Author: Brian Klepper
Health care’s Great Resignation will cost employers
Published in BenefitsPro on 4/13/2022
Brian Klepper, Jeffrey Hogan and John Rodis
Four months ago, a Morning Consult poll reported that, since February 2020, almost one in five (18%) health care workers had quit their jobs due to the pandemic. Then a USA Today/Ipsos Poll found that 23% of health care workers say they’re likely to leave health care soon.
As it turns out, these figures are misleading. Relatively few health care workers have left the industry entirely. Most who have moved have gone to higher-paying health care jobs. A recent Altarum Institute analysis found that hospitals’ workforces fell only 1.8% since February 2020. A December Washington Post article reports that hospital staff nurses are tripling their hourly rate by taking travel gigs with short-staffed health care organizations. A just-out New Jersey Hospital Association survey estimated that its members’ 2021 spending for agency and travel staffing grew three-fold over the previous year, consuming an additional $450 million.
In other words, the COVID-induced provider labor shortage has been a windfall for health care workers willing to take advantage of new opportunities. But it has added significant costs for hospitals, medical groups, nursing homes and other providers that must pay more to recruit replacements and to keep existing employees from straying. It’s clear that this problem is the tip of an iceberg; COVID has saddled health care organizations with all kinds of expensive new problems.
These unexpected costs could have far-reaching impacts on health care’s structure and function. Employers have become accustomed to (and have been frustrated by) health coverage premium inflation that, over the last decade, has relentlessly grown 47%, more than twice as fast as general inflation (23%).
It is reasonable to anticipate that, in the near future, providers will demand rate hikes to cover their increased overhead. These new financial burdens will fall hardest on the employers and unions that pay for a sizable portion of US health care coverage.
Many employers may be unwilling or unable to absorb these new costs. High-margin businesses, like those in the technology and finance sectors, may see the increases as inconsequential. But most employers are experiencing cost increases throughout their supply chains. Many are struggling, and a new health care cost demand is likely to raise their collective ire. Rank and file businesses and governmental units may see the increase as a threat to their viability, and employers in low margin sectors could be forced to choose between financial stability or paying a good deal more than expected for health coverage. Some will opt out.
A sizable drop in health coverage would reverberate into several notable impacts. Of course, access to health care for employees and their families would deteriorate. Providers will find it costly to onboard new recruits into organizational operations, and to re-establish patient relationships that have been rattled by staffing changes. Emergency department utilization would spike with patients seeking immediate care, while emergency service revenues would tumble. Now more reliant on self-paying patients, providers’ elective procedures and revenues would fall and the health care labor market would loosen. The rhythm of the provider community’s businesses would be utterly disrupted.
At the same time, the health care coverage market might give new strength to the torrent of new value-focused vendors that offer better health outcomes and/or lower cost in high-value niches—e.g., management of musculoskeletal care, chronic conditions, maternity care, specialty drugs—than most currently available care. Many high-value companies like these have, until now, found themselves blocked by the major legacy players that make more if health care costs more.
As costs reach a tipping point, employer purchasers will most likely determine health care’s shape going forward. To find affordable coverage for their employees and their families, purchasers may resort to going around their brokers’ and health plans’ offerings, and being more receptive to direct contracts with proven high-value health solutions. That could foil the excessive care and cost practices that have dominated American health care for decades.
Health care’s dysfunctions are so deeply embedded in both policy and the marketplace that achieving meaningful reform is all but impossible. A powerful and sudden financial nudge could loosen the grip of health care’s dominant players, offering purchasers the opportunity to buy health care differently, favoring approaches that consistently deliver better results, and allowing a more competitive health care marketplace to quickly take shape.
There is no question that the scenario we’ve described would exact a temporary but difficult toll from every American individual and business. But if it forces a more rational, accountable and value-based reorganization of US health care for the long term, the COVID pandemic, painful as it has been, might just be the catalyst required to accelerate the movement to value.
Brian Klepper, PhD, Jeffrey Hogan and John Rodis, MD each lead independent consulting practices focused on health care value and high performance.
Where Health Care Value Can Lead
Posted on The Health Care Blog on March 15, 2022
By BRIAN KLEPPER
It seems inevitable that, in the near future, an innovative health care organization – Let’s call it The Platform – is going to seize the market opportunity of broader value. It will cobble together the pieces, and demonstrate to organizational purchasers that it consistently delivers better health outcomes at significantly lower cost than previously has been available.
To manage risk and drive performance, The Platform will embrace the best healthcare management lessons of the past decades: risk identification through data monitoring and analytics, driving the right care, quality management, care navigation and coordination, patient engagement, shared decision-making, and other mission-critical health care management approaches. It will practice care that is grounded in data and science, and is outcomes-accountable.
But The Platform will also appreciate that a few specialty vendors have developed deep expertise in dealing with clinical or financial risk in high value niches – where health care’s money is – like management of musculoskeletal care, chronic disease, maternity, surgeries, high performing providers, or specialty drugs. It will understand that it often makes sense to partner with experts who can prove and guarantee high performance rather than trying to learn to achieve high performance within each niche. The Platform also will realize that simplicity is a virtue, and that bundling specialized services under one organizational umbrella is easier for health plan sponsors to manage and for patients to negotiate than an array of individual arrangements.
The Platform and organizations like it will spark the interest of self-insured employers and unions, because they’re at risk, and likely to be persuaded by a better deal (and particularly one with guarantees). But they’ll also find reception by other organizations that carry risk or are responsible for managing care and cost: e.g., stop-loss carriers, captives, fully insured health plans, Medicare Advantage plans, Managed Medicaid plans, third party administrators, and advanced primary care organizations. If The Platform demonstrates better performance than its conventional competitors, it might scale rapidly, sweeping the market. Traditional healthcare vendors might find themselves in a more competitive marketplace than they’ve experienced in past decades.
The key here is that, in the US, patients and those who pay for health care deeply want a better way. Most health care organizations pay only modest attention to quality and are holding on to pricing that reflects what the market will bear and that is unrelated to cost, though excellent care can be delivered for far less. The difference between what is and what realistically could be is large enough that an opportunity exists for business to switch to upstarts representing stronger value. What’s needed is an integration platform that facilitates an easy-to-use comprehensive framework of high performing, best-in-class specialty services.
In the health care value-focused community, many organizations have demonstrated that they reliably produce better results, particularly in high value niches. Of course, most vendor organizations are eager to be publicly recognized as “high performance” vendors. The trick is competently identifying those that consistently deliver.
It’s reasonable to believe that a robust ecosystem of risk reduction mechanisms can result in far better health outcomes while conservatively reducing total health spending by 25 percent or more. That said, to my knowledge, no one has yet brought together all these approaches within a single health management organization. Most health plans make more if health care costs more, so they have not yet shown an interest in offering lower cost health care (without compromising quality). But value-based arrangements are finally getting traction and purchaser interest in value is accelerating. The fact that better results are occurring in the market means that high performing approaches will continue to evolve and succeed.
High value models are already being developed by advanced primary care firms like Marathon Health and CareATC, and retailers like Amazon Care and Walmart Health. These and similar efforts could hugely disrupt the current US health system by moderating the excessive services and costs that the legacy health care industry has come to depend on. Going the next step in health care management by assembling and scaling the powerful capabilities of high performers is an opportunity waiting to be exploited.
The fundamental tension within US healthcare is whether our health system will strive to optimize quality, cost and value, or strive to optimize revenues and margins. Responses to this question determine the approaches that characterize every aspect of health care, whether it’s the scientific evidence that guides a protocol, the interoperability of an electronic health record, or whether patients have access to information that can help them make better care choices.
For decades, the industry’s profiteering has dominated health care. The question now is whether purchasers will favor high value, turning the tide and remaking our health system in ways more consistent with the welfare of healthcare’s patients and purchasers.
Brian Klepper, PhD is a healthcare analyst and Principal of Worksite Health Advisors.
