Trends in the Industry Narrow Networks Are All the Rage Health
System Strategies How to Successfully Deploy the Right Strategy
Heres What Were Going to Cover Today
Slide 3
Payors have been shedding risk for a decade, shifting their
books of business from 70-80% fully insured to 70-80% self-insured,
putting all the risk on the employer (to pay for care) and on the
hospital (to collect larger and larger financial responsibility
from patients). They capitalized on the consumer-directed health
care trend and dramatically increased the financial risk carried by
their members. Risk What Are Health Plans Doing? Utilization IP,
physician visits, and Rx usage are all down. Elective surgeries are
way down. ER visits are up. Premiums Premium increases continue to
outpace medical inflation (and have for more than 20 straight
years). Profit 2008 - 2013 is the single most profitable period in
the history of the managed care industry. Stock prices have surged,
and now the ACA is requiring millions of new customers to purchase
their products. Networks Narrow and getting narrower by the
day.
Slide 4
Whats Happening Across the Nation? Exchanges Exchanges are open
for business. Network participation is a major strategic issue for
providers. Consumer marketing and brand strategies are suddenly
critical. The world is suddenly upside down on a number of fronts.
? WALL STREET JOURNAL Young Avoid New Health Plans Early Buyers of
Coverage Are Older Than Expected, Raising Expense Concerns In
Kentucky, nearly 40% of 4,631 enrollees in private health plans are
over age 55, while 24%, including children, fall under age 34. A
much higher portion of young people signed up for Medicaid plans.
WellPoint Inc., the largest insurer offering plans in Connecticut,
said most of its enrollees in that state were between 55 and 64 in
a recent call with investors. The insurer said it predicted an
initial wave of enrollees might be older, but that it would
increase efforts to woo younger members.
Slide 5
1. Payors becoming providers - limited but important 2. Payors
demanding cuts - how do you tackle new problems with fewer
resources? 3. Health systems launching their own health plans 4.
Taking risk 5. Direct contracting with employers 6. Narrow networks
7. Pushback on physician rates, non-hospital sites, implants and
stop loss 8. Major league payor/provider conflict Trends in the
Industry
Slide 6
Insurers across the nation are watching Highmark, which became
the first and so far only insurer to take a major step into the
hospital business when it purchased seven medical centers this
year. Every insurer and Blue Cross plan in the country is taking a
close look at what's happening in Pittsburgh, said Ted Schwab,
partner at the health and life sciences practice of Oliver Wyman, a
New York-based management consulting firm. If this one is
successful, you're going to see activity at an unprecedented level,
he said. Hospitals and health insurers are increasingly jittery
about maintaining revenue and profit as customers and the
government demand that the health care system rein in costs and
improve quality. Insurers across the nation are watching Highmark,
which became the first and so far only insurer to take a major step
into the hospital business when it purchased seven medical centers
this year. Every insurer and Blue Cross plan in the country is
taking a close look at what's happening in Pittsburgh, said Ted
Schwab, partner at the health and life sciences practice of Oliver
Wyman, a New York-based management consulting firm. If this one is
successful, you're going to see activity at an unprecedented level,
he said. Hospitals and health insurers are increasingly jittery
about maintaining revenue and profit as customers and the
government demand that the health care system rein in costs and
improve quality. 1. Payors Becoming Providers
Slide 7
Highmark and West Allegheny Health System (WPAHS) Aims to
offset UPMCs alleged dominance in Pittsburgh market; announced
during public and hostile negotiations with UPMC. Highmark assumes
the mantle of hero supposedly ensuring competition in the market by
saving WPAHS and maintaining choice (other than UPMC). Deal would
put Highmark back in the drivers seat, playing a larger role in
care delivery and quality. WPAHS later said deal was off the table,
but Highmark blocked them from pursuing other buyers, while
pressuring the system to declare bankruptcy. Settled with
bondholders for $.85 on the dollar. Other Highmark initiatives: -
In January, announced plans to build 10 ASCs in western
Pennsylvania. - Acquiring Jefferson Regional Medical Center and
Saint Vincent Health System. - Creating regional physicians
network, recruiting 200+ physicians in past year; largest
acquisition was Premier Medical Associates, Pennsylvanias largest
independent physician practice. 1. Payors Becoming Providers
Slide 8
Macro Payor Trends: Vertical Integration October 2012 AIS
Report on BCBS Plans N.C Blues Plan Invests in Urgent Care to Cut
ER Costs ...the catalyst for the deal with FastMed came following a
review of data regarding ER visits by members...Non-emergency ER
visits represent about 14% of all ER claims paid by the insurer,
and a 5% shift away from ER use to urgent care clinics could reduce
medical spending by $8 million annually. November 20, 2012
Pittsburgh BusinessTimes Highmark-WPAHS talks get underway The
acquisition must be approved by the state Insurance Department,
which would also open the doors to an additional $200 million
