Not-for-profit hospitals are feeling financially pinched as healthcare reform efforts seek to simultaneously increase healthcare accessibility, cut costs, and improve quality.
Marking a second consecutive year of weak financial performance at not-for-profit hospitals, 2013 expenses outpaced revenue growth in the sector and similar results are expected this year, according to Moody's Investors Service.
In a median report released this week, Moody's says "operating revenue growth dropped to an all-time low of 3.9 percent and was outpaced by expense growth for a second consecutive year, an unsustainable trend." NFP hospitals posted 5.1 percent revenue growth in 2012.
Moody's pegged the 2013 growth rate of NFP hospital expenses at 4.3 percent. Expenses grew at 5.5 percent in 2012.
Jennifer Ewing, a Moody's analyst who co-authored the report, says lower reimbursement for services coupled with a shift to outpatient care from inpatient care is bringing financial pressure to bear on NFP hospitals.
She cites several factors dragging on revenue growth: lower reimbursement from commercial payers as they drive harder pricing deals on insurance exchanges as well as shift risk to providers and patients; tighter Medicare reimbursement; "built-in" statutory cutbacks for government programs that help fund hospitals such as reductions in federal Disproportionate Share Hospital payments; and Medicare's proposed "two-midnight rule" for determining outpatient vs. inpatient status accelerating growth of outpatient services at the expense of relatively more profitable inpatient care.
Ewing says "lower-cost providers" such as pharmacy clinics and urgent care centers are also draining revenue from NFP hospitals. They are acting as "new competitor[s]," she said of the new entrants and new business models proliferating in the delivery of healthcare.
Weak Cash Flow
Cash flow is also a weak spot in the NFP hospital median report, which states, "The operating cash flow margin reached an all-time low of 9%."
Despite that grim figure, Ewing sees glimmers of hope for hospital executives. "This is the first year expense growth slowed, [and] it still outpaced revenue."
The report also noted growth in NFP hospital "absolute and relative liquidity measures." Ewing said "we believe the reasons for the increases in liquidity are the strong equity market and wiser capital spending."
"As the stock markets do well, the hospitals do well," added Lisa Goldstein, associate managing director at Moody's and a co-author of the report. "The investment returns can build up your cash."
Goldstein says the imbalance between expenses and revenue growth at NFP hospitals will likely persist over at least the short term. "We expect these 2013 trends to continue for 2014," she said.
'In a Tough Spot'
"The hospital community has been under pressure for some time," said Peter Angood, MD, CEO of the American College of Physician Executives. The ongoing financial squeeze has prompted hospital officials reconsider how they deliver care to patients across the board.
Two of the prime efforts to expand healthcare accessibility—the new public health insurance exchanges and Medicaid expansion—are likely to be a net negative for many hospitals, Angood said.
"That's going to increase pressure on hospitals to manage that new population of patients," he said, noting traditionally low Medicaid reimbursement rates and the bill collection burden linked to the high level of patient cost-sharing on the exchanges.
Katherine Hempstead, team leader and senior program officer at the Princeton, NJ-based Robert Wood Johnson Foundation, said financing an NFP hospital is a lot like keeping an airline afloat, with both industries "highly regulated, with a high cost of entry and high cost structure."
"They really are in a tough spot," she said of NFP hospitals. "The good news is they are becoming more efficient. … Hospitals are becoming much more mindful of what they do that is wasteful and what they do that is efficient."
Hempstead pointed out that a key finding of the Moody's report is the shift away from inpatient care in dollars and cents. "If I were a hospital, I would be looking for other places in the delivery chain where there's growth," she said. "Hospitals are not going to go away, but there are so many forces that are pulling away from inpatient care."
In addition to focusing on efficiency gains and opening new lines of service, NFP hospitals can also hold the line financially through consolidation efforts that build market power and by establishing high quality standards, Hempstead said.
"Hospitals need to demonstrate superior quality," she said. "It's possible we have excess capacity. It's possible we'll see hospital closings. But there's no substitute for hospitals. I don't think [the financial situation] is an existential threat for the whole sector."
Data-driven consumer engagement is the vanguard of the effort to provide cost-effective treatment of chronic disease. How one payer is tracking psychosocial indicators for the neediest patients.
I hear bugles in the distance.
As they trailblaze the vast value-based healthcare delivery frontier opening up before them, insurance carriers have encountered two daunting obstacles: engaging individual customers, who are becoming determinants of value; and harnessing a treasure trove of health data.
Consumer engagement has risen to pivotal importance in the healthcare industry, Margaret Rowland, MD, chief medical officer of Portland-based CareOregon, told me this week. "Consumer engagement is essential for achieving ideal health outcomes. If you are going to get good health outcomes, a population has to be engaged in the process. If they are not involved, then it won't make a long-term difference," she says.
CareOregon, a nonprofit that covers 160,000 people and focuses primarily on the low-income and vulnerable, has teamed up with Health Integrated to leverage the Tampa, FL-based company's data analytics and consumer engagement capabilities to help provide cost-effective care to the health plan's most costly patients: members of medically vulnerable populations such as people suffering from multiple chronic illnesses.
About half of American adults have at least one serious chronic condition such as hypertension or kidney disease, according the Centers for Disease Control and Prevention. "The majority of US healthcare and economic costs associated with medical conditions are for the costs of chronic diseases and conditions and associated health risk behaviors," the federal agency's website states.
Rowland told me health plans are facing challenges in reaching out to these members that go far beyond the bounds of traditional approaches to healthcare. Data analytics is riding to the rescue.
"Increasingly, we are understanding the psycho-social issues that affect vulnerable populations. For example, when we speak to a diabetic about a blood test, if they have nowhere to sleep that night then a blood test is just not their priority. As healthcare providers, we need to understand their lives when we speak to them. We need to help stabilize their social lives before we can really expect them to self-manage their health issues," she says.
