With the launch this spring of a nationwide telemedicine-provider network, the country's largest commercial health insurer is set to offer coverage for virtual doctor visits to 20 million beneficiaries by next year.
Telemedicine is ready for takeoff, and UnitedHealth Group is banking on it.
The commercial payer Goliath, which provides healthcare benefits coverage for more than 40 million people through the company's UnitedHealthcare division, recently announced an ambitious initiative to offer coverage for telemedicine doctor visits in 47 states and the District of Columbia.
Karen Scott, senior director for product and innovation at UnitedHealthcare, says the initiative is designed to help elevate telemedicine to the mainstream of healthcare delivery options. "Choice and access are key components of our strategy," Scott told me last week. "Our strategy is to build a robust model and infrastructure comprised of multiple provider groups, which enables us to support many types of virtual visits across the country."
UnitedHealthcare's strategy is slated to unfold over the next two years.
"With this new initiative, virtual visits are covered as an in-network benefit, and are available to self-funded customers in 2015; rolling out to fully insured and individual members in 2016," Scott told me. "We see the greatest demand among our self-funded employer groups… We can quickly enter the market and offer the benefit to a significant number of members. In 2015, 1 million members will have access to virtual visits as a covered benefit. In 2016, an additional 20 million commercial members will have access to the virtual visit network."
The potential for eye-popping growth in UnitedHealthcare's new telemedicine business line reflects rapid expansion of telemedicine service offerings across the country. Last year, 12 million Americans were served in some form through telemedicine technology, and that number is expected to double this year, according to the American Telemedicine Association.
The backbone of UnitedHealthcare's "virtual visit network" is a trio of telemedicine service providers: Boston-based American Well; San Francisco-based Doctor on Demand; and Now Clinic, a telemedicine platform developed at American Well and marketed at Optum, which is another division of UnitedHealth Group. Pooling telemedicine providers is enabling UnitedHealthcare to offer coverage for virtual doctor visits in every state except Alaska, Arkansas, and Louisiana.
The president and CEO of American Well Systems, Roy Schoenberg, MD, MPH, says the UnitedHealthcare telemedicine initiative has a "huge footprint."
"We don't want to force anyone into specific services," Schoenberg told me this week. In states served by multiple members of the televisit trio, he says American Well, Doctor on Demand, and Optum are content to let UnitedHealthcare beneficiaries pick their favored telemedicine provider. "The membership can decide which telehealth services to go for."
Telemedicine as Care Setting
UnitedHealthcare's telemedicine initiative is just scratching the surface of a burgeoning market, he says. "They're looking for telehealth to grow… beyond a quick CPAC prescription to one of the ways you get care from your doctor. What we've seen so far is the first generation of telehealth, mostly quick solutions for patients. What we're now seeing is the arrival of the second generation— catering to the much bigger chunk of healthcare in management of chronic illnesses—conditions like cancer, and behavioral health."
Roy Schoenberg, MD, MPH
That second generation of telemedicine will be focused on providers, Schoenberg says. "For telemedicine to become a care setting, we have to give just as much attention to the healthcare provider as the healthcare patient. We need to be equipping providers with technologies to make telehealth part of the way they treat patients."
Shifting the Financial Risk
The accelerated adoption of value-based payment models in the healthcare industry has emerged as a potent prompt for providers to embrace telemedicine. Schoenberg says that accountable care contracting and other value-based payment models are "shifting the financial risk to provider organizations," and that telemedicine is a powerful tool to help manage that risk.
"That transition is giving a clear message to the provider side: You need to find a better way to monitor and envelop patients. The delivery side of healthcare has realized that they have to start equipping themselves with technology to stay closer with their patients. Health systems now view telehealth as an imperative."
Payers have a crucial role to play in supporting provider adoption of telemedicine services, Schoenberg says. "Payers, historically, have needed to offer telehealth services because of their undeniable convenience. This year, health plans are starting to invest in bringing telehealth into their own provider networks."
In recognition that most health plan dollars are spent on treatment of chronic disease, he says payers are asking themselves a multibillion-dollar question: "How can we equip our physicians to treat their chronic disease patients more effectively?"
One of the answers to that question is telemedicine, Schoenberg says. "You can literally equip providers with technologies so they can care for their patients in a modern way. You can convert conversations from email and telephone exchanges into well-documented telehealth visits. The health plans have a huge role to play. It's all about payers working with providers to get telehealth technology into their hands."
UnitedHealthcare is banking on telemedicine, and it would be wise not to bet against them. Last year, its insurance division generated $120 billion in revenue, showing that its executives know a thing or two about banking.
Apple Inc., one of the largest corporations in the world, also is bullish on telemedicine, Schoenberg says. "We have had a long collaboration with Apple. Telehealth is more transformative than most people think. That company is putting telehealth in its sights."
He says there is a cartoon-like quality to the pace of telemedicine growth. "You start with a little wave, then you're 1,000 feet in the air. It's a thrilling, delightful and exciting experience."
Individual health insurance exchanges are moving toward sustainability, but some payers and providers still fear the future.
This article first appeared in the October 2014 issue of HealthLeaders magazine.
What a difference a year makes.
Last fall, the new public health insurance exchanges seemed imperiled by the technical misadventures of the federal government's bug-plagued enrollment website, healthcare.gov, and some of the related state exchanges.
But as the second open enrollment period approaches next month, early doubt about whether the exchanges for individual coverage would survive the winter has given way to a view that an HIX future is certain. Insurance companies operating on the new exchanges are looking forward to a more predictable business environment; increased competition among carriers is easing patient and provider angst over narrow networks; the HIX marketplace has become a hotbed for innovation; and some on the exchanges are vying to upend the large group market that has dominated the health insurance industry for decades.
With newly proposed mental health parity requirements, Medicaid is joining the decades-long payment reform effort that has sought to boost access to mental health services.
As cost-consciousness spreads throughout the healthcare industry, awareness is rising about the steep price of unmet mental health needs.