infusion for WPAHS from Highmark. Highmark has already committed
$200 million to WPAHS as part of its effort to create a $1 billion
medical network to compete with the University of Pittsburgh
Medical Center. January 17, 2013January 17, 2013 CNBC New Cigna
Medical Group Health Center Opens The treatment center is designed
to provide cutting-edge health care to Cigna customers through easy
access to primary care physicians... June 09, 2011June 09, 2011 Los
Angeles Times WellPoint to buy CareMore Health Group for about $800
million The deal is part of an effort by WellPoint to boost its
presence in the senior care market. CareMore, based in Cerritos,
has 26 clinics in California, Nevada and Arizona that specialize in
caring for people on Medicare. July 2011 Managed Care Magazine
Humana Steps Back To Seize the Future When Humana recently
purchased Concentra, a company that, among other things, operates
300 stand-alone clinics, the plan entered familiar terrain. Before
becoming primarily a health insurance company in 1993, Humana was
the nations largest for-profit hospital company. September 1, 2011
WALL STREET JOURNAL UnitedHealth Buys California Group of 2,300
Doctors UnitedHealth Group Inc. will acquire the operations of a
major southern California physician group, in the latest example of
how lines are blurring between insurance companies and health-care
providers.. 1. Payors Becoming Providers
Slide 9
2. Payors Demanding Cuts - Demands for rate cuts increasingly
common from Blues and United - Price leaders in each market
particularly at risk - Lower volumes, government cuts create huge
price pressures - Population health, wellness strategies require
resources for investment - not starvation diet
Slide 10
New provider-owned health plans. Hospitals from Colorado to
Virginia are exploring similar strategies spurred by rising costs
and incentives in the health reform law. An estimated 20 percent of
networks market an insurance product, including MedStar Health,
serving the Washington-Baltimore region with Georgetown University
Hospital and eight other facilities. Another 20 percent are
exploring doing so, according to a survey of 100 hospital leaders
conducted last year by the Advisory Board. Driving the change is
the transition from FFS payment schemes, which pay for each doctors
visit, appendectomy or CT scan separately, to one that pays
providers a lump sum per person per year. This will shift more of
the financial risk of medical care from insurers to providers. Once
hospital systems are paid this way, theyre sort of halfway toward
being an insurance company, said Chas Rhoads, chief research
officer for the Advisory Board. The more hospitals take on risk and
manage the care, the more they look like insurance companies. And
ultimately you have to ask: why do we even need an insurance
company sitting between a health system and an employer? 3. Health
Systems Launching Their Own Plans
Slide 11
New provider-owned health plans. 3. Health Systems Launching
Their Own Plans
Slide 12
Slide 13
13 Forming or joining payors narrow networks was the most
common strategy currently in place. Population health strategies
for employers and other groups were said to be in preparation or in
place by over half of respondents. Q: Different strategies that
many health systems have begun to implement are listed below.
Please indicate the stage, if any, that appropriately describes
where your hospital/health system stands in implementing the
following strategies or programs. Health System Strategies by Stage
in Hospital or Health System Implementation Strategy N/A: Do not
have in place and no plans to in future STAGE 1: Talking about it,
but not doing anything yet STAGE 2: Planning and preparing to
implement STAGE 3: Currently have in the works Don't know/ Unsure
Total Participating in a capitation or other global risk
program/initiative 27%25%13%29%7%100% Population health for
employers and other groups 12%24%25%31%8%100% Starting your own
health plan or joining an existing provider-owned health plan
38%20%7%26%8%100% Forming or joining one or more payors' narrow
networks 17% 13%47%5%100% 3. Health Systems Launching Their Own
Plans
Slide 14
Risk Now, the payors are finishing their hat trick of shedding
risk in their new contract approaches. - All the latest trends in
payor/provider contracting point to providers taking on more risk
for the care they provide. - Providers are facing lower payments
for fee-for-service care, quality-based payments that may be
complex or even impossible to manage or measure. - We face tiering
and restricted networks that will drive up deductible and
co-payment collection problems even more. The contracts for
participation in Exchange networks are likely to shift even more
risk onto providers. 4. Taking Risk
Slide 15
Trust toward Payors (Behavioral Reliability) This organization
makes every effort to honor its commitments 15 The average of all
payor scores is 56.9 (on a 100-point scale). Cigna and Blue Cross /
Blue Shield performed best with scores of 66.4 and 65.9
respectively. United Healthcare performed worst with a score nearly
14 points (24%) below the average. Q. For each health plan below,
indicate your level of agreement with this statement: This
organization makes every effort to honor its commitments. *Trust
Index Score values are calculated on a scale from 0 for "Strongly
disagree" to 100 for "Strongly agree" wherein "Neither" is valued
at 50 and "Don't know" responses are excluded from the
analysis.