Zachary Fritz, executive VP for sales and marketing at Health Integrated, told me last week that there are three main elements to the company's approach to helping health plans serve vulnerable populations:
"Biopsychosocial" care management uncovers the physical, psychological, and social dimensions of a member's health conditions, then a "personal clinician" trained in social work and medical sciences targets interventions at particular needs
Data analytics tools "identify, stratify, and intervene with greater customization and scalability" while measuring the impact of interventional measures
A coordinated and integrated care delivery model strives to get the health plan, providers, and community resources "working together in the best interests of the individual and driving adherence to mutually agreed upon, medically necessary, and evidence-based treatment and care plans"
Deploying data analytics is a necessary step to target individuals in vulnerable populations who could benefit from health services, but delivering that care is a more personalized consumer engagement exercise, Fritz says. "The first step is identifying the right people through data analytics. But we go further because when an individual is simultaneously facing behavioral barriers and social impediments along with managing their multiple chronic conditions, it's a difficult challenge for them to be fully engaged in their physical health. Traditional, one-size-fits-all clinical programs don't have optimal impact for most people. We believe that a care team must first address what we call the 'root-root' causes of the barriers for better self-management."
Once data analytics have identified a health plan member in a vulnerable population, a personal clinician can assess the entirety of factors affecting the individual's medical conditions and help craft a globalized treatment plan, Fritz says. Addressing a member's "root-root" problems such as substance abuse or an ongoing domestic dispute can result in significant health gains: "Vulnerable individuals and people in vulnerable health situations face under-identified and under-treated behavioral barriers. When we engage this way, we influence the medical outcomes."
Unless health plans boost their data analytics and consumer engagement efforts, they face the risk of "missing" members in vulnerable populations and paying the price in unnecessarily high health service costs, according to Fritz.
"For us, a missed member is part of the 5-to-10% cohort that is driving 35-to-40% of the costs in Medicaid and Medicare populations. These members suffer from multiple chronic conditions exacerbated by psychosocial factors that may be in the form of a diagnosed behavioral health condition like depression or an undiagnosed, underlying challenge like poor social support, substance abuse, or a personality disorder. These factors impact physical symptoms and disease progression and often result in patterns of avoidable, costly healthcare utilization.
"In addition to being clinically complicated, these individuals are hard to reach and, understandably, difficult to motivate. Emails, text messaging, web portals, and even mail are usually not enough to engage this type of member," he says.
Engaging these types of members is in the interest of health plans. The value-based healthcare frontier will be an inhospitable place for insurers if the costs of chronic disease care continue to mount.
The Medicare Advantage program is emerging as an entry point for healthcare providers seeking to establish their own health plans, such as UNC Health Care and Catholic Healthcare Initiatives.
As healthcare providers across the country consider opening subsidiary health insurance plans, some of the early adopters view the Medicare Advantage program as an advantageous place to get started.
In combination with a population health management effort, UNC Health Care has launched a Medicare Advantage plan targeted at the residents of Wake County, NC. This week, Allen Daugird, MD, MBA, president of UNC Physicians Network and UNC Health Care's chief value officer, told HealthLeaders that developing an MA health plan is a high-gain, low-risk opportunity for providers.
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"Medicare was attractive because the annual cost of care is so high, and even a small percentage decrease in costs results in a large sum. However, we also realized the shortcomings of traditional Medicare as a vehicle for care and value, even with various shared savings programs, where any shared savings is very uncertain and very long in the future," Daugird said.
"On the other hand, with Medicare Advantage, [the Centers for Medicare & Medicaid Services] provides a monthly payment up front, and it is severity-adjusted so that there is an incentive to take care of the sickest patients. Medicare Advantage HMOs can require assignment to a primary care home and a more narrow network of like-minded value providers," he continued.
"Lastly, MA plans can offer covered benefits traditional Medicare cannot such as transportation, unrestricted home visits, exercise and nutrition classes… and these enhanced benefits can improve the health of seniors and often decrease the total cost of care."
MA plans offer seniors a value-based healthcare delivery option to traditional, fee-for-service Medicare. Across the country, dozens of carriers administer MA plans, which have expanded sharply in recent years and provide health coverage to about 15 million seniors.
Juan Serrano
Daugird says UNC Health Care officials decided it would be essential to pair their MA plan with a population management effort.
"MA means taking on full financial risk. If there is no population health management, the cost of care required by the benefit structure can exceed the aggregate per-member-per-month CMS payment, resulting in huge financial losses," he said. "This is a very costly segment of the American population, and it is fool-hardy to take on financial risk without a plan for effective population care management."
'The long haul'
Medicare Advantage is part of Catholic Healthcare Initiatives' long-term strategy "to move into different models of care," says Juan Serrano, senior VP of payer strategy and operations at the Englewood, CO-based health system.
CHI, which operates healthcare facilities in 17 states, has founded a wholly owned subsidiary, Prominence Health, to build a portfolio of health insurance products. The nonprofit health system has also acquired a pair of insurance carriers over the past two years: Soundpath Health Inc. in Washington and QualChoice in Arkansas.
Serrano says launching an MA plan in Washington and acquiring two health plan businesses has established a foundation for HCI to operate in the insurance sector of the healthcare industry. "We realized that we needed to develop the skills more traditionally found at health insurance companies."
CHI determined Medicare Advantage would be a good fit for the health system's early forays into the insurance market largely because it is an individual product, Serrano said.
Unlike the broad provider networks that are still relatively common in the group insurance market, CHI officials believe MA plans "could make a lot of sense when offered in a narrow network." The MA plan the nonprofit is offering in Washington State is based on a narrow network model and "we align each of our MA patients with a primary care doctor in our network," Serrano said.
With large commercial carriers dominating the group health insurance market, individual insurance is an area where healthcare providers can compete with established market players, he added. "We are leading with the individual products," he said of HCI's short-term health insurance strategy.
HCI is offering health plans in Washington State and Arkansas this year, and is expanding its insurance product offerings next year to Kentucky, Nebraska, Ohio, and Tennessee.
Picking the right partner
CHI and UNC Health Care each have key partners helping the healthcare providers learn how to operate health plans.
