How Value Can Save Us

Brian Klepper

Posted 8/19/2018 on The Doctor Weighs In as “High Value Health Care: Is It the Wave of the Future?”

The most consequential health care question of our time is whether the iron grip on policy and the marketplace exerted by the industry’s dominant players – a grip that continues to favor volume-based care, opaque quality and cost information, widespread information blocking, and little in the way of quality or safety management – can be broken in favor of value-based services. Decades of lobbying on every relevant health care law and rule has facilitated the industry’s capture of regulation, formidably favoring incumbents and putting innovators at an equally formidable disadvantage. The fix is depressingly in.

It is also remarkably comprehensive. Every health care sector – supply chain, care delivery, finance and information technology – has devised mechanisms that allow it to extract about twice as much as it gets in any other developed country. Because US health care has relentlessly pursued the maximized cost promoted by regulatory advantages and fee-for-service unbundling, our care and cost patterns are dramatically different and more inflated than those in other industrialized countries. Our use of high cost specialty care instead of low cost primary care, for example, is far higher.

Continue reading “How Value Can Save Us”

Validating Health Care Performance

Brian Klepper

Posted 8/20/18 in Valid Points, the Newsletter of The Validation Institute

The beginning of wisdom is calling things by their true names. – Confucius

BKlepperFor purchasers, health care is the Wild West. Vendors of all types – disease managers, wellness companies, care navigation firms, ambulatory surgery centers, benefits advisors, worksite clinic firms, and on and on – have a long history of making exuberant claims about their outcomes and savings. Purchasers – self-funded employers and unions – generally have no alternative but to take those promises at face value, assuming they’re grounded in solid data and hard math. They may be more resigned than surprised when the expected results don’t materialize.

The propensity of vendors in the population health management sector to over-promise and under-deliver became so pronounced that Al Lewis, a nationally prominent health care outcomes analyst, wrote an entertaining book about it, called Why Nobody Believes the Numbers. Why Nobody Believes tells how 12 companies cooked their numbers, and how they mostly thrived despite a flow of bogus results. Anyone familiar with corporate health benefit plans over the past couple decades is aware of the immense popularity of wellness and disease management programs despite skinny evidence showing that they’re effective.

In 2010, Sean Slovenski, then CEO of an Intel-GE subsidiary called Care Innovations (and now Walmart’s SVP & President of Health and Wellness) created a new organization, The Validation Institute, to evaluate the calculation methods of health care organizations making claims about their performance. If their data sources and data are credible, if their math makes sense and if the evaluator find that the intervention has produced the promised results elsewhere, then the product/service would be “validated.” If not, the evaluators provide guidance on how to do the calculations properly.

This approach – independent, objective, highly capable third party review and evaluation – was the right solution, providing a fresh, straightforward way for responsible vendors to be accountable.

For purchasers, validation represents a significant advantage. They can be confident that vendors’ performance will approximate what they promised. By reducing this uncertainty, an increasing number of purchasers, Walmart included, now give validated vendors preferred status in the bidding process.

With rapidly growing momentum and increasing influence, the Validation Institute is poised to close a glaring gap in health care purchasing. Accordingly, every purchaser should insist that every health care vendor become validated and build the validation requirement into its Request for Proposal process. Likewise, the validation process should become a critical step in every vendor’s go-to-market plan.

In a health system awash with excess and opacity, an important first step is a rigorous process that gets to transparent outcomes. In health care, that step starts at The Validation Institute.

Brian Klepper is a health care analyst.

A Whiff of Market-Based Health Care Change

Feb 1, 2018

By BRIAN KLEPPER

Posted 2/01/18 on The Health Care Blog

BKlepperTuesday’s announcement about AmazonBerkshire Hathaway and JPMorgan (A/BH/JPM) was short on details. The three mega-firms will form an independent company that develops solutions, first, for their own companies’ health plans and then, almost certainly, for the larger health care marketplace. But the news reverberated throughout the health care industry as thoroughly as any in recent memory.

Health care organizations were shaken. Bloomberg Markets reported that:

Pharmacy-benefit manager Express Scripts Holding Co. fell as much as 11 percent, the most intraday since April, at the open of U.S. trading Tuesday, while rival CVS Health Corp. dropped as much as 6.4 percent. Health insurers also fell, with Anthem Inc. losing as much as 6.5 percent and Aetna, which is being bought by CVS, sliding as much as 4.3 percent.

