When Cigna Corp. CEO David Cordani talked about the “cornerstone” of his company’s growth strategy in a recent Forbes interview, he didn’t single out the individual market or employer-sponsored insurance as the primary drivers of expansion--at least, not in the U.S.
It was markets beyond U.S. borders that he described as having outstanding growth opportunities when he said that the company was “going global with the Cigna franchise.”
That may be one reason Cigna announced this week the appointment of an executive to head up the health, life, and accident operations of Cigna International. Based in Hong Kong, the new position will be responsible for expanding business in the 26 countries other than the United States where Cigna currently does business.
While there is still room for growth in the U.S. health insurance industry, particularly with a new mandate to purchase insurance set to go into effect in 2014, international markets may play a large role in the expansion strategies of some of the largest companies in the near future.
Ex-patriot Americans make up a portion of the international market, but the real growth will likely come from within other nations. Cordani identified two major trends that he hopes will drive the international business.
First, individuals are purchasing supplemental insurance products in addition to their primary (often government-run) insurance. He envisions these supplemental packages expanding into more comprehensive services as markets change. That’s why it’s important to start building relationships with the customers now.
“Somebody might buy a hospital coverage. They might buy a surgery coverage. They might buy a cancer coverage. They're slices now. But they will evolve ... as the market evolves, to more comprehensive coverages,” Cordani said.
The second trend is happening on the employer side, as companies in rapidly growing countries, like China, are increasingly competing for talent and, like employers in the U.S., want to use health insurance as a recruiting tool.
“The reason why they want to opt out of the system is because while everybody has access to care in the system, they're struggling to get accessibility to the highest-quality physicians or hospitals. So we see that change as an area where we could add significant value,” Cordani said.
A third trend fueling growth could be reforms or changes to existing government-run healthcare systems. For instance, Britain’s National Health Service is preparing to outsource some services to private companies in an attempt to slash spending and increase government efficiency. Humana, UnitedHealth, Aetna and MCCI are already lining up for contracts. (Opponents of this change warn about inheriting the insurance fraud and abuse seen in the U.S., much like how opponents of healthcare reform here vilified the NHS not long ago).
For the most part, these global opportunities are going to be limited to the largest of the health insurers. But as emerging economies around the world continue to see rapid growth, the opportunities for health insurers may expand as quickly as these developing markets.
When insurers talk about the future of their business these days, the focus is usually on the sweeping changes included in the Patient Protection and Affordable Care Act. And while those changes will undoubtedly determine the future of the industry in the longterm, it may be the struggling economy that has the bigger financial impact in the short-term.
At least, that's one of the biggest threats identified in a recent report from the KPMG Healthcare and Pharmaceutical Institute.
Throughout 2009, most insurers managed to thrive as the economy faltered, thanks in large part to expense savings and capital gains, the report says. The largest insurers had combined profits of $14.4 billion, an increase of 56% from 2008. Not too shabby.
But publicly-traded insurers also saw a 2.3% decline in commercial membership because of employer layoffs during that time. It may grow more difficult to squeeze out cost savings, and if unemployment continues to remain high, KPMG expects the health insurance market to grow much slower—about 7% annually between form 2009 to 2011.
"Many healthcare companies are finding that their businesses are less recession-resistant than previously thought, and the future is uncertain. Managed care companies are faced with declining enrollment as unemployment remains high in a tough pricing environment. This will undoubtedly be a challenging year," writes James Davenport, partner at KPMG LLC and author of the report.
Add to that the impact of reform—new restrictions and medical-loss ratio requirements, and cuts to Medicare Advantage—and companies will increasingly "face pressure to maintain their profitability."
Although the health insurance mandate will bring up to 32 million new customers, primarily to the individual market, the employer-sponsored health insurance system continues to grow and remains the source of many Americans' coverage. As long as companies are laying off workers or waiting to resume hiring, insurers should be concerned.
So what's an insurer to do when faced with the dual challenges of a bad economy and industry overhaul? If they can't expand membership organically, more may look to do so through mergers and acquisitions, the report predicts. As I wrote in a previous column, the industry has been consolidating for a while, and may face even more pressure to do so in the near future.
While a lot of insurers are still going to be profitable, they may have to pay a lot more attention to overhead and efficiency to make it happen. The KPMG report even predicts job cuts at some insurers struggling to reign in administrative expenses. And that's certainly not going to help the unemployment rate, which is causing the problem in the first place.