Serrano says CHI was drawn to acquire Soundpath Health and QualChoice in part because both health plans had provider roots. Two large physician organizations founded Soundpath and a consortium of health systems provided financial backing for QualChoice. "They have a culture of understanding the healthcare delivery side," he said.
Daugird says UNC Health Care established a partnership with Alignment Healthcare to leverage the Irvine, CA-based company's population management expertise.
Alignment Healthcare's "leaders not only know what to do, but have proven they can execute, and have replicated their business and care model in multiple markets," he said.
"They know how to work and align incentives with hospitals, physicians, payers, and, most importantly, seniors. They also have built very sophisticated and effective analytics to continuously risk stratify the senior populations they are accountable for and proactively manage the care of these frailest patients, often using resources traditional Medicare does not pay for."
"In short," Daugird said, "They know what they are doing. We don't. And we want to learn from them. Because we are inexperienced, they are also taking on most of the financial risk in the beginning."
Fueled by patient demand and advances in technology, the construction of costly proton beam centers is picking up steam. Insurers are paying for limited applications.
Scripps Proton Therapy Center
With several countries charging ahead in efforts to build proton beam therapy centers for cancer radiation treatment, American healthcare providers and their partners appear poised to advance the technology beyond its infancy in this country.
"It's one of the areas where the U.S. is behind," says Jason Caron, a partner at Chicago-based law firm McDermott, Will and Emery, who has worked on proton beam therapy center projects for more than eight years. He noted that Japan is considered a leader in the field, with a dozen advanced particle beam radiation centers, including four centers using the most cutting-edge technology, carbon ion beams.
So far, 14 proton beam therapy centers have been built in the United States and a dozen more are in development, according to the Silver Spring, MD-based National Association for Proton Therapy. Most of the U.S. facilities have multiple examination rooms, which are built inside giant vaults that keep protons from escaping and causing harm to caregivers and others who work or live near the facilities.
Proton beam centers have a staggering capital cost. In February, the Scripps Proton Therapy Center opened in San Diego with a $220 million price tag, according to the project's developer, San Diego-based Advanced Particle Therapy.
Despite the cost, proton therapy is becoming widely accepted in the oncology community as a superior treatment for many cancers compared to traditional proton-based radiation treatment because protons can be targeted at a tumor without irradiating surrounding healthy tissue. "In breast cancer treatment, conventional therapy irradiates the heart as well as the tumor," he says. "Proton therapy does not irradiate the heart to any significant degree."
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Unlike treatment with protons, which can pass through a patient's body, protons can be focused specifically on malignant tissue, says APT President and CEO Jeffrey Bordok. "The physics of protons versus protons are pretty hard to argue against. You're able to avoid damage to tissue around the tumor. There's a lot of evidence that this has been working over the past 20 years."
As more American patients have become aware of the less invasive technology, they are emerging as a key driver of proton beam center growth in the United States, Caron says.
"People are becoming educated about the benefits of proton therapy," he says. "It's not the best for all cancers, but if you have a cancer near a major structure or are very young, proton therapy is beneficial."
Leonard Arzt, executive director of the National Association for Proton Therapy, says consumer demand for the treatment has created a marketing opportunity for the top cancer centers in the country. "If you're in the radiation oncology business, you want the latest and greatest tool."
Proton beam center financing
Securing financing for proton beam centers remains the prime stumbling block for growth of the technology in the United States, but the capital-cost challenge is easing, say several experts in the field.
"There's no clear and simple model to do this," Arzt says. "In an age of healthcare reform and keeping costs down, banks are skeptical about the lofty goals of treating 2,000 patients per year."
Most "multi-room" U.S. proton beam centers cost about $200 million to build, and they treat approximately 1,500 patients annually. An emerging trend is construction of smaller proton beam centers with one examination room, at a cost of about $30 million, Arzt says. "The trend is away from multi-room facilities to 'compact machines.'"
There are three classes of proton beam center financing, according to Caron and Arzt.
Large healthcare providers are best equipped to follow the "institute model," in which a major hospital or health system obtains all of the financing for the project. Rochester, MN-based Mayo Clinic is building two proton beam centers with the assistance of a $100 million donation. "Only a Mayo Clinic can do that," Arzt says.
Joint ventures are the most complicated way to finance a proton beam center, according to Caron and others at McDermott, Will and Emery. Last spring, several proton beam center experts from the law firm led a presentation on financing these joint ventures. They noted that risks are difficult to align and distribute when multiple partners are involved in a proton beam center, such as health systems, equipment manufacturers, real estate firms, and banks.
The Scripps Proton Therapy Center was developed through a project manager model: Advanced Particle Therapy assumed the construction and maintenance costs, while San Diego-based Scripps Health is responsible for staffing and operating the facility. "We are responsible for providing all the equity and debt for the project," Bordok says.
Chris Van Gorder, president and CEO of Scripps Health, says the project manager agreement with APT provides the health system with a financially sustainable path to operating a proton beam center.
"Scripps Health's relationship with Advanced Particle Therapy is a great fit, because it gives Scripps the opportunity to offer advanced proton therapy to our patients without having to invest the significant capital required for this technology," he says. " We want to offer our patients the full range of cancer treatment options so they can have access to the one that is the best fit for their individual situation, close to home in San Diego."
Commercial payers getting on board
Several commercial insurance carriers are providing coverage for proton beam therapy.
"We do cover proton beam therapy for certain conditions, and costs are covered by the plan, except for appropriate copays, coinsurances, and deductibles depending on the member's benefits. This is a prior-authorized service managed for us by CareCore," said Donald Fischer, MD, MBA, senior vice president and chief medical officer at Pittsburgh-based Highmark Inc. "We have medical policy for this treatment documented online for all Highmark commercial members in Pennsylvania, West Virginia, and Delaware, as well as for our Medicare Advantage members."
