With several years of reimbursement rate cuts expected, large Medicare Advantage insurance carriers have distinct advantages over their smaller counterparts. For one thing, the cuts are driving efficiency gains and zapping waste.
For Medicare Advantage carriers, size matters.
Over the past two weeks, Moody's Investor Service, Aetna, and a House Ways and Means subcommittee hearing have illuminated the prospects for payer success in the MA realm.
The program is feeling the pinch of reimbursement cuts linked to a decade-long, $300 billion reduction in Medicare funding to help finance the implementation of the Patient Protection and Affordable Care Act.
Last week, Moody's released a report focused on large MA carriers titled "Medicare Advantage Cuts: Prognosis Not Bad for Most Health Insurers." The report's key findings speak volumes about the big players in the MA business. Four out of five of the top MA carriers have a "manageable" MA risk exposure because they operate several other insurance lines, Moody's says.
And MA products are "sustainable" despite the reimbursement cuts and potential for lower membership growth rates, and the "track record" and "adaptability" of large MA carriers indicate they can weather the reimbursement cut storm.
After reading the Moody's report, I spoke with an official at Aetna, one of the large MA carriers the investor service had analyzed. The Hartford-based insurance giant does indeed appear to have a manageable and sustainable MA business with a track record of adaptability.
Nancy Cocozza, president of Medicare business at Aetna, says the MA reimbursement cuts have driven the company to boost efficiency and root out waste.
"It's forced us and others in the industry to make progress," she told me, noting Aetna's strategy to maintain its MA products includes strengthening provider partnerships to reduce wasteful spending and maximizing gain-sharing from the MA star rating system for quality. "These are things that we've been hard at work trying to accelerate. The results have been positive."
Aetna has established accountable care contracts with more than 800 healthcare providers nationwide: "They are, in essence, moving toward payment for outcomes," Cocozza told me.
The insurer is also embedding case managers at healthcare facilities to help providers perform at a higher level in the areas of care coordination and transitions of care, she told me: "We are vigilant any time there is a transition, it's an opportunity for things not to go right."
Realizing efficiency gains through MA providers is far preferable to hiking premiums or slashing benefits, Cocozza told me. "We try to understand our member population. We know they like things to be stable," she said.
One of the positive consequences of the financial pressure being applied to MA is the promotion of cooperation between insurers and providers, according to Cocozza. "The ACA has caused all of us to get out there and act more like partners than adversaries… We still haven't cracked the code, but there's a change in intent. Changing behavior is hard. It takes a lot. It takes more than a contract … to effect change," she told me. "It really takes sitting down with clinical leaders and seeing what works."
Banking gain-sharing from the MA five-star rating system for quality is a critically important part of Aetna's business strategy, Cocozza told me, noting that 64% of the company's MA beneficiaries are enrolled in 4-star plans. "Aetna has the highest star rating compared to our national counterparts," she said. "We take it really seriously. It is very much industry-leading."
One of the ways Aetna is achieving high quality ratings is through in-home risk assessments with MA members. "We do pretty extensive visits with home nurse practitioners," Cocozza told me. "It's a way for us to make sure members get preventive care training. Members feel like their health plan is trying to do something good for them."
The prospects for smaller insurance carriers offering MA products are less rosy.
The CEO of SCAN Health Plan, which offers MA prescription drug plans to about 170,000 people in California and Arizona, provided the smaller-player perspective two weeks ago at a House Ways and Means subcommittee hearing. "We are evolving to these cuts. We have no choice," Chris Wing told the lawmakers.
Unlike the much larger Aetna, which has MA plans in counties across the country and a diverse array of insurance products, SCAN and other smaller MA carriers are being forced to make changes that will be destabilizing for members, Wing testified.
"There will be withdrawals from markets. There is one geography where SCAN is withdrawing entirely in 2015," Wing said in response to questioning from a congressman. "There will also be a slight trimming of the networks in California and Arizona. We're a nonprofit, but we have to have a margin."
Wing testified that SCAN is struggling to find ways to maintain "special needs plans" for 30,000 MA prescription drug plan members who suffer from multiple chronic conditions such as heart disease and diabetes. "We love to do the special need plans, but they are underfunded," he said.
If federal officials want to ease the pain of big MA cuts, they'll need to focus on the smaller carriers.
Large employers and healthcare payers are turning to nontraditional partners in their quest to contain health costs.
Data-driven, technology savvy, consumer friendly new entrants to the healthcare industry appear to be filling a gap in the shift from a fee-for-service healthcare system to value-based delivery of services.
Scott Rotermund
Chief Growth Officer
Welltok
"We bring engineering depth from the consumer world," Scott Matthews, VP of product marketing at San Francisco-based Castlight Health, said Monday in an interview. "We're bringing modern consumer technology to healthcare."
Founded in 2008, Castlight reported 2014 first-quarter total revenue of $8.38 million, with $1.79 million gross profit. Matthews says the consumer-driven technology company is geared to steer the healthcare industry in a new direction. "Castlight's mission is to fundamentally transform the healthcare system with market forces," he said. "We're working with 35 of the Fortune 500."
Castlight is helping several large self-insured employers optimize their health and wellness benefits with cloud-based, cost-controlling technology. Matthews says U.S. employers spend more than $600 billion annually on healthcare costs associated with their workers, adding "30 percent of that is wasted, and the costs rise 8 to 10 percent annually."
Castlight's Enterprise Healthcare Cloud features four "solution centers," he says. "It's a holistic system that works together."
One of those four pillars is Castlight Connect, which helps employers optimize the impact of their suite of health and wellness programs, Matthews says, noting that large employers often have more than a dozen programs that offer services beyond traditional medical and dental insurance policies.
"All these programs are very expensive, but have the potential to drive tremendous gains for both employers and employees," he said of worker benefits such as prenatal care, nurse hotlines, employee assistance programs, second opinion services, wellness programs and preventive care.
"The fundamental problem is the employees don't use them. Typically, they are not aware of them in their time of need."