Cancer mortality has been steadily declining for two decades, falling to 21% in men and 12.3% in women between 1990 and 2006, according to new data from the American Cancer Society.
Decreases have occurred in three major cancer sites: lung, prostate, and colorectal cancers accounted for most of the decrease in men, while breast and colorectal cancer accounted for the majority of the change for women. The improved survival rates have prevented an estimated 767,000 deaths over the period.
The success can be attributed to a combination of better prevention, earlier detection, and improved treatments, says Ahmedin Jemal, DVM, PhD, researcher with the American Cancer Society. Despite the good news, however, there is still room for improvement, particularly when it comes to cancer prevention, he says.
“We have to celebrate what has been achieved so far because there is a continuous decrease in cancer death rates,” Jemal says. “But there is an opportunity to accelerate the decrease if we apply what we know to all segments of the population.”
He points to smoking, one of the most preventable causes of cancer, as an example. Although smoking in the U.S. has decreased, nearly 20% of adults continue to smoke, and better smoking cessation programs could prevent even more cancer deaths.
There is also room for improvement in screening rates. The CDC this week released new data on breast and colorectal cancer screening findings:
—At least 10,000 people die each year because they have not been screened
—Only 63% of recommended adults were screened for colorectal cancer in 2008, although that is up from 52% in 2002
—Breast cancer screening rates have remained steady at around 81%.
Health insurance coverage is one of the primary factors affecting screening, but physicians also play a large role, the CDC says. ”The new studies indicate that physician recommendation for screening remains an important but underused motivator for cancer screenings.”
Deaths from cancer declined across all demographic groups, however racial and ethnic disparities remain a problem. African–American men had a 34% higher death rate than white men, and African–American women had a 17% higher death rate than white women. Screening rates tend to be lower for African Americans and Hispanics, as well. The differences are tied to poverty and access to care, says Jemal.
In recent years, the better cancer survival rates have led to more focus on follow–up care from providers. Hospitals and physicians have to put more effort into survivorship programs and monitoring patients to detect any recurrence of cancer. However, the healthcare system could improve early prevention efforts, Jemal says.
For providers, this means more effort to advise patients to quit smoking, to maintain a healthy body weight, and to stick to regular screening schedules, he adds. “In the U.S., [healthcare] is treatment–driven, but there is not much attention given to prevention. But it is very, very important.”
Although public opinion about the recently passed Patient Protection and Affordable Care Act remains split, support for the overhaul has increased steadily since the legislation was passed in March.
One of the best examples of the trend is Pollster.com's aggregate of nearly two dozen polls tracking opinions about healthcare reform. Public opinion reached a low in January, when about 52% opposed reform and 40% were in favor, according to the tracker. However, the latest averages show the country evenly split—44% favor the legislation and 44% oppose it.
The most recent poll on healthcare reform, released this week from the Kaiser Family Foundation, shows a 48% plurality in favor of the legislation and 41% opposed. That nearly flips the numbers from the previous month, when the KFF poll found 41% in favor of the bill and 44% opposed.
Not all polls show net support for reform, however. An NBC/WSJ poll released last week found that although support increased from 38% to 40% from May to June, disapproval held steady at 44%.
Now that healthcare reform is no longer center stage in Congress or the media, more people say they understand the legislation and its impact, according to the KFF survey. Seventy percent said they understand how the legislation will impact them in the June survey, compared to only 61% in May.
When asked about individual provisions in the legislation, Americans were even more supportive of most of the law. More than 60% had favorable views of health insurance exchanges, expanding Medicaid, allowing children to stay on their parents' plans until 26, restrictions on insurance companies, high-risk pools, tax credits for small businesses, and increasing the Medicare payroll tax for high-income individuals.
The mandate to purchase health insurance or pay a fine had the least amount of support, with 65% of respondents expressing unfavorable opinions.
Although the increase in public opinion is not unexpected now that the debate has died down and the opposition to the legislation is less vocal, it is unclear how the legislation is now viewed by providers and other members of the healthcare sector.
Several members of the American Medical Association have recently been critical of the organization's support for reform, particularly because of Congress' inability to fix the sustainable growth rate formula that requires cuts to Medicare reimbursements for doctors. But there haven't been polls of physician opinion since the legislation's passage to gauge the intensity of the disagreement.
Reform could enter the public spotlight again as midterm elections approach in November. However, the KFF poll found that reform votes are unlikely to sway the elections one way or the other. Roughly equal amounts said that a candidate's reform vote would make them more likely to vote for him or her (35%) or more likely to vote against him or her (32%). Nearly one-third said a candidate's vote wouldn't matter either way.
