But patient advocates including David Lipschutz. senior policy attorney at the Center for Medicare Advocacy, are concerned about those who may be left behind. “It’s great for the people in Medicare Advantage plans, but what about the majority of the people who are in traditional Medicare?” he asked. “As we tip the scales more in favor of Medicare Advantage, it’s to the detriment of people in traditional Medicare.”

The details of the 2019 Medicare Advantage benefit packages must first be approved by CMS and will be released in the fall, when the annual open enrollment begins. It’s very likely that all new benefits will not be available to all beneficiaries since there is “tremendous variation across the country” in what plans offer, said Gretchen Jacobson, associate director of the Kaiser Family Foundation’s Program on Medicare Policy. (Kaiser Health News, which produces California Healthline, is an editorially independent program of the foundation.)

In addition to next year’s changes in supplemental benefits, CMS also noted that a new federal law allows Medicare Advantage plans to offer benefits that are not primarily health-related for Medicare Advantage members with chronic illnesses. The law and the agency’s changes are complementary, CMS officials said. They promised additional guidance in the coming months to help plans differentiate between the two.


We Won’t Get Value-Based Health Care Until We Agree on What “Value” Means



Some health care leaders view with trepidation the new, disruptive health care alliance formed by Amazon, Berkshire Hathaway, and JPMorgan Chase. But I’m excited because disruption is all about delivering a new level of value for consumers. If this trio can disrupt the United States’ health care system into consistently delivering high-value care, we will all owe them our gratitude.

First, their leaders — Jeff Bezos of Amazon, Warren Buffett of Berkshire Hathaway, and Jamie Dimon of JPMorgan Chase — must think deeply about what “value” actually means for the companies and individuals they will serve and for the people and organizations they will engage to deliver care.

Then they need to consider how they will bridge the divergent interpretations of value. It turns out one reason there’s been such little progress in creating a value-based system is that the stakeholders in the U.S. health care system — patients, providers, hospitals, insurers, employee benefit providers, and policy makers — have no common definition of value and don’t agree on the mix of elements composing it (quality? service? cost? outcomes? access?).

That’s the big takeaway of University of Utah Health’s The State of Value in U.S. Health Care survey. We asked more than 5,000 patients, more than 600 physicians, and more than 500 employers who provide medical benefits across the nation how they think about the quality, service, and cost of health care. We focused on these groups because we feel their voices have not been heard clearly enough in the value discussion. What we discovered is that there are fundamental differences in how they define value in health care and to whom they assign responsibility for achieving it. Value, it seems, has become a buzzword; its meaning is often unclear and shifting, depending on who’s setting the agenda. As a result, health care stakeholders, who for years thought they were driving toward a shared destination, have actually been part of a fragmented rush toward different points of the compass.

But the Utah survey’s findings also suggest a straightforward (though not simple) way to overcome this confusion: stop, listen, and learn. The most effective thing that stakeholders can do to create a high-value health care system is to pause in their independent pursuits of value to describe to each other exactly what it is they seek. Jumpstarting this stakeholder dialogue will require real leadership from executives in business, health care delivery, academic medicine, and patient advocacy groups. They’ll have to muster the courage to say to their constituencies, “The path toward value that we charted may not have been the right one.”

Those dialogues should happen at three levels: nationally, among representatives of stakeholder groups; institutionally, among partners in the care delivery process; and individually — for example, between patients and their physicians, and between employer sponsors of health plans and their employee beneficiaries.

There are several examples of the fundamental value misalignments that could be starting points for these discussions. The first concerns the relative importance of health outcomes. For physicians like me, clinical outcomes are paramount; health improvement and high-quality care are essential components of health care value. And we assume that patients share that perspective. But, it seems, they don’t. When the Utah survey asked patients to identify key characteristics of high-value health care, a plurality (45%) chose “My Out-of-Pocket Costs Are Affordable,” and only 32% chose “My Health Improves.” (In fact, on patients’ list of key value characteristics, “My Health Improves” was slightly below “Staff Are Friendly and Helpful.”) Given the chance to select the five most important value characteristics, 90% of patients chose combinations different from any combination chosen by physicians. In general, cost and service were far more important in determining value for patients than for physicians.