As employees face higher out-of-pocket expenses for healthcare including deductibles and co-pays, the consumer's need for information has increased exponentially, Matthews said. "You have to reach the employees at their point of need. Employers have to step up with how they do their communication," he said. "We live in a world of immediacy… They want what they want very quickly."
Matthews says Castlight uses cloud-based technology to give employees their companies' pertinent healthcare information instantaneously as the workers use the Enterprise Healthcare Cloud's platform.
"We know what employees are talking about. We know what they are typing in," he says, citing an employee entering the word "pregnancy" into the platform's search engine as an example. "Right then and there is the time to tell what programs the employer has for you."
Castlight recognizes the necessity to avoid appearing intrusive, Matthews says, explaining that the Enterprise Healthcare Cloud search engine would display a company's pregnancy-related programs off to the side of the search results for "pregnancy."
"To the user, it feels very natural," he said. "It's very subtle."
Guarding privacy and establishing trust is an essential element of Castlight's consumer-friendly business model, Matthews said. "Employees go to Castlight and set up their account. It has an initial registration piece [and] first-time user experience.
Large employers thoroughly vet Castlight's privacy safeguards, "They don't mess around with this stuff," Matthews says.
'Guiding Consumers to Optimal Health'
Denver-based Welltok is another new entrant to the healthcare industry seeking to combine technology, data analytics and retail strategies to deliver a higher level of value for healthcare consumers and payers.
About 10 million consumers were using Welltok's CaféWell platform last year, according to Built In Colorado, which has reported that Welltok raised more than $21 million in investor funding during the first quarter of this year.
Welltok enables health insurers and other population health managers to guide and incentivize consumers to achieve their optimal health," Scott Rotermund, Welltok's co-founder and chief growth officer, said via email last week.
"Welltok’s CaféWell health optimization platform organizes the growing spectrum of health and condition management programs, apps, communities and tracking devices. CaféWell's unique integration platform then drives engagement through the creation of personalized, adaptive plans for each consumer based on his or her health status, benefits and goals… The platform leverages social, gaming and cognitive technologies to provide a fun, rewarding experience for consumers. Currently, CaféWell is sponsored for consumers by health plans, which may distribute it through an employer group or community health systems."
Rotermund says new entrants with technical and retail skills are equipped to tackle the consumer engagement challenge in the evolving healthcare industry.
"We need to elevate the discussion away from the fitness and nutrition basics that the industry has been harping on for over a decade and more towards optimal health. Wellness and prevention are important components, but incomplete." Rotermund says.
"We need to be drilling down to an individual level and guiding consumers to optimal health given their health status, conditions, benefits and goals. For example, telling a pre-diabetic, middle-aged man to eat healthy and exercise more isn't working. We need to tap into his unique circumstances, motivations and then provide the actions – aligned with incentives – that will drive engagement and outcomes."
Integrative approaches are crucial when utilizing technology to help organizations and consumers clear healthcare hurdles, he says. "There's great buzz about wearable devices … and other neat solutions coming to market."
"However, the risk is that all of these great innovations are trying to elbow their way onto the market and not getting to the consumers who could really benefit from them. Comparable to the digital entertainment industry, a platform is crucial to bring all of these assets together and provide recommendations or 'playlists' for consumers."
Matthews says tech-savvy and consumer-centric new entrants have an opportunity to upend the healthcare industry.
"Our intention is to move the market, improve the quality of care. That's going to benefit everybody. We envision a world where the entire healthcare system benefits from this."
Average 2015 premium rate increases on the new health insurance exchanges are likely to stand in the high single digits, according to data collected from half the states.
Nationwide, increases in proposed 2015 premium rates in the individual health insurance market, which includes the new public exchanges, are trending between 7 percent and 8 percent, according to data collected by New York-based PricewaterhouseCoopers LLC.
"It seems to be staying in that single-digit range," Caitlin Sweany, senior manager at PwC's Health Research Institute, said on Thursday. "We've [analyzed] several iterations of this data."
PwC is tracking the release of public data on proposed 2015 individual premium rates and has highlighted the information with an interactive map. As of Thursday, the consultancy had reported data from 24 states and the District of Columbia, with the aggregate average proposed premium increase pegged at 7.5 percent.
State regulators will announce the actual 2015 individual insurance premium rates by the fall.
Most Americans, about 165 million, get health insurance through employer-sponsored group plans. With 8 million lives enrolled in the new Patient Protection and Affordable Care Act-spawned exchanges, the individual market is now in a state of HIX domination.
"The individual market in most states is pretty much what's on the exchange," Sweany said.
Assessing the Numbers
State-by-state variation in key data points, such as enrollment and number of participating insurance carriers, has been a HIX hallmark in the exchanges spawned under the federal Patient Protection and Affordable Care Act.
Wide variation is also present in the proposed 2015 individual insurance rates, Sweany said. "It really depends on the market and the state," she said. "It's really hard to generalize."
In Arizona, insurance carriers offering individual health insurance policies filed a wide range of proposed premium changes for 2015, the PwC data shows, with one carrier seeking a 27 percent increase and another proposing a 23 percent rate cut. Vermont is on the high end of the average-premium-rate increase spectrum, with a 12.6 percent hike proposed statewide for next year, according to PwC.
"People are looking for one number to hang their hats on," Sweany said. "There's a lot of variation in the individual market."
Jaime Estupiñan, a partner at New York-based Strategy&, which is working with PwC to monitor individual premium rates, said there are a host of factors influencing next year's health insurance markets.
"We're looking at a composite of various markets, and each market is complex," he said of the effort to track individual premium rates. "Coming out with a single number is going to be fraught with over-simplification."
One trend in the data should have a calming effect on premium rates in the exchanges, Estupiñan said.
"In many of the insurance exchanges, some of the larger national players did not join. In many markets, there will be more of these kinds of new entrants [to the exchanges] in 2015," he said, adding these established healthcare payers are adopting a "conservative premium-setting approach."