Slide 16
Trust toward Payors (Honesty) This organization is accurate and
honest in representing itself and its intentions 16 The average of
all payor scores is 55.7. Cigna and Blue Cross / Blue Shield
performed best with scores of 65.9 and 62 respectively. United
Healthcare performed worst with a score 13 points (23%) below the
average. Q. For each health plan below, indicate your level of
agreement with this statement: This organization is accurate and
honest in representing itself and its intentions. *Trust Index
Score values are calculated on a scale from 0 for "Strongly
disagree" to 100 for "Strongly agree" wherein "Neither" is valued
at 50 and "Don't know" responses are excluded from the
analysis.
Slide 17
Trust toward Payors (Fairness) This organization balances its
interests with ours and doesn't routinely take advantage of us. 17
The average of all payor scores is 47; all scores were lower in
this measure, suggesting a disconnect between the interests of
payors and providers. Cigna and Coventry performed best with scores
of 57 and 52.6 respectively. United Healthcare again performed
worst with a score nearly 11 points (23%) below the average. Q. For
each health plan below, indicate your level of agreement with this
statement: This organization balances its interests with ours and
doesn't routinely take advantage of us. *Trust Index Score values
are calculated on a scale from 0 for "Strongly disagree" to 100 for
"Strongly agree" wherein "Neither" is valued at 50 and "Don't know"
responses are excluded from the analysis.
Slide 18
Trust toward Payors Combined Trust Measures 18 The average of
all combined payor scores is 53.2. Cigna, Blue Cross / Blue Shield,
Coventry and Aetna were all above average. WellPoint / Anthem,
Humana, BlueCard, and United Healthcare were all below average.
Composite Trust Index Score values are calculated as an
equally-weighted mean of all three individual Trust measures.
Slide 19
Consumer Trust toward Payors Combined Trust Measures 19 66% of
respondents believed Blue Cross / Blue Shield to be the health plan
most trusted by consumers; only 6% believed the plan to be the
least trusted. 47% believed United Healthcare to be the health plan
least trusted by consumers; only 6% believed the plan to be most
trusted. Q. Thinking about the consumers and patients you serve,
who do you think they regard as the MOST trustworthy health plan?
Q. Thinking about the consumers and patients you serve, who do you
think they regard as the LEAST trustworthy health plan?
Slide 20
Please indicate what stage (if any) your hospital/health system
is at in terms of implementing the following strategies/programs.
2013 Dont know Stage 3: Currently have in the works Stage 2:
Planning and preparing to implement Stage 1: Talking about it, but
not doing anything yet Do not have in place and no plans to in
future 5. Direct Contracting
Slide 21
6. Narrow Networks Networks Narrow and getting narrower by the
day. Exchange networks started the trend, but challenge is much
bigger.
Slide 22
6. Narrow Networks Networks Narrow and getting narrower by the
day. Exchange networks started the trend, but challenge is much
bigger. How do you protect (and grow) market share? How much will
you discount to participate in a payors exchange network? What are
your competitors likely strategies? How does your organization
become must have for employers and consumers alike? How do you
establish relevance with consumers, and preference? How do you
protect (and grow) market share? How much will you discount to
participate in a payors exchange network? What are your competitors
likely strategies? How does your organization become must have for
employers and consumers alike? How do you establish relevance with
consumers, and preference?