Given the significant impact medication adherence has on healthcare quality and costs, providers, payers, and researchers have tried to figure out what makes one patient adhere strictly to a potentially life-saving medication regimen and another give up after a couple of months. The difference, according to a study in the Archives of Internal Medicine, may be the physician.
Researchers at McGill University in Montreal looked at adherence to prescribed antihypertensive medication, and found that a physician's medical management and communication skills influenced whether a patient stuck with the regimen.
Within six months after starting treatment, more than 22% of all patients had discontinued the medication, many of them within the first 60 days. But physicians with higher-than-average clinical decision-making ability reduced noncompliance by 23%, and for doctors with strong communication skills noncompliance was 12% lower. Researchers measured both skills using scores from Canada's licensing examinations.
The findings are significant because they point to possible steps providers and healthcare organizations could take to improve medication adherence by educating and training physicians. "Training programs could improve the ability of physicians to manage chronic conditions by ensuring that these aspects of management are systematically incorporated into undergraduate and postgraduate medical training," the authors wrote.
Evaluation tools to support clinical decision making and medication monitoring in the practice environment may be even more fruitful, they said.
The long-term impact of such a change could be large. Between one third and one half of all patients don't take medication as instructed, and some of them end up returning to the hospital with more severe conditions as a result. Measured in otherwise avoidable spending, that costs the U.S. healthcare system as much as $290 billion a year, according to an estimate from the New England Healthcare Institute.
Medication adherence has proved difficult to improve, and providers and payers have tried everything from case management to paying patients to take their medications. It's a big challenge because there are multiple phases to adherence, said Edmund Pezalla, MD, MPH, national medical director with Aetna, who is testing several pilot projects for improving compliance.
Many people have problems during the first stage, when they begin taking the medicine, he said. "This is a phase where people just don't get started taking their medication. They may not understand why they're taking it or may not be convinced it will work. They may also have safety concerns."
In fact, the McGill University study found that physician communication skills were most important early on in a treatment cycle. The most significant factor in determining compliance was a treatment change -- a modification in drug or dosage to account for an adverse reaction -- before the end of the first prescription, and doctors with stronger clinical and management skills were more likely to make such a change.
The more communicative and knowledge physicians may have had better results "either because they followed up their patients more effectively, or their patients were more motivated to report problems," the researchers wrote.
Most high-risk insurance pools for patients who can't obtain coverage because of pre-existing conditions began enrollment Thursday, slightly past the 90-day deadline established by the Patient Protection and Affordable Care Act.
Under the legislation, states had the option of administering their own plans or letting their residents opt-in to a plan run by the Department of Health and Human Services. Twenty-nine states plus the District of Columbia decided to operate their own plans with funding from the federal government. The remaining 21 will rely on the federal Pre-existing Condition Insurance Plan (PCIP), the name for the high-risk pools announced by Secretary Kathleen Sebelius Thursday.
HHS also launched of a new consumer website, www.healthcare.gov, that contains information on how the plans are administered and how patients can enroll.
Last week, Republicans in Congress questioned the effectiveness of the pools after the Congressional Budget Office released a report suggesting the $5 billion allocated for the pools in reform legislation wouldn't be enough to cover the costs. If HHS doesn't restrict enrollment or services, the actual cost to the federal government could be two or three times higher, the report said.
On Wednesday, Sebelius attempted to address some of the cost concerns in a conference call, according to The Hill. Options for controlling costs ranged from reducing benefits to redistributing funds to turning people away from the pools. However, Sebelius did not say she would ask for more funds from Congress.
Although the number of people who could potentially qualify for the program is in the millions, enrollment will likely be limited to 200,000-700,000 during the 2011-2013 period. By 2014, patients with pre-existing conditions will no longer need the high-risk pools because they will be able to obtain coverage from private insurers.
While the federal government will provide funds for administering the pools, they will be largely funded through member premiums and cost-sharing. Participants will be required to pay a premium "that is not more than the standard individual health insurance premium in their state for insurance that covers major medical and prescription drug expenses with some cost-sharing," according to the HHS announcement.
That could range from as little as $140 a month to as much as $900, Richard Popper, deputy director of the the new Office of Consumer Information and Insurance Oversight. HHS, told the Associated Press.