In particular, the set of carriers that will be new to the exchanges in 2015 appears unlikely to try to under-cut HIX competitors with aggressively low premium rates, he added.
Cost-sharing Calculation
Premium rates only tell part of the story about 2015 HIX consumer costs and the business strategies of carriers operating on the exchanges, said Katherine Hempstead, team leader and senior program officer at the Princeton, NJ-based Robert Wood Johnson Foundation.
"When we look at rates, we also need to look at cost sharing," she said, adding that the number and scale of cost-sharing mechanisms on the exchanges such as co-pays and deductibles has fueled some of the harshest HIX criticism. "There's a lot of experimentation going on. At some point, we need to have fewer cost sharing options."
Healthcare providers view cost-sharing as a net negative financially because higher cost sharing results in a higher debt collection burden.
In July, the Robert Wood Johnson Foundation and Breakaway Policy Strategies released a report on exchange cost sharing in 2014. The key findings, which focus on HIX health insurance policies in the "silver" tier, include primary care physician visit copays as high as $75 and specialist visit copays as high as $150.
In addition, unlike most employer-sponsored insurance, many silver policies on the exchanges subject PCP and specialist office visits to a deductible, the report found.
"Anyone who's only looking at the premium rates in 2015 is going to miss a lot of action," Hempstead said.
Using nutrition to improve the prevention, treatment, and palliative care of disease could be the most cost-effective cure for America's rising healthcare costs and health insurers are getting into the act.
Rebecca Katz
Americans have created a self-destructive relationship with food that is fueling chronic disease epidemics and driving up healthcare costs.
"Other cultures do not behave the way we do with our food," Rebecca Katz, a California-based chef and author of three books based on her philosophy of "sustainable nourishment," told me recently. "We want it cheap and we want it fast, and there's a price to be paid for that. We have to get back to the basics."
The Baltimore native is a longtime chef who earned a master's degree in nutrition and health education from Hawthorn University. In 1999, she experienced the powerful connection between health and food first-hand when her father was diagnosed with cancer. Katz had no idea how to cook for someone fighting laryngeal cancer, and neither did anyone else.
"At that time, food and cancer was like inviting ants to a picnic. Nobody wanted to talk about it," she told me. "There was so much more science to look at."
Since then, Katz has taken a careful look at the scientific data linking food to clinical outcomes.
Her second book, The Cancer-Fighting Kitchen, notes some powerful data points, including the astounding figure that as many as 80 percent of cancer patients are malnourished, "in some cases leaving them too weakened to withstand ongoing treatment."
Helping her father survive his cancer ordeal was the first step in an epic quest for Katz, who believes the concept of sustainable nourishment is an essential ingredient in any recipe designed to help Americans lead healthier lives.
Health Objective: Sustainable Nourishment
While insurers, employers, healthcare providers and government regulators are seeking to craft carefully calibrated rewards and penalties to incentivize people to embrace better nutrition, Katz says more fundamental changes will be necessary to achieve changes in the American diet that are more than passing fads or resolutions that last a few weeks, if you are lucky.
"This isn't rocket science," she assured me.
Sustainable nourishment is "nutrient-dense, health-supportive food that tastes great," she says, noting that systems of rewards and punishments have limited effectiveness in changing a human behavior as engrained as someone's eating habits. "If it doesn't taste good, you won't eat. It's not enough to put someone on a really strict diet."
Katz says changing people's dietary habits is a hands-on process. "It's not just enough to say it. Demonstrating it and having people taste it is what works," she told me. She has led classes and appeared on videos, but prefers workshops with patients and healthcare providers "where they actually taste the food."
Working with "point-of-care providers" to teach them how to cook for someone undergoing cancer treatment helps healthcare providers teach patients sustainable cooking habits, says Katz, who has led a series of workshops for oncology caregivers at Stanford University. "It's not just the doctors, it's anybody who is touching the patient," she told me. "Oncologists are incredibly interested in this."
And so are insurers and employers.
How Health Plans Promote Good Nutrition
"We offer Highmark customers flexible incentive programs to facilitate behavior change and reward positive lifestyle practices, such as good nutrition," Anna Silberman, the Pittsburgh-based Blue Cross Blue Shield affiliate's VP of clinical client relations, told me this week. "We work with customers to develop customized reward programs that address their unique population's condition prevalence, culture, and lifestyle risks."
Highmark health plans include several wellness programs that promote good nutrition, Silberman says. As part of rewards programs, employers can offer through Highmark insurance policies, members can complete online "wellness profiles" that assess lifestyle risks and help establish a plan to change dietary habits.
"This interactive tool covers nutrition and addresses readiness, motivation, and confidence to change eating habits. After completing the questionnaire, members better understand their health status and a personalized action plan is provided to improve or maintain healthy eating habits," Silberman told me.
Highmark and its employer clients reward members for working with coaches who help them make dietary changes, she told me: "Coaches provide onsite and telephonic personal wellness consultations and personal nutrition coaching. Inbound and outbound calls are made based on chronic conditions, lifestyle risk, and customized programs."
Beginning in January, Highmark is set to offer grocery store loyalty cards that will be "used to track and reward healthy food purchases," Silberman says.
Minneapolis-based United Healthcare also has several programs to encourage health plan members to make positive dietary changes. In Tennessee, United offers health plan members Care4Life, an education and support program for people living with Type 2 diabetes.
The program uses online tools, including a mobile app, to deliver personalized diabetes management information. Care4life provides access to healthy recipes, nutrition tips, and behavior modification information provided in collaboration with the American Diabetes Association.
Employers are watching their workers waistlines closely, LuAnn Heinen, vice president at the National Business Group on Health, told me this week: "Large employers have deployed a range of strategies to promote healthy eating at work, at home, and when dining out."
Those strategies include plates and cafeteria trays that guide appropriate portion size, third-party programs such as Weight Watchers, and individual coaching for weight management, she says.
Employers and their health plan partners definitely have a role to play in encouraging healthy eating habits. "It makes sense to consider incentives at the workplace… pricing that favors healthier options, rewards card programs for on-site dining and so on," Heinen told me.
