Nestled in the gently rolling hills of Verona, Wisconsin, a small Madison suburb, is the 1,000-acre "Intergalactic Headquarters" of Epic Systems, the multibillion-dollar company that claims its software manages medical records for 179 million Americans—or 56 percent of the country. Epic's HQ features a conference room tucked in a tree house. There's a Dungeons & Dragons-themed building with a moat and a replica drawbridge. One corridor is modeled to resemble a New York City subway car, complete with a statue of a homeless guy asleep on a bench. A group of Harry Potter-inspired office buildings dubbed the "Wizards Academy" is currently under construction.
Hospitals, facing growing pressure from insurers to cut costs, are taking an axe to their supply chains. New forms of payment triggered by the Affordable Care Act have threatened to reduce revenue for hospitals, prompting providers to add services and constrain costs. Many hope that technology long used in retail and other industries will help them cut inventory costs by millions of dollars. Up until last year, the team managing supplies for BJC HealthCare's network of 12 hospitals in Illinois and Missouri kept track of medical devices the old fashioned way: by counting them, said Marcia Howes, chief supply chain executive at the company. [Subscription Required]
Healthcare's cybersecurity ills are well-known, and a new study of enterprise secure software development shows just how far that sector lags behind other industries. The new Building Security in Maturity Model (BSIMM) study published today, BSIMM6, found healthcare organizations scored much lower than their counterparts in the financial services, independent software vendor, and consumer electronics industries, when it comes to internal software security programs and practices. BSIMM6 studied more than 100 enterprises including 10 firms in healthcare. Six of those healthcare firms--Aetna, ANDA, McKesson, The Advisory Board Company, Siemens and Zephyr Health--agreed to be named as part of the study, which is headed up by software security firm Cigital Inc. with the help of NetSuite.
When my doctor walks into the exam room, I want her to pay attention to me, not the computer. Not only is that what all patients want, but it's what doctors want, too. Yet doctors today are under pressure to feed the digital beasts. Health care's latest best-selling M.D. author, Bob Watcher, says that in a 10-hour shift a single doctor might record 4,000 clicks. Worse, much of this activity is routine census taking, driven by insurers and regulators who assume digitization makes it easy to gather statistical data, regardless of whether it contributes to the quality of care.
Choosing the right model can reduce risk, and cash reserves are important, but access to patient data is the vital third leg to launching and operating a successful health plan.
Hospitals looking for ways to gain market share and reduce costs through improved healthcare management are creating their own health plans. Despite the challenges, they're incented by financial need and encouraged by the positive experiences of health systems that have already plunged into the commercial insurance market.
A recent report from Moody's Investors Service forecasts an uptick in nonprofit hospital systems creating health plans over the next few years, but Moody's cautions that starting a new plan or acquiring an existing business both carry significant risks. Managerial skills shift, competition intensifies, and start-up costs rise, notes Moody's Vice President and Senior Analyst Mark Pascaris.
"Different management expertise is needed to operate a commercial health insurance business versus an acute care hospital," Pascaris says. "Health plans require actuarial skills for pricing models and specific marketing and service acumen, for example."
And despite substantial risks to cash flow margins, the trend is expected to persist, especially among larger systems which can absorb the costs. Drivers include the Patient Protection and Affordable Care Act, which encourages care coordination and population health management; continued focus on cost reductions, synergies through greater economies of scale, and creating new revenue streams, Moody's says in its report, "Hospitals Entering Insurance Business Gamble on Long-Term Payoff."
Not-for-profit hospitals with a health insurance business, often known as an integrated delivery system (IDS), tend to operate at noticeably lower operating cash flow margins than similar health systems without insurance, Pascaris says. "Entering the insurance business inevitably suppresses hospital system margins from the beginning," he notes.
In addition, Moody's points out that recent merger and acquisition activity among insurers will intensify competition. Nevertheless, some healthcare leaders will be drawn to the IDS concept by hospitals that were pioneers and are now showing good results.
