Payer 101: Three things every healthcare market researcher should know

How much do you know about the U.S. health insurance landscape?

In this post, we’ll discuss three basic aspects of U.S. health plan payers: type, geography, and size. Understanding these aspects will help you design a study sample that is representative of your market.

Case Study: Crossing the Hospital-Alternate Site Continuum

This study demonstrates how one of our clients was able gain information on how to improve their marketing strategy for a product in order to retain customers as they moved from the hospital to an alternate site of care.

What are Accountable Care Organizations (ACOs)?

Hello again!

Since our last blog post, the leaves have turned green, the summer months have passed, and we have just begun to enjoy the crisp autumn air.

Lately there has been much debate surrounding the launch of Accountable Care Organizations (ACOs) under President Obama’s Patient Protection and Affordable Care Act. ACOs are one of the key provisions in the 2010 health reform law designed to help reduce the cost of medical care. There is so much talk about this concept, but what exactly are ACOs?

An ACO is a network of providers and hospitals that share responsibility for delivering healthcare to a minimum of 5,000 Medicare beneficiaries for at least three years. It is based on the idea that hospitals, doctors, and other health care providers should work together to coordinate care for their patients. By coordinating care, the ACO will reduce costs by avoiding unnecessary tests and procedures. Those organizations that produce better outcomes will be rewarded, and for those that don’t, financial penalties will be incurred. In a recent study of ours, we found that with the development of ACOs, providers will take on responsibility for not only delivering actual medical care, but also providing some level of medical management between appointments.

Sounds like a great idea however, a lot skepticism has surrounded the development and launching of ACOs. First, there are very few providers that truly understand the ACO concept. In a recent survey conducted by Beacon Partners, only 15% of 200 provider organizations are “very familiar” with ACOs. Of those 200 surveyed, 92% are in the development stages for an ACO, and nearly all respondents’ budgets are not yet established.

Second, the Centers for Medicare and Medicaid (CMS) have yet to issue the final rules, which will affect the application process that prospective participants have to go through. Prospective participants will need to review the final rules before entering the application process in order to demonstrate their ability to comply with the eligibility requirements. Then, CMS will need to review all applications and offer contracts before the January 2012 launch deadline.

Lastly, the systems that were considered to be the models for a new health care delivery system, namely the Mayo Clinic, the Cleveland Clinic, Geisinger Health System and Intermountain Healthcare, have all declined to apply for the ACO program. Hospital and physician groups complained that the program created more financial risks than rewards and imposed burdensome reporting requirements.

Given the series of events surrounding the development of ACOs, it is no wonder that there is skepticism and doubt. Too much confusion and too many barriers surround the development of ACOs, including high start-up costs and regulatory issues. Add to that the refusal by health system role models to apply to the ACO program and you have a complicated situation.

Referring to our last post, this is one way to reduce the cost of care, a much needed move in our unstable economy. As prices for healthcare keep increasing over the year (health insurance is expected to rise 5.4% in 2012), patients deserve access to affordable healthcare. We urge ACO development leaders to address the barriers that health systems are encountering in order to aid in launching a successful ACO program.

Author:  Nicole Victoria

Editors:  Ken Chiang and Robert Kaminksy

 

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Healthcare reform and the quality of care

One of the most significant aspects of healthcare reform is its emphasis on improving the quality of care.  Many aspects of the law seek to improve the quality of care as a way of reducing cost.  The healthier we all are, the less we’ll spend on doctors and tests.  Now, if only the law could help every American lose 10 pounds!!  That would be the best ways to reduce the cost of care.

We cannot really discuss the quality of care until we know how to measure it.  There needs to be a consensus as to what constitutes good care.  The simpler these measures are to understand, the more providers and patients can focus on them and achieve success.

We also need a system for measuring the quality of care.  Quality measures also need to be simple so that they can be implemented and data collected cost effectively.  Of course, to do that, we need widespread use of electronic health records.

The U.S. government announced in February of 2009, the American Recovery and Reinvestment Act (ARRA). The ARRA act included $19 billion under the portion of its HITECH Act to promote the adoption of Electronic Health Record (EHR) technology in healthcare. Starting in 2011, medical providers can receive up to $44,000 or more by demonstrating what has termed as “meaningful use” of certified EHR technology to be eligible for government funds. 