Frankly, I was stunned by the degree of this misalignment between patients and physicians (and, by extension, the care delivery organizations the doctors work for). This disconnect alone could account for a substantial portion of the Sisyphean lack of progress we’ve seen. But there are plenty of others. Notably, the Value survey found a striking lack of consensus on who had responsibility for ensuring that health care embodies the desired high-value characteristics. Moreover, the survey’s respondents generally displayed limited understanding of how the health care system works more than a step or two beyond their direct experience. This led to responses at odds with reality — for example, only 4% of patients and physicians recognize that an employer’s choice of health plan affects out-of-pocket costs.

Both of these kinds of misalignment — regarding the relative importance of outcome, cost, service, and quality, and who is responsible for achieving specific value characteristics — demonstrate the core problem: Stakeholders have not communicated with each other effectively, at the macro and micro levels, on what value means to them. I have two thoughts on how to start the process of getting communications and information flowing.

At the micro level, we should leverage the growing power of physician- and hospital-review systems to gather more (and more-sophisticated) information on what is most valued by individual health care consumers. Our system alone collects more than 3,500 patient comments a week. Now we need to apply our growing computational capacities to deeply mine that data both within and among systems to create an enhanced patient experience that is informed by how they define value. And business leaders should expand their companies’ efforts to track and analyze — and educate their employees about — the multiple dimensions of value in the health benefit plans they offer.

At the macro level — national, regional, and inter-institutional — major organizations should step up to convene initial rounds of stakeholder dialogues. Academic medical centers (AMCs) such as University of Utah Health are well positioned to be conveners. (The Utah Value Forum this month brought together regional stakeholders to address the challenges we all face.) AMCs are also uniquely qualified to undertake rigorous research to better understand the misalignments and misunderstandings found in studies like the Value survey. In fact, more than simply being capable, I think the public service missions of AMCs virtually obligate them to be leaders in this essential effort.

But they are not obligated to lead alone, nor would their solo leadership be compelling enough to bring all stakeholders to the table. We need corporate health benefit plans, for-profit health systems, and insurers — at a minimum — to help lead this effort.

If Messrs. Bezos, Buffett, and Dimon really want to drive major change in the U.S. health care delivery system, they should help convene value-focused dialogues, providing the kind of political and economic cover necessary to bring stakeholder groups into these conversations. And they shouldn’t stop there: They’ll have to remind everyone that these conversations aren’t only about cost containment — that “value” means more than just what we pay. (Or, as Buffett put it in one of his famous chairman’s letters, “Price is what you pay; value is what you get.”)

They should partner with providers, hospitals, and health systems to develop more-effective provider/hospital review systems and other methods of enhancing communication among parties in the care delivery process. They should seed pilot projects aimed at bridging the gaps in patients’, physicians’, and employers’ definitions of value. And being the smart, creative, bold people they are, they should help guide all stakeholders through the difficult compromises necessary to create a collective vision of a high-quality, patient-focused, cost-effective health care system.

That would truly be disruptive.



Top seven healthcare leadership problems




USA Today editorial board: Amazon, Berkshire Hathaway, JPMorgan can’t ‘fix our nonsensical health care system’


Monopoly Medicine - How Big Pharma Stops Competitors Monopolizes Health Industry 1

While health insurers and benefit managers saw stocks tumble on news Amazon, Berkshire Hathaway and JPMorgan Chase & Co. will enter the healthcare arena, the editorial board at USA Today isn’t convinced the move will be as disruptive as some think.

In an opinion piece published Feb. 20, USA Today editors wrote, “To BBD [Jeff Bezos, Warren Buffett and Jamie Dimon] we say: Go for it. If you can come up with ways to provide your employees with better health care for less money, more power to you. To the rest of the country we would say this: Don’t get too excited. Not even a company as crafty as Amazon, or a bot as all-knowing as Alexa, can fix our nonsensical health care system.”