Make Patient Care About Value, Not Volume
Published May 8, 2021 in MedPage Today
Brian Klepper and Jeff Hogan
After the coronavirus pandemic and our stalled national economy, it is America’s runaway, intransigent, and immensely influential healthcare system that most urgently begs for the Biden administration’s close attention. The excesses that characterize U.S. healthcare — stratospheric unit pricing and wildly exorbitant overtreatment — are deeply entrenched, and make it an increasingly unaffordable burden; one that threatens our national economic security and our global competitive standing, diverting precious resources from other vital needs like education, transportation, and infrastructure.
For decades, healthcare inflation has risen at a multiple of general inflation so consistently that we now assume that’s the way it should be. In 2020, we spent about $11,100 per person on healthcare, slightly more than double the average spend in other developed countries. CMS predicts that by 2027, our annual healthcare spending will rise to about $17,500 per year per person or about a 60% increase over seven years. It is not just that much of American healthcare is inefficient; it’s that every part of the industry — supply chain, health information technology, care delivery, and finance — now depends on excessive care and costs to maintain the spectacular financial performance they have become accustomed to.
At the heart of America’s healthcare quality and cost crises is the corrosive way we pay for care. Decades of fee-for-service (FFS) reimbursement — paying piecemeal for healthcare procedures rather than for care bundles and their outcomes — have made it easy and lucrative to deliver more care rather than the right care. FFS pays for providing services, independent of outcome, which has inhibited innovation and protected the status quo, distorting our care and cost patterns and rendering them distinctly different than those in other developed countries.
In contrast, value-focused payment arrangements typically put providers at risk for their clinical and financial outcomes, and reward higher performance. These arrangements are a desirable approach from the purchaser’s perspective since paying for results disincentivizes unnecessary or poor quality care. For healthcare organizations to succeed with value-based payments, they typically must innovate, managing both clinical and financial processes. An incentive structure that rewards innovation and high performance would be transformative, rapidly revolutionizing virtually all of U.S. healthcare.
Much of the healthcare industry sees moving to value as a disastrous path that will reduce revenues and profitability. Despite a great deal of lip service acknowledging the need for a value-focus and more than a decade after the campaign for alternative payment models (APMs) began to get traction in the national conversation, the industry has dragged its feet and FFS still overwhelmingly dominates the payment landscape. In Xtelligent Healthcare Media’s recent Value-Based Care Assessment survey, half of the respondents (including 70% of physician practices) reported that more than 75% of their organizations’ revenues still come from FFS arrangements.
In other words, U.S. healthcare’s primary challenge is to overcome the health industry’s opposition and move healthcare’s incentive frame from volume to value.
One piece of good news is that healthcare clinical and financial management is experiencing a renaissance. Hundreds of new firms have emerged in the past several years that deliver measurably better health outcomes and/or lower costs than conventional approaches, particularly in high-value niches. Exciting new high-performance companies are gaining traction in musculoskeletal management, chronic disease management, specialty referral management, drug management, women’s health management, cancer management, high-acuity mental health management, and other costly areas.
Other good news — if it can be called that — is that purchasers’ restlessness has been exacerbated by the pandemic. Public entities’ tax bases have shrunk while healthcare costs have continued to rise. The big employers have awakened and employers of all sizes are hurting. These organizations simply don’t have the discretion or the resources to pay for unaccountable care. Many are finally receptive to direct contracting with proven non-conventional solutions that their health plan administrators, who make more if healthcare costs more, refuse to offer.
So, the future of U.S. healthcare is at a precarious moment. If campaign priorities were any indication, the Biden administration’s healthcare reform proposals will no doubt focus on finding better, more equitable ways to cope with healthcare’s existing structure. For their reform aspirations to be meaningful, though, that healthcare team must extend its reach and seek solutions that can bring U.S. healthcare back into balance as a core function that supports the American people.
Providers emerging from COVID-19 disruptions have faced an existential threat due to their reliance on volume-based reimbursements. The administration could sponsor programs that support greater organizational stability, as well as superior, predictable clinical and financial results. They could accelerate the drive to value and encourage providers to embrace risk, transforming their practices by treating patients as consumers and by integrating virtual care, behavioral health, and patient engagement into their platforms. The CMS Innovation Center Direct Contracting Initiative for primary care offers an example of a progressive risk-path supply chain model that incorporates these elements. It gives provider groups the opportunity to become dedicated to specific patients by using virtual capabilities, which will highlight the benefits of using technology for access and care coordination.
America should resist solutions that require even more money to pay for the current system. Instead, it should establish a process that methodically gets U.S. healthcare back to a system that serves rather than preys on its people. Reforms like this will require committing to a long-term plan, rewarding delivery of the right, most efficient care, and encouraging care and cost management processes that are accountable and predictable for patients and purchasers.
Dramatically better, less costly healthcare is well within reach of the American people. Getting there, though, will require a firm commitment to a value-focused health system payment structure that encourages innovation and high performance care. This is the way out of our current healthcare debacle.
Brian Klepper, PhD, is a healthcare analyst and principal of Worksite Health Advisors in Charlotte, North Carolina. Jeffrey Hogan is a health benefits advisor and principal of Upside Health Advisors in Farmington, Connecticut.
The Rise of PBM Purchaser Advocacy: A Case Study
Published in America’s Benefit Specialist on 4/01/2021.
Employers now devote about 20 percent of their health plans’ total spend to drugs and, for many employers, that figure can be as high as 30 percent or more. The prescription drug supply chain is intentionally complex and opaque, which renders it inscrutable to all but the small group of professionals long seasoned in that niche. Even though it’s well known to be highly wasteful, few organizational purchasers have been able to implement tactics that force greater efficiencies in this part of health care.
Pharmacy Benefit Management (PBMs) firms are increasingly influential components of the US drug machinery, managing prescription drug benefits for health plans, employers, and other payers. Maneuvering behind the scenes, they dictate total drug costs for insurers, define which medications patients’ will have access to, and determine how much pharmacies are paid. These roles have made them powerful; the top three PBMs – Express Scripts, CVS, and Optum Rx – are behemoths that control some 75% of the US PBM market.
The top PBMs have also come to generate higher revenues and profits than major insurers. For example, in 2017 Aetna reported revenue of $60.5 billion and profits of $1.9 billion. In the same year, CVS’s pharmacy benefit management business alone generated $130.6 billion in revenue and profits of $4.8 billion.
The interdependence between health plans and PBMs has also prompted stronger business relationships between the players, evidenced by Aetna’s recent merger with CVS and Cigna’s acquisition of Express Scripts. Optum Rx is a subsidiary of United Health Group.
Their financial strength and role in the marketplace have made the dominant PBM business models seemingly invincible. But there are chinks in their armor: the well-documented sleight-of-hand mechanisms that drive their extraordinary profitability numbers at the ever-increasing expense of American business. Withholding manufacturers’ rebates, manipulating formularies to optimize the profitability of specific drugs, adding a hefty margin to and hiding the true cost of each drug, failing to disclose account details, and many other suspect business practices now define the mainstream PBMs. It’s not unreasonable to argue that traditional PBMs represent an antiquated model, a market vacuum waiting to be filled.
As was inevitable, a new crop of transparent, progressive PBMs is emerging in the marketplace – e.g., Capital Rx, Costco Health Solutions, Flipt Rx, Mako Rx, Veracity Rx – and are focused on driving lower costs and better health outcomes by highlighting fixes to flawed PBM approaches. Below, I describe the approaches of one innovator, Flipt Rx, to driving better performance.
An interesting backstory provides some context. Flipt was founded by Aaron Greenblatt, whose family has owned a generic drug manufacturing business, G&W Laboratories, for more than a century. Reviewing G&W’s own employee health plan, Dr. Greenblatt realized that the PBM
managing their pharmacy benefit was charging G&W as much as 1,600 percent of what they had sold their own drugs for into the wholesale market and directly to pharmacies. That raised the question of where the money was going and became the impetus for building a better model. Starting from scratch, they designed a PBM that took advantage of cleaner administrative approaches and leading-edge engagement and technological capabilities. Here are some of the structural elements baked into Flipt, an anti-PBM PBM.