Back to healthcare reform — the Patient Protection and Affordable Care Act (PPACA).  To drive improved quality of care, PPACA requires the identification and publication of a core set of quality measures for Medicare and Medicaid adults.   PPACA also requires Medicaid to establish a quality measurement program. 

PPACA requires the integration of reporting on quality measures with reporting for the meaningful use of electronic health records.  By focusing on the effective use of EHRs with certain capabilities, the HITECH Act makes clear that the adoption of records is not a goal in itself:   it is the use of EHRs to achieve health and efficiency goals that matters.  HITECH’s incentives and assistance programs seek to improve the health of Americans and the performance of their health care system through “meaningful use” of EHRs to achieve five health care goals:

• To improve the quality, safety, and efficiency of care while reducing disparities;
• To engage patients and families in their care;
• To promote public and population health;
• To improve care coordination; and
• To promote the privacy and security of EHRs.

In the context of the EHR incentive programs, “demonstrating meaningful use” is the key to receiving the incentive payments. It means meeting a series of objectives that make use of EHRs’ potential and related to the improvement of quality, efficiency and patient safety in the healthcare system through the use of certified EHR technology.

Stage 1, which begins in 2011, the criteria for meaningful use focus on electronically capturing health information in a coded format, using that information to track key clinical conditions, communicating that information for care coordination purposes, and initiating the reporting of clinical quality measures and public health information.

The final rule reflects significant changes to the proposed rule while retaining the intent and structure of the incentive programs.  Key provisions in the final rule include:  

• For Stage 1, CMS’s proposed rule called on physicians and other eligible professionals to meet 25 objectives (23 for hospitals) in reporting their meaningful use of EHRs. The final rule divides the objectives into a “core” group of required objectives and a “menu set” of procedures from which providers can choose.  This “two track” approach ensures that the most basic elements of meaningful EHR use will be met by all providers qualifying for incentive payments, while at the same time allowing latitude in other areas to reflect providers’ varying needs and their individual paths to full EHR use.
•  In line with recommendations of the Health Information Technology Policy Committee, the final rule includes the objective of providing patient-specific educational resources for both EPs and eligible hospitals and the objective of recording advance directives for eligible hospitals.

Healthcare reform will fund the implementation of medication management services by pharmacists.  Medication therapy management (MTM) is a partnership of the pharmacist, the patient or their caregiver and other health professionals that promotes the safe and effective use of medications and helps patients achieve the targeted outcomes from medication therapy.  MTM includes the analytical, consultative, educational and monitoring services provided by pharmacists to help consumers get the best results from medications through enhancing consumer understanding of medication therapy, increasing consumer adherence to medications, controlling costs, and preventing drug complications, conflicts, and interactions.

Healthcare reform requires the public reporting of physician performance on quality and patient-experience measures through a website that will be called Physician Compare.  What begins with the implementation of EHR and the development of quality measures that are evaluated through data supplied by the EHR ends in public reporting of the results.  This will enable patients and hospitals to work with the physicians that provide the highest quality of care.  While high-quality of care might cost more up front, the (hoped for) decrease in hospital readmissions, adverse events and co-morbidities will (hopefully) reduce costs in the long term.

Implications for Healthcare Manufacturers

The emphasis on quality measures will more and better opportunities for healthcare manufacturers to demonstrate how their products and applications drive improvements in the quality of care.  Such demonstrates need to be based on clinical data that demonstrate how the product or application performs compared to the quality measures that Medicaid and Medicare adopt.  Medical groups and hospitals will look to healthcare manufacturers and government agencies to provide data that cut across multiple settings of care.  However, the growing availability of sophisticated EHR systems could enable medical groups and hospitals to develop data that are specific to their own patient demographics and mix.  It is in the best interest of healthcare manufacturers and government agencies to help coordinate these efforts.  Healthcare manufacturers will be encouraged to develop data for patient niches so that they are ready to address data that medical groups and hospitals gather that might demonstrate different results than those generated by the healthcare manufacturers.

The government and healthcare community (ie, providers and payers) will develop the quality measures.  The medical groups, hospitals and other payers will implement the EHR systems required to collect data relevant to those measures.  There is an opportunity for healthcare manufacturers to play a role in connecting the two endpoints.  That is, healthcare manufacturers can develop algorithms for analyzing the data so that the results comply in an appropriate way with the outcomes measures that Medicare and Medicaid establish.