Beyond Waistlines I hope the efforts to transform the American waistline do not stop at the border line. Our high-sugar, high-fat, high-salt cuisine has become one of the top U.S. exports. Do you really need a hint to know what American restaurant chain has a presence in nearly every country on Earth?
Hint: hamburger.
"It was not always this way," Katz told me. "Unfortunately, our way is infiltrating into other countries, and you're seeing diabetes in places where it never existed before. We should be incorporating more of other countries' foods into our diet, not the other way around."
The California chef's fourth book on the connection between food and health, "The Healthy Mind Cookbook: Big flavor recipes to enhance brain function, mood, memory and mental clarity," is slated for publication in February. She told me the book will break new ground: "The gut is the second brain. What we put in the gut affects how we feel."
With Medicare programs taking a $300 billion hit to help fund value-based healthcare reforms under the Patient Protection and Affordable Care Act, Medicare Advantage health plans are feeling the pinch.
Among the lawmakers in attendance, last week's House Ways and Means healthcare panel hearing on Medicare Advantage featured partisan fireworks over reimbursement rate cuts to the value-based healthcare insurance program.
The testimony of a key witness, Chris Wing, CEO of Long Beach, CA-based SCAN Health Plan, displayed some of the economic responses insurers are making to adjust MA drug and health insurance policies in response to the federal cutbacks.
Chris Wing
CEO of SCAN Health Plan
With $300 billion slated to be slashed from MA and traditional fee-for-service Medicare programs to help fund the Patient Protection and Affordable Care Act, insurers have to respond, he testified. "We are evolving to these cuts, we have no choice," Wing stated in his opening remarks.
SCAN is a not-for-profit Medicare Advantage Prescription Drug plan with about 170,000 members in California and Arizona. Wing, who offered testimony on both MA prescription drug plans and MA health plans, said 38 percent of seniors in California are enrolled in MA health plans. Affordability is a prime enrollment draw, and 90 percent of SCAN members pay no premium for their Medicare prescription drug benefit. "No wonder people are voting with their feet and choosing Medicare Advantage. But there are storm clouds on the horizon," he testified.
Wing stated that improving collaboration between MA payers and providers is an effective way insurers can offset the financial blow of lower federal reimbursement rates. "The goal is: how can we work together to improve the model"
In an interview after last week's hearing, Wing noted that seniors will have to bear some of the burden as cuts to MA reimbursement continue to be made through the rest of this decade.
"Over the past few years, the MA program has sustained a series of significant funding reductions," he said. "Some seniors have already begun to feel the impact of these cuts in higher out-of-pocket costs, reduced benefits, and more limited provider choice. Many more seniors will be impacted as the vast majority of the ACA cuts—80 percent—take effect over the next few years."
Wing said SCAN had stepped up its efforts to collaborate with healthcare providers who are serving Medicare Advantage patients.
"Reimbursement rates cannot continue their recent steep decline… SCAN is pursuing a collaborative approach. In California, we have always enjoyed the trust of our physician groups. Several years ago, we launched what we call our 'Provider Integration' initiative. We are now creatively collaborating with our physician partners to meet the financial challenges of MA while delivering the 'triple aims' driving healthcare reform: lower cost, higher quality and improved access."
Assessing MA's Future
Despite the billion-dollar blows ahead, officials at Hartford-based Aetna Inc. are bullish on the MA program.
"Over the last several years, we have seen how the growing popularity of Medicare Advantage among beneficiaries has translated into political support for the program. Members of Congress from both sides of the aisle have successfully weighed in with CMS the last two years to push for changes to lower proposed rate cuts," Aetna officials said in a prepared statement Monday in response to questions about the program's future.
The commercial payer gave assurances that achieving value-based healthcare delivery and hitting star-ratings benchmarks for quality will be critically important in attaining MA success for years to come,
"Medicare Advantage plans are able to demonstrate value for beneficiaries in health outcomes, care management, and innovation through new programs and partnerships. As long as we continue to provide good value to consumers and maintain a high star-rating performance, Aetna is well-positioned to offer high-quality and innovative products to employers and beneficiaries despite this challenging environment."
With healthcare providers spending at least 85 cents of every healthcare dollar, Aetna said working with providers to improve efficiency and establish value-based payment models will also be a critical factor for carriers as they absorb federal reimbursement cuts.
"Medicare's ACOs alone won't solve all of Medicare's financial issues, but moving toward this model is a huge step in the right direction," they said. "We have demonstrated that ACOs can not only reduce healthcare costs, but can also help improve the coordination and quality of care, without drastic cuts to benefits."
SCAN's CEO said MA health plans are an essential element of value-based care delivery in the broader Medicare program. "Nationally, 30 percent of Medicare beneficiaries are now enrolled in MA and more than half of new Medicare beneficiaries are choosing MA."
"MA plans offer lower costs than traditional Medicare and that is extremely important for lower income and chronically ill seniors… Almost all quality measures point to Medicare Advantage as better than traditional Medicare. Medicare Advantage plans also have made a measurable, positive difference in quality of care relative to hospital readmission rates, quality of life and effective management of chronic conditions."
When it comes to cutting the budgets of federally administered programs such as MA, where you sit often dictates where you stand on the issues, Paul Clark, a legal analyst at New York, NY-based Wolters Kluwer, said after last week's Ways and Means hearing.
"CMS and HHS are increasingly looking for value for the money they spend on federal healthcare programs, including every part of Medicare. Every change delivered under the guise of quality incentive or improvement can be looked at a couple of different ways—the federal government is cutting back on funding for hospitals, or home health agencies, or physicians. Or, the federal government is looking to get the best value for its healthcare dollar."
In addition to the reimbursement cuts linked to the PPACA, Clark said the evolution of value-based reforms in traditional, fee-for-service Medicare will play a decisive role in the future of Medicare Advantage.
"It will be interesting to see how overall Medicare program changes put into effect the last few years will affect MA enrollment in the future," he said.