Statistics compiled at the Arlington, VA-based National Association on Mental Illness illustrate the crushing cost impact on healthcare providers and payers.
For youths and adults under the age of 45, mood disorders such as depression are the third most common cause of hospitalization.
Serious mental illness has been linked to many chronic diseases, with the life-expectancy of the seriously mentally ill 25 years lower than other Americans
About half of all chronic mental health conditions start by age 14, but years pass before care is provided at higher costs than early interventions.
For the healthcare industry, part of the solution to this daunting economic problem is mental health parity, a visionary goal for healthcare coverage that policy makers in Washington began pursuing in earnest nearly two decades ago.
The tentative first step toward parity in group insurance coverage began during the Clinton administration, with passage of the Mental Health Parity Act of 1996. The law's requirements included equating the coverage caps for physical health conditions and mental health conditions, but huge parity gaps remained, such as exempting substance abuse services from provisions of the law.
A leap forward came in 2008, when President George W. Bush signed the Mental Health Parity and Addiction Equity Act. The law embraced and extended the provisions of the 1996 legislation, including coverage parity requirements for substance abuse services.
In 2010, the Patient Protection and Affordable Care Act introduced mental health parity requirements to the individual insurance market.
The latest advancement for mental health parity came this month, with federal officials proposing mental health parity requirements for Medicaid and the Children's Health Insurance Program (CHIP). "The goal is to align as much as possible with the approach taken in the final [federal mental health parity] regulation to create consistency between the commercial and Medicaid markets, according to a Centers for Medicare & Medicaid Services fact sheet released with the proposed rules.
The proposed rules include two crucial provisions:
Plans must provide beneficiaries and providers with the criteria for medical-necessity determinations for mental health and substance abuse disorder benefits.
Plan enrollees would gain the right to know the reasons behind denials of claims for mental health or substance abuse services.
This week, Vikki Wachino, director of the Center for Medicaid and CHIP Services, told me the proposed rules reflect a continued commitment at the federal level to push for mental health parity reforms.
"Improving quality and access to care impacts the health of our nation. Whether private insurance, Medicaid, or CHIP, all Americans deserve access to quality mental health services and substance use disorder services… The proposed rule is a way to advance equity in the delivery of mental health and substance use disorder services. The proposal will support federal and state efforts to promote access to mental health and substance use services as part of broader delivery system reform through the Affordable Care Act."
Kimberly DiBella-Farber, COO of the Child Guidance Center of Southern Connecticut Inc., says the proposed mental health parity rules for Medicaid and CHIP are another step in the right direction, particularly for states with tight-fisted Medicaid benefits that limit access to services. However, the mental health parity journey is far from over, she says.
'Still a Lot of Work to Do' Many steps must be taken before it is as easy to seek treatment for a broken bone as a broken spirit, DiBella-Farber told me. Payment reform has strengthened the legal and regulatory framework for requiring coverage of mental health services, but there are gaping holes in the continuum of care that providers can offer people with mental health conditions, she says. "There's still a lot of work to do."
For starters, there are not enough mental health providers to meet the demand for mental health services, particularly for the Medicaid-eligible population, DiBella-Farber says. "New graduates are not looking to become Medicaid providers. In some areas of Connecticut and New York, you can put up a shingle and work in the insurance realm. For clinics, it's hard to compete for staff when private practice salaries range from $150 per hour to $200 per hour."
Mental health providers also face an intractable infrastructure investment shortage, she says. "We have clinics, we have emergency rooms, and we have hospitals. We don't have any in-between levels of care. Not only do we need staff, we need programs."
Across the country, transitional housing facilities for people with mental health conditions are either woefully inadequate or nonexistent, DiBella-Farber says. "There are a lot of people who can't live on their own or hold down a job for 12 months a year because of their condition. It makes a huge difference to their health when they know they're not going to be kicked out onto the streets because they experience a difficult episode."
She says there are several other vitally important programs missing or underfunded in the mental health continuum of care, including intensive outpatient programs, home therapy visits, and case management for "concrete needs" such as groceries and employment services.
The mass shooting at Sandy Hook Elementary School in Newtown, CT, has prompted discussions about beefing up mental health programs in The Constitution State, but progress has been painfully slow, DiBella-Farber says.
"We're two-and-a-half years later, and really nothing has changed. Now we're looking at a state budget deficit. … It's definitely worth the investment, but it's a hard sell when there's no guarantee where the money is going to come from."
High Stakes and Untapped Opportunities
Katherine Hempstead, health insurance program director at the Princeton, NJ-based Robert Wood Johnson Foundation, says demand for mental health services is clearly outstripping supply. "There needs to be better ways to provide access to behavioral health providers at a lower cost. I believe there are untapped opportunities involving scope of practice and use of technology that can contribute to better access and care management," she told me this week.
Hempstead says the proposed mental health parity rules for Medicaid and CHIP appear well-intended, adding the stakes are high for people suffering from mental illness.
"The actual enforcement of parity provisions is challenging, and has been so in the private insurance arena as well. The requirement for more transparency about medical necessity rules is a helpful step. … A lot of mental health conditions are treatable rather than curable, but the treatment can make an enormous difference in terms of quality of life and productivity, in the Medicaid population as well as the privately insured population."
Four clinics integrated with a big St. Louis hospital have expanded their menu of services, boosting patient visits at the low-cost settings and staving off competition.
Financial payment models and shifting patient patterns are rapidly transforming the healthcare industry.
St. Anthony's Medical Center in St. Louis is banking on the urgent care center (UCC) becoming a new center of gravity in healthcare.
Charles Lewis, MSN, RN
In a HealthLeaders Mediawebcast tomorrow, a pair of St. Anthony's executives will detail how the 767-bed hospital has redesigned four wholly owned urgent care centers into more robust players in the organization's game plan for the continuum of care.
The ongoing initiative includes slashing UCC patient transfer times to the St. Anthony's emergency department and providing a "blended model" of UCC services, which features not only acute care but also occupational medicine and health and wellness programs.