- Most PBM-employer agreements are intensely lengthy – 300 pages is common – complicated and loaded with ambiguous and unfavorable terms for the purchaser. Flipt uses a straightforward contract – 17 pages – that is clear and easily understood.
- Flipt does not use “spread pricing” and makes no money on the drugs. Instead, it charges a modest per member per month (PMPM) administrative fee.
- Flipt passes all rebates through to its customers and provides reporting that makes those transactions transparent.
- Flipt has developed a “smart adjudication” capability that reduces administrative load and streamlines fulfillment. For example, its adjudication system looks for evidence in the enrollee’s medical or lab claims that meet the criteria for prior authorization. It should soon be able to extend that function by incorporating member-reported outcomes data as a key element of the enrollee’s file.
- Flipt invites audits by its clients.
- Flipt uses an evidence-based formulary. It relies on independent third-party assessments from sources like The Institute for Clinical and Economic Review (ICER) for fairly market-priced medications.
- Flipt recommends that its clients/health plan sponsors use value-based benefit designs. This means that Flipt encourages customization of the formulary to include high-value medications, and offers its plan sponsors the option to cover, exclude, or increase member cost share for low-value drugs.
- High tech/high touch approaches make smarter drug purchases easy and are core to Flipt’s model. Enrollees can download a robust and popular mobile app, Apple or Android, that lists the pricing of each prescribed drug at pharmacies in the enrollee’s region, as well as what that individual’s costs will be, based on his/her health plan design.
- The app texts the enrollee if a therapeutic equivalent drug – that is, a different drug that produces the same or comparable clinical impact – is available at a lower cost. If the enrollee chooses that option, Flipt will facilitate the prescription change with the physician. This texting function lets members proactively find lower-cost alternative drugs prior to the pharmacy filling the prescription.
- A concierge function is equally foundational. Sometimes members need help moving between pharmacies or working with their physicians to change medications. So Flipt offers an easily accessible concierge support team to help members facilitate these key transactions.
- Flipt will guarantee PMPM savings with plan sponsors with 5,000+ members.
Flipt claims that its clients typically realize drug savings of 20-30 percent, which should translate to a total health plan cost reduction of 4-9 percent. That’s a strong warranty, especially for a company that guarantees performance.
But the larger point is that Flipt represents a fresh and powerful new approach to prescription drug management. Like its few like-minded competitors, it brings together an array of approaches that engender employer trust and enhance the drug acquisition experience for both the enrollee and the employer. Its business model drives high-value drug choices, which improves health outcomes and lowers costs. By incorporating third-party guidance, it conveys to purchasers that its practices are founded in science.
In short, this new crop of pass-through, transparent vendors represents a new paradigm, a high-performance drug management alternative, that merits the close inspection of benefits managers and benefits advisors.
Brian Klepper is a health care analyst and advisor focused on identifying, vetting, and connecting high-performance health care vendors with organizations that hold health care clinical and financial risk.
The MedsEngine: Chronic Condition Management Takes a Leap
Brian Klepper and John Rodis
Posted Mar 7, 2021 on The Doctor Weighs In
Now and then, a solution emerges for a large, seemingly intractable problem. In some cases the fix is straightforward, grounded in a fresh evaluation of well-understood circumstances. But more often it’s born from a sustained, in-depth effort that permits incremental successes and takes time to achieve a fully capable answer. MedsEngine, described below, is a good example.
There is little question that better management of major chronic conditions – like hypertension, diabetes, heart failure and asthma – represents our most important health care outpatient improvement opportunity. In 2016, chronic conditions and the downstream health and productivity events they generate – heart attacks, strokes, amputations, emergency visits, hospital admissions, absenteeism – consumed a breathtakingly large portion of our national economic output, about one-fifth of US Gross Domestic Product.
Worse, our efforts to manage chronic conditions have yielded despairingly weak results. Performance can be measured by the percentage of cases that are “controlled,” meaning patients’ metrics are within acceptable limits. Currently only 44% of Americans with hypertension are controlled. Fewer than 10% of diabetics are controlled. Better control would translate to safer patients, with better health outcomes and lower costs.
The standard response to poor results has been to assign blame. Patients are lax about taking their meds. Doctors don’t give patients the attention they need. Chronic conditions are simply too resistant to control. With these assumptions as a backdrop, most interventions aim to change patient behavior, typically with little success.
But these reactions ignore the complex structure of chronic diseases and what it takes to manage that complexity. As it turns out, two elements are necessary for successful chronic condition management. First, physicians must prescribe the right medications for each patient, and, second, patients must be engaged, participating in therapy and self-care. Let’s put aside the second, on the assumption that the better health outcomes associated with the right drugs are a reward that should easily win patients’ buy-in.
Prescribing the most appropriate drugs is an obvious goal, but more complicated than it seems due to the number of variables involved in choosing them. So consider, for example, that there are five distinct causes for hypertension, each with its own physiologic configuration. At least 28 medical conditions require consideration in hypertension therapy. Twelve different drug classes – with multiple drugs within each class – apply to hypertension management, though most physicians are familiar with and adhere to, at most, four or five. And then there are dozens of different demographic risk groups, each with slightly different physiologic sensibilities. There are other variables as well, including the effect of these medications on co-morbidities, as well as the drug-drug interactions.
These dynamics present an overwhelming management challenge, easily exceeding a clinician’s capacity to competently match an individual patient’s details to a treatment pathway. Choosing the correct medications for a patient’s chronic condition can be a process that literally requires sifting through millions of permutations. Complexity inevitably hits a ceiling, with the upshot that physicians often prescribe drugs and/or dosages that are not the best fit for the patient.
But machines may allow us to juggle many more variables competently and reliably. That has been the vision of MediSync, a firm that, in other parts of its business, develops management solutions for large primary care and multi-specialty physician practices. It has taken two decades to sort out next steps and do the work that brought MedsEngine to fruition.
What makes it worth considering the sheer complexity involved in an ambitious project like this? First is science. Driven by artificial intelligence, the MedsEngine coding had to reflect our current understanding of each chronic disease’s physiology and pharmacology, and the relevant interactions occurring among and between them. It had to pull patient information from the electronic health record to determine the specific physiology involved and the medications best suited to that. But it also required being transparent about the sources of each part of the science, so that physicians and other clinicians can trust and buy into its credibility.
The proof is in the data. The first table below shows the percentage of patients with a specific condition who are adequately controlled. The second table shows cost and savings data across different populations.
|Chronic Disease||US Avg||MedsEngine|
|Diabetes (3 Way)||<10%||57%|
|Benchmark/Population||MedsEngine (Reduction)||PMPY Reduction|
|Regional Total Cost PMPY (Risk Adjusted)||$5,037||$3,732 (26%)|
|Medicaid (2017)||11,515 Patients||$4.4 Million||$382.11|
|Medicare Advantage (2017)||942 Patients||$1.3 Million||$1,380.04|
This performance has been validated and recognized by credible third party groups. PriMed Physicians, a primary care group in Dayton, OH, was one of two practices that piloted the MedsEngine. The medical group practice association, AMGA, ranked PriMed best in the US at achieving blood pressure outcomes ≤139/89, with 95% of their hypertension population under control. Similarly, the Centers for Disease Control and Prevention certified PriMed as first in their Million Hearts awards program and as the only large group nationally to exceed 90% of hypertension patients under control.
The same technology drove PriMed’s control of Type 2 diabetes, which was also recognized by AMGA as first among US physician groups, achieving simultaneous control of all three major Type 2 diabetes markers: blood pressure, LDL and HbA1c.