"Ten years ago, MA plans could distinguish themselves by offering preventive healthcare or prescription drug benefits that were not necessarily available under traditional Medicare. But now a beneficiary can get preventive health care at no extra cost under traditional Medicare, or a prescription drug benefit under Part D, so there may be less incentive for a beneficiary to sign up for Part C. The evidence doesn't show that happening yet – MA enrollment keeps on growing. But if MA enrollment starts declining in the next few years, you have to look beyond just MA reimbursement for the cause."
The ability of cost savings achieved through healthcare reform efforts to offset the coming cuts to Medicare Advantage is hotly debated at a House Ways and Means health subcommittee meeting.
A decade-long, $300 billion hit to Medicare to help fund the PPACA is coming home to roost.
The question that loomed large Thursday over a hearing before the House Ways and Means health subcommittee centered on gauging the impact of deep cuts to payments for Medicare Advantage—privately operated health insurance policies for seniors that feature value-based healthcare delivery.
Medicare provides health insurance coverage to about 54 million Americans, according to Kaiser Family Foundation. Most beneficiaries have coverage in Medicare's traditional, fee-for-service payment model, with about 15.7 million people enrolled in privately operated MA policies this year.
Everyone in the hearing room, including the four witnesses who testified before the House panel, agreed cuts are coming. But the ability of cost savings achieved through healthcare reform efforts to offset cuts to Medicare Advantage was hotly debated among lawmakers, as well as among those seated behind the witness table.
Rep. Kevin Brady (R-TX), the chairman of the health subcommittee, offered a dark view of cuts to Medicare Advantage, which several GOP members of the panel pegged at an annual average of $3,700 per MA beneficiary.
"Can these popular plans continue to be able to serve seniors?" Brady said in his opening remarks, noting MA enrollment had tripled over the past decade. "The future for Medicare Advantage may look grim."
Congress and officials at the Centers for Medicare & Medicaid Services could trigger a widespread destabilization of the MA market if they allow the Medicare cuts to accelerate in 2015, Brady said. "Millions of seniors in every area of America face cuts. We need to make sure seniors have this valuable option."
The ranking Democrat on the health subcommittee offered a far brighter view of MA than Brady's dire warnings. "There's a good story to tell about the Medicare Advantage program," Rep. Jim McDermott, (D-WA), said. "As I listen to the chairman, it's all about the scare tactics of the past."
McDermott predicted a positive financial report on the Medicare trust fund, which is expected to be released any day. Surging MA enrollment and a steady decline in MA premium rates indicate the companies operating MA health plans are on sound financial ground, he argued. "Which insurance company has gone in the tank in the past five years? Their revenue and profits continue to grow."
Dueling Witnesses Two of the witnesses who appeared before the subcommittee mirrored the divided opinions of the lawmakers.
Robert Book, PhD, senior research director at the Washington, DC-based consultancy Health Systems Innovation Network LLC, predicted market disruptions in the form of higher premium rates, diminished benefits, or health plan withdrawals from the MA market if deep payment cuts are allowed to occur.
"Every county in the country will see [an MA] cut by 2017," Book said citing research he has conducted on the PPACA-related reimbursement cuts.
"There are more cuts to come," he said, estimating payments to MA health plans will experience a "27 percent overall cut" from the health reform-linked payment reductions. "It's going to be extremely difficult for plans to maintain Medicare Advantage benefits in the face of those cuts."
Joe Baker, president of the DC-based Medicare Rights Center, testified that MA health plans are robust enough to weather the payment-cut storm.
"The Medicare Advantage program continues to be stable and strong," he said, noting that the cost savings generated from MA's value-based healthcare delivery model have strengthened Medicare broadly. "Improved savings in the Medicare Advantage program benefits all Medicare beneficiaries."
Baker also pointed to the range of MA health plans available to Medicare-eligible Americans, noting seniors have access to an average of 18 MA health insurance policies.
The Medicare Rights Center president acknowledged that there is room for improvement in the MA program such as boosting the transparency of MA claims, and providing information to seniors that allows them to clearly see the premium and benefit design variation between MA policies. "Even with the success, Congress should take steps to improve the MA program," Baker said.
'An Attractive Option'
As is often the case in Washington politics, the truth about PPACA-related cuts to fee-for-service Medicare and Medicare Advantage probably resides somewhere in the middle ground between warnings and congratulations.
"The Medicare Advantage program has been criticized for years for reimbursing private plans at rates that are much more than what Medicare would pay to cover the same beneficiaries under traditional Medicare. So cutting back on MA payments has been an attractive option for federal policymakers for years," Paul Clark, a legal analyst at New York, NY-based Wolters Kluwer.
With about 20 percent of the Medicare cuts already enacted, he said, MA health plans appear to be financially stable under the payment ax for now. "Although there has been a lot of criticism of the ACA's MA cuts, four years after the ACA was enacted, payment cuts have been rolled out in half of all U.S. counties, and MA enrollment has continued to grow year after year," he said.
Fecal microbiota transplantation is an inexpensive treatment for a potentially deadly infection. But FMT is not for the squeamish. It's time for payers to get on board with this antibiotic alternative, which has a 90% cure rate.
First the good news about Clostridium difficile, the deadly bacteria that can take over the gut of hospitalized patients after their natural gastrointestinal flora has been decimated by antibiotics: There's an inexpensive and highly effective treatment for it.
C. diff, which is antibiotic-resistant, causes diarrhea that contributes to the deaths of about 14,000 Americans this year, according to the federal Centers for Disease Control and Prevention. It's also a cause of costly hospital readmissions, with about a quarter of infected patients experiencing at least one relapse within a month after completing antibiotic treatment.
There are reports of fecal transplantation in early Chinese medicine, but the earliest documented instances of the procedure in Western medicine date back only to the 1950s. Now researchers are trying to isolate the beneficial microbiota that seek and destroy C. diff.
One Mayo Clinic researcher likens exploration of the uses of gut microbiome in disease treatment to "the beginning of the space program."