USA Today said the reason an Amazon-Berkshire-JPMorgan company won’t create overarching change is because U.S. healthcare is built upon an “upside-down” architecture. They wrote providers and drug companies “have monopoly or near-monopoly powers” to set prices, while employers and payers are much more fragmented.

“The three companies — particularly Amazon — are known for their ability to disrupt industries. But in health care, they aren’t up against an old-school industry fallen behind the times; they’re facing powerful monopolies or near-monopolies brimming with technology of their own,” according to the report.

To view the full opinion piece, click here.






PwC Strategy: 12 plays for disruptors in healthcare


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We see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement).

In early February, Amazon, JPMorgan Chase, and Berkshire Hathaway announced a partnership to tackle rising healthcare costs for their U.S. employees.

The announcement, which didn’t do much beyond outlining the formation of the partnership, is a sign of the times. The details of the Amazon–JPMorgan Chase–Berkshire Hathaway plan, which, notably, does not involve a health industry incumbent, have yet to be fully revealed. Although the three companies have a substantial number of U.S. employees — 1.1 million between them — they are not aiming to produce value via scale. The consortium’s stated goal is to help improve health costs via technology, and to create value by providing greater transparency and competition, reallocating risk, and eliminating waste and intermediaries.

But the announcement is interesting for a few reasons. Even though it is directed at the companies’ own employees, it highlights the types of capabilities and platforms that may be needed to win in the future health marketplace. It points to the potential for new entrants to disrupt incumbents in insurance and care delivery. And it throws into relief the kinds of bold moves that resilient players can afford to make.

The Plays

A consortium between companies with complementary capabilities and scale has the potential to optimize the matching of supply and demand within healthcare via new mechanisms (i.e., exchanges), the facilitation of easier transactions (including faster, multichannel delivery), and new products (such as wellness and healthcare bundles). And as a consortium begins to target health spending successfully, it could move from lower to higher clinical complexity and from local to national marketplaces.

Accordingly, we see three classes of potential plays for a consortium of companies that band together, ranging from the least disruptive (and quickest to implement) to the most disruptive (with the longest time to implement). They are incremental innovation (testing the waters with gradual and piecemeal innovation); technology and analytics (enabling the improvement and redesign of the existing system); and radical disruption (creating new platforms, marketplaces, and ecosystems).

Incremental Innovation Plays

  1. Buy/partner with a third-party administrator. Use the buying power provided by the companies’ large number of members to buy or partner with a third-party administrator, thus removing the need for payors. The service could then be extended to other employers.
  2. Offer near-site clinics. Leverage the combined physical footprint of the consortium members to invest in up-front care that would in turn reduce downstream hospital costs. This would include partnering with facilities/care delivery providers and recruiting general practitioners to offer on- or near-site primary care clinics.
  3. Enable direct-to-provider contracting. Segment the employee base into groups — e.g., chronic conditions, healthy, risky — and directly contract with providers to manage those populations.
  4. Enter pharmaceutical/durable medical equipment (DME) distribution and manufacturing. Ship drugs in one convenient monthly package directly from manufacturers, use cloud computing to create a more efficient pharma supply chain. A consortium could potentially expand into the manufacturing of biosimilars and generics drugs.

Technology and Analytics Plays

  1. Offer virtual services. Build or host a network of virtual care services such as telehealth and second opinions, and eventually evolve to operate a “virtual hospital” in which specialists supervise medical care from a distance.
  2. Offer a customized consumer (member/employer) portal. Leverage data and analytics capabilities to personalize consumer engagement and experience, provide targeted concierge services, and integrate health and productivity incentives.
  3. Offer data-driven insights. Use data collection, tracking, and management to automate discovery, fuel AI-enabled decision making, and offer insights to stakeholders on, for example, the relative effectiveness of wellness programs.
  4. Offer services for providers/employers. Leverage data, technology, and analytics capabilities to relieve the administrative and regulatory burden for providers and employers.

