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Analysis

The Care Delivery Reckoning: 'Employers Simply Cannot Afford to Maintain the Status Quo'

By Jack O'Brien  
   October 01, 2020

California healthcare stakeholders weigh in on the lessons healthcare finance leaders can learn from the health system in the Golden State.

Healthcare finance leaders have opportunities to reevaluate their spending practices considering the ongoing COVID-19 pandemic and learn from what has worked in California's health system, according to two CEOs.

HealthLeaders hosted the first Healthcare Finance NOW Summit Tuesday, which featured sessions on topics that matter to finance leaders as they navigate the new normal and envision a road map for the future. The event was sponsored by Vizient and Lumeris.

Related: Embracing Healthcare Finance Innovation and Accountability in Spending

The event was bookended by an opening presentation from Elizabeth Mitchell, CEO of the Pacific Business Group on Health, and a closing presentation from Dr. Micah Weinberg, CEO of CA Fwd. 

Below are takeaways from both of their sessions.

Accountability in Healthcare Delivery and Spending in the Wake of COVID

Mitchell talked about healthcare trends that have persisted for years and have been heightened due to the pandemic, such as the urgency among large employers and healthcare purchasers regarding prices.

"Employers simply cannot afford to maintain the status quo [of healthcare spending]," Mitchell said. "I know they've been saying that for a long time, but in the COVID era, this has become a stark reality."

Mitchell said that employers are increasingly committed to improving the quality of care for their employees, though she added that purchasers see "the market as having failed in healthcare," which leads to growing support for policy reform and potential government intervention.

She highlighted specific healthcare policies, such as prescription drug pricing regulations, the price transparency rule, surprise billing measures, and hospital rate setting, as areas where purchasers are looking for action.

"If you come away with anything today, it's that there is a collective readiness on the part of employers to act," Mitchell said.

Related: PBGH CEO on Sutter Health Antitrust Settlement: 'I Don't Think This Issue Will Go Away'

Healthcare costs continue to rise and have a disproportionate impact on the broader scope of American life and the economy, Mitchell said, and it is the responsibility of healthcare leaders, rather than purchasers to change the industry's trajectory.

Mitchell said PBGH has worked with its employer members in reexamining interactions with providers, developing innovative care delivery relationships, and achieving high-quality care at a lower cost.

She added that some employers have indicated it is their "obligation" to pursue narrow networks because those arrangements provide the highest quality and most cost-effective care on behalf of their employees.

Mitchell said employers believe they are aligned with clinicians because "employees are their patients," so there is a mutual understanding for meeting quality and cost expectations.  

While health benefit design is not the "day job" for many large employers, Mitchell said many are embracing direct contracting to "get the value they know their employees deserve."

Innovation in Healthcare Finance: Lessons From California

The healthcare system in the Golden State is marked by fragmentation, according to Dr. Weinberg, but one common theme is how healthcare finance supports multiple aspects of the broader economy.

"[Healthcare finance] supports institutions that support so many of our regional economies, especially in our rural areas where often a hospital is the largest employer," Weinberg said. "Something that [CA Fwd] focuses on is not only those jobs, but how economic opportunity itself is the primary driver of health."

Weinberg detailed the effects of the COVID-19 crisis on hospitals across the states, highlighting the negative financial impact on providers compared to payers.

Due to the temporary suspension of elective procedures in the state, and the subsequent fear among patients about visiting the hospital and contracting the coronavirus, Weinberg cited statistics from the Office of Statewide Health Planning and Development that showed hospitals experienced more than $12 billion monthly revenue declines during the first four months of the pandemic.

"The challenge for hospitals is that there were a lot of people, and this is still true to a lesser degree, that were forgoing necessary care other than for COVID because of concerns about interfacing with the healthcare system," Weinberg said. "So the financial impact on California hospitals with the COVID crisis was a significant reduction in revenue."

Related: Consolidating California: Concentrated Provider Markets and Rising Prices

Reflecting on California's healthcare system, Weinberg said there are two key lessons for providers in other states to learn from:

  • State policy matters
    • California has a state-based [health insurance] mandate, higher subsidies, and the highest enrollment in a stable market.
    • California proves a state can partner successfully with the [healthcare] industry.
  • [States] can spend $300 billion on healthcare and still have massive health disparities by race and class.
    • It is not clear [California] can make progress on social determinants of health through more health spending.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

"If you come away with anything today, it's that there is a collective readiness on the part of employers to act," said Elizabeth Mitchell, CEO of the Pacific Business Group on Health.

"The challenge for hospitals is that there were a lot of people, and this is still true to a lesser degree, that were forgoing necessary care other than for COVID because of concerns about interfacing with the healthcare system," said Dr. Micah Weinberg, CEO of CA Fwd.


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