Relatively few primary care physicians currently track their success at controlling chronic conditions, small wonder when the results have been so lackluster. But the ability to predictably control these major chronic diseases is a significant advance, with important clinical and financial impacts for the larger health system. A system that allows providers to reliably achieve performance targets not only enhances patient care and value, but allows those providers to guarantee health outcomes and savings, making them far more desirable in a value-focused marketplace. As a result, MedsEngine can serve as the foundation for care that is more evidence-based, predictable and accountable.
MedsEngine’s AI-driven platform capabilities have already been established for three major chronic conditions, but can reasonably extend to ten or so other conditions. Mark DeRubeis, CEO of Premier Physicians in Pittsburgh, the other MedsEngine pilot site, summed up the promise represented by this approach: “The MedsEngine offers the opportunity for exponential improvement in chronic care management. It enables you to get the diagnosis right the first time, to prescribe the right medicine the first time. If you look at the alternative to that, it may take two or three or four times the effort, and this enables you to cut all of that out and gain an efficiency that didn’t exist prior.”
MedsEngine is the first of what will almost certainly be a flood of new digital tools that facilitate far more effective care. But make no mistake, building these tools well is as complicated as the problems they seek to address. Fortunately, the rewards, in terms of better health and lower costs, are likely to be equally powerful.
Brian Klepper, PhD is a health care analyst focused on proven high performing health care innovators. John F. Rodis, MD was formerly President of Saint Francis Hospital in Hartford, CT.
Tying Health Care Investment to Performance
Oct 16, 2020• 0
By BRIAN KLEPPER and JEFFREY HOGAN
GoodRx’s planned initial public offering recently made the news, notable because the company, launched in 2011, has been profitable since 2016. Evidently, it’s become unfashionable for investors to demand proof of performance, so GoodRx’s results shone like a beacon. By contrast, most health care firms seeking funding convey bold aspirations and earnest promises. Investors throw in with them and hope for the best.
But few new entrants seem to do the necessary advanced due diligence to assess exactly where and how their product, service or innovation should be positioned in the health care ecosystem to derive maximum value. Ironically, COVID has intensified and highlighted the fragility of the health care ecosystem, as well as the greater disruption opportunities available to new entrants.
Health care has become irresistible to investors, the outgrowth of the industry’s dominant players’ spectacular financial performance. Over the past 45 quarters, for example, major health plan stock prices have grown 4-6 percent per quarter, 1.2-2.2 times the growth rates of DJI and S&P (See the table below). Investors hope to either 1) capitalize on the health care’s ongoing culture of overtreatment and egregious pricing, or 2) support and share in the savings associated with rightsizing care and cost.
The result has been a torrent of investment. Mercom Capital reports that, in the last decade, investors have poured $50 billion into some 5,000 digital health startups, each one no doubt guaranteeing wholesale health system disruption that never arrived.
There are a couple of messages here. In the main, few health care startups are constituted to thrive. And apparently, few investors critically evaluate a venture’s broader design elements to gauge its chances for success. Many startups have great ideas and some even operationally execute those ideas well, but gaining traction in the health care marketplace requires much more than that. A viable venture must also integrate with its clients’ workflows, and connect with existing players in the larger health care management ecosystem.
There’s a huge opportunity to disrupt the status quo, but it requires a thoughtful, comprehensive design. As Michael Porter pointed out, “If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful.”
Purchasers of health care risk management services – e.g., employers, worksite clinic firms, captive insurance arrangements, stop loss carriers, provider risk managers – exist in a high noise-to-signal environment and are constantly besieged by vendors. If they are value-focused, the question is whether the venture can quickly differentiate by demonstrating consistently superior results, meaning better health outcomes and/or lower costs than usual approaches. Assuming they can do that, there are more hurdles to clear to have a shot. For example:
- Is the venture aimed at the right audience? If the venture achieves lower costs with equal or better outcomes, it may be wholly uninteresting to health plans that are still volume-based, that make more if health care costs more. Lower costs here likely translate to lower net revenues, earnings, stock price and market cap, results that health plans may avoid at all costs. But value-focused purchasers may be inclined to take notice.
- Potential clients want to know about other clients’ experience. Are there testimonials from people you can talk with, attesting to a program’s operational excellence and vendor-client warmth?
- Can the program scale, delivering consistent results independent of geographic location or the population’s demographics?
- Are the services sticky, remaining effective over time? Can they provide ongoing, predictable management of clinical or financial risk?
- Can clients come quickly up to speed on the services? Does the vendor provide training that facilitates ease of use with the program?
- Are all key constituencies aware of the program. If a physician-based program improves health outcomes and reduces cost, are provider risk managers aware of it and demanding its use?
- Do the processes integrate seamlessly into the clients’ existing workflows? If, for example, a new physician tool is on a different platform than the electronic health record, it may require unaffordable additional steps and will almost certainly fail.
- Does the program exchange information easily with other critical management vendors? Is it mindful that it must fit into a broader existing management structure?
- Is the vendor willing to financially guarantee the achievement of performance targets? Doing so puts its money where their mouth is, conveying confidence in its ability to deliver.
Some well-funded ventures have used marketing bluster to successfully convince the market that they’re excellent – see Al Lewis’ scathing review of Livongo – but in a health care market that increasingly considers value, purchasers are becoming more discriminating. In addition to performance data, many want to see independent, third party validation, like that provided by The Validation Institute, affirming that the approach in question works.
Livongo and others are going directly to employers with their services, and desperate employers seem ready to listen. Other unique direct disruptors like Vera Whole Health and Integrated Musculoskeletal Care offer employers bonafide, at-risk solutions that supplant existing fee-for-service provider payment methods. They often use hybrid models that take responsibility for specific patients, and extend in-person and virtual primary care with the full functionality of advanced primary care. This agnostic model can steer to warranted episodes-of-care bundles for the biggest programmatic spend drivers.
True innovation is exploding now, if you can spot the right firms. Companies like Dispatch Health are offering a quality at home urgent care solution that threatens brick and mortar urgent care. MediSync’s artificial intelligence-driven tool suite is revolutionizing chronic care management, which represents 75 percent of health care spend. ConferMed offers a national virtual specialty network that improves outcomes and drives out unnecessary care and cost.
Employers and at-risk organizations are increasingly abandoning traditional fee-for-service health care models in favor of value-based solutions, with payment systems that demand accountability and predictability. New ventures have a huge opportunity to succeed, but only if they have appropriately interpreted all of their opportunities in this new landscape. Most have not.
Brian Klepper is a health care analyst and Principal of Worksite Health Advisors, in Charlotte, NC.
Jeffrey Hogan is a health benefits advisor and Principal of Upside Health Advisors in Farmington, CT.
Will virtual doctor visits support healthcare’s drive to value?
Published in Employee Benefit News on August 3, 2020.
By Jeffrey Hogan and Brian Klepper
In the early weeks of the pandemic, COVID-19’s most visible impact on day-to-day healthcare came in the industry’s near overnight embrace of virtual visits. The threat of rampant infection alarmed regulators and deeply frightened patients and clinicians. So with temporarily loosened rules, primary and specialty care practices quickly pivoted to telehealth tools, adjusting their care patterns to the new frame.
The speed and scale of the transformation was breathtaking. In the week ending April 18, almost 1.3 million Medicare members received telehealth services, compared to just 11,000 six weeks before. That was a growth of 11,718%, or almost 120-fold.
In a real and profound way, telehealth saved the day, providing an alternative to healthcare’s ossified patient visit structure. Snatched from The Locker of Little-Used Tricks, many clinicians discovered they could use virtual care to connect with and solve many problems of patients who were hiding in their homes. They got on-the-job training in the robust and often lesser known capabilities of remote visits — like specialty care coordination — as well as the technology’s clear limitations when a clinician can’t lay hands on a patient.
The sudden move to virtual visits didn’t just provide a new care pathway. It also revealed that under certain frequently occurring circumstances, telehealth can be highly effective, efficient and dramatically more convenient for patients. Deployed properly and mindful that many health issues require close, hands-on examination, virtual care is here to stay. Ryan Schmid, CEO of the highly regarded worksite clinic firm, Vera Whole Health, maintains that 80-85% of primary care visits can be appropriately handled virtually. The figure for specialty care is probably somewhat lower, but still significant.
