Today’s Medicare Advantage plans are flourishing and the Silver Tsunami is among the reasons.
“Over the last four years, Medicare Advantage enrollment increased by more than 30 percent, while the number of people eligible for Medicare grew by about 18 percent,” said Steve Warner, vice president of Medicare Advantage Product for UnitedHealthcare Medicare and Retirement.
Other reasons for the growth: Innovative models from big insurers and upstarts alike that improve care for health plan members and drive revenue for payers as they look beyond fee-for-service.
IT STARTS WITH THE CONSUMER
Consumers are finding unique value in MA, both in terms of the quality of care and in the financial value.
Medicare Advantage, in fact, makes it easier for consumers to navigate the healthcare system and choose providers, in a way that traditional Medicare does not, said those interviewed.
“Actually it’s pretty hard to navigate the healthcare system on your own,” said Tip Kim, chief market development officer at Stanford Health Care. “Most Medicare Advantage plans have some sort of care navigation.”
Warner of UnitedHealth’s Warner added that Medicare Advantage also offers value and simplicity.
“It provides the convenience of combining all your coverage into one plan so you have just one card to carry in your wallet and one company to work with,” Warner said. “Most plans also offer prescription drug coverage and additional benefits and services not available through original Medicare, including dental, vision and fitness.”
REBRANDING FOR THE NEW ERA
MA plans did not emerge out of thin air. By another name, Medicare Advantage is managed care, a term that was the bane of healthcare during the height of HMOs in the 1980s.
“Medicare Advantage has rebranded ‘managed care’ to ‘care coordination,'” said consultant Paul Keckley of The Keckley Report. “Humana and a lot of these folks have done a pretty good job. Coordinating care is a core competence. Managed care seems to be working in this population.”
MA came along at the right time for CMS’s push to value-based care.
“I would suggest on the providers’ side, embracing Medicare Advantage is an opportunity to get off the fee-for-service mill,” said Jeff Carroll, senior vice president of Health Plans for Lumeris, which recently paired with Stanford Health Care on the Medicare Advantage plan, Stanford Health Care Advantage.
“Provider-sponsored Medicare Advantage plans are a way to put teeth into an accountable care organization,” Keckley added. “Medicare Advantage success is a silver tsunami among major tsunamis. Obviously it’s a profitable plan for seniors and profitable for underwriters. The winners in the process will get this to scale.”
MA is an innovative model that is not a government-run system, but a privately-run system essentially funded by the government.
PAYERS IN THE MA GAME
UnitedHealthcare has the largest MA market share of any one insurer. Twenty-five percent of Medicare Advantage enrollees are in a UnitedHealthcare MA plan, followed by 17 percent in Humana, 13 percent in a Blue Cross Blue Shield and 8 percent in Aetna, according to the Kaiser Family Foundation.
Numerous insurers, in fact, have gotten into the MA market, including Clover Health in San Francisco, a five-year-old startup which has Medicare Advantage as its only business.
Clover is a tech-oriented company that boasts machine learning models that can accurately predict and identify members at risk of hospitalization.
Because Clover focuses only on MA, it can do a better job at problem solving the needs of an older population, said Andrew Toy, president and CTO of Clover Health.
“The problems we face in Medicare Advantage are very different from a younger generation,” Toy said.
Forty percent of the older population is diabetic. Most seniors will be dealing with a chronic disease as they get older.
In other insurance, whether its individual or commercial, the lower cost of the healthier population offsets the cost of the sicker population. MA has no way to offset these costs. Plans can’t cherry-pick consumers or raise premiums for a percentage of the population.
What MA plans can do is design plans that fit the varying needs of the population. A plan can be designed for diabetics. For younger seniors or those not dealing with a chronic disease, a plan can be designed that includes a gym membership.
“All these plans are regulated,” Toy said. “We have the flexibility to move dollars around. We can offer a higher deductible plan, or a nutrition plan. The incentives for us in Medicare Advantage are different than the incentives in Medicare. CMS has explored giving us more leeway for benefits. Consumers have a choice while still having the guarantees of Medicare.”
Toy believes regular Medicare is more expensive because MA offers a more affordable plan based on what an individual needs.
“When you need it, we get more involved in that care,” Toy said, such as “weight control issues for diabetics.”
The drawbacks are narrower networks, though Toy said Clover offers an out-of-network cost sharing that is pretty much in line with being in-network.
UnitedHealthcare’s Medicare Advantage LPPO plans offer out-of-network access to any provider who accepts Medicare, Warner said.
UnitedHealthcare also offers a wide variety of low and even zero-dollar premium Medicare Advantage plans and annual out-of-pocket maximums, Warner said. By contrast, original Medicare generally covers about 80 percent of beneficiaries’ healthcare costs, leaving them to cover the remaining 20 percent out-of-pocket with no annual limit.
“From a consumer value proposition, it makes Medicare Advantage a better deal,” Kim said. “One is Part B, 20 percent of an unknown number. Knowing what the cost will be in a predictable manner is a preferable manner.”
Stanford Health Care launched a Medicare Advantage plan in 2013. Lumeris owned and operated its own plan, Essence Healthcare, for more than eight years. Stanford and Lumeris partnered on Stanford Health Care Advantage in northern California, using Lumeris technology to help manage value-based reimbursementand new approaches to care delivery through artificial intelligence-enabled diagnostic tools and other methods.
“We are not a traditional insurance company,” Kim said. “We’re thinking about benefits from a provider perspective. It’s a different outlook than an insurance company. By definition we’re local.”
MA MARKET STILL HAS ROOM TO GROW
While the Medicare Advantage market is competitive, it is also under-penetrated, Brian Thompson, CEO for UnitedHealthcare Medicare & Retirement, said during a 2018 earnings report.
Currently, about 33 percent of all Medicare beneficiaries are in an MA plan, he added, but UnitedHealth sees a path to over 50 percent market concentration in the next 5-10 years.
It’s a path not so subtly promoted by the Centers for Medicare and Medicaid Services.