According to Highmark's medical policy, the insurance carrier provides coverage of proton beam therapy for the following conditions: chordomas and chondrosarcomas of the base of the skull or spine; melanoma of the uveal tract (iris, ciliary body and choroid); hepatocellular carcinoma; pediatric brain tumors such as posterior fossa tumors, optic pathway tumors, and brainstem lesions; pediatric central nervous system tumors; and pediatric spinal tumors.
But Cigna, which also works with Bluffton, SC-based CareCore National LLC to manage proton beam therapy coverage, reimburses the therapy for only three conditions, citing a lack of clinical evidence showing the treatment is superior to more conventional radiation therapy for most cancers. "While PBT has been used in patients in the United States since the mid-1950s, and although it has been shown to be effective in some malignancies, there is no published data clearly demonstrating superiority over conventional forms of radiation therapy," state the Bloomfield, CT-based carrier's guidelines for radiation therapy.
California's latest multimillion-dollar attempt to build a statewide health information exchange aims to shave healthcare costs and improve care, but its leaders face a long-term funding challenge.
This month's launch of an ambitious statewide health information exchange in California poses an $80 million challenge to the project's organizers: sustaining an HIE over the long haul.
Blue Shield of California and Anthem Blue Cross are picking up the $80 million tab for Cal INDEX during its first three years of operation. After the seed money has been depleted, subscription fees are expected to keep Cal INDEX finances in the black.
The Cal INDEX board and other leaders of the project are mindful of earlier attempts to create broad and sustainable health information exchanges in the Golden State that have fallen short of expectations. "We have to create value in the data," David Feinberg, MD, MBA, president of UCLA Health System and chairman of the Cal INDEX board of directors, said this week.
He says there is inherent value in gathering as much data as possible about a patient such as pharmacy and clinical service records and claims information to get "the complete picture" of a patient's medical status and history.
"We've gone from paper records to digital records," Feinberg says. "The real power is when we can start using that information to make good decisions."
But designing health information exchanges that can be self-funded and become long-term players in their respective markets takes not only planning and determination, but "a sustainable business model."
Cost Savings and Smarter Clinical Decisions
Feinberg says Cal INDEX officials have already begun to identify healthcare organizations that will be likely to pay subscription fees to gain access to the HIE's data, including 30 large accountable care organizations that have active relationships with Blue Shield of California and Anthem Blue Cross.
Lloyd Dean, CEO at San Francisco-based Dignity Health, says he is hopeful that Cal INDEX will not only be sustainable, but also fill a critical gap in efforts to contain the cost of healthcare in California.
"We believe that as the Cal INDEX program is scaled, it will create efficiencies that make it cost effective over the long term," Dean said this week.
"What's unsustainable is the status quo. Today, health care spending makes up 12% of California's GDP, and the healthcare industry is well behind other industries in terms of adopting cost-saving technologies. The bottom line is that we can't afford to wait to start implementing these integrated data-sharing programs."
He says Cal INDEX will initially focus on areas that are likely to improve quality of care and cut costs. "As more providers and payers join Cal INDEX and begin sharing information, we anticipate that we'll find more and more value in the data sets available."
"In the near term, we're looking for electronic health records that will help us determine which procedures or devices are the safest and result in the fewest readmissions. Studying such information will help us improve the patient experience and provide more cost-effective care over time."
Dignity Health, which features more than 40 hospitals and healthcare centers in California, Arizona, and Nevada, sees value in the data Cal INDEX is expected to collect, he said.
John Kansky
Interim President and CEO of the
Indiana Health Information Exchange
"From a provider perspective, the idea here is very simple: The more we know about our patients, the better care we can deliver," Dean says.
"We think Cal INDEX can provide doctors and nurses immediate access to health information at the point of care that allows them to make smarter clinical decisions and provide better care with better outcomes for patients. By working together instead of in silos, we can reduce costs by eliminating redundant tests and paperwork."
Hoosier HIE Thriving
In operation for a decade, the Indiana Health Information Exchange is one of the oldest and most successful HIEs in the country.
John Kansky, interim president and CEO of the Indiana Health Information Exchange, says he and his colleagues are well-aware of the necessity to craft an HIE business model capable of delivering value to the subscribing organizations that keep IHIE afloat financially. "There's a lot of focus on health information exchange sustainability, and it's a lot of work," he says.
Kansky notes that one of the first HIE projects in the country, launched with grant money in Santa Barbara, CA, failed, mainly because of a lack of long-term planning and outreach to potential sources of financing.
He says HIE projects started with grants or other finite seed money are risky without a solid business model designed to eventually achieve self-funding. "You've given yourself a runway, and when you get to the end of the runway, you better have a way to demonstrate value," he says.
Cal INDEX officials should already be approaching as many potential subscribers as possible, Kansky says. "'What would this exchange have to do for you in three years in order for you to pay for it?'" he said. "That's the question they should be asking everyone."
Indiana's HIE built a sustainable public-private business model by offering data and data services to a wide range of healthcare industry stakeholders. "We have multiple services to multiple sectors in healthcare," Kansky says, noting that IHIE subscribers include physicians, hospitals, laboratories, imaging centers, payers, and nursing homes. IHIE officials are constantly eyeing new markets, including self-insured employers, patients, and home care organizations.
In addition to having a large portfolio of data services to offer, successful health information exchanges must focus on establishing data use agreements with the organizations that are providing the data, Kansky says.
"When you agree to participate and pay fees, you also agree to provide data… It's not our data. There's this whole concept of data governance," he says of the process involved in setting rules for the use and sharing of HIE information. "Your partners absolutely need to trust you [and know] how the data is going to be used and not used."
Thinking Big
No matter how well a state-based HIE is designed and managed, it will have inherent limitations and will likely be unable to slake the thirst of clinicians seeking "the complete picture" of their patients, according to Brian Baum, CEO of West Friendship, MD-based vitaTrackr Inc.
"Counter to the Indiana experience, I think the state-based health information exchanges… are building an infrastructure for yesterday's healthcare," he said this week.