Webcast presenter Charles Lewis, MSN, RN, executive director of emergency services and ambulatory care at St. Anthony's, says the four UCCs are staffed to provide a broader array of services than most standalone or business-chain urgent care centers.
"We staff our urgent care centers with board-certified physicians and midlevel providers who are supported by a mission-ready workforce. This staffing enables each urgent care center to provide care and services to a multitude of patient types: urgent illness or injury, occupational medicine and workplace injury, preventive health, outpatient lab, and imaging. The urgent care centers also serve as an alternative care site when patients cannot see their primary care physicians," Lewis told me this week.
Under St. Anthony's UCC model, each urgent care facility has a minimum of eight staff members on duty. In addition to clinical staff such as physicians and lab technicians, the roster includes an occupational medicine doctor and at least one occupational medicine technician.
St. Anthony's has been in the urgent care center business for two decades, assembling its foursome of UCC facilities through a combination of acquisitions and internal development. With dozens of rival UCCs in the St. Louis metropolitan area, competition is a major challenge. The revamped St. Anthony's UCCs have reversed a downward trend in patient visits, according to Lewis and his HealthLeaders webcast co-presenter, Beverly Bokovitz, MSN, RN, chief nursing officer at the medical center.
"Our urgent care centers provide care for almost 80,000 patients each year, and they serve a multitude of patient types," Lewis says.
The redesigned St. Anthony's UCCs, which use the same electronic health records system as the medical center’s emergency department, have also boosted the synergy between the urgent care facilities and the rest of the organization, he says. St. Anthony's main campus in St. Louis remains the heart of the organization, but the recent UCC redesign reflects a broader vision of healthcare's future that extends beyond the hospital walls.
"We recently implemented a direct-to-emergency department bed transfer after a doc-to-doc handoff for patients coming from our urgent care centers and from the primary care physicians with St. Anthony's Physician Organization. We've found this change greatly reduces duplication of testing and services, and it improves the patient experience," he told me.
The UCC redesign at St. Anthony's not only takes a step toward a less hospital-centric healthcare industry, but also embodies the mantra of delivering the right care, at the right time, in the right place.
The cost-effectiveness of UCC facilities is at least implied in the 2014 patient visit and gross revenue data at St. Anthony's. The UCC facilities posted 77,357 patient visits, generating $28.9 million in gross revenue. The emergency department posted fewer patient visits, 71,043, generating $71.3 million in gross revenue.
The healthcare landscape of the future is still developing, but urgent care facilities appear destined to be a key part.
A plan to down-weight Medicare Advantage star ratings to reflect the impact of beneficiary socioeconomic status has been put on hold, prompting strapped health plans to press for relief.
Federal officials are stuck at the drawing board.
Lois Simon
President, Commonwealth Care Alliance
Since last year, the Centers for Medicare & Medicaid Services has been mulling risk-adjustment of Medicare Advantage star ratings to reflect the impact of beneficiary socioeconomic status on health plan performance. In February, CMS proposed down-weighting a half-dozen Medicare Advantage star ratings, partly on the basis of statistical evidence linking disadvantaged socioeconomic status to relatively poor clinical outcomes in star-rating metrics such as hypertension control.
In the final 2016 MA payment rate and "Call Letter" rules announced Monday, CMS dropped the plan to down-weight six MA star-rating metrics. The agency "believes additional research into what is driving the differential performance on a subset of measures is necessary before any permanent changes in the Star Ratings measurements can be developed and implemented."
In a conference call Monday with reporters, CMS Deputy Administrator Sean Cavanaugh said federal officials remain committed to "adjustments in the future" to help create a level playing field for MA health plans with high percentages of disadvantaged beneficiaries.
For regulators, the key hurdle is gaining a better understanding of the causal relationships between socioeconomic status (SES) and delivery of healthcare services, Cavanaugh said. "There's not yet a consensus on what is driving the observed differences."
The differences are real and have a price that MA health plans are paying, Lois Simon, president of Boston-based Commonwealth Care Alliance (CCA), told me Tuesday. "Star ratings are lower in Medicare Advantage plans that are serving high percentages of 'dual-eligibles,'" she said, using the common designation for disadvantaged seniors who are eligible for services under both Medicare and Medicaid.
She says it takes more optimization of resources to serve these individuals. "It is harder to reach them. It can be harder to establish trust with them. You need to expend more resources to achieve good health outcomes with this population."
MA health plans garner reimbursement bonuses if they can cross the four-star threshold in MA's five-star rating program. CCA's MA health plan, which serves about 5,600 seniors with a high percentage of dual-eligible beneficiaries, has been able to achieve an overall 4.5-star rating through an expansive and expensive approach to team-based care, Simon says.
CCA assembles larges teams of caregivers around beneficiaries ranging from primary care physicians to geriatric social workers. "All of them work collaboratively on a baseline assessment. Many of those baseline issues are not medical, and we identify resources in the community that can make a difference in people's lives: finding safer housing; helping people apply for assistance programs like food stamps; arranging for mental healthcare services; and monitoring the medications for frail elders – we check to see who's going to go to the drugstore and actually pick it up," she says.
Richard Bringwatt
President, SNP Alliance
"These are the kinds of things I do as a daughter for my mother," Simon adds, "but not everyone has that kind of family support."
'Outside the Control of the Plans'
Richard Bringwatt, president of the SNP Alliance, a Washington, DC-based trade association that represents special needs plans, says CMS has to find a way to offset the costs tied to providing healthcare services to dual-eligible seniors or risk driving the payers who serve this population out of the MA market.
"By not risk-adjusting for SES, you create incentives to avoid the poor," Bringwatt says. "Before risk-adjustment [was adopted in healthcare], there was an incentive to avoid sick people and to avoid the people with complex cases."
He thinks CMS has made the right call to delay the modest proposal to risk-adjust MA star ratings for SES, but he wants federal officials to act soon.