As a way to encourage insurers to take risk and get in the market, around 2009, CMS gave MA insurers 114 percent of what it paid for fee-for-service Medicare. The agency began decreasing those payments so that by 2017, traditional Medicare and MA became about even.
MA insurers instead thrive on their ability to tailor benefits toward wellness, coordinate care and contain costs within the confines of capitated payments, the essence of value-based care.
They have received CMS support in recent rate notices that gives them the ability to offer supplemental benefits, such as being able to target care that addresses the social determinants of health. Starting in 2020, telehealth is being added to new flexibility for these plans.
WHAT THE FUTURE MAY HOLD FOR MA
Medicare Advantage plans have expanded and, in so doing, opened innovative new options for plans and their customers alike at the same time that the ranks of people eligible for Medicare continues to swell.
So where is it all going?
Medicare Advantage is changing the way healthcare is paid and delivered to the point that Keckley and Toy agreed the future may not lie in Medicare for All, but in Medicare Advantage for all.
“I think a reasonable place to end, is in some combination where the government is involved in price control, combined with the flexibility of Medicare Advantage,” Toy said. “That’s really powerful.”
Former Aetna CEO Mark Bertolini spent 8 years as company head until 2018 when the insurance giant was sold to CVS. He joins Yahoo Finance’s Adam Shapiro, Julie Hyman, and Julia La Roche to discuss his new memoir “Mission-Driving Leadership: My Journey As A Radical Capitalist.”
Healthcare growth opportunities for 2019 should pivot around the three big themes: digital transformation, value-based care, and patient-centricity, according to a new report.
According to Frost & Sullivan’s report, “Global Healthcare Market Outlook, 2019,” digitization of products, services, and commerce models are democratizing current healthcare systems, manifesting a new era of healthcare consumerism.
“Now the new vision for healthcare is not just about access, quality, and affordability but also about predictive, preventive, and outcomes-based care models promoting social and financial inclusion,” says Kamaljit Behera, transformational health industry analyst at Frost & Sullivan, and author of the report. “This makes digital transformation and realization of long-pending policies reform a key growth priority for healthcare executives and major health systems during 2019 globally.”
According to Behera, increasing pricing pressure and shifting the focus of the healthcare industry from a volume- to value-based care model demands that drug and device manufacturers elevate their business models beyond products to customer-centric intelligent platforms and solutions.
“In 2019, the healthcare market will continue to transit and stick into the value-based model,” Behera says. “More sophisticated outcomes-based models will get deployed in developed markets, and emerging nations will start following the best practices suited to their local needs.”
Despite the promise of digital transformation, the potential promise and actual commercial application still remain the poles apart from some of the most touted technologies like AI and blockchain, according to Behera.
“Current technology is often perceived to increase the barriers between patient and providers,” he says. “In order to bridge these gaps, healthcare executives need to change the debate around digital transformation and start look beyond the mirage of technology novelty and really focus on the outcomes.”
Behera predicts that these five areas will be the biggest areas of growth for healthcare in 2019:
1. Meaningful small data
Healthcare data analytics focus will shift from ‘big data’ to ‘meaningful small data’ by hospital specialty, according to Behera. “Increasing digitization of healthcare workflows is leading us to a data explosion along the care cycle, globally,” he says. “This makes insights generation from existing healthcare data for targeted use cases a relatively low-hanging opportunity relative to other emerging technologies. Additionally, health data being the ‘holy grail,’ the analytics solutions are considered the first foundational step to catalyze complementing technology promises leveraging healthcare data (e.g., artificial intelligence, cloud computing, and blockchain).”
Entailing this, Frost & Sullivan research projects the healthcare analytics market revenue to cross $7.4 billion in the United States by the end of 2020.
“The key pivotal theme driving this growth opportunity includes population health management, financial performance improvement, and operational automation by patients, payers, physicians, and procedures,” Behera says. “Also, the rise of value-based care and outcomes-based reimbursement programs will continue to boost the demand for specialized analytics solutions.”
In 2019, payers and providers will continue to prioritize and leverage the potential of specialty-specific analytics solutions to investigate drug utilization, treatment variability, clinical trial eligibility, billing discrepancy, and self-care program attribution specific to major chronic conditions, according to Beherea.
2. Digital health coming of age with increased focus on individual care
“During 2019, we project application of digital health will continue to go far beyond the traditional systems and empower individuals to be able to manage their own health,” Behera says.
Favorable reimbursement policies (e.g., toward clinically relevant digital health applications) will expand care delivery models beyond physical medicine to include behavioral health, digital wellness therapies, dentistry, nutrition, and prescription management, according to Behera.
“For example, major insurance bodies are already using digital health services to communicate with patients,” he says. “Traditionally, lack of formal reimbursement processes is actually a deterrent to the uptake of these—wearables, telehealth etc. The next 12 months will see a relaxation of reimbursement rules for digital health solutions.”
The global aging population and an expanding middle class are major contributors to the chronic disease epidemic and surging healthcare costs, Behera says. “This year will be a pivotal year for defining value for healthcare innovation and technology for digital health solutions catering to aged care and chronic conditions management to bending healthcare cost curve,” he says.
“Telemedicine in emerging markets will become more mainstream and will aim to become a managed services provider [rather] than being just a telemedicine platform,” he says. “Telemedicine will move into the public health space as well, with countries like Singapore is testing the platforms in a regulatory sandbox. Finally, as the lines between retail, IT, and healthcare continue to blur, non-traditional players such as Amazon, Apple, Google, Ali Health, Microsoft, and IBM, among others, will continue to make further headway into the individual care space— providing the required impetus to public health systems to ensure accessibility and affordability of care-leveraging, patient-centric digital health tools and solutions.”
Healthcare executives should prioritize their roadmap for growing IoMT and connected health ecosystems (device-, wearables-, and mHealth-generated individual health data) in order to monetize these new sources of innovation and service-oriented future revenue streams, according to Behera. “The future focus should shift from drug and device mind-set to intelligent solutions/services, demonstrating outcomes-based health benefits to individuals and their caregivers,” he says.