Baum points out that Americans are not only mobile, with many people moving from state to state several times over the course of their lifetimes, but they are also increasingly drawing healthcare services from nontraditional sources such as retail clinics and telemedicine.
Gathering up all of the jigsaw pieces that constitute "the complete picture" of a patient requires an integrated, national effort."
"It's just going to get exponentially worse going forward," Baum said of the growing number and variety of sources of information on individual patients such as wearable devices. "We're at the cusp of the industry having a flood of information."
He believes state-based health information exchanges will face an increasing challenge in gathering up all of the "baseline data that becomes the predictor of health," including blood pressure, weight, and cholesterol values. "That data is going to be increasingly coming from a more diverse set of sources," Baum said. "It's just expanding at a rate that we can't even project."
The vitaTrackr CEO says health information exchanges are an essential part of the drive to adopt population management techniques that will "move the needle" of American health, but the HIE future is national in scale.
"Ultimately, healthcare data is going to have to plug into a larger national infrastructure," Baum said. "You've got to enable an environment where in order to succeed in healthcare you have to be connected."
As the healthcare industry moves away from a fee-for-service model, providers, payers, and vendors are assessing whether their brands are fit for the consumer-driven future and making changes.
Wellpoint's decision last week to revert to its Anthem brand reflects the growing importance of consumers in the healthcare marketplace, according to the Indianapolis-based insurance carrier and other healthcare industry executives.
"This is really the perfect time for us to rebrand," Doug W. Bennett Jr., public relations manager at Anthem, said in an interview last week. "Our research and experience show that consumers consider brand as they make their healthcare purchasing decisions, just like they do in other purchasing decisions."
WellPoint Health Networks Inc. and Anthem Inc. merged in 2004.
Bennett says the Anthem brand's strong name recognition with consumers played a critical role in the decision to drop the Wellpoint moniker. "In this environment, we think it's important that we present ourselves to the public by the name that they already know and trust, which is Anthem, the name by which the majority of our products are sold," he said.
"Linking our corporate name to our product name allows us to speak to consumers, investors and even associates with a single voice."
Dan Prince, president of Nashville-based Catalyst Healthcare Research, says branding is one of the bedrock elements for health plans seeking to boost engagement with consumers.
"I think the shift by Wellpoint to become 'Anthem' is a smart move," Prince said last week. "Health plans want and need to be viewed as more 'consumer-friendly,' especially as they will be selling more of their services directly to consumers. In another instance, United Healthcare choosing to market health insurance products under the AARP name shows the power of a brand that enjoys a positive reputation with the desired consumer audience – seniors. Otherwise, why would UHC do this? So, good branding matters."
UnitedHealthcare sells supplemental Medicare plans under the AARP brand name and pays a fee to AARP for use of its name.
Provider Branding Prince says Health Catalyst Healthcare has worked with several hospitals and healthcare systems to help them include consumer engagement in their branding efforts. "Generally, CEOs and chief marketing officers want a brand that is 'consumer-friendly,' meaning that consumers relate positively to the name of the organization, that they get at least a hint of what the organization does or emphasizes, and they want a name that sets them apart from the competition."
He cites consumer influence in a brand project his company tackled in Florida. "We conducted the marketing research that led the brand previously called 'UF&Shands' to become 'University of Florida Health,' or 'UF Health' for short," he says.
"The new name was perceived positively by consumers in both Jacksonville and Gainesville. The new name suggests that this is an academic center brand, and it says that this brand is 'health' oriented; all in a few words. The historic 'Shands' name was well-known in one market but not the other, so the word lives on as the name of the system's hospital in Gainesville, but it was dropped from the overall brand name."
In addition to appealing directly to consumers, healthcare providers must consider the views of all stakeholders from the communities they serve when changing brands, according to a pair of CEOs on opposite sides of the country.
Richard Afable MD
CEO of St. Joseph Hoag Health
Last year, community feedback was a key factor in branding decisions when Hoag Health and St. Joseph Health combined to form a healthcare delivery network in Southern California.
"When St. Joseph Health and Hoag announced that we were affiliating to form a new network of care in Southern California, we were faced with two options: One, call this new network of care an entirely new name, or two, adopt an identity that pays tribute to the legacy names of our well-respected health systems," said Richard Afable MD, CEO of the new combined enterprise, St. Joseph Hoag Health.
"We opted to present the community with a partnered identity that builds upon our highly respected legacy names. As you can imagine, there was significant internal discussion around this naming strategy, but the true determinant was what our community told us. They said that our two legacy names were trusted and well respected individually. Together, they believed this new name represented an organization that could deliver even more for local health care."
'A Disparate Array of Names' David Rehm, president and CEO of Cape Cod-based HopeHealth, said healthcare organizations launching branding campaigns should apply balanced levels of effort in community outreach and "creative elements" of branding such as logo design. "We really thought through a plan to reach out to the community," he said.
HopeHealth's original parent organization, Hospice and Palliative Care of Cape Cod was founded more than 30 years ago. Through a series of acquisitions, the organization's mission was transformed over time from hospice care to a wide range of services for patients suffering with chronic illness. "We had a disparate array of names," Rehm said. "We didn't have a brand that encompassed what we had become and what we wanted to be in the future."
While adopting the HopeHealth name was "a reflection of a strategic plan" to expand the organization's geographic reach and range of services, reaching out to the communities the organization served was critically important for the rebranding effort, he said.
"A series of small meetings" prior to launching the brand included face-to-face discussions with top donors. "We wanted them to know what the new brand reflected and didn't reflect," he said, "that was really important for our donors. The success we had [with the new brand] was greatly related to that effort."
'Transformational Period' As the traditional fee-for-service model of healthcare service delivery is upended, branding is approaching the top of the agenda in boardrooms at every healthcare organization from coast-to-coast, St. Joseph Hoag Health's Afable says.
"This is such a transformational period for healthcare, I'd be surprised if almost all healthcare organizations aren't re-thinking their brands," he said. "Consumer decisions are more important than ever before. The challenge is that the brand has to realistically reflect the offerings of the product or service. The best brand in the world will fall flat if it doesn't deliver for consumers, physicians, community partners, employers and all the stakeholders healthcare touches."