Microbiome as 'Miracle Cure'
"Our patients have failed all other therapies," Lee Jones, founder, CEO and president of Rebiotix, told me this week. The Roseville, MN-based company is developing a fecal matter suspension that can be delivered to a C. diff patient's GI tract with an enema. The shelf-stable product, RBX2660, is in the final stage of testing at the federal Food and Drug Administration.
Rebiotix decided "the most prudent action was to mimic" the real microbiota.
Although it's "a non-antibiotic product… we've had to formulate our product as a drug product," she told me. "We try to preserve as much of the natural product as possible. Fresh stool is almost always guaranteed to work."
"We don't talk with our patients, but we hear about them in our clinical data," Jones told me. "For those people, this is like a miracle cure."
James Burgess
Rebiotix is raising millions in capital for its microbiome business, and Jones is convinced that healthcare payers will soon rank this treatment high on their lists. "There's a great deal of value in stopping people from returning to the hospital," she told me of C. diff patients. "We do believe there will be people willing to pay."
Far from commercialization, however, Rebiotix does not yet have pricing information and has "not yet begun to investigate the reimbursement landscape," a spokesperson told me.
NonprofitApproach
In Massachusetts, Open Biome, a nonprofit startup venture, is filling the fecal microbiota transplantation market niche one homogenized 250-milliliter bottle at a time. Each is priced at $250.
"The steps for sourcing and distributing fecal microbiota "are fairly simple," Open Biome Executive Director James Burgess told me this week. "What's a little more complicated is the donor screening."
Open Biome donors deposit four samples per week at its Cambridge facility. "We run them though a couple rounds of risk evaluation," Burgess said of the donors. The cost can rise to "several thousand dollars" for same-day fecal transplant procedures, he said.
First, donors complete a questionnaire that includes queries about recent antibiotic use and travel to countries with waterborne illnesses. A second round of screening tests donor candidates for several diseases including HIV and syphilis.
"Only about 30 percent pass through that questionnaire and round of assays," Burgess said. Once a sample is obtained, the material is homogenized and held in quarantine for 60 days in one of the startup's minus-80-degree freezers.
"That's just to make sure we haven't seen any change in the donor since the beginning of the collection window," Burgess says.
At that point, the microbiota samples are ready to be administered to patients. As the startup's website says, "With Open Biome, all that's needed to deliver FMT is a doctor and an endoscope."
Who Will Pay for FMT?
Hospitals, their patients, and some commercial insurers already see the value and are paying for the procedure.
For now, Hartford, CT-based Aetna was the only commercial payer willing to discuss FMT with me. "Aetna considers fecal bacteriotherapy medically necessary for persons with Clostridium difficile infection, with infection confirmed by a positive stool test for C. difficle toxin, that has recurred following at least one course of adequate antibiotic therapy," an Aetna spokesperson told me last week. It covers the cost of the fecal material and the procedure to administer including clinician fees.
While the insurance carrier has established standards for C. diff treatment with vancomycin and metronidazole, "Aetna considers fecal bacteriotherapy experimental and investigational for all other indications."
Aetna appears to be among the enlightened few payers who have seen the fecal transplantation light, Burgess told me. "Most of the costs are being borne by the patients and the hospitals," he said, adding that there are reimbursement codes in place for elements of fecal transplantation delivery such as colonoscopy.
The Open Biome executive director expects other payers to see the benefits of FMT soon. "This is a really big win from the payer perspective," Burgess told me, noting a $250 bottle of fecal matter is a bargain compared to a $1,500 course of vancomycin.
A new player in the healthcare delivery system is taking on an old challenge: primary care.
Relief for a common side effect of healthcare reform—increased demand for primary care services—may come from a place well known for soothing many ills.
CVS Caremark, one of the biggest retail pharmacy brands in the country is playing a major new-entrant role in healthcare delivery.
With several new provider partners announced last week, the Woonsocket, RI-based company has established clinical affiliations with more traditional healthcare providers in six states: Hartford HealthCare and ProHealth Physicians in Connecticut, Memorial Health in Georgia, Lahey Health and Baystate Health in Massachusetts, Texas Health Resources in Texas, Palmetto Health in South Carolina and The Baton Rouge Clinic in Louisiana.
The centerpiece of the pacts are MinuteClinics, which offer treatment for conditions that do not require a trip to an emergency room or an urgent care center, CVS officials said via email Monday.
In Retail Medicine, Opportunity for Market Share Growth
"MinuteClinic locations are not intended to act as primary care sites, but instead complement the work of the primary care physicians by supporting their efforts in providing convenient and accessible care," CSV said. "MinuteClinic provides treatment for common family illnesses and administers wellness and prevention services, including health-condition monitoring for patient with chronic diseases."
CVS Caremark cited research indicating that the quality of care at "retail clinics" is equivalent to traditional healthcare delivery settings such as hospitals. It is "on par with the care provided at ERs, urgent care centers and physician offices, which was demonstrated through a Rand-sponsored study, published in the September 2009 issue of the journal Annals of Internal Medicine," CVS said, noting the research "was largely based on MinuteClinic data."
With headquarters in Fort Worth, Texas Health Resources is a faith-based, non-profit health system that includes 25 acute care and short-stay hospitals. Texas Health doctors are set to serve as "collaborating physicians" at 34 MinuteClinic locations in the Dallas-Fort Worth area, according to the health system and CVS.
"Texas Health Resources and Texas Health Physicians Group are collaborating with CVS Caremark as part of our strategy to coordinate care for people across the continuum of health needs through each stage of their journey from birth to end of life," said Donald Fowler, MD, a family physician at Sunnyvale Medical Group.
"We believe this affiliation with CVS Caremark will reinforce our ability to keep people healthy and out of the hospital. That will enhance their overall well-being and help fulfill our mission to improve the health of the people in the communities we serve."
Fowler said Texas Health physicians "will provide medical supervision of nurse practitioners and physician assistants who staff the MinuteClinics." The new partners will have an integrated electronic medical records capability in place next year.