In next 12 to 18 months, the priority will be to bring AI/cognitive platform technology use cases closer to clinical care to augment the physicians and even patients with actionable decision-making ability, according to Behera. “In next two to three years, AI will become a common theme across all digital initiative and platforms.”
AI-based work flow optimization use cases will represent more than 80% of the workflow market contribution. These include:
“For example, Google is already at work to use machine learning for predicting patients’ deaths, and the results boast a flattering figure of 95% accuracy, which is better than hospitals’ in-house warning systems,” says Behera. “AI application across clinical and non-clinical use cases will continue to show hard results and further bolster the growth in the healthcare space in 2019.”
AI-powered IT tools that manage payers’ and providers’ business risks (including clinical, operational, financial, and regulatory) continue to be important for the market, according to Behera. “Across all regions in the world, AI-based cognitive technologies are proving to be the most useful for medical imaging and clinical diagnostics—as a decision-support tool—followed by AI application to derive intelligence on remote patient monitoring data to promote outcomes-based personalized care.”
4. Regenerative medicine
Cell-gene therapy combinations are rapidly gaining momentum, which make use of gene-editing tools and vector delivery systems to devise innovative curative therapies, according to Behera.
“There is also a pipeline of induced pluripotent stem cells (IPSCs), mesenchymal stem cells (MSCs), and adipose-derived stem cells (ADSCs) for novel therapeutic treatments for neurological, musculoskeletal, and dermatological conditions, among others,” he says.
These are poised for growth because rising pressures to decrease healthcare cost globally, the emergence of value-based reimbursement models, and healthcare digitization trends are transitioning the treatment model from “one-size-fits-all” to stratified and outcomes-based targeted therapies, according to Behera.
“Many factors determine the rate at which the stem cell therapy market advances,” he says. “It is driven by the success of stem cell treatments in curing life-threatening diseases such as cancer, heart diseases and neuromuscular diseases in the world’s aging populations. Emerging gene-editing techniques such as CRISPR/Cas9 that offer high precision, accessibility, and scalability, compared to other genome editing methods, such as ZFNs and TALENs for cell and gene therapy applications will continue to attract high investment both from venture capital and pharma companies.”
As regenerative medicine is redefining medical technology synergies by combining stem cell technology with tissue engineering, market participants should be investing in innovative models such as risk sharing, in-licensing/out-licensing deals, fast-to-market models, and in-house expansions, according to Behera.
“With cell-therapy manufacturing being time sensitive, biopharma companies should implement IT-based solutions for improved manufacturing capabilities,” he says. “Despite the promises with novel cell and gene therapies such as CRISPR/Cas9, questions around ethical application challenge its future potential. This makes it necessary for the life science research executives to work closely with regulators in developing guidelines and regulations [that will] guide ethical and real-word unmet needs of the healthcare industry.”
5. Digital therapeutics
“Digital therapeutics are about to become a true medical alternative that will utilize communication-based technologies, apps, and software to improve patient outcomes and help to lower the cost of healthcare,” Behera says. “Digital therapeutics offer the benefit to improve patient outcomes and reduce treatment cost by replacing the need for a drug or augmenting a standard of care, but they are not endorsed by a regulatory body, such as the FDA.”
Frost & Sullivan projects that the overall digital therapeutics market is to grow at a CAGR of 30.7% from 2017 to 2023.
“Digital therapeutics will become an exciting healthcare option that adds a curative dimension to technology,” he says. “As care for these chronic diseases expands in scope, prevention and recovery are becoming the new focus areas—apart from diagnosis and treatment. This demands a holistic view of individual health, lifestyle, and environmental data beyond the clinical health records to efficiently stratify at-risk patients for a preventive and targeted treatment paradigm.”
Defining digital therapeutics appears at first glance to be a simple task, but challenges develop when attempting to define digital therapeutics as a market opportunity, according to Behera.
“Healthcare executives exploring the growth opportunities should prioritize their market positioning, which is often dictated by focused use cases (e.g., condition management vs. behavior management) rather than the technology novelty,” he says. “At present, many companies are either claiming to be or cited in the media as digital therapeutics, but only a small number of early-stage participants are seeking FDA certification based on randomized clinical trials. They make it critical for healthcare executives to keep a close watch on progressing regulatory developments, such as the FDA precertification program.”
If you ignore the Sword of Damocles hanging over the industry in the form of a Texas federal judge’s ruling the entire ACA unconstitutional, 2019 could shape up as a relatively chaos-free year with little chance of legislative or regulatory upheaval. Despite the fact that the number one issue on voters’ minds during the 2018 election was healthcare, it’s unlikely that the extremely divided Congress will be able to address it in any meaningful way. Cue the 2020 election.
The biggest issues healthcare industry leaders foresee include:
1. Addressing social drivers of health
Although it’s become clear that a person’s zip code has more impact on their health than their DNA, dealing with the social determinants (or social drivers) of health that relate to where a person lives are often far outside of the scope of most health plans’ operations. That’s rapidly changing. Whether it’s food or housing insecurity, economic stability, social or environmental safety or literacy, the impacts these social drivers have on health outcomes and costs are significant. Spurred by state Medicaid agencies and CMS, finding and deploying tools to measure and address the underlying issues that drive much of the cost and utilization in healthcare will be a focus during the year.
2. Provider consolidation
As hospital systems extend their reach with acquisitions, mergers and alliances (for example the $28 billion Catholic Health Initiatives and Dignity Health merger), health plans will be faced with much less leverage in rate negotiation and greater challenges in establishing competitive product differentiation as providers will have more power to dictate terms for products and rates. On the other hand, plans aligned with providers will face a more favorable environment and may see significant growth over their unaligned competition.
3. Medicaid work requirements
Adding work requirements for “able-bodied adults” to Medicaid expansion waivers has allowed Republican states that opted out of this ACA option (and the significant federal dollars that go with it) to find a way to participate that aligns with their stated conservative values.