Slide 23
...but if theres no agreement on which hospitals and doctors
deserve the best or worst ratings, then how, asked Dr. Bechta, can
the insurers claim that these plans are driving patients to the
lowest-cost, best-quality providers? 6. Narrow Networks
Slide 24
Thousands of employers across the country are slashing
expensive doctors and hospitals from their insurance rosters in a
move to hold down rising healthcare costs a trend that is gaining
favor with corporate bosses, if not the rank and file. The
availability of doctors varies by each narrow network. Woodland
Hills-based Health Net, one of the first to promote the strategy in
California, features 47,000 doctors in its full HMO network but
just 7,000 physicians in its Silver plan. That network available in
10 counties, including Los Angeles, Orange, San Bernardino and
Riverside can save businesses as much as 14% on insurance premiums,
a spokesman said. An even smaller network, Bronze, has 1,600
doctors in (three LA counties), and can shave as much as 24% off
insurance bills.
Slide 25
What businesses say they want - and what insurers are promising
- are networks made up of fewer but higher quality physicians.
Whereas tiered networks offer incentives to patients who see
preferred or high performing physicians, or charge higher co- pays
for visits to lower-tier doctors, narrow networks dont pay for care
for anyone other than those physicians deemed cost-efficient and
high quality. By definition, a network cant be narrow without
leaving some doctors out. Where networks are supposedly quality
based, its unclear that all insurers are offering physicians a
chance to understand why theyre included or excluded, or disclosing
the measures by which the network is selected. 6. Narrow
Networks
Slide 26
As the health care overhaul moves ahead, the nations health
insurers are scrambling to reinvent themselves, hoping to boost
their image and entice millions of Americans to enroll, some for
the first time. Blue Shield of California has opened centers inside
Lucky Supermarkets in San Francisco. Blues plans in Florida,
Pennsylvania and three other states have also opened store- front
sales centers. Customers going to H&R Block this tax season
will be asked if they want to learn about health insurance options,
part of a partnership with Blue Cross Blue Shield expected to
expand to as many as 42 states by next spring. 6. Narrow
Networks
Slide 27
Slide 28
Slide 29
7. Pushback on Key Revenue Items Physician employment and rates
Non-hospital sites (OP, lab, Dx imaging) Addition of new hospitals
or entry into new markets Implants, high cost drugs, and stop loss
thresholds Facility fees
Slide 30
Sources: Nooga,com, Pittsburgh Business Times, Public
Broadcasting Atlanta, Beckers Hospital Review, Durham-Middlefield
Patch, The Post and Courier How much rates will rise through Dec.
31, 2014, has become the latest point of disagreement between
health insurer Highmark Inc. and the University of Pittsburgh
Medical Center 8. Major League Payor/Provider Conflict
Slide 31
Health System Strategies
Slide 32
ACO Strategy In 2012, about one-third of providers had an ACO
strategy in place or were making preparations. This year, over half
of providers have an ACO strategy in place or nearly in place.
Please indicate what stage (if any) your hospital/health system is
at in terms of implementing the following strategies/programs. 2013
Stage 1: Talking about it, but not doing anything yet Stage 2:
Planning and preparing to implement Stage 3: Currently have in the
works Do not have in place and no plans to in future Dont know 9%
2013 Do not have in place and no plans to in future Stage 2:
Planning and preparing to implement Stage 3: Currently have in the
works Stage 1: Talking about it, but not doing anything yet
Internal Wellness or Population Health Strategy Please indicate
what stage (if any) your hospital/health system is at in terms of
implementing the following strategies/programs.
Slide 33
Clinical Integration Strategy +11% Please indicate what stage
(if any) your hospital/health system is at in terms of implementing
the following strategies/programs. Dont know Stage 1: Talking about
it, but not doing anything yet Stage 2: Planning and preparing to
implement Stage 3: Currently have in the works Do not have in place
and no plans to in future 2013 11% Direct Contracting with
Employers Please indicate what stage (if any) your hospital/health
system is at in terms of implementing the following
strategies/programs. 2013 Dont know Stage 3: Currently have in the
works Stage 2: Planning and preparing to implement Stage 1: Talking
about it, but not doing anything yet Do not have in place and no
plans to in future
Slide 34
34 Forming or joining payors narrow networks was the most
common strategy currently in place. Population health strategies
for employers and other groups were said to be in preparation or in
place by over half of respondents. Q: Different strategies that
many health systems have begun to implement are listed below.