Radical Disruption

  1. Develop a B2B and B2C clinical capacity exchange/marketplace. Much as Airbnb does with rooms and OpenTable does with restaurant tables, enable care-delivery providers to monetize current and excess capacity and let consumers identify, compare (on price, quality, and availability), and book needed clinical capacity at the required time and for the needed procedure.
  2. Develop a direct-to-employer (D2E) reverse auction platform. Similar to a private exchange, the D2E platform would let employers segment their employee base by micro geographic and risk segments, aggregate similar risk pools across employers, and enable payors or health plans to offer customized plan options for consumers. Shortening the distribution chain and bundling healthcare products and services would make healthcare more shoppable.
  3. Roll out an encounter-based, claimless model. Partner with large care-delivery organizations that cover the full continuum of care and are in risk-sharing/capitated arrangements to create an encounter-based, claimless network. For certain populations or certain types of care, patients would have unlimited access to physicians without having to file claims.
  4. Develop next-generation healthcare connectivity platform. Create a consumer-centric, plug-and-play connectivity platform, aimed at improving the overall health, wealth, and productivity of individuals. Much in the same way that a financial portal accommodates a range of products and services, this platform would allow payors, providers, consumers, and external partners to coordinate whole health and wellness products and services. Imagine logging onto an Amazon-like portal, filling out a risk assessment, receiving advice, interacting with nurses, and having Alexa act as a concierge to set up appointments, order pharmaceuticals, and provide behavioral nudges.

The Responses

Regardless of the plays they pursue, consortia will force incumbent stakeholders to create a more competitive market and more clearly define their value. As such, they will only add to the pressure being placed on the industry by disruptive and aggressive mergers, such as the one between CVS and Aetna.

The fact that a new group of entrants, blessed with deep pockets and strong capabilities, is potentially entering the market only heightens the urgency for the industry to focus on its strategy. Companies that react with one-off moves to respond to these announcements, or that stand still, are going to get disrupted. At the same time, in this evolving landscape, resilient first movers and fast followers will have the opportunity to gain a sustainable advantage. As we’ve noted, there are a series of no regretsoffensive, and option value moves that can increase all stakeholders’ ability to remain resilient and win in such a turbulent landscape.

No regrets moves, which make sense regardless of how the future develops, would include payors developing more effective technology and analytics, providers creating more holistic care protocols, and pharmaceutical companies teaming up with employers to manage costs more effectively. All players would benefit from the ability to explain and justify their prices and link them clearly to value.

Offensive moves, aimed at enabling the organization to get to a strategic destination first or faster, include providers partnering with new employer consortia to streamline the drug supply chain, pharmacy benefit managers (PBMs) expanding their business model to include broader medical benefits, and employers creating their own health consortia.

Option value moves offer a more nuanced way for companies to approach the future. These are low-risk, low-regret initiatives that preserve or afford the opportunity to participate in new markets and develop new products. They could include PBMs providing value-added services, such as tying reimbursements to the performance of high-cost specialty drugs, or retail pharmacies working with large employers to create near-site clinics, or employers considering forming their own consortia.

As we noted at the outset, a great deal is still unknown about the intent and potential of the Amazon, JPMorgan Chase, and Berkshire Hathaway health consortium effort. But one thing is clear: All stakeholders in the healthcare ecosystem need to ensure that their business models are resilient and allow for timely responses and the flexibility to evolve.


Prime for Disruption


A line graph titled "Cumulative Growth Compared to Inflation."


Earlier this week, Amazon.com Inc., JPMorgan Chase & Co., and Berkshire Hathaway Inc. jolted Wall Street with their announcement of a joint venture designed to reduce health care costs for their combined one million US employees. It is exciting to see innovative private sector companies lend their intellectual and financial capital to a seemingly intractable issue that has plagued the American economy for decades. About 18 percent of our nation’s financial output is now devoted to health care. For decades, health care costs have outpaced overall economic growth, and the gap is projected to remain to remain at three percentage points a year.