As expected, these firms’ stock prices rebounded the next day. But you could interpret the drops as reflections of the perceived fragility of health care companies’ dominance, and traders’ confidence in the potential power of Amazon’s newly announced entity. Legacy health care firms, with their well-earned reputations for relentlessly opaque arrangements and egregious pricing, are vulnerable, especially to proven disruptors who believe that taming health care’s excesses is achievable. Meanwhile, many Americans have come to believe in Amazon’s ability to deliver.

Those who buy health care for employers and unions probably quietly rejoiced at the announcement. For them, the prospect of a group that might actually transform health care would be a breath of fresh air. In my experience at least, the CFOs and benefits managers at employers and unions are acutely aware that they’re being taken advantage of by every health care industry sector. They’re genuinely weary from it, and they’d welcome a solid alternative.

Their health care intentions notwithstanding, the A/BH/JPM group is formidable, representing immense strength and competence. Amazon is an unstoppably proven serial industry innovator, continuing to consolidate its position in the US and in key markets globally. Berkshire Hathaway harbors significant financial strength and a stop-loss unitUS Medical Stop Loss, fluent in underwriting health care risk, which should be handy. In addition to the fact that JPMorgan is the nation’s largest bank, with assets worth nearly $2.5 trillion in 2016, it has a massive list of prospective buyers in its commercial client base.

This triumvirate knows that, in health care, they have an advantage. There are proven but mostly untapped approaches in the market that effectively manage health care clinical, financial and administrative risk, consistently delivering better health outcomes at significantly lower cost. In the main, legacy health care organizations have ignored these solutions, because efficiencies would compromise their financial positions.

To put this into perspective, consider that, since early 2009, when the Affordable Care Act was passed, the stock prices of the major health plans have grown a spectacular 5.3-9.6 times, 3.7 times the growth of the S&P and 3.2 times the growth of the Dow.

At the end of the day under current fee-for-service arrangements,  health care’s legacy organizations make more and have rising value if health care costs more. If they take advantage of readily available solutions that make health care better and cost less, earnings, stock price and market capitalization will all tumble. They’re in a box.

What little we know about Amazon’s intentions indicates that they are ambitious. Presumably they’ll begin by bringing technology tools to bear. That could cover a lot of territory, but assembling and integrating high value narrow networks by identifying the performance of different health care product/service providers seems like a doable and powerful place to begin. High performance vendors exist in a broad swath of high value niches. Arranging these risk management modules under a single organizational umbrella can easily result in superior outcomes at dramatically less cost than current health care spend.

Amazon has developed a relationship with industry leading Pharmacy Benefits Manager (PBM) Express Scripts, Inc. (ESI), likely to operationalize mail order and facility-based pharmacies. Given ESI’s history of opacity and hall-of-mirrors transactions – approaches that are directly counter to Amazon’s ethos – it’s tempting to imagine that that relationship is a placeholder until Amazon can devise or identify a more value-based model.

Also, a couple weeks ago, Amazon hired Martin Levine, MD, a geriatrician who had run the Seattle clinics for Boston-based Medicare primary care clinic firm Iora Health. This could suggest that Amazon aspires to deliver clinical services, likely through both telehealth and brick- and-mortar facilities.

All this said, we should expect the unexpected. The A/BH/JPM announcement wasn’t rushed, but the result of a carefully thought through, methodical planning exercise. As it has done over and over again – think Prime video; 2 day, free shipping; and the Echo – it is easy to imagine that Amazon could present us with powerful health care innovations that seem perfect intuitive but weren’t previously on anyone’s radar.

What is most fascinating about this announcement is that it appears to pursue the pragmatic urgency of fixing a serious problem that afflicts every business. At the same time, it may represent an effort to subvert and take control health care’s current structure.

So while we may be elated that a candidate health care solution is raising its head, we should be skeptical of stated good intentions. Warren Buffett’s now famous comment that ballooning health care costs are “a hungry tapeworm on the American economy” ring a little hollow when we realize that Berkshire Hathaway owns nearly one-fifth of the dialysis company Da Vita, a model of hungry health industry tapeworms.

Finally, we should not doubt that this project has aspirations far beyond US health care. The corporatization and distortion of health care’s practices is a global problem that will be susceptible to the same solutions of evidence and efficiency everywhere.