Unfortunately, work requirements are much easier to put in place than to administer as some of the early-implementing states like Arkansas are finding out. Expect more non-expansion states to use this mechanism to expand their Medicaid coverage and for the health plans involved to be inundated with a whole new set of administrative requirements and challenging enrollment issues.
4. Personal healthcare technologies
The Dick Tracy watches are here and are way more than cool communication devices. Measuring pulse and blood sugar, breathing rate, simple ECGs, and providing emergency alerts for falls are only the beginning of what appears to be a host of clinical monitoring and alerts coming from these personal technologies. Whether and how health plans address and incorporate the application of these new capabilities to their membership will make a significant difference in the MCO’s market presence and competitive stance.
While these were a some of the more frequently mentioned challenges, obviously other issues resonated a higher level for some execs based on their geography and product lines. Here’s hoping that 2019 sees the industry better serve the diverse healthcare needs of the country by meeting consumers’ demands for quality, affordability, and access.
Claire Pomeroy, CEO and president of the Albert and Mary Lasker Foundation, an expert in infectious diseases and a long-time advocate for patients, drove home the point of the importance of the social determinants of health by relating a story of a young woman who needed asthma medication but was unable to afford it.
She got a prescription for an inhaler she couldn’t afford, Pomeroy told a full room at HIMSS19. She knew the story because she was that woman. She needed a ride, food and money for a few days and had no way to get any of that, let alone buy a drug she couldn’t afford.
The clinicians followed all of the right clinical protocols for her condition. But, she said, “They didn’t have the information they truly needed to make me better.”
What was needed was for her clinicians to pay attention to the social determinants of health, an issue that providers are increasingly realizing need to be addressed if their population of patients is to remain healthy.
Without this attention being paid to housing, food, transportation and other socio-economic needs, costs will never be brought inline, as hospitals see patients returning to be admitted or get care through the emergency room.
“Our cost and our outcomes demand change,” Pomeroy said.
The statistics show the need. Black mothers die at truly unacceptable rates in this country, she said and all blacks in the United States have a life expectancy that is on average, 10 years less than whites.
All people in the United States who have a college degree live longer than those with a high school diploma. Stress on the job plays a part. And the opioid crisis has led to overdose deaths surpassing the odds of dying than from a car accident.
“We must redesign the U.S. healthcare system from one of sick care to wellcare,” Pomeroy said.
Healthcare makes up only 10 percent of what goes into the social determinants of health. The biggest percentage goes to behavioral patterns, genetic predisposition and social circumstances.
“We work all day and are only impacting 10-15 percent of the social determinants of health,” Pomeroy said. “Spending on social determinants make sense. We need to move beyond pilot programs and start scaling some of these things.”
Hospitals that spend money on housing to take care of their homeless population see a a 93 percent reduction in costs. For every $25 increase in delivered meals for older adults, there’s a 1 percent decline in nursing home admissions.
“Addressing the social determinants is an investment,” she said.
The biggest challenge is lack of funds for hospitals struggling to stay in the black, lack of data and siloed proprietary care information.
Information connectivity allowed one health system to learn that 31 percent of the Medicaid moms in its area were not enrolled in WIC, and therefore not getting access to food and supplies for their babies.
Technology is needed, as are more health policies for reimbursement that address risk adjustment. State innovation models help, as does the Centers for Medicare and Medicaid Services accountable health communities model, a five-year pilot looking at the connection between social assistance, health and costs.
EHRs should include information on housing, food, transportation and other needs. Systems must transform their thinking, create a new strategy, empower multidisciplinary teams, educate health professionals, invest in research and “raise our voices to drive change,” Pomeroy said.
The pace of change in healthcare is not slowing down; in fact, it is accelerating. Healthcare organizations that are most successful in 2019 will know what challenges and changes are coming down the pipeline, and they will prepare accordingly.
To help ensure you don’t get left behind, we’ve assembled the top six challenges the industry will face in 2019.
1. Shifting the focus from payment reform to delivery reform. For the past few years, C-suite leaders at healthcare organizations have been focused on navigating healthcare payment reform—attempting to preserve, improve, and maintain revenue. Amidst those efforts, delivery reform has sometimes taken a back seat.
That will need to change in 2019. Organizations that are the most successful will focus more on patient care than revenue, and they will see improved outcomes and reduced costs as a result.
Many organizations are already exploring delivery reform with initiatives that focus on:
In 2019, however, they will need to bring all of these initiatives together to implement sustainable improvements in how healthcare is delivered.
An added bonus? Organizations that accomplish this will see enhanced revenue streams as value-based reimbursement accelerates.
2. Wrestling with the evolving healthcare consumer. Healthcare consumers are demanding more convenient and more affordable care options. They expect the same level of customer service they receive from other retailers—from cost-estimation tools and online appointment booking to personalized interactions and fast and easy communication options such as text messaging and live chats.
Organizations that don’t deliver on these expectations will have a difficult time retaining patients and attracting new ones.
That’s not the only consumer-related challenge healthcare organizations will face. In 2019, millennials (between the ages of 23 and 38), will make up nearly a quarter of the U.S. population.
This generation doesn’t value physician-patient relationships as highly as previous generations. In fact, nearly half of them do not have a personal relationship with their physician, according to a 2015 report by Salesforce.
Finding ways to maintain or increase the level of humanity and interaction with millennials will be a key challenge in 2019. Patient navigator solutions and other engagement tools will be critical to an organization’s success.
3. Clinician shortages. Physician and nurse shortages will continue to intensify in 2019, creating significant operational and financial challenges for healthcare organizations.
The most recent numbers from the Association of American Medical Colleges predict a shortage of up to 120,000 physicians by 2030. On the nursing side, the Bureau of Labor Statistics projects a need for 649,100 replacement nurses by 2024.
The implications of the shortages, combined with the fact that healthcare organizations face a number of new challenges in the coming years, are many. Fewer clinicians can lead to burnout, medical errors, poorer quality, and lower patient satisfaction.
Healthcare organizations that thrive amidst the shortages will find new ways to scale and leverage technology to streamline work flows and improve efficiencies.