Telehealth’s validation as a highly utilitarian clinical tool during the early months of the pandemic confirmed the need to elevate its logistical stature, integrating and optimizing it — in terms of regulation, infrastructure requirements and finance — into the larger health services ecosystem. That integration must fully appreciate virtual care’s potential and ensure that capabilities, like interoperability, are developed to support an ever-expanding and ever more useful platform.
The financing model that can best drive telehealth’s application will be critical. Ideally, providers should be incentivized through at-risk arrangements, like capitation, to manage most cost-effectively, while ensuring through data that quality remains appropriate. Almost certainly, CMS’ policies on this topic will specify an approach that the commercial sector will follow. It is not yet clear whether the major health plans organizations — e.g., United, Anthem, CIGNA, Aetna, Humana — are in favor of the value that virtual visits can deliver, and will structure payment that fosters telehealth’s ongoing growth and stability. The approaches that both public and private payers settle on are hugely important and will define virtual care’s influence for years to come.
On June 30, 340 organizations representing the full range of health care stakeholders, submitted a letter to Congress asking for permanent policy changes that will allow Americans to access telehealth services past the COVID-19 pandemic. The decisions made in the next few months about the shape of telehealth have momentous implications, particularly for the healthcare value movement. While it does not solve all problems, virtual care offers a highly flexible, low resource approach that, with many patients, can deliver a positive care experience with equal or better quality at lower cost. It represents an important arrow in health purchasers’ value quiver, moving our health system in the right direction.
Brian Klepper is Principal, Worksite Health Advisors. Jeffrey Hogan is Principal of Upside Health Advisors.
Health Plans Need to Go Farther To Get Us Through the COVID-19 Crisis. Employers Can Encourage Their Cooperation.
Posted on The Health Care Blog on Apr 9, 2020
By JEFFREY HOGAN and BRIAN KLEPPER
Among its less appreciated but more worrisome impacts, COVID-19 threatens to destabilize America’s health care provider infrastructure. Patients have largely been relegated to sheltering at home and, to avoid infection, are avoiding in-person clinical visits. The revenues associated with traditional physician office visits have been curtailed. Telehealth capabilities are gradually coming online, but are often still immature. The concern is that many practices will be financially unable to keep the doors open, compromising access and healthy physician-patient relationships.
Health plans have become health care’s bankers, controlling the funding that fuels larger care processes. Health insurance companies and health plan administrators rely on networks of doctors and hospitals to deliver health care services. They also rely on premium payments from employers to administer and pay for health care. In conventional fee-for-service, pay as you go arrangements, providers are paid after they have delivered care services. The stability of this approach, of course, assumes an unhindered flow of patients receiving care.
When the stability of that flow is disrupted, as it has been with COVID-19, physician practices become vulnerable. Solving that vulnerability would give members access to critical services – primary care, specialty care, urgent care and pharmacy coordination – during this epidemic. Without these resources, members will be forced to turn to overburdened hospitals, where they risk increased COVID-19 exposure.
To keep health care services readily available through this crisis and beyond, we need health plans to provide bridge financing, advancing operating funding for 120 days and paying for telemedicine at the same rate as in-person visits. Health payers can easily estimate payments to providers and simply front that estimated payment now. Payers wouldn’t exist without providers. Most important, members need access to these providers to get health services in their homes. Stable revenue flow is clearly an all-around win, in the interests of patients, providers, payers and employers.
Many health plans have already been pro-active in helping health care providers through the COVID-19 crisis. For example, United Health Care and Anthem have waived patient co-pays for care associated with COVID-19, a move that will provide considerable relief to employees and their families already under considerable financial stress.
Both Aetna and Anthem have announced that they now pay for telemedicine services at the same rate as in-person services. This is a huge step forward that encourages telemedicine as a first line of defense, limiting potential COVID-19 exposure in physician offices. Many innovative telemedicine companies have now found ways to facilitate services directly with a patient’s own primary care physician (PCP). Further, there are services that allow PCPs caring for patients with comorbidities access to specialists and pharmacists.
Blue Cross of Idaho has gone farther still, by committing to advance 3 months of payment to keep independent primary care physicians financially viable. We need to see more progressive arrangements like this.
If you’re an employer, write or CALL the payer President in your market. Make this personal and encourage your colleagues to do the same. We’re in a crisis, and employees and their families need these better services now. Feel free to copy and paste any of the language included here.
Let’s give our providers the resources they need to treat members remotely, to take providers off the sidelines and to reduce the tremendous pressures on our heroic frontline hospital workers.
Jeffrey Hogan leads Upside Health Advisors, a health care consulting firm in Farmington, CT. Brian Klepper leads Worksite Health Advisors, based in Charlotte, NC.
The Bellwether Year
Posted on Valid Points on 12/18/2019
Brian Klepper and Jeff Hogan
For decades those of us focused on healthcare’s excesses have despaired at the elusiveness of reform, convinced that the problem was intractable. America’s vast healthcare industries – supply chain, health information technology, care delivery and finance – have become the largest and richest business sectors. As health care’s wealth blossomed, so did its influence over policymakers, ensuring that every relevant law and rule was spun in its favor. The rules of the game became rigged, with America’s patients and health care purchasers so disadvantaged by policy that they became pawns within an opaque system that was impervious to change. We’re happy to report, later in this piece, that things are actually changing demonstrably in many areas.
The value movement emerged within this environment over the past five years or so. Hundreds of value-focused firms entered the marketplace, including many that had devised new ways to manage healthcare clinical and financial risk within high value niches. Major health plans tended to dismiss these approaches; they make more if health care costs more, but health management alternatives offering better health outcomes and/or lower costs became increasingly attractive to organizations whose financial performance was tied to the management of health care risk. Self insured employers, stop-loss firms, captives, worksite primary care clinics, Medicare Advantage and Managed Medicaid plans – all these represented opportunities for upstart health care risk managers.
Slowly, over time, more groups took a leap and replaced core health plan services with alternative management offerings – e.g., narrow networks, musculoskeletal care, cardiometabolic care, cancer management, drug management, PBM services – and ultimately even the largest, most powerful legacy health care organizations have felt the need to course correct. Consider the following developments that we’ve seen in 2019.
Last week the Blue Cross and Blue Shield Association (BCBSA) announced that it would establish a national high performance network for its 36 independent Blue organizations. The press release noted that this is BCBSA’s “first new program to serve a nationwide marketplace in 25 years,” which presumably reflects a decision of some gravity. Considering that the Blues have for decades relied on very broad provider networks, it is fair to assume that narrowing those networks will have significant political implications as longstanding provider partners lose access to patients. Also, our understanding is that the Blues have been using the Cave Consulting Group’s Marketbasket system, a capable provider performance profiling tool. Building performance-based networks has been an industry promise for years, but rarely has it been brought to fruition. All in all, the BCBSA announcement is a bow to the traction that value-focused programs are getting in the market, and signals momentous disruption to a model that has been bulletproof for decades.
In a related effort, Optum, a subsidiary of United Health Group, has now acquired 45,000 primary care physicians and acquired or partnered with comprehensive services throughout the care continuum. This initiative is designed to control the whole supply chain, creating care capabilities comprised of their owned and many non-owned provider entities with which they share risk. Their plan requires that Optum adjudicate the risk in this model, which allows them to disrupt traditional fee-for-service hospital-dominated markets. Contracted payers merely help to facilitate claims. Optum is laser focused on getting people out of hospitals and into their contracted providers. It remains to be seen, though, whether these arrangements can perform competitively enough to maintain Optum’s dominant hold on their many markets.