"The stars program still disadvantages dual-eligible beneficiaries served by specialty care plans. CMS needs to keep itself on the hook for providing meaningful relief in the short term while it seeks to find a more workable solution for the long term."
Last month, the SNP Alliance and Bowie, MD-based Inovalon released a data-heavy study on the impact of beneficiary SES on Medicare Advantage star ratings. The study, which includes claims data from 2.2 million MA beneficiaries, used the largest data set available, says Christie Teigland, PhD, Inovalon's senior director of statistical research.
Inovalon researchers worked closely with CMS officials to establish that several SES factors have a demonstrable impact on MA star-rating performance. "This kind of analysis was never available before," she told me.
Bringwatt says one of the key findings of the study is that underlying factors associated with disadvantaged neighborhoods such as shortages of physicians are driving weak performance in MA star ratings for health plans with high percentages of dual-eligible beneficiaries. "The differences are outside the control of the plans [and] independent of the design of the plans."
Teigland says the Inovalon study found wide variation in the impact of SES on Medicare Advantage star ratings, including geographic variation and different blends of SES factors affecting star metrics in varying degrees. "Different factors influence different measures."
The study focused on seven MA star metrics, including breast cancer screening rates. Poverty rates were associated with performance for most, but not all, of the seven MA star metrics. Teigland says breast cancer screening rates demonstrated geographic variation due to "different standards of practice across the country."
CMS faces "a long process" establishing the mix of SES factors that are impacting star metrics and crafting an appropriate solution, Teigland adds.
"If you're going to do it right, you have to go through a process that has a lot of variables to it," she says. Time is of the essence for MA health plans that serve populations with high percentages of dual-eligible beneficiaries because "the plans can't wait that long. Plans are bleeding and losing dollars."
Alternative Approach to Level Playing Field
Teigland says the risk-adjustments to MA star ratings for SES that were proposed in February were not adequately targeted to have a significant impact.
"We ran those numbers and there was zero impact on the average star rating. The aggregate result was zero change," she says. About 15 out of 500 MA health plans her team studied would have posted star-rating gains under the CMS plan to down-weight six MA star metrics to reflect SES impact.
Simon says a better option to account for the higher costs linked to serving dual-eligible MA beneficiaries is to add an adjustment factor to the overall payment methodology that would offset the financial burden of serving a high-risk population. "It would be cleaner to make the adjustment on the payment methodology and let the stars ratings fall where they may."
This week, the Empire State is taking a bold step toward boosting consumerism in the healthcare industry, with enactment of a new transparency law that sets responsibilities for providers, payers, and patients.
New Yorkers know how to cut a deal.
Ambitious healthcare transparency legislation approved a year ago in Albany goes into force this week. The "Emergency Medical Services and Surprise Bills" law features consumer protections for out-of-network care, a pricing benchmark for healthcare services based on nearly 2 million NY insurance claims, and an independent dispute resolution process for providers and payers to arbitrate contested billings.
Robin Gelburd
FAIR Health President
FAIR Health Inc., a not-for-profit corporation founded in 2009 to build a national database of insurance claim information and serve as a resource for the healthcare industry, is providing the data for setting the new transparency law's pricing benchmark. FAIR Health President Robin Gelburd says the new law has thrust the Empire State into the healthcare transparency limelight.
"New York was successful in getting the law passed because it seeks to afford consumers tangible protections but there's breathing room in the law," Gelburd told me this week. "It's not intended to be overly intrusive on provider network design. It's a workable solution and approach."
She says the new law was adopted with widespread support, even among healthcare providers, who have been wary of transparency initiatives in other states.
"There's a balancing of a variety of different interests. In New York, the medical society was at the table, as well as the hospitals. … There was a lot of give-and-take, and there was general satisfaction in the compromises they had to make"
Fittingly with Major League Baseball returning to action this weekend, the independent dispute resolution (IDR) mechanism in the new law features "baseball arbitration." The Medical Society of the State of New York website says the IDR mechanism ensures fairness for providers and payers.
"Either the physician or insurer could bring the claim to the IDR process. To encourage reasonableness on both sides, the IDR entity would be required to choose between the plan's payment or the non?participating physician's fee ("baseball arbitration"). Only in the rare instances where the reviewer believed that a settlement is reasonably likely or both the physician fee and insurer payment represent unreasonable extremes, the reviewer can give the parties ten business days to negotiate a fee without consequence if one or neither party wished to participate in such a re?negotiation."
The pricing benchmark is a crucial component of the new transparency law because it exemplifies the initiative's attempt to "properly contextualize" healthcare information and "create a common vocabulary" to promote apples-to-apples comparisons, Gelburd says.
Under the new law, pricing of healthcare services is geared to usual and customary costs (UCC) drawn from FAIR Health's insurance claim database. The UCC pricing benchmark is 80% of the average billing for a service found in the FAIR Health database.
"Health plans have to describe how they reimburse relative to that benchmark, but they don't have to pay at that level," Gelburd says. "New York took the step of applying a standardized meaning to usual and customary cost."
She says the pricing benchmark is slated to play a pair of crucial functions. "It will serve as a point of articulation for benefits that are available to a health plan member. It will also play a role in dispute resolution. If the insurer and the provider don't agree on the bill for services … UCC becomes one of the relevant factors to look at. It gives you some structure, some guide posts to help guide the conversation."
Gelburd says the FAIR Health claims database is serving as an indispensable source of truth for healthcare stakeholders in New York and across the nation.
"Everyone needs independent data to advance decision-making. Our database has become an oasis that many people are coming to drink from," she told me, adding that the national database is helping healthcare officials to craft network adequacy regulations, develop benefit design innovations, and direct epidemiological research. "It's become a real looking-glass for the country. We feel the responsibility of the trust that people have placed in us."
New York’s new transparency law has great promise but much work lies ahead.
"Given the creativity and the good intentions that went into crafting this law, there are many more steps to take," Gelburd says. "Now, the real challenge is to make sure there's consumer awareness of the law, and all the key stakeholders have to make sure there are resources available to consumers."