Today, retail pharmacies are a secondary or tertiary contact for those drug companies and medical device suppliers that distribute product through this channel.  The growing importance of MTM programs will increase the importance of retail pharmacies for select disease states (eg, hypertension, dyslipidemia, diabetes).   Healthcare manufacturers will need to develop programs at the corporate levels of the retail pharmacy companies as well as the neighborhood pharmacies to educate the pharmacists and encourage and support the appropriate implementation of the MTM programs.  More effective MTM programs will encourage therapy compliance and higher quality care.

As the above evaluation demonstrates, the ARRA and PPACA will provide numerous new avenues for healthcare manufacturers to work with physicians, hospitals and other providers to drive an improved level of care.  The time is now to plan for these initiatives and start their development.

Price controls — Do they ever work?

A proposed rule from CMS would reduce physicians’ Medicare payments by 6.1% starting Jan. 1, 2011. That is in addition to a projected 23.5% cut scheduled to take effect Dec. 1, 2010 unless Congress changes it.

The sustainable growth-rate formula (SGR) formula has called for payment cuts to doctors for years, with Congress stepping in intermittently to stop the reductions.  The latest intervention came on June 24, 2010 when the House replaced a 21.2% Medicare physician pay cut with a 2.2% raise through November.  Unless, Congress acts by the end of November, the 2.2% raise will be eliminated and the 21.2% cut will be implemented, resulting in a 23.5% reduction in current reimbursement rates.

Add in the potential 6.1% reduction scheduled for January 2011 and physicians face the potential of a nearly 30% SGR cut.

Do we need academic studies and journalistic investigations to tell us how doctors will respond?  Of course not.  We all can guess what will happen.  However, the studies and investigations are available.  As reported in the New York Times and elsewhere, physicians will reduce the number of Medicare patients they see.  As reported in a new study in Health Affairs, doctors will respond by simply treating more patients or ordering more tests and procedures for existing patients to make up for the lost income.  Cost cuts for Medicare will not yield a commensurate decrease in Medicare spending.  Also, there will be a growth in spending for commercial and Medicaid patients.  An onward and upward goes the healthcare cost spiral.

The solution is for cost cutting to be part of a broader strategy for healthcare cost management.  Only a partial list of strategies include:

• Incentives that encourage patients to better manage their own health (eg, reductions in healthcare premiums for weight loss; value-based insurance design)
• Financial incentives for physicians based on patient outcomes
• Better management of the healthcare services and resources available to patients (eg, patient centered medical homes)
• Evidence-based increases or reductions in reimbursement for select healthcare services based on the value they deliver in terms of outcomes
• Reductions in administrative requirements
• Better sharing of healthcare information between providers
• Development of cost-effective treatment algorithms and incentives for physicians to comply with them

Taking cost out of the healthcare system will affect provider income.  However, the reduction in income does not need to translate dollar-for-dollar in a reduction in profitability.  More efficiently using our healthcare system will yield a reduction in the infrastructure required to deliver healthcare.  For example, a reduction in the administrative burden for a doctor or a hospital can be accompanied by a reduction in staff.   Therefore, reductions in services are more palatable than simple cuts in reimbursement.

A thoughtful and coordinated strategy for reducing the use of our healthcare system that improves outcomes is the critical next step.  Hodge-podge cost cuts by government and private payers only leads to more ill effects.  As illustrated above, such attempts actually lead to increases in reimbursement.  This is where the Federal administration needs to focus its efforts and provide leadership. 

Many of us look today at China and wonder about the wisdom of state capitalism.  Under this system, authoritarian governments use markets “to create wealth that can be directed as political officials see fit.” The ultimate motive, he continues, “is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).” Under state capitalism, market enterprises exist to earn money to finance the ruling class. (Credits to  “The End of the Free Market” by Ian Bremmer.)  In the United States’ healthcare industry, democratic capitalism has led to chaos. 

In 2009 and 2010, we saw how the country reacts to a state takeover of the healthcare industry.  I am not arguing for a complete takeover.  However, a step in that direction where the administration works with healthcare industry to develop a coordinated strategy seems wise and appropriate.  Once the plan is developed, we can leave it to the free markets to implement it.  Without leadership, chaos and cost rises that significantly hinder the health of business, large and small, will continue.