And because MinuteClinic is migrating its EMR to an Epic system, "bidirectional, real-time connectivity will be available between MinuteClinics and THPG practices," he added. "The migration begins this fall and should be complete by the end of 2015."
Gauging the Marketplace
Market conditions are ripe for healthcare organizations to boost primary care services in Texas and nationally, said W. Stephen Love, president and CEO of the Dallas-Fort Worth Hospital Council. "Nationwide, a lack of primary care providers is something hospitals are looking at. There is a shortage of primary care," he said.
Love said regional economic growth, which includes a fracking boom in the petroleum industry, is contributing to the need for more primary care services. "As you look at North Texas and you see the growth rate in North Texas, the hospitals are reaching out to their communities," said the leader of the Fort Worth council, which includes 85 hospitals.
"Providers are looking at ways to provide services in the communities they serve in a collaborative way and to offer the best primary care services they can."
The MinuteClinic deal in North Texas is designed to meet a market need, Fowler said. "Approximately 50 percent of MinuteClinic patients report that they do not have a primary care provider."
"Patients without a primary care physician are given a resource list of primary care physicians in the area, which will include Texas Health Physicians Group practices and others. If a patient indicates she has a primary care provider, with the patient’s permission, MinuteClinic will send a visit summary to the named provider.
Retail Medicine Syncs with High-Deductible Health Plans
"One of our goals is to expand access to quality primary care close to where people live and work," Convenient access to primary care, medication monitoring, and other information promises to enhance care coordination and improve outcomes.
In addition to the 34 MinuteClinics that Texas Health and CVS are opening this year, the partners have announced plans to open seven more North Texas clinics by early 2015.
The Rhode Island-based retail giant also appears to be looking for broader retail clinic growth in the near future. "CVS continues to explore opportunities to collaborate with health systems, hospitals, integrated delivery systems, patient-centered medical homes and accountable care organizations throughout the country," the company said.
A large multi-hospital research effort is underway to solve one of the great mysteries of federally driven healthcare reform— the net financial impact of providing coverage to millions of previously uninsured Americans.
Katherine Hempstead,
Coverage Team Director and
Senior Program Manager,
RWJF
About 1,700 hospitals have embarked on a quest for elusive healthcare reform truths that could determine the fate of their financial futures.
In a collaborative effort with the Robert Wood Johnson Foundation, 24 state hospital associations and their members are collecting data on inpatient admissions and emergency department utilization. The Hospital ACA Monitoring Project is designed to gauge the net financial impact on hospitals from the federal Patient Protection and Affordable Care Act.
"The impact of healthcare reform on hospitals has upside, but also downside issues that are concerning," Katherine Hempstead, coverage team director and senior program manager at RWJF, said of risks including "expansive utilization of medical services by low-margin payers."
As more Americans who previously lacked health insurance gain coverage through the new public exchanges and expansion of Medicaid to more poor adults, hospital bottom lines are expected to benefit from a reduction in uncompensated care. That's the upside.
The downside risks for hospitals include the expectation that there will be surge in medical services utilization, particularly from the expanded Medicaid population.
Research conducted on the 2008 lottery-based expansion of Medicaid in Oregon raised alarms in hospital board rooms last year. The study, published in the New England Journal of Medicine, found a spike in medical service utilization after Oregon's Medicaid expansion. [One state, Arizona, has reported benefits stemming from expansion.]
Although the implications of the Oregon research are cause for concern, Hempstead says the increased utilization finding should not have come as a surprise.
"If you give uninsured people access to primary care through coverage, they will use medical services more," she said, adding that the Hospital ACA Monitoring Project is designed tackle questions that can't be answered by looking at a single state.
"The hospitals are not really starting out at the same place," Hempstead said. Rather, the impact of healthcare reform on a hospital with a large Medicare and commercially insured patient population is not going to have the same financial impact from the PPACA as a safety net hospital that serves a large number Medicaid patients. "Expanding coverage isn't the same thing as changing the delivery system."
'Real, Documented Information'
The New Jersey Hospital Association is serving as the data repository for the Hospital ACA Monitoring Project. Kerry McKean Kelly, vice president for communications and member services at the NJHA, said the monitoring project should provide hospitals with essential information.
The monitoring project has targeted a handful of conditions to follow because they are believed to be good indicators of cost-effective utilization of medical services.
"Newly covered patients theoretically will have greater access to primary care for minor health issues, so the question this study will answer is: Will they use that rather than go to a hospital emergency room or wait until a problem becomes serious enough for a hospital admission?" she said.
"This project focuses on those minor issues that we expect to see a change in—up or down—with respect to emergency department visits. These include urinary tract infections, headaches, and acute upper respiratory infections. We’d also expect to see volume changes in those conditions that, if treated early on in either a primary care or ED setting, would prevent an inpatient hospitalization. These would include avoidable admissions for things like short-term diabetes complications, hypertension and urinary tract infections."
Examining Utilization
The Hospital ACA Monitoring Project will be collecting utilization data by payer because the hospitals involved in the effort are eager to determine how healthcare reform is going to affect their payer mix, Hempstead said.
"We may see the volume increase but the revenue decline due to low-margin payers. I do think the margins are going to change… Providers want to know who's paying because it determines how much they are going to get paid."
In addition to a spike in overall medical services utilization, the Oregon Medicaid research found an increase in emergency department usage. "What surprised people is that patients didn't stop using the emergency room," Hempstead said of the Oregon study.
While more research is needed to explain why Medicaid expansion can increase emergency department utilization, some reasons are obvious, Hempstead said. "A lot of people like to use the ER. It's just a pathway that they have established," she said. "A lot of people find it convenient."
Unlike the new public health insurance exchanges, which have policies with cost-sharing features that provide patients with financial incentives to stay out of the emergency department, Medicaid programs often lack incentives for patients to seek care in the most cost-effective setting, according to Hempstead. "There have to be some other delivery system reforms," she said.
With 2013 baseline data in hand, the RWJF researcher is confident that the Hospital ACA Monitoring Project is going to provide insight about questions that have vexed hospital officials from coast to coast.