For health plan members, the new transparency law provides several consumer protections related to provider networks, she says.
"Networks are the source of the river [for claims disputes]. One of the key issues that's being addressed by the law is surprise bills. To avoid surprise bills, you have to go to the source of the river and find out what's in-network and out-of-network. This law places the burden on everyone."
Under the new law, if a health plan member cannot find a particular service or doctor in-network, "there is a pathway to get that certification" and avoid out-of-network billing, Gelburd says. The law allows plan members to request access to a particular service or doctor to be considered in-network and for health plans to evaluate the requests. Patients have appeal rights.
Transparency is essential to make sure providers, payers, and patients are treated fairly, she says: "For this law to work, consumers need to go to information that's reliable, robust, and up-to-date."
Healthcare Consumerism has Far to Go
New York has taken a leap forward in achieving healthcare industry transparency; but on a national scale, the journey has just begun, according to the findings of a consumer survey that the National Health Council released last month.
The survey focused on people with chronic illnesses who purchased health coverage last year on the new public insurance exchanges. The research included six focus groups in three cities and more than 400 health plan beneficiaries polled nationwide. A significant information gap is among the top findings of the research: Only 42% of gold plan enrollees reported having enough information to select a health plan, with even worse results for silver and bronze enrollees, who reported having enough data to make an informed decision 37% and 24% of the time, respectively.
Marc Boutin, CEO of the NHC, which is a Washington, DC-based nonprofit patient advocacy group, says consumerism is establishing a tenuous hold in the healthcare industry. "The first stage of consumerism is there's a demand in the marketplace. What we're seeing in healthcare is there is consumer demand for information, and now the system needs to build up to meet that demand," he told me this week.
Boutin says the healthcare industry needs to reach three milestones before consumers can play a constructive role in the marketplace: transparency in transactions; making transaction information easily accessible, useful and uniform; and presenting information in a "machine-readable" format.
"There's been a lot of movement on the transparency side, but you need all three elements to create the tools that make consumerism work," Boutin says, adding that providing consumers with information on health service cost appears to be an obstacle nationwide. "Cost is not reported in a way that is transparent, uniform, or machine-readable yet."
While fostering consumerism in healthcare will take several more years of effort, Boutin is hopeful the country has reached a tipping point.
"We're still pretty close to the ‘hopelessly opaque’ mark on the spectrum, but we're seeing dramatic movement. Transparency and uniformity are the first two big steps you have to take. And this needs to go farther than the exchanges. It needs to go to the broader insurance industry. It's just a matter of time."
The transparency law in New York applies to all health plans that are purchased or renewed after April 1.
Medicare's standard for delineating outpatient vs. inpatient status at hospitals won't be in full force until the end of September if a bill to repeal the sustainable growth rate formula is passed in April.
After a year-long enforcement freeze, hospitals want to keep two-midnight Rule audits on ice.
"The two midnight rule is an arbitrary, time-based benchmark," Priya Bathija, says senior associate director of policy at the Chicago-based American Hospital Association. "Before two midnights, [admission to the hospital] was always the physician's decision based on medical judgment: a patient's medical history, the facilities available, the risk of an adverse event, diagnostic testing, and consultation with the patient."
According to rule, hospital stays spanning less than two midnights are considered outpatient care and billed under Medicare Part B. Hospital stays spanning more than two midnights – or stays that doctors expect to span at least two midnights – are considered inpatient care and billed under Medicare Part A. Medicare Part A pays providers at rates higher than Part B, which requires patients to share 20% of the bill.
The two midnight rule was adopted Oct. 1, 2013, the beginning of the 2014 federal fiscal year. But amidst widespread provider protestas a backdrop in April 2014, Congress and the president delayed enforcement until at least the end of this month.
The American Hospital Association has called for the enforcement freeze to continue until Oct. 1, the beginning of the 2016 federal fiscal year. If the so-called SGR fix bill is enacted into law, that delay will become a reality. The bipartisan bill passed in the House last week. The Senate is expected to vote on it in April and President Obama has said he will sign it.
If, however, federal officials insist on enforcing the Two-Midnight Rule, Bathija says hospitals need more time to ensure compliance with the length-of-stay rule. "For AHA members, they should be implementing the Two-Midnight Rule, but the enforcement freeze should continue. It gives hospitals more time to make sure they can comply," she said.
In a letter to CMS last month, Linda Fishman, AHA senior vice president for public policy, called for delayed enforcement of the two midnight rule as part of a reform initiative for Medicare's Recovery Audit Program and short stay payment (SSP) for hospitals. "We strongly urge CMS to undertake comprehensive reform of the RAC program to improve its management and fairness. RAC reform should go hand-in-hand with an SSP solution; without such changes, implementation of the two-midnight policy will continue to be problematic," Fishman wrote to CMS Deputy Administrator Sean Cavanaugh.
The AHA wants federal officials to expand payment of hospital outpatient services beyond Medicare Part B. "We believe that an SSP policy, supplementing the existing two-midnight policy, could reimburse hospitals more accurately for the resources used to treat patients who stay in the hospital less than two midnights," Fishman wrote.
She says limiting hospital payments to Medicare Part B often does not reflect the intensity of medical treatments in the first days of care. "Under the two-midnight policy, CMS generally considers hospital admissions spanning two midnights appropriate for payment under the inpatient [rates]. In contrast, hospital stays of less than two midnights are generally considered outpatient cases by CMS, regardless of clinical severity."
She says the two-midnight policy results in "inadequate reimbursement to hospitals for beneficiaries who require an inpatient level of care, but who stay in the hospital less than two midnights."
Fishman says a prime goal of the AHA reforms is for Medicare payments to more accurately reflect the cost of services during short hospital stays. "In many cases, the payment rates are far less than the costs incurred by the hospital. CMS could, for example, consider allowing hospitals to record a room and board charge associated with these services, thereby more accurately reflecting their costs."