4. Living with EHR choices. Despite the hype and hopes surrounding EHRs, many organizations have found that they are failing to deliver on their expectations.
A recent Sage Growth Partners survey found that 64 percent of healthcare executives say EHRs have failed to deliver better population health management tools, and a large majority of providers are seeking third-party solutions outside their EHR for value-based care.
The survey of 100 executives also found that less than 25% believe their EHRs can deliver on core KLAS criteria for value.
As we recently told Managed Healthcare Executive, that statistic is striking, considering how important value-based care is and will continue to be to the industry.
Despite the dissatisfaction surrounding EHRs, switching EHRs may be a big mistake for healthcare organizations. A recent Black Book survey found 47% of all health systems who replaced their EHRs are in the red over their replacements. A whopping 95% said they regret the decision to change systems.
Hospitals and physician may not be entirely happy with their EHR choices, but the best course may be to stick with their system. Highly successful hospitals and health systems will find ways to optimize workflow and patient care which may involve additional IT investments and best of breed investment approaches, rather than keeping all of the proverbial eggs in the EHR basket.
5. Dealing with nontraditional entrants and disruptors. In 2018, several new entrants entered and/or broadened their reach into healthcare.
Amazon acquired online pharmacy retailer PillPack, and partnered with JPMorgan Chase and Berkshire Hathaway to create a new healthcare partnership for their employees. Early in 2018, Apple announced it was integrating EHRs onto the iPhone and Apple watch, and recently, Google hired Geisinger Health CEO David Feinberg for a newly created role, head of the company’s many healthcare initiatives.
New partnerships have also arisen between traditional healthcare entities that could result in significant healthcare delivery changes. Cigna and Express Scripts received the go-ahead from the DOJ for their merger in September, and CVS and Aetna formally announced the completion of their $70 billion merger November 28.
All of these new industry disruptors and mergers will impact healthcare organizations, likely creating new competition, disrupting traditional healthcare delivery mechanisms, creating price transparency and pressures, and fostering higher expectations from consumers in 2019. Keeping an eye on these potential disrupters will be important to ensuring sustained success in the long term.
6. Turning innovation into an opportunity. From new diagnostic tests and machines to new devices and drug therapies—the past few years in healthcare have seen exciting and lifesaving developments for many patients. But these new devices and treatment approaches come with a cost.
One of biggest 2018 developments that best exemplifies the challenge between innovation and cost is CAR T-cell therapy. This new cancer treatment is already saving lives, but it racks up to between $373,000 and $475,000 per treatment. When potential side effects and adverse events are accounted for, costs can reach more than $1 million per patient.
Finding the best way to incorporate new treatments like this one, while balancing outcomes, cost, and healthcare consumer demands, will be a top challenge for healthcare organizations in 2019.
No matter which cog in the healthcare system one blames for the skyrocketing costs of healthcare (big pharma inflating the list prices of drugs; hospitals for upmarking services; insurers for leaving gaps in care resulting in surprise bills) consumers’ pocketbooks aren’t the only ones affected.
A separate American Hospital Association-backed study predicted health systems will lose $218 billion in federal payments by 2028, and private payers (whose dollars would normally help hospitals make up the difference) have been curtailing reimbursements as well.
Bad debt was another fear in the ACHE report. Uncompensated care costs peaked in 2013 at $46.4 billion and, though the figures have decreased slightly since then, hospitals shelled out $38.3 billion in 2016. Wisconsin alone was on the hook for $1.1 billion in uncompensated care in fiscal year 2017.
“The survey results indicate that leaders are working to overcome challenges of balancing limited reimbursements against the rising costs of attracting and retaining talented staff to provide that care, among other things,” ACHE president and CEO Deborah Bowen said in a statement.
Other financial concerns included competition, government funding cuts, the transition to value-based care, revenue cycle management and price transparency.
And 70% of hospital CEOs were worried about shifting CMS regulations in 2018, along with regulatory/legislative uncertainty (61%) and cost of demonstrating compliance (59%) — unsurprising, given the current administration’s track record of unpredictability.
Patient safety and quality of care was also top of mind for health system CEOs, with over half of respondents anxious about the high price of medications, involving physicians in the culture of quality and safety and getting them to reduce unnecessary tests and procedures.
Also of interest was the high rank given to addressing behavioral health and addiction issues, according to Bowen, which ranked fifth in its first year of being included in the survey. The topic has been front and center in the industry of late, in line with the increasing recognition of social determinants of health and the breakdown in silos of care.
Ranking of the issues has remained largely constant since 2016, though in 2017 more hospital CEOs were concerned about personnel shortages than patient safety and quality.
Ripple effects from 2018 will continue well into the new year as players deal with some massive policy and business shifts.
The coming year for healthcare will see the industry reckon with some of the massive changes set in motion last year, such as megamergers like CVS-Aetna and Cigna-Express Scripts and a judge’s declaration that the Affordable Care Act is no longer constitutional.
On the policy front, newly-installed Democrats in Congress (and the party’s 2020 presidential candidates) will be pushing for more comprehensive health coverage plans while the GOP considers tougher Medicaid restrictions at the state, and potentially federal, level.
Meanwhile, some familiar storylines are likely to continue. Effusive digital health funding and increases in mobile and telehealth services show no signs of abating, and neither does general M&A activity.
Here’s a snapshot of a few big trends for the payer and provider crowds to watch for in 2019.
Historically, behavioral health services have been mostly disparate, but increased spending in digital health and a focus on lowering out-of-pocket costs will help spur greater connectivity, Sandra Kuhn, national lead for behavioral health consulting at Mercer, told Healthcare Dive. She predicted “more partnerships between traditional medical and behavioral health carriers on smaller, targeted point solutions” as the industry already began to see last year.
The trend more broadly fits into the push to recognize and act on social determinants of health.
One partnership is the Utah Alliance for the Determinants of Health, a coalition of providers, community organizations and government agencies banding together to reduce the impacts of SDOH. Their plan seeks to address socioeconomic stressors like housing instability, food insecurity and transportation — circumstances with a direct effect on mental and physical health — before patients show up in the ER lobby. Intermountain Healthcare, a primary stakeholder, invested $12 million in the initiative.