Moody's notes that these health systems have been successful with their own health plans in part because they have ample cash reserves to weather insurance cycles and regulatory changes that come with the line of business.
The right model can reduce some of the risk, says Alan Murray, co-founder, president and CEO of North Shore-LIJ CareConnect, the first provider owned health plan in New York State. The plan was first offered in early 2014 by North Shore-LIJ Health System in Staten Island, NY, one of the largest integrated health systems in the United States. Murray is also president and CEO of North Shore-LIJ Health Plan, which offers a managed long-term care plan for Medicaid recipients.
CareConnect is meeting all financial expectations, progressing as expected toward break even at the two- or three-year mark, Murray says. The health plan grew about 130% from the first year to the second. "We continue to expand the network and become more and more attractive to a wider audience of individuals, small group clients, and large group clients," Murry says.
Alan Murray
Much of the growth in the first year came when brokers saw the CareConnect model working, the CEO says. As brokers saw that the health plan saved money for its members while also lowering premiums, CareConnect became a best buy.
Murray attributes much of the plan's success to the CareConnect model. In particular, he notes, the CareConnect and North Shore-LIJ Health System are closely integrated. "From a clinical perspective, we have designed CareConnect to take advantage of the fact that North Shore-LIJ is a very well established provider," he says.
"With medical necessity, for instance, we adopted North Shore's clinical practice guidelines as one of our foundations for the prior approval process. If a physician requests a procedure outside of those guidelines, we have a review process with one of our medical directors, the requesting physician, and if necessary, a peer from the health system so that they can have a realtime clinical conversation on the merits of a case."
That is quite different from the prior approval process of most health plans and makes CareConnect more attractive, Murray says. The health plan also focuses on reducing readmissions and emergency department visits by working with North Shore-LIJ to create a 30-day discharge plan that includes outreach, scheduling appointments, and education on medications.
Access to EHR Data CareConnect also has access to the electronic medical records in the North Shore-LIJ system, giving the health plan complete and realtime access to the care being provided, which opens up opportunities for CareConnect to offer resources and other aid. Making healthcare easier for the customer is a primary goal for CareConnect, and that is made possible by the health plan's integration with the health system, Murray says.
Steve Nolte
A hospital-owned health plan is the farthest thing from the traditional fee-for-service reimbursement and provides the best environment for maximizing the benefits of quality-based care, says CEO Steve Nolte of Sutter Health Plus, an HMO health plan affiliated with not-for-profit Sutter Health in California. Sutter Health Plus offers plans to individuals, families and employers in the greater Sacramento, Central Valley, and Bay Area communities.
"I think we're on the cusp of another growth spurt in healthcare," Nolte says. "The ACO model and the whole idea of risk is resurrecting the ideas around capitation and HMOs. With a provider who's serious about it and deeply embedded and committed to their community, the tenets of HMOs and capitation are the way of the future. Providers are saying this is the right model."
The model was not as attractive in past years because there was not as much data available, and a provider-owned health plan relies on extensive datato redefine and shape how care is delivered, Nolte says. Providers also are more appreciative of care management and more willing to deploy the right tools for making better clinical decisions, he says.
"We have to do things differently," Nolte says. "The environment in which we provide services is completely different from 50 years ago, even 20 years ago. That means we have to reinvent ourselves to meet the community's needs. Large providers that are getting into the payer side of healthcare are doing it because they recognize the mission to serve the community in the best way possible is an obligation we cannot take lightly."
Most people believe they have no opportunity to shop for the best price for their personal health care. However, UnitedHealthcare has developed a free app called Health4Me for iPhones and Android devices. The app provides a range of estimated costs for common health care procedures and services, allowing people to comparison shop. CHI Health also has a website at http://tp.chi.acelogicus.net/nesf that can give estimated costs at CHI Health St. Francis for a range of medical areas. The UnitedHealthcare app has been available since 2012.