Dawn Maroney, chief sales, marketing, and product officer at Irvine, CA-based Alignment Healthcare, says branding is a key factor in the company's recent acquisition of Citizens Choice Health Plan.
"Consumers in today's market want value with affordability, and they want their information fast," she says. "Branding helps companies become more current to the demands of the consumers and the opportunity to have more of a social and digital presence. Our branding will have a consistent theme to all mediums and it has a look that works locally, nationally, and regionally as we extend our population health model footprint across the United States."
The branding frenzy in healthcare has extended into the vendor community as well.
Last week, Jacksonville, FL-based Orange Health Solutions announced it had changed its name to Citra Health Solutions after the recent acquisition of MZI Healthcare. "We believe the business of healthcare should be simple and innovative. The new logo, name, and positioning statement communicate just that," said Kristi Stovall, vice president of marketing and brand management at the newly minted company.
She says the Citra brand reflects the "consumerizing" of healthcare. "We want a brand that is consumer-focused and simplified," Stovall said. "Healthcare from the consumer side should not be complicated."
Big companies are taking a broad range of actions to cut spending on employee healthcare benefits. That means higher costs for workers, a push for more consumer engagement, and greater use of telemedicine.
Brian Marcotte
President and CEO of NBGH
Large employers are facing a balancing act next year, simultaneously shifting healthcare costs to their workers and ramping up healthcare consumer engagement efforts, according to a National Business Group on Health survey of 400 companies.
During a press briefing Wednesday that unveiled the survey, NBGH President and CEO Brian Marcotte said 2015 marks a healthcare cost-cutting turning point for employers and workers. "If there is any year the employee is going to focus on the healthcare packet, this is the year," he said of the benefits enrollment season leading up to Jan. 1.
A key finding of the survey is the expectation among large employers that they will be able to contain the growth of 2015 healthcare costs to 5%. Overall healthcare costs are forecast to rise 7%, but employers expect their internal cost-cutting measures will pare 2%off growth in their healthcare spending.
Workers should expect the cost of their 2015 employer-sponsored healthcare coverage to hike about 5%, Marcotte said.
Large employers are using a range of measures to trim the costs of providing health insurance to their workers, the NBGH survey found. In addition to relatively traditional cost-sharing measures such as deductibles and co-pays, employers are increasingly turning to consumer-directed health plans and consumer "decision-support tools" to drive down healthcare costs, Marcotte said in an interview after Wednesday's press briefing.
The NBGH survey found tangible evidence that large employers are banking on engaging with their employees to drive down the cost of healthcare benefits.
More than half of the companies surveyed—57%—reported that they were either launching or expanding consumer-driven health plans in 2015. About a third reported that they are set to offer a CDHP as their only benefit plan next year.
Key Player is the Consumer
Consumer engagement is a key issue for the entire healthcare industry, according to Marc Scher, a partner at Amsterdam-based KPMG. "Accountability for your health is a really big deal," he said. "The best way to keep costs down is to keep people healthy."
Two weeks ago, KPMG released a survey of North American CEOs that included 61 top executives from the healthcare industry. The KPMG survey found healthcare executives more positive about growth compared to their peers in other industries, and "consumer engagement is inherently reflected in that perception," Scher said.
"Even in advance of the ACA, it was clear that we couldn't sustain ourselves in what was going on in healthcare," he said, adding that providing consumers with pricing and quality information has the potential to transform the healthcare industry. "It's not a comprehensive system today. Providers need to think about not only treating patients but also attracting patients… But the key player here is the consumer."
Now that consumers have "skin in the game," there is a growing expectation that financial incentives will help steer patients to best practices and create "more efficient and cost-effective care," Scher says.
Health plans with high deductibles and consumer-directed health plans are being used by employers to incentivize workers to take a more active role in their healthcare spending decisions, he says. "They may not actually be spending more money out-of-pocket, but they see the money go out," Scher said of workers in consumer-directed health plans.
Other NBGH Survey Findings
Skinny Plans −Next year, about one in six large employers plan to offer "skinny plans" to workers who fall short of the federal healthcare coverage requirements under the Patient Protection and Affordable Care Act. While acknowledging federal regulators and employers "are going to have to address" the potential for creating second-class health plans, Marcotte said there is a pressing need to find a way to offer affordable healthcare coverage to workers at businesses with tenuous profit margins. "The need for a skinny plan is real," he said. "Even in the new exchanges, they are looking at offering plans with benefits lower than the bronze plans."
Telemedicine−is being embraced by large employers. In 2014, about 28 percent of large companies offered telemedicine services, mostly to fill gaps in primary care for minor conditions, Marcotte said. The 2015 NBGH survey found 48 percent of large employers will be offering telemedicine services next year. "We're seeing an explosion in telemedicine," he said. "It's part convenience. It's less expensive for certain conditions. And, hopefully, it keeps people out of emergency rooms."
Drug costs −Large employers are alarmed over the growth rate of specialty pharmacy drugs such as chemotherapy treatments, with annual costs rising at about 20 percent. "What's going to help here is price transparency," Marcotte said.
California and Mississippi are investing in health information technology projects that incorporate a broad range of longitudinal patient data and promise insight into population health.
Efforts to upgrade the quality of patient data on statewide health information exchanges are taking a leap forward in California and Mississippi.
In The Golden State, a pair of healthcare payers have announced ambitious plans to launch the California Integrated Data Exchange. Blue Shield of California and Anthem Blue Cross have committed $80 million to operate Cal INDEX for three years.
The HIE will feature longitudinal patient information, which will enable healthcare providers and payers to see a broad range of clinical information over time, such as hospitalizations, medications prescribed, lab results, and allergy histories. This type of data is more comprehensive than encounter-based health records and can be used to study and track population health.
In Mississippi, the state Division of Medicaid has cut a deal with a healthcare analytics firm to create a statewide clinical data repository, a master patient index, and longitudinal patient records for more than 750,000 Medicaid beneficiaries.