A CMS spokesman says "CMS is evaluating options for next steps in our medical review strategy."
Two-Midnight Rule Foes Face Time Pressure
Most hospitals realize the time is nearing to comply with the Two-Midnight Rule, healthcare and finance analysts say.
Ronald Hirsch, MD, vice president of the regulations and education group at Chicago-based Accretive Health and former medical director of case management at Sherman Hospital in Elgin, IL, says hospitals have had enough time to adapt to the Two-Midnight Rule.
"The rule has actually been in full force since October 1, 2013… Hospitals should be ready for full auditing and subject to full auditing," Hirsch says.
"The rule is simple. It is two steps: does the patient require hospital care and is that care expected to take over two midnights. That is so much simpler than the previous risk-based method of deciding who gets admitted and who gets observed. That method resulted in 800,000 appeals and a two-year appeals backlog. But there still is a subjective component to who needs to be in the hospital and how long that patient will require to get better. If doctors use rational decision-making and document that rationale, there should be no problem."
Daniel Steingart, a vice president and senior analyst at New York-based Moody's Investor Service, says most hospitals are already operating under the two-midnight rule. "Just about everybody is complying with the rule. Over the past year, we've seen a reduction in hospital inpatient stays directly related to the rule."
The rule is part of a broader financial trend, Steingart says. "It's certainly a piece of the puzzle in the slowing of inpatient revenue and growth in other reimbursement areas. There's been a general shift to outpatient care. The two midnight rule is not a major driver; there are other reasons more people are being treated on an outpatient basis. There have been changes in health plans to higher deductibles and copays for patients. That generally slows volume of services."
Value-based payments such as shared savings contracts and bundling are also driving down medical service volume, Steingart says. "Providers are incentivized to spend less money, which tends to slow down revenue growth."
Hospitals are crying foul over the rule to seek revenue relief wherever they can find it, he says. "It's part of the revenue pressure on hospitals. It's tied to the shift from volume to value, but the shift is on a very small scale so far. The rollout is uneven. Healthcare is still local. It's not like the country switched a switch on the wall. About 4% to 6% of provider reimbursement comes in value-based contracts. Only a few markets are in front of that. It's a relatively slow train moving out of the station toward Medicare's goal for 50% value-based reimbursement."
Widespread provider-payer integration appears inevitable, but health systems, hospitals, and physician groups face a years-long learning curve.
Healthcare providers are clearly interested in offering their own insurance coverage products for patients, but adoption is more like a steady flow than a flood.
Herb Kuhn
President and CEO,
Missouri Hospital Association
In January, St. Louis-based Ascension Health became the latest large health system to embrace the health plan business, with a $50 million bid to acquire a Michigan-based insurance carrier. Officials at Ascension and US Health and Life Insurance Company declined to comment, but Herb Kuhn, president and CEO of the Missouri Hospital Association, says the proposed acquisition deal is a sign of the times.
"An increase in strategic partnerships is a natural extension of efforts to improve healthcare delivery between hospitals and among providers and payers. The shift from volume to delivery of value is fundamentally redefining relationships and structures. At the same time, these new organizations are gaining new capacity to look around the corner at a changing system and adapt to the new environment," says Kuhn.
He says the merging of provider and payer services into one organization has become a prime strategy in the healthcare industry to drive the retooling of American medicine. "It's connecting historically independent actors in the system to improve care and organizational performance. A team approach, with shared goals, will greatly accelerate clinical redesign efforts and assist in how the organizations reshape their medical management models. Moreover, it will help providers align their efforts, increasing patient and consumer engagement and enhancing the healthcare experience."
For many providers, taking on this strategy is easier said than done, according to a HealthLeaders Media intelligence report released this month. The findings of the report, which surveyed more than 300 leaders at health systems, hospitals, and physician organizations, offer several insights:
Data is an enticement. 43% of survey respondents saying they are using payer data to better understand the care experience of patients.
Size matters. 26% of health systems reporting ownership or operation of a payer business unit or health plan, compared to 16% of hospitals and 7% of physician organizations.
Providers are wary. 28% of survey respondents reporting that they assessed whether to launch a payer business unit or health plan then decided against it. Only 16% of the healthcare provider officials reported owning or operating a payer business unit or health plan.
'Synergy Capture' Key to Provider-Payer Integration
Bill Copeland, vice chairman of New York-based Deloitte LLP, says it will take a decade for healthcare providers to establish successful models for incorporating payer business units and health plans into their organizations.
"Unlike the 1990s, when we saw health systems develop health plans then pull back, the market has changed enough that this is here to stay," he says. "There's been a lot of consolidation among providers. They actually have networks of physicians to work with. They have more expertise in managing care."
Copeland says the fact that providers are embracing payer functions is a predictable response to the revolutionary changes sweeping across the healthcare industry.
"It isn't doing the same things the same way they have for the past 50 years… It's very natural for industries to do this kind of vertical integration. It allows you to unlock value. You don't have to give up value to a payer. You can reward the right behavior in doctor compensation and increase value in care. You can change the setting. Care doesn't have to be in an office. It can be a nurse in a car driving around visiting patients."
While vastly higher levels of provider-payer integration appear inevitable, providers face several challenging obstacles, Copeland says.
"You have to have reserves. Providers are going to be regulated by new organizations that they're not used to working with. They need staff with new competencies that they're not used to hiring. There's a tension in provider and payer relationships, and [some providers] don't want to introduce that tension into their organizations."
Copeland agrees with one of the key findings of the HealthLeaders intelligence report. "I do think it takes a health system. You have to have a critical mass that creates something that will be interesting to your community. You have to ask, 'Do you have enough delivery system assets that would be adequate enough that you don't have to fill holes and gaps?' You need a strong balance sheet."
Providers who are considering payer initiatives should focus on the "synergy capture," Copeland says.