In the purchaser community, the North Carolina State Employee Health Plan, with 727,000 lives, will run out of money in 2023. Led by a charismatic State Treasurer, Dale Folwell, and arguing that hospital bills are often unreasonably high, the plan proposed moving to a Reference-Based Pricing (RBP) scheme, which would have dropped hospital reimbursement about 38 percent. Backed by the Republican legislature, the state’s hospitals closed ranks, accused Folwell of advocating for radical tactics, and refused to agree to his terms.
In the short term, the health plan’s efforts to move to RBP failed. But the health plan budget crisis hasn’t gone away and the problem continues to fester. No doubt Mr. Folwell has realized that there are lots of ways to skin a cat, and that other cost containment approaches – e.g., better managing high cost niches like cancer or cardiometabolic disease, performing claims review, managing drug spend – may be equally effective as RBP and less confrontational.
The Connecticut State Employees’ Health Plan also revised what they’re doing, putting the mechanisms in place to establish a statewide and national Centers of Excellence network that will be available to their 280,000 working and retired families. Working with data from a new statewide All Claims Data Base (ACDB), Remedy Partners, Health Advocate and Carrum Health, will identify the best performing facilities and physicians by procedure or condition category, and contract for those services through more efficient warrantied bundled pricing arrangements.
It is worth appreciating what the steps in North Carolina and Connecticut represent. State Employee Health Plans around the country are typically very large groups with generous benefits. In most cases they have been managed through conventional, often conflicted advisor and health plan relationships that have not done them any favors. Under growing financial duress, these plans have finally determined to leverage their collective purchasing heft and do something different. Those steps entail rejecting some health plan recommendations and often going around conventional arrangements, many of which have been more beneficial to the plan and providers than to the purchaser.
Finally, note the landmark Rand Hospital Transparency Initiative, which highlighted the problem of commercial cost shift, especially at the hospital level, by comparing what Medicare and commercial purchasers (i.e., employers and unions) pay hospitals for the same services.
While the study found tremendous variation in commercial payment, in general, it found that employers pay 241% of what Medicare pays for the same services. For perspective, consider that the Medicare Payment Advisory Commission (MedPAC), an independent agency advising Congress, found that, broadly, Medicare reimburses hospitals at about 10% less than cost. Efficient hospitals lose about 2% on each Medicare patient, while the three-quarters of hospitals that lose money in Medicare lose about 18% on each patient.
Hospitals’ argument for the pricing differential is that they need higher commercial reimbursements to remain afloat. The result, intended or not, has been that non-government payers very handsomely subsidize Medicare’s below-cost reimbursements at a level that is difficult to justify and employers pay that cost.
The RAND study also highlighted for purchasers the huge value of cost and quality transparency. Purchasers can easily access this information to help them design high performance facility incentives and, in many cases, to negotiate directly with specific facilities. Version 3.0 of this study will be out shortly and will almost certainly accelerate market-based and policy change in the many states being added. Clearly, the release of this information has alarmed and motivated large, expensive hospitals around the country to suddenly be interested in cost and quality discussions. More importantly, it has created very public visibility (and concern) around hospital pricing and quality.
A couple years ago, when we first saw value-based efforts getting traction, we reminded ourselves that, even with these tremendous successes, the value market was a drop next to the ocean of more conventional health care arrangements. But recent events show that value is taking hold and shifting the strategies of both health care purchasers and mainstream industry players, moving us toward a better and less opaque system. We could see that clearly in 2019, and so we expect even better news in 2020 and beyond.
Brian Klepper is a health care analyst and Executive Vice President of The Validation Institute, based in Charlotte. Jeff Hogan is Northeast Regional Manager of Rogers Benefit Group in the Hartford, CT area.
A Health Care Value Ecosystem Is Forming
Posted on Valid Points on 11/20/19
By Brian Klepper, PhD
It may not feel like it, but the health care value movement is gaining momentum, as well as recognizable support and distribution structures. Hundreds of new health care vendors claim they are value-focused, delivering better care and/or lower costs than conventional approaches, and some are proving it with data. More impressive, it’s not just that isolated self-insured employers here and there are casting aside a standard health plan offering in favor of an alternative service or method, but that these risk management approaches are often being deployed in combination and regionally by large groups or collaboratives of smaller groups. American health care’s drive to value may be so small as to be nearly imperceptible, but it’s real and accelerating.
In Connecticut, for example, the state employees’ health plan has contracted with Remedy Partners to build episode-of-care contracts based on robust quality and cost information, creating a more competitive marketplace by driving the business to higher value providers. The goals here are to decrease (1) pricing for routine procedures and treatments, (2) the rates of avoidable events/complications, (3) use of low-value care services, and (4) the volume of unnecessary procedures. Remedy believes that this effort alone can drop the plan’s total annual health care spend by 10%.
It’s useful to appreciate that programs like this are of necessity complicated. They are being deployed within a deeply entrenched structure that has been historically uninterested in efficient health care and is generally ill-equipped to operationalize it. Lots of moving parts are required. Employee incentives must be developed that steer use towards high performing providers. Providers must be fed reports continuously that reflect their performance on all contracted episodes, so they can focus on moving to or staying in a higher tier. They must also receive lists of resource-intensive patients and patients most at-risk of adverse events, so targeted care management can be deployed.
Other vendors have undertaken operational redesign of different high value health care niches. Costco established a pharmacy benefits management (PBM) function for its own nearly 300,000 employees and dependent lives and, now, about one hundred mostly mid-sized self-funded employers. Their design looks like what you might expect from an organization that has developed a following of 90 million subscribed shoppers. All rebates are passed back to the purchasers. The employer’s contractual terms are clearly stated in 16 pages, unlike the byzantine 100+ pagers that PBMs typically insist on. All transactions are utterly transparent and the organization invites audits. The formulary is evidence-based. A single administrative fee covers all services, including those associated with managing patient care processes. Costco estimates that the average employer will experience savings of 18%-40% off current drug spend.
In Indiana, benefits advisor Richard Sutton is working to network the dozens of worksite primary care clinics he has implemented for school districts around the state. This will allow patients from one district with a clinic to use another that may be more convenient, and allow districts that don’t have clinics to piggy-back on (and share financial support for) another district’s resource. In addition, high value programming in some clinics, like IMC’s musculoskeletal management that impacts one in five patients, and Carrum Health’s high performance narrow networks, can more easily become generalized to more clinics.
Variations on these approaches can work for smaller self-funded employers as well. Benefits advisor David Contorno typically offers new clients an array of high performance health care approaches that can improve health outcomes and lower cost, but he also encourages employers to collaborate with others in the same region to increase direct contracting market leverage for all of them.
In many markets, the high value health care movement has generated enough awareness and strength to change how that market works, making it more competitive and value-focused, encouraging health care vendors of all types to seek business on more favorable terms than in the past. Every win moves us further forward, and drives faster change.
Brian Klepper is a health care analyst and the Executive Vice President of Validation Institute. He also hosts the ValidPoints Podcast, a monthly podcast featuring conversation with healthcare vendors, innovators, and employers focused on transforming health care outcomes and costs.
Walmart Refines Its Approach To Primary Care
Posted on Valid Points on 10/23/2019
By Brian Klepper, PhD
A couple weeks ago, Catalyst for Payment Reform hosted a webinar that provided a glimpse into Walmart’s health care strategy and management plans. Lisa Woods, Senior Director of US Benefits, talked about a new program to simplify and improve health care, particularly primary care, for Walmart’s million-plus associates and their families.
She alluded to Walmart’s well established and continuously expanding Centers of Excellence (COE) programs, as well as two new programs: first is a Personal Healthcare Assistant, powered by health care navigation firm Grand Rounds, that helps Walmart associates with billing and appointment issues, finding a quality provider, understanding a diagnosis, coordinating transportation, arranging child care during appointments, and other important patient needs.
Walmart has also broadened its telehealth offerings, including preventive health, chronic care management, urgent care, and behavioral health. All video visits have a $4.00 copay and associates can book an appointment with a primary care physician within one hour and a behavioral health visit within one week, making services highly accessible. Their partners for this program are Doctors on Demand, Grand Rounds, and Healthscope Benefits.