Early efforts include experimental EHR technologies, value-based payments for even more population health management programs and wraparound services. Health Affairs highlighted two separate initiatives, each making inroads on social determinants by carrying out existing population health programs in tandem with trusted community partners.
Overall, Kuhn said, more organizations will step up with tactical solutions to what has otherwise been an intractable problem. That includes payers like state Medicaid programs, many of which have begun value-based payments for behavioral health services.
Progress on behavioral and population health is happening in tandem with — or perhaps existing symbiotically alongside — the growth of telemedicine. At Riverside Health System, a rural health network in Newport News, Virginia, a long-term telebehavioral health initiative has improved coordinated care among psychiatrists and clinical social workers, as well as replaced a chunk of services offered at the system’s nursing homes.
Riverside isn’t the first to find success with telebehavioral health, but the system’s wider experimentation with programming, a happy accident triggered by a psychiatrist shortage, has certainly shown there’s a market for it — one that Quartet, Lyra and Teladoc have been quick to capitalize on. This year will see a swath of players from across the industry tackle behavioral health gaps by complementing primary care with telemedicine.
While larger health systems tend to have the means to be early adopters of new and robust healthcare technologies, physicians are beginning to integrate such services into their practices.
Use of telehealth among the commercially insured has been gradually rising since the mid-2000s, having grown 52% annually from 2005 to 2014 before spiking 261% between 2015 and 2017, according to JAMA.
Revenue cycle management firm SYNERGEN Health estimates digital health tech for remote use will grow by 30% this year, allowing patients to better manage their own healthcare, giving clinicians an opportunity to spend more time with more patients and, of course, generating new revenue streams.
As more payers hop aboard the telemedicine train and more services are covered, hospitals will continue see costs fall. A 2017 report from the Rural Broadband Association found that telehealth services were associated with an annual cost savings of $20,841 per U.S. hospital on average. The caveat here for hospitals is the very real possibility that large facilities will become increasingly more obsolete and overhead costs will become too costly as patients find yet another reason to stay away from their doors.
Many are hoping the days of the $629 hospital bill for a wet towel and a Band-Aid are coming to an end, but it’s not likely to happen in 2019.
Still, legislators and consumers alike are making price transparency an issue in hopes of curbing skyrocketing healthcare costs.
CMS took some action last year by finalizing a new rule mandating hospitals post chargemaster rates online in a machine-readable format. But the rule is effectively toothless. Hospitals were already required to make those prices available, and chargemaster rates only apply to the uninsured and balance billing. And despite the fact that the rule went into effect on the first day of the year, CMS admitted recently that it has no way of enforcing the mandate and would not comment on how many hospitals are currently in compliance with the rule.
“It is [our] expectation that all of them will comply,” CMS Administrator Seema Verma said on a call with reporters.
The rule doesn’t specify where hospitals need to post their charges. The only requirement is that they’re made available online, which has allowed health systems like mega-operator Ascension to bury their charges behind a tangled maze of clicks.
The company has previously defended itself in a statement to Healthcare Dive by arguing the costs can be confusing for patients, as they don’t take financial assistance and charity care into consideration. Chargemaster information, as some critics have pointed out, isn’t a very useful measure of pricing for consumers. It can actually be counterproductive.
Thomas Lee, chief medical officer at Press Ganey, speaking at the U.S. News Healthcare of Tomorrow conference, said economists don’t believe price transparency has a noteworthy impact on cost and efficiency.
“I’m predicting not much will happen and people won’t pay attention to it because the charges aren’t actually relevant to the vast majority of people,” Lee said. “If people are uninsured, I doubt they’re looking at these things either.”
If the ACA taught economists and legislators anything about American consumers, it’s that they want healthcare, but don’t want to take the time to shop around for it. In a recent Health Affairs survey, just 13% of respondents responsible for cost-sharing in their last healthcare encounter sought cost information before receiving care. Only 3% compared prices of different providers.
History seems to be repeating itself, as CMS hopes its “first step toward price transparency” will be picked up by market forces. By mandating the information be made available in a different file format, CMS believes it has “set the stage” for that data to be used by private third parties that can develop tools for consumers to use.
“There’s nothing in the rule that prevents hospitals from going further with this,” Verma said. “Hospitals can do that today.”
But they aren’t. In fact, the percentage of hospitals unable provide patients with price information jumped from 14% to 44% between 2012 and 2016, according to a JAMA study.
In short, the CMS rule is much more of a light nudge than a forceful shove into price transparency, and without regulation and the means of enforcing it, hospitals have little to no incentive to change. But expect the wheels of the price transparency conversation to continue turning in 2019, regardless.
As insurers have bulked up in scale after blockbuster mergers last year, Fitch Ratings expects relationships between providers and payers to be even more contentious during contract negotiations even in a value-based payment setting.
Some recent headline-grabbing squabbles include UnitedHealthcare’s contract impasse with Envision Healthcare, an ER staffing firm. Tenet and Cigna’s contract negotiations stalled and finally reached a multi-year deal this year.
Hospitals can also expect low rate increases from commercial insurers, according to Moody’s.
In markets where there is a dominant insurer and multiple hospitals, “Each hospital will need to demonstrate why it is indispensable to the insurer … and why it should be included in a network,” Moody’s reports.
However, there are potential glimmers of hope. As more states have expanded Medicaid, it puts pressure on other states to do so, which would provide a means of payment for hospitals that have gone without payment caring for the uninsured.
Payers and providers will continue to enter into value-based contracts in 2019 at varying degrees, according to Moody’s.
Many hospitals are engaging in contracts that offer incentives or alternative payment models for reaching certain quality measures, but very few are taking on full risk, or both the upside and downside risks within a contract, according to Moody’s.
That will continue into 2019: few are likely to take on downside risk, or the possibility of losing money, Moody’s reports.