Please indicate the stage, if any, that appropriately describes
where your hospital/health system stands in implementing the
following strategies or programs. Health System Strategies by Stage
in Hospital or Health System Implementation Strategy N/A: Do not
have in place and no plans to in future STAGE 1: Talking about it,
but not doing anything yet STAGE 2: Planning and preparing to
implement STAGE 3: Currently have in the works Don't know/ Unsure
Total Participating in a capitation or other global risk
program/initiative 27%25%13%29%7%100% Population health for
employers and other groups 12%24%25%31%8%100% Starting your own
health plan or joining an existing provider-owned health plan
38%20%7%26%8%100% Forming or joining one or more payors' narrow
networks 17% 13%47%5%100% 3. Health Systems Launching Their Own
Plans
Slide 35
employer engagement is not occ med
Slide 36
Must Have Hospitals 36 Most respondents indicated their
hospital or health system was a must have, whether for all services
(52%) or only certain services (22%). Q: As you think about the
reputation of your hospital or health system, which of the
following best describes your hospital, in the eyes of the major
payors you work with?
Slide 37
The future for health systems revolves around employers. How? -
Health systems launch their own health plans - Pursue direct
contracting strategies - Launch new population health and wellness
programs - Begin to engage employers in conversation, understand
their issues and concerns, and explain how their needs will be met
in the future. Wild card is the employer response to private and
state insurance exchange options. - If providers fail to price
their services properly and demand commercial market rates, the
exchanges will incentivize employer dumping - Research estimates
that between 15% and 40% of small to midsize employers will stop
providing employer-sponsored coverage. Providers could experience
the largest reverse cost shift in history, the greatest shift of
high-margin commercial business into lower-margin exchange
business. Critical Audience: Employers On the other hand, what
happens if youre out of network?
Slide 38
Tighter Managed Care Restrictions Consumer-Driven Health Plans
(High- Deductible Plan w/ HSA) Higher Employee Cost Sharing Disease
Management Programs Critical Audience: Employers
Slide 39
This year, grocery giant Kroger Co. has flown nearly two dozen
workers to Hoag Orthopedic Institute in Irvine and several other
hospitals across the U.S. for hip, knee or spinal fusion surgeries
in an effort to save money and improve care. Starting in January,
Wal-Mart will offer employees and dependents heart, spine, and
transplant surgeries at no cost at six major health systems across
the nation, with free travel and lodging. Its all part of a growing
movement by employers fed up with wildly different price tag for
routine operations. In response, businesses are showering workers
with generous incentives - including waiving deductibles and
handing out $2,500 bonuses - to steer them to these top- performing
providers offering bargain prices. At Kroger, employees may pay 10%
out of pocket if they choose one of the companys 19 select
hospitals, compared to 25% to 50% out of pocket for other nearby
medical centers. Critical Audience: Employers
Slide 40
Several employer groups across the country are calling on
health plans and healthcare providers to make healthcare pricing
more readily available to their employees and consumers by 2014.
Catalyst for Payment Reform - a not-for- profit organization of
large employers and health care buyers that includes 3M, Delta
Airlines, Dow Chemical, the Walt Disney Co., and Xerox Corp. - is
directing the effort. Critical Audience: Employers
Slide 41
How to Successfully Deploy the Right Strategy
Slide 42
clarity
Slide 43
Roadblocks in Achieving Better Payment Terms 43 Nearly 2 of
every 3 respondents (65%) felt they need better benchmark data to
achieve better payment terms with payors. A majority (51%) believed
improved public perception would eliminate roadblocks as well. Q:
Which of these roadblocks would you face, if any, when pushing for
better payment terms with your largest payors? Select ALL that
apply.
Slide 44
resolve
Slide 45
strategy
Slide 46
story
Slide 47
discipline
Slide 48
The Meek Submit, The Bold Survive More hospitals are engaging
employers than ever before. - The city on the hill strategy. -
Direct contracting with large employers. - Narrow network products
with 2nd and 3rd tier payors. - Wellness and disease management
programs. - Medical homes, ACOs, risk strategies. Population health
is the future - the question is what (exactly), when each switch
get flipped, and how margins are protected. Hospitals are helping
drive exchange enrollment, and trying to figure out their consumer
marketing strategies. Bigger health systems are expanding margins
and increasing leverage. Deals abound, affiliations are everywhere,
and scale is everyones goal.