Daniel Stein and Matthew Resnick, from physician profiler partner Embold Health, described how their data collection/analytics approach identifies physicians with histories of providing the most appropriate care. In three markets – Northwest Arkansas, Tampa/Orlando and Dallas/Ft. Worth – Walmart’s “Featured Provider” program will connect patients to the high-performing providers that Embold has identified in eight specialties: primary care, cardiology, gastroenterology, endocrinology, obstetrics, oncology, orthopedics and pulmonology. Walmart has been a key partner in the development of Embold Health – CEO Daniel Stein is a former Walmart Medical Director – and its efforts to accurately profile the quality of health care delivery at the individual physician level. The health outcomes improvements and savings associated with only using high performing physicians should be profound.
The changes that Walmart has announced reflect a laser focus on solving specific problems, like overtreatment and patient difficulty with navigating the system, that plague all primary care programs. The company has been tinkering with and testing different primary care models for a decade or more. As with its COE program, the goals of Walmart’s new health care programs are a more refined, disciplined, and methodical set of innovations focused on driving better care, a better patient experience and lower cost, and that, for the most part, are not yet available to most primary care patients elsewhere in US health care.
As a side note, it’s worth recognizing that, in an ideal world, the major health plans – e.g., United, CIGNA, Aetna, Anthem – with many millions of lives, would have pioneered these approaches to manage health care risk, to improve health outcomes and reduce cost. The fact that payors haven’t been motivated along these lines is a reflection of the perverse incentives that have driven the US health system for decades, that all patients and purchasers are up against, and that have facilitated the kinds of innovations discussed here.
Walmart attacked these problems because they are at risk for their population and its costs. Few employers have the resolve and the resources available to develop key innovations that can move an industry like health care forward.
Not surprisingly, Walmart appears to see an opportunity here and has larger plans. Walmart almost certainly believes its health care efforts are applicable beyond their own population, and, like Haven, Kroger, and Costco, has staked out a health care business strategy. Primary care are logical services to begin with, and Walmart has announced that its pricing will be 30%-50% below conventional primary care prices. Walmart’s focus on improving experience, health outcomes and cost, combined with its national footprint and deep resource base, could immediately catapult it to the first rank of competitors in this space.
No doubt Walmart has its eye on providing primary care services to groups as well as individuals. Relationships with health plans would allow them to share in the savings they generate through their primary care platform and associated programs.
Think about the territory covered here. Walmart intends to:
- Develop highly price competitive primary care clinics across the country.
- Offer very low cost telemedicine that can be a convenient pathway to primary care and other care, streamlining care processes.
- Implement a Personal Healthcare Assistant that can simplify navigating the health care system and expedite a much enhanced patient experience.
- Connect to the highest performing local physicians and regional COEs in each specialty, driving appropriate and disrupting inappropriate care and cost, in strong contrast to the inappropriate care and cost patterns that have come to dominate US health care.
- Develop some tie to health plans that would allow it to benefit from the health outcomes improvements and savings their management approaches create.
A vigorous primary care campaign by Walmart would undoubtedly threaten traditional primary care models and spur competitive innovation among progressive primary care organizations, especially if it publicly conveyed a dedicated focus on transparent management of full continuum health outcomes and cost. This would powerfully differentiate Walmart’s primary care efforts from those of competitors like Walgreens and CVS, whose convenience care primary care models are mainly dedicated to maintaining the status quo.
Walmart’s activities in this space are one signal that the old paradigm in health care is waning, and a new value-based health care market is emerging. It can’t happen soon enough.
Brian Klepper is Executive Vice President at The Validation Institute.
How High Performance Health Care Vendors Are Getting Market Traction
Posted on Valid Points on 9/12/2019
By Brian Klepper, PhD
The health care marketplace is literally bursting with new “high performance” ventures that consistently deliver better health outcomes and/or lower cost than conventional approaches, particularly in high value niches of clinical and financial risk management.
Exciting young companies have been found and vetted that specialize in the management of advanced primary care, diabetes and other cardiometabolic disorders, musculoskeletal disorders, drug costs, cancer, high value medical claims, imaging, dialysis, reference-based pricing, bundled pricing, formation of high performance networks, allergies, sleep, captive insurance arrangements, and so on. The power of these new organizations to deliver far healthier patients for far less money is real and very compelling. High interest in projects like Validation Institute, which serves as an advocate for health benefits purchasers, validating the performance claims of vendors, and identifying vendors with consistently superior results, is evidence that this area is alive and gaining steam.
That said, it’s important to distinguish between the emergence of high performance organizations and their uptake by the market. Even if they offer better results and value, upstart providers face significant barriers to getting market traction. After decades of dominating the benefits environment, health plans and brokers have a firm grip on arrangements and are not necessarily sympathetic toward programs that lower costs if they also reduce earnings.
As a result, introductions of high performance offerings to potential clients often depend on assertive benefits advisors who genuinely seek new client value, have scanned the marketplace for top performing vendors, and are willing to guide placement of those vendors either with or without the approval and cooperation of the client’s health plan. Often, these out-of-the-box advisors have been willing to forego the commissions that bind most brokers to health plans’ interest rather than their clients’, and work for defined client fees. Talk to advisors, like David Contorno or Richard Sutton, who have taken this approach, and they’ll tell you how liberating it has been to work purely on behalf of the client.
Clients have inherent barriers to change as well. First, only those that are self-funded for their health benefits have the latitude to choose their vendors. Among those, most are cautious about health plan changes and how they might disrupt an enrollee’s experience. Most are willing to learn about and entertain new approaches, but implementing new programming is a big step.
Even so, more companies are making that leap. The cost pressures on businesses are relentless and tremendous, and there’s no indication that the legacy health plans will do anything to meaningfully alleviate the pain. In the business audiences I see, the attendees are rapt by the information they receive from the high performance vendors. They are fascinated that these solutions exist and are so powerful.
It is also not lost on them that it wasn’t their health plan sponsors who has brought these solutions to them. It was their advisor, genuinely working on their behalf.
Most important, they buy into the approaches and results that are placed in front of them. If they trust their advisor and the vendors presented have the advisor’s support, they’re eager to get started. If the vendor offers a performance guarantee – organizations like Integrated Musculoskeletal Care, Vera Whole Health, PriceMDs and Carrum Health do this – all parties have levels of confidence and comfort that make proceeding with an unconventional vendor far easier to accomplish.
The emergence and growing uptake of high performance vendors are the most exciting trends in health care today. A noticeable percentage of purchasers are finally willing to take reasonable steps to bet on proven new approaches, and to avoid the conventional, mediocre, or poor quality care that has dominated the system for decades. This appears to be gaining the most traction with sizable groups that have enough leverage to act independently of health plan wishes, but many benefits advisors, in an attempt to be relevant, are bringing their clients along as well. There’s no question that the legacy players still dominate, but it’s clear that a new paradigm of high performance is established and firmly rooted, with accelerating growth.
Which means that health care’s future now seems more promising than most of us have thought.
Brian Klepper is a health care analyst and Executive Vice President of Validation Institute.
How a Value Focus Could Change Health Care
Posted on Valid Points on 8/14/2019
Brian Klepper, PhD
How will the drive to health care value affect health care’s structure? We tend to assume that the health care structure we’ve become accustomed to is the one we’ll always have, but that’s probably far from the truth. If we pull levers that encourage the right care at the right time, it’s likely that many of the problems we think we’re stuck with, like over-treatment and a lack of accountability, will disappear.
A large part of getting the right results is making sure that health care vendors have the right incentives. All forms of reimbursement carry incentives, so it’s important to align them, to choose payment structures that work for patients and purchasers as well as providers. Fee-for-service sends exactly the wrong message, because it encourages unnecessary utilization, paying for each component service independent of whether its necessary and independent of the outcomes. Compare U.S. treatment patterns to those in other industrialized nations and you’ll find ours are generally bloated with procedures that have become part of practice not because they’re clinically necessary but simply because they’re billable.