No More "Islands of Information"
Cal INDEX is being designed like a public utility, Simon Jones, VP of health information technology product strategy at Blue Shield, said this week. As is the case with utility companies, uniformity and interoperability are key goals for Cal INDEX, he says. "It will allow us to plug information into that grid in a more uniform way."
Healthcare institutions, he notes, are notorious for creating "islands of information" such as primary care physician records.
Like a new public utility, Cal INDEX is expected to spread across the state over time, with early data collection efforts focused on large population centers. "You start out at big cities, then they get more ubiquitous over time and end up at the farm."
With access to Cal INDEX data set to be provided to patients, providers, payers, and academics, the new health information exchange is also embracing the philosophical spirit of a public utility, Jones said: "It's supposed to be for everybody."
Access to longitudinal patient data has the potential to drive significant gains in quality and cost efficiency. "People move across the healthcare ecosystem, and their information hasn't followed them," Jones said. But "Cal INDEX gives [physicians] a complete picture to provide the best care that they can" by offering a timeline view of a patient's health history.
Longitudinal patient data is an essential tool in population management, enabling providers to "get more proactive" about treating chronic diseases, which account for the bulk of healthcare spending nationwide, he adds.
Cal INDEX is also expected to help cut healthcare costs by reducing duplication and waste, including unnecessary repetition of lab tests.
After the Cal INDEX seed money runs out in three years, the health information exchange will be financed through subscription fees. While the precise mechanism for the subscription financing has not been determined, Jones says the cost of operating Cal INDEX will be spread as evenly as possible. "No single entity will bear the entire cost."
Cal INDEX is slated to be operational by the end of the year. The health records of 9 million people, about one quarter of California's residents, are expected to be available through the health information exchange.
Boosting Medicaid Management in MI A health information exchange effort announced in Mississippi last week is expected to boost efficiency and quality of care in the state's Medicaid program.
The first step in the Mississippi project was creating a master patient index, boiling down the records of several million Medicaid beneficiaries over the past decade to identify the 750,000 residents who are actively using the Medicaid program today, state officials said.
The next step was creating a repository of longitudinal patient data, according to the state DOM Office of Information Technology Management.
"To increase efficiency while improving care, we need to offer Medicaid providers a full 360-degree, instantly accessible view to a high volume of data, said Rita Rutland, the agency's deputy administrator, in a media statement.
Emeryville, CA-based MedeAnalytics was brought in to build a master patient index for Mississippi's Medicaid beneficiaries. The senior VP and general manager of its health plan business unit calls the MPI for Mississippi's Medicaid beneficiaries "foundational infrastructure."
"When you cannot be certain whether two patient records are the same patient or two separate patients, and you multiply this by millions of cases at the population level, you see that you cannot have accurate multi-domain systems like that which we implemented in Mississippi without an MPI in place," said Scott Paddock.
His company reviewed millions of records spanning a decade, found 7 million non-unique individuals, and condensed them into 2.3 million unique beneficiaries.
State and federal funding is paying for the Mississippi health information exchange effort, but the cost was not disclosed.
A Call for Responsibility, Accountability
Kevin Coleman, head of research and data at Sunnyvale, CA-based HealthPocket, says health information exchanges have the potential to revolutionize the healthcare industry, but not without risk.
"The emerging use of vast amounts of patient data… holds the promise of reduced medical spending and improved clinical results, but it also brings with it the prospect of intrusions into medical choices previously decided between doctor and patient," he said.
Given the "enormous benefits" patient data can bring the nation, however, "the question for society is not whether or not to allow for the widespread use of patient data but, rather, how can it be [used] most responsibly and accountably."
The medical loss ratio, also known as the 80/20 rule, is trimming spending by payers. But the fate of the nation's drive to cut healthcare costs rests in the hands of the biggest spenders—providers.
Are healthcare payers parasites or purveyors of value?
As the nation struggles to rein in healthcare spending, which federal officials pegged at $2.8 trillion in 2012, payers and providers have been subjected to intense pressure to boost efficiency and reduce waste. The necessity to take action is undeniable: The share of the economy devoted to healthcare spending is about 17 percent and it is threatening to crowd out other essential goods and services.
One step in the monumental journey toward healthcare cost control is the Medical Loss Ratio law under the federal Patient Protection and Affordable Care Act. Also known as the 80/20 Rule, the MLR requires insurers to spend at least 80 percent of every premium dollar on patient care. Insurers that fail to meet the 80/20 Rule standards are required to pay refunds to health plan members.
In 2012, health plan members gained from upfront premium reductions estimated at $3.4 billion and $500 million in rebates. Last year alone, the 80/20 Rule saved consumers $3.8 billion up front on their premiums as insurance companies operated more efficiently.
Additionally, consumers nationwide will save $330 million in refunds, with 6.8 million consumers due to receive an average (2013) refund benefit of $80 per family for a total of about $9 billion in savings since the MLR program's inception.
But here's the takeaway number for me: 0.00139 percent. This number represents the healthcare spending reduction in 2012 that federal officials tied directly to the 80/20 Rule.
Providers Hold the Keys
The 0.00139 percent figure is a mathematical representation of a truth about the US healthcare system that data analytics pioneer David Burton, MD, shared with me earlier this summer: If you want to make a dent in healthcare spending, the real action is on the provider side of the equation.
Don't get me wrong. Every billion worth of savings we can squeeze from healthcare spending makes a difference.
But don't be fooled, either. Extracting unwisely spent pennies out of payers for each premium dollar is not going to fundamentally fix our healthcare spending problem.
Burton, former CEO and chairman of Salt Lake City-based Health Catalyst, told me that politics and public relations were the prime motivations behind the relatively speedy rollout of the 80/20 Rule compared to the sweeping changes required to reform the way healthcare providers do business. "It's backwards," he told me of the federally driven healthcare reform process under the PPACA.