"The critical piece to making this work as a provider is taking advantage of the integration. This is not a standalone effort. It's the synergy capture. Ultimately, you will achieve more affordable care and improved patient experience. Unlocking the value is not being constrained by the ways we do things today. Physicians are eager for this kind of change. There is a long list of things that are constraining the system that, through vertical integration, you are able to unlock."
North Carolina Health System Committed to Bearing Risk
Last summer, UNC Health Care decided to offer a Medicare Advantage health plan in partnership with Irvine, CA-based Alignment Healthcare. Louisville, KY-based Humana was added to the partnership mix in November.
Allen Daugird, MD, MBA, president of UNC Physicians Network and UNC Health Care's chief value officer, says the MA health plan is off to a slow start but has been a good investment.
"We have about 1,600 enrollees and had hoped for more, but we're satisfied. Some of this we think is because the concept of a narrow-network HMO Medicare Advantage plan that requires signing up with a primary care provider is a new one for North Carolina. It was also a new product for Humana, who relied on their sales force, which might not have totally understood the Alignment model. And lastly, unexpectedly, Duke launched a new, similar narrow-network MA HMO in partnership with Aetna," he said last week.
"Successes include Alignment having three care centers operational by January and providing many 'jump start' visits to new enrollees, where a comprehensive medical evaluation occurs and bridge prescriptions are provided until patients get in to see their new primary care provider if they are changing practices. Having the Alignment Care Centers on UNC's version of Epic was also a success, and makes information sharing much easier and effective. Another success is that we have been able to develop permanent collaborative communication and problem-solving structures for providers and Alignment. Lastly and most importantly, seniors in Wake County North Carolina now have a new Medicare option that has the most extensive and cost-effective set of benefits available."
Daugird says UNC Health Care's MA health plan is a building block for the organization's future.
"We see the march toward value care and risk contracts only accelerating. The recent announcement by [the Centers for Medicare & Medicaid Services] about its plans to accelerate value payment programs underlines this. The state of North Carolina is also very interested in moving its Medicaid populations into risk-value programs. Employers and insurance plans are, too. To prepare for all this, we continue to build a population and value-care infrastructure to support care and cost management as well as the necessary IT and analytic systems."
Prominence Health, a business unit of Catholic Health Initiatives, gives the non-profit hospital operator a key to unlocking value in provider-initiated insurance enterprises.
When you are trying to make big strides, it helps to have a large footprint.
Juan Serrano
Senior VP of Payer Strategy and Operations,
Catholic Health Initiatives
Catholic Health Initiatives, an Englewood, CO-based nonprofit health system, operates 105 hospitals in 19 states. CHI has a three-pronged health insurance strategy: a payer business unit called Prominence Health; Medicare Advantage health plans offerings in six states; and commercial health insurance products and services offered through a partner in Arkansas.
Juan Serrano, senior vice president of payer strategy and operations at CHI, told me last week that the sprawling faith-based health system's payer business unit has been able to leverage several advantages. Parts of the transcript of our conversation have been edited for brevity and clarity.
HLM: How would you characterize the maturation process at Prominence Health? Is it past the start-up phase?
Serrano: We regard our health plan and corporate health business as in operational- and growth-phase: We are fully operational across all health plan segments. We are entering new markets and launching new employer-focused solutions, and our sales and marketing channels are actively developing our growth channels.
HLM: From a big picture and organizational view, what kind of impact has Prominence Health had on CHI? For example, has CHI been able to make gains in population health management?
Serrano: Our Prominence Health insurance, network, and population health management capabilities are advancing our health system's ability to negotiate, operate, and manage a growing portfolio of customer populations, from the Medicare Shared Savings Program and bundled payments, to value-based relationships with most major health insurers, and risk-based arrangements aligned with CHI's objectives to improve the health of our communities through active participation in each person's health and wellbeing.
HLM: Among providers, health systems seem most interested in launching their own health insurance business units. What risk-bearing advantages does CHI have over smaller provider organizations?
Serrano: Having a distribution channel for healthcare services accelerates population [health] management. We also have [Medicare Advantage] membership scale. It can take three to five years to build up, and you typically need 15,000 to 20,000 members. By spreading Medicare Advantage over six markets now and 12 markets eventually, we can quickly reach scale. You need infrastructure for health plan operation: IT, operating a call center, operating a claims center. You need to have all those functions in place. The reserve funding and the marketing function may be the largest economic barrier. You have to come up with the financing resources to market Medicare Advantage health plans.
HLM: "Unlocking value" has become a catch phrase in healthcare industry vertical integration. How is CHI integrating health insurance into the organization in a way that maximizes value creation?
Serrano: We have actively transitioned our business model from a hospital-centric organization to a health system organization. CHI is well-positioned with an effective provider network. We are organizing our providers into more capable networks to build and improve population health management.
HLM: CHI acquired a commercial carrier in Arkansas. Is the health system planning to sell more commercial health insurance?
Serrano: Probably a dozen of our states are attractive from a Medicare Advantage perspective. For commercial licenses, we are looking across our entire footprint. QualChoice in Arkansas is the only place where we are operating an insurance license today.
Part of that market is third-party administration [of group insurance plans]. We are expanding our administration of commercial insurance to other markets. There are 20,000 members who are part of the CHI health system's insurance coverage in Nebraska. We're being thoughtful of where we want to offer insurance products. We want to be confident. [The Patient Protection and Affordable Care Act] is impacting insurance pricing. We want a clear line of sight on how insurance products are going to fit into our portfolio from an economic perspective.
HLM: To maximize the benefits of having in-house health insurance products, is it important for an integrated health system to close gaps in the continuum of care?
Serrano: We have been both employing physicians and affiliating with physicians. Our physicians have a mission to provide care where it is needed, not necessarily in a CHI hospital. Our goal is to be "clinically integrated." It's a more pluralistic approach to providing care in the community.
HLM: In the US healthcare industry, there is a natural and historical tension between providers and payers. How has that tension played out at CHI with the health system's new payer business unit, Prominence Health?