However, while the popularity and use of these payment models continues, its cost-savings benefits have yet to be realized, according to a recent report.
Meanwhile, CMMI continues to test for ways to drive change in the healthcare by paying for quality as opposed to quantity. For instance, CMMI is testing whether it can reduce utilization and ultimately costs by addressing social-needs such as housing for Medicare and Medicaid beneficiaries. CMMI’s director Adam Boehler said he won’t force organizations to take on risk, but will help them take on a level of riskthey’re comfortable with.
But in an about-face, the Trump administration seems to be signaling that it may institute mandatory payment models that could put providers at risk of losing money.
Medicare Advantage will continue to be a profit center for insurers, which typically enjoy a 5% margin, according to 2016 data from the Medicare Payment Advisory Commission.
As the population ages, it presents a growth opportunity for payers. Enrollment in MA plans grew by 8% from 2016 to 2017, according to a recent MedPAC report, as many more seniors are choosing to enroll in plans run by traditional insurers. About 34% of beneficiaries choose MA, a significant increase from a decade ago when just 10% enrolled in such plans.
Beginning this year, MA plans have greater flexibility to offer non-traditional benefits such as adult daycare, meals or in-home care to improve the overall health of patients, particularly those will high needs. CMS Administrator Seema Verma previously said 270 MA plans will offer these new benefits in 2019.
These new benefits also pose an opportunity for nontraditional healthcare companies such as Lyft and Uber, which are looking for ways to shuttle seniors to appointments and pharmacies.
Payers including Cigna touted the future growth opportunity it sees for MA. “We are well positioned today and going forward for existing and new markets,” Cigna CEO David Cordani said of MA, according to Forbes.
As states weigh expanding Medicaid, it’s another potential opportunity for managed care plans to contract with states. As more states expand the program, it puts pressure on the remaining holdouts.
Last year, some red states took the issue to the ballot box and got approval for expansion, potentially providing a roadmap for stakeholders to replicate in other states where the legislatures balk at expansion. California Gov. Gavin Newsom is backing an idea that would expand Medicaid eligibility in his state to undocumented young adults, providing another opportunity for Medicaid managed care firms.
Likely potential winners are Centene and Molina. Centene is the nation’s largest Medicaid managed care firm with operations in 21 states covering more than 8 million people. Molina serves more than 3 million in 13 states and Puerto Rico.
Just recently, Molina CEO Joseph Zubretsky said even without expansion ushered in by the Affordable Care Act, $1 billion of new revenue opportunity exists in Molina’s existing footprint because of states like Illinois that are expanding Medicaid managed care statewide.
The recent breathtaking flurry of mega-mergers coupled with increasingly challenging market forces and an ever shifting political landscape has cast a cloud of confusion regarding where the U.S. healthcare delivery system is heading.
So, where do you go to find the map?
Every year, the JP Morgan Healthcare Conference provides an incredibly efficient snapshot of the strategies for large healthcare delivery systems, the hub for healthcare in the U.S. Most of these organizations are also the largest employers in their respective states. The conference took place this week in San Francisco with over 20 healthcare systems presenting, including Advocate Health Care, Aurora Health Care, Baylor Scott & White Health, Catholic Health Initiatives, Geisinger Health System, Hospital for Special Surgery, Intermountain Healthcare, Mercy Health in Ohio, Northwell Health, Northwestern Medicine, Partners HealthCare System, WakeMed Health & Hospitals and many of the other big name brands in the market. Each provided their strategic roadmap in a series of 25-minute presentations from their “C” suite. If you’re looking for the GPS on strategy and a gauge on the health of healthcare, this is it.
How do their strategies differ? What direction are they heading in? There is a great line from Alice in Wonderland that goes, “If you don’t know where you’re going, any road will take you there.” You would think that line applies perfectly to the U.S healthcare system, but the good news is it actually doesn’t.
While the exact destination for everyone is TBD, the direction they are heading in is actually pretty clear and consistent. It turns out that they are all using a very similar compass, which is sending them down a similar path.
So, what are the roadside stops health systems consider absolutely necessary to be part of their journey to creating a more viable and sustainable value-based business model?
Based on the travel plans for over 20 of the largest and most prestigious healthcare delivery systems in the country, here’s your GPS and list of 12 things you “must do” on your journey.
1. You Must Scale
Clearly the headline at #JPM18 was the flurry of major announcements regarding major mergers. With that said, two of the mergers were front and center: teams were there to present from Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora, which will be a $10 billion organization with 70,000 employees, as well as San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, which will be a $28 billion organization with 160,000 employees. The size and scale of these mergers is pretty stunning. While the announcement of these and the other recent mega-mergers has forced many into their board room to determine what the deals mean to them, the consensus at the conference was this: There are a number of different paths forward to achieve scale. Some, like Baylor Scott & White in Texas, have aggressive regional expansion plans. Others are betting on partnerships to provide the same or even more value. Taking a pulse of the room, two things were clear. The first is there is no definition of scale any more in this market. The second is that, despite this flurry of mergers, “getting really big” is not the only destination.
2. You Must Pursue “Smart Growth” and Find New Revenue Streams
Running counter to the merger narrative in the market, Salt Lake City-based Intermountain provided a good overview of the movement to what is called an “asset light” strategy of “smart growth.” This is a radically contrarian approach to the industry norm, which is the capital intensive bricks and mortar playbook of buying and building. As part of their strategy, Intermountain will open a “virtual hospital” delivering provider consultations and remote patient monitoring via telehealth. The system will also launch a number of healthcare companies every year, leveraging their considerable resources in a manner they believe will produce a higher yield. Other health systems outlined a similar stream of initiatives they have in motion to diversify their revenue streams and expand their business model into higher margin, higher growth businesses. One example is Cincinnati-based Mercy Health, which achieved strong growth and leverage via their investment in a revenue cycle management company. Advocate in Illinois formed a partnership with Walgreens. Together, they now operating 56 retail clinics and Advocate has seen a significant impact on driving new patients and downstream revenue to their system. The bottom line is all now recognize that they must think and act differently to be able to continue to fund their clinical mission and serve their community.