All this is promising in the extreme, but there’s also a catch. The US health care industry’s excesses undermine our republic and have become a threat to our national economic security. The solutions that this A/BH/JPM project will leverage could become an antidote to the devils we all know plague our country’s health care system. That said, we should be mindful that, over the long term, our saviors could become equally or more problematic.

Brian Klepper is Principal of Worksite Health Advisors, which connects health care purchasers to high performance health care services.

“High Performance” Health Innovators Stand Ready To Serve

BKlepperA particularly pernicious American healthcare myth holds that costs are out of anyone’s control. Health plans and benefits consultants often convince organizational purchasers that costs simply are what they are, and that no better alternatives exist.

Nothing could be further from the truth. In fact, there’s reason to believe that a new crop of “high performance” healthcare innovators could make healthcare more rational. The question is whether employers and unions will embrace the high performers, independent of their health plans. Are they sufficiently frustrated that they’ll step outside the poorer performance conventions placed on them by health organizations invested in the status quo?

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To Promote Health Care Excellence, Let’s Recognize Approaches That Assure Value

BY BRIAN KLEPPER

BKlepper 2017A challenge for health care purchasers is choosing vendors whose performance matches their cost and outcomes claims. A 2015 Mercer survey found that only 41 percent of worksite clinic sponsors think that they’re saving money. As Al Lewis and Tom Emerick have detailed, many wellness and disease management companies simply overstate their results. In many cases employers may not realize that they, not the vendor, take the risk for results.

One important answer is the Care Innovations Validation Institute, founded by Intel, that offers health care vendors and purchasers objective validation of vendors’ claims.  The Institute stands behind its work with a money-back guarantee. In the Wild West of the health care marketplace, the Validation Institute is an invaluable resource for purchasers, allowing them to confidently proceed with vendors, knowing that their promises have been vetted by scientists.

With these dynamics as backdrop, World Health Care Congress has partnered with The Validation Institute and The Health Rosetta Institute, another not-for-profit organization dedicated to accelerating adoption of proven fixes to health care dysfunction. Together, they are sponsoring The 2018 Health Value Awards, showcasing health care organizations and programs that demonstrate measurably better health outcomes, costs and/or safety than conventional care.

These awards will recognize health care vendors, brokers, and purchasers who deliver higher value care. They seek to identify high performance organizations that adhere to principles of compassion, evidence, transparency, competition and efficiency, as examples that can be emulated.

The first competition will be held within 11 categories, eight of them formally validated by the Validation Institute: Validated categories cover programming by health plan sponsors (i.e., employers and unions), health plan administrators, and organizations that provide or manage care.

While the awards program’s larger emphasis is on validated high performance approaches, it will also recognize individuals and companies on the basis of more qualitative information. Non-Validated Categories will recognize individuals and firms that are progressive benefits leaders.

Applicants will describe and provide performance data on innovative health benefits programming that has measurably demonstrated significant improvements in health outcomes, patient safety and/or cost Judges will consider not only programmatic impact, but scalability (i.e., ease of program replication in other sites/employers), stickiness (or the durability of impact over time), and the calculation methodology used to demonstrate efficacy.

Online nominations for the 2018 awards competition will be solicited between July 15, 2017 and January 31, 2018. Anyone, including nominees, may submit nominations. Special attention will be given to candidates who receive multiple external nominations.

A multi-stakeholder panel has developed criteria for initial review of the submissions, and an independent panel of experts will review all submissions. Five finalists within each category will be selected and announced by February 28. Final selections will be made by the independent panel.

Health Value Award entrants should plan to attend the 2018 World Health Care Congress unless there are unusual circumstances. Registration for representatives will be complimentary. Finalists will also participate, at a discounted rate, in a validation process developed and managed by The Validation Institute. Stipends will be available to applicants who need support.  Entry is not a guarantee of validation.

The Health Value Award is part of a larger movement to bring health care purchasers clear and transparent value data.  This, in turn, will move competition among vendors to objective, measurable results.  By shining bright lights on those that truly perform, the Award program is an important first step in the right direction.

Brian Klepper is an analyst and Principal in Worksite Health Advisors, which connects health care purchasers with high value offerings.