Serrano: The payer unit has the same goal, providing care, but with the added goal of discouraging unnecessary spending such as avoidable hospitalizations. Then there's arguing over pricing and the fee schedule.
We came at the tension from two directions. First, there was a realization the tension is going to happen anyway. We embrace the tension. Second, it's about partnership and sharing. It's not about the health system getting more money from the payer. It's also not about the payer getting more money from the health system. Rather, it's about creating value.
We saw the benefits as outweighing the risks of working with a competing business model. It's a partnership within the same family of companies. [Developing payer capabilities] allows us to factually inform the health system about what does work and what does not work. For us, operating a health plan is about realizing the synergy benefits.
HLM: Is CHI trailblazing health system vertical integration?
Serrano: There are some aspects of what we're doing that are truly innovative; but 20 or 30 years ago, you had HMOs and other forms of managed care. Some aspects of what we're doing have been tried before. What we have been doing is making sure our business model avoids the pitfalls that came before.
The health plan has to be operated effectively. There has to be sufficient funding, underwriting resources, and an effective network of care. Much of the innovation is focused on new models of care, doctor compensation, and managing the patient experience in a way that is significant for the consumer. In healthcare, consumer engagement has really lagged. We're doubling down on how to improve the consumer experience.
HLM: Regulators require health plans to carry hefty reserves. Have reserve requirements for Prominence Health squeezed CHI's ability to invest in other areas?
Serrano: We certainly have those conversations. We benefit from having a very strong balance sheet. Parking cash in reserves—you restrict your use of cash when you put it in reserves. Having the capacity to move cash into reserves is a characteristic of CHI. It creates a long-term dynamic. The way the economics are intended to work reflects the global impact on CHI, with growth of market share and a synergistic dynamic.
The key is unlocking the value between these two organizations. Over the long term, we will more than offset the parking of CHI cash in reserves. We have multiple health plans in multiple markets. We have a collective family of offerings. Over time, the health plans will repay CHI.
An appellate court ruling is a setback for federal officials in their effort to award a new round of contracts for Medicare's Recovery Audit Program.
A US Court of Appeals ruling earlier this month that invalidates a provision of Medicare's 2014 Recovery Audit Program contracts is the latest setback for federal officials who administer the program.
Melissa Jackson
Senior Associate
Director of Policy,
American Hospital Association
The 2014 contracts were slated to be awarded last year, but a series of challenges from Recovery Audit Contractors (RACs) has delayed the rollout of the new contracts. In the meantime, the Centers for Medicare & Medicaid Services has temporarily extended the original round of RAC contracts awarded in 2008.
"It's the ongoing saga of the RAC contracts," says Melissa Jackson, senior associate director of policy at the Chicago-based American Hospital Association.
In April 2014, one of the inaugural RAC contractors, Fairfax, VA-based CGI Federal Inc., filed a lawsuit against the government in the US Court of Federal Claims. CGI asserted a payment provision of the 2014 Recovery Audit Program contracts violates federal law.
CGI objected to a change in the timing of payment for contingency fees that RAC contractors receive when audits of healthcare providers reveal over payments from Medicare. Specifically, the original Recovery Audit Program contracts require Medicare to pay RAC contingency fees after the first level of appeal, which takes about 120 days. The 2014 Recovery Audit Program contracts set the timing of RAC contingency fee payment after the second level of appeal, which can take more than 400 days.
In August 2014, the US Court of Federal Claims ruled in favor of the government, and CGI appealed the case to the US Court of Appeals for the Federal Circuit.
On March 10, the US Court of Appeals reversed the lower court's decision. The appellate court decided that the change in payment terms violates federal contract law; specifically, the 2014 Recovery Audit Program contracts ran afoul of a prohibition against terms inconsistent with customary commercial practices. The case was remanded to the US Court of Federal Claims.
This week, CGI and CMS offered brief comments on the Court of Appeals ruling.
"We are pleased at the court's decision to recognize our position against the new payment terms proposed for Medicare recovery auditors. [The appellate court's] ruling encourages private sector participation in a vital government initiative to identify and recover improper payments for the Medicare program," said Linda Odorisio, vice president for global communications at CGI.
A CMS spokesman provided the following comment: "CMS is reviewing the court's decision related to Recovery Audit contingency fees, but cannot comment at this time on the decision or next steps in this process."
Reading the RAC Tea Leaves
Susan L. Smith, JD, a legal analyst at New York-based Wolters Kluwer Law & Business, says the US Court of Appeals ruling is a victory for CGI.
"Because the new payment terms are included in CMS's proposed RAC contracts, it is likely that CMS will be required to rebid the contracts without those terms. Furthermore, CMS may be required to consider CGI in its renegotiations because the appellate court determined that CGI was a prospective bidder at the time it filed its complaint in the Court of Federal Claims," Smith said this week.
Jackson also views this month's court ruling as a win for CGI, but she says it is hard to predict how CMS will react to the decision. "If CGI had lost this appeal, they would have been out of contention for future contracts. How CMS moves forward depends on how the lower court handles it," she said.
The timing of RAC contingency fee payments has little bearing on healthcare providers, Jackson says, noting that the level of the fees is more problematic. "We are continuing to press for fundamental reform of the RAC program and its financial incentives. We really don't have an opinion on when the RACs get paid. We have an issue with RAC fees that range from 9.5% to 12% [of the Medicare payments recovered through RACs]. That's really what's driving their bad behavior."
In addition to alleging overly zealous RAC clawbacks of Medicare payments, the AHA is critical of CMS's efforts to keep hospitals informed about developments in the Recovery Audit Program, Jackson says.
"For hospitals, it's really an issue of transparency. We want to have CMS clearly communicate how the new RAC contracts are going to work. We want a period of time so hospitals can 'onboard' with their new RACs. Hospitals have not been entirely aware of when the audits have started," she said, noting a two-month hiatus in RAC auditing last summer while CMS struggled to come to grips with the CGI court case. "It's been hard to have consistent and clear information coming from CMS."