3. You Must Measure and Manage Cost and Margins
While some are moving aggressively to get scale, everyone is looking to more effectively use the resources they have and get more operating leverage. Margin compression was a consistent theme, with many systems now moving into consistent, stable operating models around managing margins versus launching reactionary initiatives when they find a budget gap. What is emerging is a new discipline and continuous process around managing cost and margins that is starting to look similar to the level of sophistication we have seen in the past for revenue cycle management. To that end, there has been major movement in the market to implement advanced cost accounting systems, often referred to as financial decision support, which provide accurate and actionable information on cost and help organizations understand their true margins as they take on risk-based, capitated contracts. Some during the conference referred to it as the “killer app” for the financial side of driving value. Regardless of what you call it, all are moving aggressively to understand the denominator of their value equation.
4. You Must Become a Brand
Investing in and better leveraging their brand has become a strategic must for health systems. The level of sophistication is growing here as providers shift their mental model to viewing patients as “consumers.” Aurora in Wisconsin cited their dedicated Consumer Insights Group and outlined their “best people, best brand, best value” approach that has been incredibly effective both internally and externally. At the same time, the bigger investments for many health systems relative to brand are more on brand experience than brand image, with a focus on understanding and radically rethinking the consumer experience. As an example, at Danville, Pa.-based Geisinger, close to 50 percent of ambulatory appointments are scheduled and seen on the same day. And every health system is making meaningful investments in their “digital handshake” with consumers, creating and leveraging it via telehealth as well as mobile applications to enhance the customer experience.
5. You Must Operate as a System, Not Just Call Yourself One
One clear theme at #JPM18 is different organizations were at different points along the continuum of truly operating as a system vs. merely sharing a name and a logo. There are a number of reasons for this, but you are increasingly seeing tough decisions actually being made vs. just kicking the can down the road. There has been a great deal of acquisitions over the last few years coupled with a new wave of thinking relative to integration that is more aggressive and more forward-looking. This mental shift is actually a very big deal and perhaps the most important new trend. Many health systems are heavily investing in leadership development deep into their organization to drive changes much faster.
6. You Must Act Small
The word “agile” is quickly becoming part of everyone’s narrative with health systems looking to adopt the principles and processes leveraged in high tech. Chicago-based Northwestern Medicine is an example of an organization that has grown dramatically in the last five years, now approaching $5 billion in revenue. At the same time, they have still found a way to operate small, leveraging daily huddles across the organization to drive their results. The team at Raleigh, N.C.-based WakeMed has achieved a dramatic financial turnaround over the last few years, applying a similar level of rigor yielding major operational improvements in surgical, pharmacy and emergency services that have translated into better bottom line results.
7. You Must Engage Your Physicians
Employee engagement was a major theme in many of the presentations. With the level of change required both now and in the future, a true focus on culture is now clearly top of mind and a strategic must for high-performing health systems. That said, only a handful articulated a focus on monitoring and measuring physician engagement. This appears to be a major miss, given that physicians make roughly 80 percent of the decisions on care that take place and, therefore, control 80 percent of the spend. One data point that stood out was a 117 percent improvement in physician engagement at Northwestern. Major improvements will require clinical leadership and a true partnership with physicians.
8. You Must Leverage Analytics
Many have reached their initial destination of deploying a single clinical record, only to find that their journey isn’t over. While health systems have made major investments big data, machine learning and artificial intelligence, there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. Part of this path is the consolidation of systems that is now needed on the financial side of the house with a focus on deploying a single platform for financial planning, analytics and performance. The primary focus is to translate analytics not just into insights, but action.
9. You Must Protect Yourself
As organizations move deeper into data, there is increased recognition that cybersecurity is a major risk. Over 40 percent of all data breaches that occur happen in healthcare. During the keynote, JP Morgan Chase CEO Jamie Dimon shared that his organization will spend $700 million protecting itself and their customers this year. Investments in cybersecurity will continue to ramp up due to both the operational and reputational risk involved. Cybersecurity has become a board room issue and a top-of-mind initiative for executive teams at every health delivery system.
10. You Must Manage Social Determinants of Health in the Communities You Serve
Perhaps the most encouraging theme for healthcare provider organizations was the need to engage the community they serve and focus on social determinants of health. As Intermountain shared: “Zip code is more important than genetic code.” To that end, Geisinger refers to their focus on “ZNA.” They have deployed community health assistants, non-licensed workers who work on social determinants of health and have implemented a “Fresh Food Farmacy,” yielding a 20 percent decrease in hemoglobin A1c levels along with a 78 percent decrease in cost. Organizations like ProMedica Health System in Ohio have seen similar results with their focus on hunger in Toledo. WakeMed has an initiative focused on vulnerable populations in underserved communities that has resulted in a significant decrease in ER visits and admissions and over $6 million in savings.
11. You Must Help Solve the Opioid Epidemic
The opioid issue is one that healthcare professionals take very personally and feel responsible for solving. It came up in virtually in every presentation, and it’s an emotional issue for the leaders of each organization. This is good news, but the better news is that they are taking action. As an example, Geisinger invested in a CleanState Medicaid member pilot that resulted in a 23 percent decrease in ER visits and 35 percent decrease in medical spending, breaking even on their investment in less than 10 months. While many would rightly argue that the economic rationalization isn’t needed for something this important, the fact that it’s there should eliminate any excuse for anyone not taking action.
12. You Must Deliver Value
The Hospital for Special Surgery in New York is the largest orthopedics shop in the U.S. and a great example of how value-based care delivery is taking shape. Perhaps the most revealing stat they shared is that 36 percent of the time patients receive a non-surgical recommendation when they are referred to one of their providers for a second opinion. This is exactly the type of value-based counseling and decision-making that will help flip the model of healthcare. Some systems are farther along than others. Northwestern currently has 25 percent of its patients in value-based agreements, but other systems have less. As the team from Intermountain re-stated to this audience this year, “You can’t time the market on value, you should always do the right thing, right now.” Well said.