How the High Cost of Care Affects Employers – and Everyone Else

Employees directly and indirectly shoulder these costs. The average premium that employers and their workers pay for a family plan in California now exceeds $1,600 a month. Employer-based family health insurance premiums in the state have increased by 234% over the last 15 years, nearly six times the increase in the state’s overall inflation rate. Every dollar spent on health care is a dollar unavailable for something else, such as education, affordable housing, and environmental protection.

Sixty-six percent of working California families face a deductible of $2,000 or more for their employer-based coverage, including many without high-deductible health plans linked to tax-advantaged health savings accounts.

Increasingly, health care is unaffordable for all of us—not just businesses like Amazon and its workers, but for retirees, the self-employed, people seeking employment, and low-income Californians who aren’t eligible for public coverage. The Affordable Care Act (ACA) attempted to address the cost burden for those with employer coverage by creating disincentives for employers to simply pass on unaffordable premiums, and by capping the share of premiums health plans spent on overhead and profit. For people who shop for insurance coverage on the individual market, the ACA provided federal tax credits to offset premium and cost sharing.

While these and other efforts have helped, more work is needed. Too many families still struggle to afford health care. In 2017, 37% of Americans with health insurance found it difficult to afford premiums each month. Forty-three percent said it was hard to meet their deductibles before coverage kicked in. Among California workers with an aggregate family deductible, 66% faced a deductible of $2,000 or more in 2016.

At least 40% of adults say they worry about being able to afford health care services, losing their insurance, or being able to afford prescription drugs.

What We Already Know About Reducing Health Care Costs

Addressing the affordability of care in California and throughout the country requires lowering the underlying cost of care across market segments. Many efforts are already underway. Health insurance companies, large self-funded employers, and public purchasers of care often deploy management strategies to reduce the use of expensive tests, high-cost prescription drugs, and duplicative services. The most common strategies include prior authorization, patient education for better clinical decisionmaking, chronic disease initiatives, and pushing the cost to employees through deductibles and other cost-sharing tools.

To date, the results of these initiatives have been mixed. The findings are consistent with a growing body of academic research that suggests the real driver of health care costs is price, not increased demand. If that is the case, the solution might be to create a market that rewards high-value providers and cost-effective drugs. This type of strategy would rely on tools like reference pricing (individual drugs are grouped by therapeutic class and payment is limited to the price of the cheapest drugs in each class), value-based insurance design (copayments are reduced or eliminated for the most efficient, effective services), or high-deductible health plans.

Unfortunately, consumer-driven approaches have also had limited impact. While companies like Amazon might develop new technologies to enable patients to easily compare, shop for, and purchase health care services in a competitive marketplace, to date these types of tools have not succeeded in reducing costs or changing provider behavior in California. More to the point, introducing blunt consumer-facing financial incentives may run counter to the overall goal of affordability. Everyone should have access to the care they need at a price they can afford and not face care that is rationed by their ability to pay for it.

The Promise of Scale

Perhaps the biggest advantage of the new joint venture is its size and reach. The most promising solutions today are found in large, integrated delivery systems. They have consistently shown that the best approach is to give providers simple, strong financial incentives to make care more efficient and effective. Because this type of model works best on a large scale, the ideal approach is for multiple public and private purchasers of care to come together to align quality reporting requirements, reward value, and support investments in improving health outcomes across entire groups of people. We are already seeing this happen in California and other states.

No one group or slice of the private health care market has the power to really drive down health care costs for everyone. It will take many, many players in the private and public sectors working together to align their efforts. The foundation of payment and delivery reform laid by the Affordable Care Act is a good place to start. Technology is critical and necessary – but it is not by itself sufficient. Leaders also need to pull policy levers, fix payment systems, and spark collaboration between purchasers. Innovators like Amazon, JPMorgan Chase, and Berkshire Hathaway will no doubt make material contributions. Their leadership, in tandem with that of other large purchasers, offers a prime opportunity to make care more affordable for everyone.