"The real excitement is going to come when we get the 2014 data," Hempstead says, adding the first quarter data from 2014 is slated for publication around the Labor Day weekend. "I'm really glad these hospitals decided to share this data."
Kelly says the monitoring project will provide essential information to healthcare providers.
"Hospitals have bought into the ACA and in fact conceded billions of dollars in Medicare funding to support the law. New Jersey hospitals, for example, will see their Medicare reimbursement decline $4.5 billion over 10 years under the ACA."
"The hope is that those investments will help us transform our healthcare system for the future, insuring more Americans and reducing healthcare costs in the long run by delivering the right care in the right setting. So the stakes are high for hospitals, and the financial impact could be severe if the positive impacts of the ACA aren’t realized, such as more patients in primary care versus EDs. "
"We don’t know – and we can’t assume," Kelly said, "whether the ACA will greatly reduce the need for charity care services. And we’re worried that new plans, with higher out-of-pocket costs for consumers, could increase hospitals’ bad debt expenses. Those are some of the very important unknowns that we hope to see through this data over time."
The Senate Finance Committee hears testimony and is expected to examine in the coming months possible solutions to the problems posed by chronic disease care, which accounts for 93 percent of all Medicare spending.
Even by Washingtonian political standards, testimony for a Senate Finance panel hearing on addressing the crushing cost of chronic disease care opened on a dramatic note this week.
Tuesday morning's first witness knows the costs associated with chronic disease all too well. Stephanie Dempsey, an American Heart Association volunteer who lives in Georgia, has suffered with heart disease since she was 21, the 44-year-old told the senators.
Over the next several months, the committee is expected to examine several possible solutions to the problems posed by chronic disease care, which accounts for 93 percent of all Medicare spending, according to the panel's chairman, Ron Wyden (D-OR). Among the proposals the committee will be assessing is the Better Care, Lower Cost Act, which Wyden and three other lawmakers introduced in January.
"My heart disease is hereditary and has impacted all of the women in my family. My only sister died at the age of 28 from heart disease. My mother, who is 69, underwent quadruple bypass surgery at the age of 48, and my maternal grandmother died at the age of 72 from coronary artery disease."
As Dempsey read nearly verbatim from her prepared statement, there were several emotionally charged pauses as she described the impact her multiple chronic conditions had on her family.
"As you might imagine, my medical expenses are significant and are becoming more significant by the day. We fell behind on our mortgage and were forced to sell our home… As it became more difficult for me to manage my illnesses, the growing burdens became overwhelming for my husband, and after 21 years of marriage, he decided to walk away."
After Dempsey concluded her testimony, Wyden proclaimed that Congress is determined to ease her burden. "You asked that you not be forgotten, and you have here both Democrats and Republicans who want to make sure that doesn't happen."
Rare spirit of bipartisanship
Although a couple of senators on both sides of the aisle could not resist the temptation to alternately praise or poke holes in the politically polarizing federal Patient Protection and Affordable Care Act, all of the lawmakers present sought to set a bipartisan tone.
"Here's my bottom line: the way healthcare is delivered in America has to change," Wyden said in remarks that opened Tuesday's hearing. "This is not something that is going to be solved overnight. This committee hearing marks the beginning of a bipartisan effort."
Sen. Orrin Hatch (R-UT), the finance panel's ranking Republican member, said taking action to manage chronic illness more effectively and efficiently is "one area where both parties can make progress."
The Utah lawmaker said the country could not afford to ignore the daunting financial challenges that chronic disease pose to every American. "Healthcare costs place enormous strain on the federal budget," Hatch said, noting total healthcare spending in 2012 has been pegged at about $2.8 trillion or 17.2 percent of the US economy's gross domestic product.
David Rehm, president and CEO of Massachusetts-based hospice and primary care services provider HopeHealth, says common ground can only take the political leaders so far.
"All of the players recognize there is a problem, and it's focused around this population of patients," says Rehm. "They all share the same focus and the same goals. But the problem comes when you have to decide what you're going to do."
Coordination of care key
Nearly all of the witnesses and senators who spoke at Tuesday's hearing said improving coordination of care is the top priority to improve treatment of chronic disease and cut costs.
Wyden asked Dempsey and another witness, Mary Lehmann, who is serving as caregiver for her elderly husband as his Alzheimer's disease advances steadily, whether it would help them to have one "go-to person to coordinate the array of services."
"It would be life-changing. If I had that one person who was the go-to person," Dempsey said, "it would be invaluable… It would not only be life-changing, it would also be life-giving," Lehmann said of the possibility of having a care coordinator to help manage the treatment of her husband.
"Most of my time is spent feeling overwhelmed," she told Wyden.
William Bornstein MD, chief quality and medical officer at Atlanta-based Emory Healthcare, said boosting coordination of care for chronic disease patients is a Herculean test for healthcare and political leaders.
"The challenge is, how do we make sure all the care is coordinated to make sure we have a patient-centered approach," he said of chronic disease patients, noting that many have a dozen specialists that they see annually.
Sen. Johnny Isakson, (R- GA) asked Bornstein about Emory nurses who serve as care coordinators. The senator noted that Emory has taken on the cost of the nurse coordinators because they add tremendous value. "It costs more to do less and less to do more," Isakson said.
Bornstein said having care coordinators "embedded" at hospitals and other points of care is only part of the solution to the country's chronic illness problem.
"We need someone who is captaining the ship," he said, "but we also need all of the specialists to think about coordination of care."
When Bornstein treats people with diabetes, he said specialists working with his patients should be planning around the effects of multiple medications. "How often does that happen? In my experience, almost never," he said.
Rehm said coordination of care for chronic disease patients "is a challenge in a number of ways," adding that the necessity to take action is pressing.
Wyden said he and his colleagues on the Senate Finance panel are determined to make progress. "In the months ahead, this committee can find bipartisan solutions to meet the challenges and strengthen the American healthcare system, and I'm committed to working with the senators to address it."