America's Health Insurance Plans, which represents payers in Washington, has an even darker perception of the 80/20 Rule. Earlier this week, an AHIP spokeswoman provided me with a scathing critique. "The MLR does nothing to address the real drivers of premium increases: the underlying cost of medical care," she said.
"Instead, it limits any expense that does not go directly to pay for medical care or is not included on a pre-approved list of 'activities that improve healthcare quality.' As a result, this regulation places an arbitrary cap on what health plans can spend on a variety of programs and services that improve the quality and safety of patient care, help patients navigate a complicated delivery system, and help control soaring medical costs."
Steve Zaharuk, a senior vice president at Moody's assigned to follow the US health insurance market, told me AHIP's concerns over the 80/20 Rule are well-founded. "Really what you're saving is administrative costs," he told me, adding that administration can have significant cost-cutting impact. "Insurance companies put a lot of money into managed care oversight. It seems the emphasis [of the MLR] is in the wrong direction. It should be focusing on just managed care."
MLR is Just One Step
Susan Horras, director of healthcare finance policy, health plan and population health initiatives at the Healthcare Financial Management Association in Winchester, IL, says the 80/20 Rule is a step in the right direction, but many more steps will be needed to control healthcare spending.
"MLR isn't designed as the definitive answer to reducing overall healthcare costs," Horras told me this week. "MLR has accomplished creating some transparency within the system, which is something all constituents in the industry are working toward. Transparency on healthcare costs will continue to expand as consumers become more educated and demand more information to make healthcare decisions."
If we manage to get there at all, I have a feeling it will be several years before we get close to the definitive answer for our healthcare spending problem.
With anxiety rising over the potential for a physician shortage in the years to come, a push is on for interstate medical licensure.
Physicians seeking to practice in more than one state and hospitals seeking to alleviate staffing shortages may find their paths eased if a proposal for an interstate licensure compact is approved and adopted.
Humayun Chaudhry, DO
President and CEO of the FSMB
The proposed Interstate Medical Licensure Compact, crafted by the Federation of State Medical Boards, and released last month would create a commission to oversee interstate medical licenses and function alongside the existing licensing authority of state boards. Humayun Chaudhry, DO, president and CEO of the FSMB, says there is a pressing need for the compact.
The move could be a boon to rural hospitals with chronic staffing shortages and lack of access to specialists. It could also break down staffing barriers impeding the progress of telemedicine.
"The compact would create a new pathway to expedite the licensing of physicians seeking to practice medicine in multiple states, which would address multiple issues," he said this week.
"Among them: physician shortages, the expected influx of millions of new patients into the healthcare system as a result of the Affordable Care Act, and the growing need to increase access to healthcare for individuals in underserved or rural areas through the use of telemedicine."
Chaudhry says the compact would ease the daunting administrative burden that physicians face when they try to practice medicine in multiple states. "The compact would make it easier and faster for physicians to obtain a license to practice in multiple states, thus helping extend the impact and availability of their care at a time when demand is expected to grow significantly."
"Proponents of telemedicine have often cited the time-consuming state-by-state licensure process for multiple-license holders as a key barrier to overcome."
Under the proposed interstate license mechanism, a physician would designate a "state-of-principal-license" inside the compact where the physician holds a full and unrestricted license to practice medicine.
Other proposed standards for a state-of-principal license include the designated state serving as a physician's primary state of residence or the location of a physician's employer. Physicians would apply for an interstate medical license through the medical board in the state-of-principal license.
This streamlined process for obtaining medical licenses in multiple states would generate a range of benefits, Chaudhry contends. "The primary benefit is extending the availability of physicians at a time of increasing patient demand and helping facilitate the growth of telemedicine in the United States, which is expected to become more and more common in healthcare delivery," he says.
"In addition, the draft compact includes new information-sharing agreements between states that would make it possible to better track and investigate physicians who have been disciplined or are under investigation."
Managing the proposed compact's "coordinated information system" would be one of the key responsibilities of the compact's commission, according to the draft rules for the compact released July 16.
"Notwithstanding any other provision of law, member boards shall report to the Interstate Commission any public action or complaints against a physician licensed who has applied or received an expedited license through the Compact," the document states.
Strict confidentiality standards would be established for information submitted to the compact's commission about alleged physician misconduct. "All information provided to the Interstate Commission or distributed by member boards shall be confidential, filed under seal, and used only for investigatory or disciplinary matters," the compact's draft rules state.
The compact's commission, which would include two representatives from each member state, would have several other crucial responsibilities, Chaudhry says.
"The Interstate Commission will provide oversight and administration of the Interstate Medical Licensure Compact, create and enforce rules governing the processes outlined in the compact, and promote interstate cooperation, ultimately ensuring that the compact continues to facilitate safe and expedient access to care and physician licensure."
Watchful Waiting at AMA
The president of the American Medical Association, which represents more than 200,000 physicians nationwide, says the group favors reforming medical licensure procedures.
"The American Medical Association policy calls for reform of the state licensure process to reduce costs and expedite applications," Robert Wah, MD, said this week via email. "Modernizing current state licensure processes should be a priority, and the AMA commends the Federation of State Medical Boards for working on the compact and other reforms to achieve that goal."
Weighing Telemedicine's Pros and Cons
Wah says the FSMB should proceed carefully, however, in the area of telemedicine.
"Through licensing, the state medical boards assure that physicians are qualified – reviewing their education, training, character, and professional and disciplinary histories. A different system or exception for telemedicine is not warranted," he said.
"State-based licensure ensures that out-of-state providers are accountable for the medical care they provide to patients located in that particular state. It is used to enforce local medical practice laws, protect patient safety and promote quality care."
In an opinion piece published in JAMA July 28, Robert Steinbrook, MD, of the Department of Internal Medicine, Yale School of Medicine, wrote:
"If the Interstate Medical Licensure Compact were to move forward, it would herald a major reform in medical licensing. But the actual influence on practice is likely to be gradual, and there would be no effects on physicians seeking additional state licenses until multiple states enacted the compact. "