Why most health plans strive to make healthcare cost more

By Brian Klepper

Published July 31 2017, 12:22pm EDT in Employee Benefit News

Health plan representatives are always saying that their plans are doing everything they can to control costs and deliver greater value. But then nothing ever seems to change.

The truth is that group health plans typically earn a percentage of total claims, and it is in their interest for healthcare to cost as much as possible. Employer or union group health plans are frequently associated with a variety of services — e.g., health IT, pharmacy benefit management, case management, reinsurance — each with its own revenue stream. By choosing and incentivizing vendors, plan administrators directly influence their systems’ capabilities to manage risk. Intentionally meek approaches to healthcare risk management result in excessive care and cost, in turn fueling higher expenditures, greater net revenues and elevated stock prices.

This structure has been spectacularly successful for the health insurance industry. Using data pulled from Google Finance, the chart and table below show the 10-year stock price performance of five commercial health plans: Aetna, Anthem, Cigna, Humana and United, as well as the Dow and Standard & Poor’s Index.

Stock prices began to creep upward in November 2008, when a Democratic majority was elected to Congress, foreshadowing the successful passage of the Affordable Care Act. Lobbying by healthcare interests was intense during this period, with Congress accepting an unprecedented $1.2 billion in campaign contributions, presumably in exchange for influence over the shape of the law. In the 8 years between May 2009 and May 2017, the stock prices of these insurers soared between 387 and 748 percent. They vastly outperformed the rest of the market, growing 1.5 to 3.0 times faster than the S&P and 1.2 to 2.4 times faster than the Dow.

 

Grim implications

Growth, driven by an endless rise in expenditures, has profoundly grim implications. Let’s say a clinical risk management firm emerges that, within a high value niche, consistently delivers measurably better health outcomes at half the cost. Reductions in unnecessary surgeries, imaging and drugs would likely yield strong savings. But the resulting drop in health plans’ net revenue would also translate into lower stock prices and market capitalization, and lead to strained relations with network providers, whose utilization and revenues would also suffer. Under these circumstances, concerns about compromised network performance and reduced valuation would deter insurers from investing in the risk management firm’s capacity to deliver better value.

Of course, these dynamics are not unique to health plans. Virtually every healthcare organization —including physician practices, health systems, imaging centers, labs, drug manufacturers, pharmacy benefit management firms — earns a percentage of the spend within its niche. Not surprisingly, each also has developed mechanisms to promote the highest possible unit volumes and pricing.

This may seem like an obvious point, but it is critical to U.S. health policy going forward. For decades, lawmakers have done the bidding of health industry lobbyists and avoided payment methodologies that reward value. This has made American healthcare, at double the cost of other developed countries, unaffordable and inaccessible to large swaths of the American people. The need to continually pay more for healthcare has drained funding away from other critical needs, such as education, transportation and infrastructure. This has played a significant role in crushing the American dream for the middle class and compromising U.S. global competitiveness and economic security.

Alternative approaches like a single payer health plan won’t solve this problem unless how healthcare is purchased also changes. A stable, sustainable health system will remain a pipe dream until people refuse to pay for products and services at ever decreasing value. Instead, healthcare purchasers must tie payment to observably better results. An abundance of market-based evidence shows this is readily achievable.

Brian Klepper PhD is a healthcare analyst and a Principal of Worksite Health Advisors.

 

 

 

 

21 Things to Know About Balance Billing

Brooke Murphy. And with a hat tip to Bill Rusteberg

The following article is entitled “20 Things To Know About Balance Billing.” We added one more. There is only one market strategy that protects consumers against balance billing – Reference Based Pricing (RBP) plans. Traditional managed care plans provide no protection against balance billing – consumers are on their own when they get one. Not so under RBP plans. 

Which plan would you rather have?

As payers and providers wage war over reimbursement rates for medical services, patients have been increasingly strapped with unanticipated health care bills that can have detrimental financial effects.

The practice of balance billing refers to a physician’s ability to bill the patient for an outstanding balance after the insurance company submits its portion of the bill. Out-of-network physicians, not bound by contractual, in-network rate agreements, have the ability to bill patients for the entire remaining balance.

Balance billing may occur when a patient receives a bill for an episode of care previously believed to be in-network and therefore covered by the insurance company, or when an insurance company contributes less money for a medical service than a patient expected.

Continue reading “21 Things to Know About Balance Billing”