By contrast, value-based arrangements are really about purchasers demanding that health care vendors deliver better health outcomes and/or lower cost than what they’ve experienced under fee-for-service reimbursement, and the payment structure often asks the vendor to put his money where his mouth is, at least where performance claims are concerned. In a market that’s still overwhelmingly dominated by fee-for-service arrangements, one way for a vendor to get noticed is to financially guarantee performance. Integrated Musculoskeletal Care, a musculoskeletal management firm based in Florida, guarantees a 25% reduction in musculoskeletal spend on the patients they touch. This typically translates to a 4%-5% reduction in total health plan spend, just by contracting with this vendor, a compelling offer in an environment that makes it hard for upstarts to get market traction.
But the real power of possible payment reforms becomes clear when one considers how it might affect utilization, cost, and workforce patterns in medical domains that have been particularly out of control. Think about spine surgery, where good data exists to argue that half or more of procedures are unnecessary or inappropriate. What would happen if, in addition to tying payment to health outcomes, reimbursement for spine surgeries suddenly was no longer fee-for-service, but a capitated rate, meaning that a limit was imposed on funds that could be devoted to it?
Fewer surgeries would likely take place because there would be little or no financial benefit in doing unnecessary procedures, plus any inability to show a positive impact on health outcomes in questionable cases.
Spine surgeons’ caseloads would drop and incomes would fall. Some spine surgeons would retire or transition to other specialties.
The spine surgery market might quickly become very competitive. In an effort to win volume, spine clinics would quantify and then market their health outcomes and pricing, particularly to health plans and primary care practices seeking, preferred surgical providers.
Spine surgeons would become far more interested in approaches that consistently deliver better health outcomes and/or lower costs. Evidence-based medicine would find a much more receptive audience and treatments that have data showing they work would gain a following much more quickly than they do now. Non-operative treatments would become much more mainstream.
Spine surgery organizations with excellent performance would grow at the expense of their competitors and the variability of health outcomes would diminish. Centers of excellence would become much better established.
In general, costs of spinal surgeries would drop, possibly precipitously, and health outcomes would blossom.
Imagine the implications if similar payment reforms were implemented across all health care, impacting other niches with excessive utilization and cost, like cancer care and cardiovascular medicine. The workloads, numbers of physicians, and revenue base within each specialty would be reshaped, each one finding a new level.
In general, health care professionals who have become comfortable over the past several decades will find the new financial normal less to their liking than before. The winners here would be patients, purchasers, and primary care physicians who will benefit from market-based pricing and a greater reliance on true evidence-based care.
If risk-based arrangements get traction in ERISA health plans as they have in Medicare Advantage and Managed Medicaid, a health care market will take shape and strengthen. The kinds of changes I’ve described above will be increasingly prevalent. The question is whether employers and unions will finally insist that we pay for results rather than for activity.
Brian Klepper is a health care analyst and the Executive Vice President of the Validation Institute.
Why Managing Clinical and Financial Risk Is Primary Care’s Future
How will primary care practices change as the health benefits market increasingly favors value? Risk bearers (like health plans, health systems, stop loss carriers, and captive insurance arrangements) often rely upon primary care physicians to do the basics: managing common ailments and coordinating care and cost in ways that deliver consistently better health outcomes and/or lower costs. But there also are management approaches available that can drive appropriateness and efficiencies throughout the continuum, facilitating still stronger performance, if primary care will only access them.
Today, primary care is in high flux, but nervous about getting ahead of market trends. Most practices are still dominated by the delivery model that evolved in response to fee-for-service reimbursement, rewarding high volumes of staccato, 10-minute office visits, referring complexity on to specialists, and managing common ailments. But most don’t actively manage the excesses that plague American health care, nor do they see it as part of their role.
Dissatisfaction with the impersonal nature of the fee-for-service model has fostered the growing Direct Primary Care (DPC) sector, which offers concierge-level personalized attention to patients who pay a monthly subscription fee. While this niche holds promise and does appear to have satisfied patients, so far, little evidence has been presented suggesting better clinical or financial results. It also is doubtful that many DPC providers have invested in the infrastructure required to more effectively manage clinical or financial risk.
A large percentage of primary care physicians (PCPs) are now employed by health systems that, in exchange for a healthy paycheck and minimal administrative burden, expect them to refer patients early and often into the system’s lucrative outpatient specialty and inpatient services.
Some primary care practices have become much more focused on optimizing their roles through Medicare Advantage (MA) contracts that offer them full risk arrangements. Organizations like ChenMed in Miami and Iora Health in Boston accept 85% of the premium – the MA plans keep the other 15% – and are accountable for managing everything that’s required within the population, including specialty services, outpatient and inpatient services, imaging, drugs, and so on. These groups have become highly adept at managing this risk and are profitable. It is not much of a stretch to imagine that similar risk arrangements can be struck between primary care organizations and employer or union health plans.
In many cases, physicians’ relationships with health systems have worn thin, and some new groups are eager to pursue risk arrangements. In Charlotte, NC, about 100 physicians at Atrium and about 50 physicians at Novant, the two dominant regional health systems – have recently left to establish new primary care practices. One of the new groups signed a management agreement with Holston Medical Group in Kingsport, TN, which over the past few years has developed advanced risk management arrangements, including an Accountable Care Organization, and the infrastructure required to aggressively manage that risk.
The next step in this evolution is to pair primary care practices that are positioned to take on risk with highly capable risk management “modules.” There are now hundreds of specialized health care management organizations, some of them proven high performers, focused on nearly every conceivable type of high-value clinical and financial risk. Companies are specialized for management of musculoskeletal conditions, cardio-metabolic conditions, cancer care, allergies, sleep dysfunction, dialysis, fertility, low-risk maternity, and so on. On the financial risk side, there are companies that specialize in claims review, large claims resolution, imaging cost management, drug spend management, reference-based pricing, bundled pricing, and more. Typically, the companies that have developed these risk management approaches have very high subject matter expertise in their niches, so generalists are not likely to be able to obtain comparable results. It’s probably worth contracting with the folks who have built a demonstrably better mousetrap.
The list detailed above goes far beyond the risk management activities most primary care practices have in their wheelhouse and think of as their responsibility. But they each represent significant areas of cost or health outcomes whose management can be overseen by primary care physicians. The primary care practice of the future will likely develop risk management capabilities in as many identifiable areas as possible, in order to drive maximum benefit, because it will be in its interests to do so.
Almost certainly, a future market will increasingly demand that providers consistently demonstrate better health outcomes and/or lower cost than conventional care. Care and cost management will be mission-critical organizational capabilities. Going at risk by guaranteeing results in some form based on the population-level outcomes and costs that an organization knows it can achieve, should be a priority.
Also, our understanding of the elements that comprise full continuum risk becomes more detailed as our experience deepens, informing the risk management tools we deploy and how we measure impact. Primary care will become more thorough and competent risk managers.
It is important to remember that many purchasers are eager to seek better deals than they’ve had access to from the conventional health plans recently. It shouldn’t be difficult to shine by outperforming our current health care system. In other words, acting from the front end of the health system, primary care physicians can cobble together multi-vectored risk management platforms favoring high-performance providers that are focused on driving optimal care and costs not only within primary care, but downstream, throughout the continuum.
Going at risk for care and cost will encourage primary care physicians to drive patients only to high performing specialty services, and to erode the delivery of inappropriate and unnecessary care. The reduction in over-treatment will create an oversupply in many specialties, re-empowering primary care and could flip the relatively disadvantaged relationship with specialists that has dominated for the past 30 years.
By organizing around highly capable of management of full continuum risk, primary care can become re-empowered, reasserting its role in health care as a manager of complexity, driving out unnecessary care and excessive cost, and bringing health care back to rights.
Brian Klepper is a health care analyst and Executive Vice President of Validation Institute.