Some states, including California and Illinois, failed to meet the July 1 deadline and will not begin enrollment until later in the year. HHS expects all states to begin enrollment by the end of the summer.
Last week Michael Kleinman, vice president for investor relations at WellPoint, Inc., put a label on the insurance industry consolidation that has been underway for years. The market is becoming an 'oligopoly', dominated by just a few companies, and healthcare reform may accelerate the process, he was quoted as saying in a recent Businessweek article.
"There are going to be smaller insurers that are not going to be able to survive in this marketplace," Kleinman said of the post-reform era. An analyst's report cited in the article predicts that the health reform overhaul could push 100 insurers with 200,000 members or less out of business, "as the plans are increasingly unable to invest in the infrastructure and technology to effectively manage care."
But that same report found that 12 health plans already cover two thirds of enrollment in the U.S. commercial market. While it's easy to point the finger at new federal regulations and price controls, the industry has been consolidating for years.
Mergers, rather than small insurers going out of business, have been the main driver. Between 1998 and 2008, there were more than 500 mergers involving health insurers.
Now, in nearly half of states the two largest insurers have a combined market share of 70% or more, according to an American Medical Association study released earlier this year. And 99% of metropolitan markets are considered highly concentrated according to federal merger guidelines.
The question now is, what effect will the new reform law have on this long term trend? The answer may not be as clear-cut as it seems.
Theoretically, an influx of 30 million new customers in any industry has the potential to spark innovation and open up new opportunities for smaller players. What better time for a smaller insurer to grow business than when millions of Americans will soon be shopping for insurance for the first time? Large insurance companies aren't as nimble, and the leaner organizations may be better able to respond to changes in the market.
More aggressive antitrust enforcement may also curb the rate of consolidation. In that period between 1998 and 2008, the feds challenged only three mergers on antitrust grounds. But the U.S. Justice Department said in March that it will be more aggressive in blocking mergers "that appear to present a competitive concern." It already denied the merger of two Michigan insurers this year.
In reality, it may not be that easy to relieve the pressures that come from combination of state and federal regulations and growing need for cost effectiveness. It's tough for any insurer to make it without the infrastructure and technology to manage the wellness, data-tracking, quality-incentive, and cost-control programs necessary in today's market.
There's one group to watch, though: Health plans in integrated systems. Although provider-owned health plans have been disappearing in recent years, in part because they are prime targets for acquisition by larger insurers, they are primed for a resurgence.
Physicians and hospitals are facing consolidation pressures just like insurers, and the intense focus on seamless and integrated care has raised interest in building health systems. Adding a health plan to that strengthens the overall alignment and cost-control potential.
Whether that will happen, and how quickly, remains to be seen. There's a lot of uncertainty about the future these days, but the trend line of the last decade, and the direction it is headed, is pretty clear.
Americans are more concerned about having to delay or cancel medical treatment in the next few months, according to a Consumer Healthcare Sentiment Index released Monday by Thomson Retuers.
Overall confidence dropped to a new low in May. Although the monthly tracking report showed a temporary increase in April, the longterm trend has been a steady decline since the report began tracking American attitudes about healthcare in December 2009, according to Gary Pickens, chief research officer with the healthcare and science division at Thomson Reuters. The Index is compiled based on interviews with 3,000 households each month.
More consumers are anticipating difficulty paying for healthcare and a higher likelihood of a cancellation or reduction in health insurance coverage. The survey found that many consumers were worried about having to delay or cancel elective surgeries or filling prescriptions. "In addition, there was a significant decrease in consumer confidence regarding all other prospective components, including use of physician visits, diagnostic tests, and therapies," according to the Thomson Reuters report.
The chief cause of the declining confidence continues to be the economy, which has been slow to recover from recession, says Pickens. "The dominant factor is the economy, because as we're all well aware, new job creation has been weak (although the bleeding seems to have stopped), and unemployment and the lack of insurance that results has a strong effect on consumer spending."
Because of the relative inelasticity of healthcare demand, the concerns about nonpayment are primarily restricted to electives and procedures, like routine screenings, that can be postponed, Pickens says.
Although recently passed healthcare reform legislation has created some uncertainty about healthcare access and insurance, the drop in consumer confidence doesn't appear to be caused by the overhaul, Pickens says. Although a previous Thomson Reuters PULSE Healthcare Survey found that half of respondents expect healthcare reform to increase healthcare costs, the Americans who expressed the least amount of confidence in the latest survey--the uninsured or the unemployed--tended to be the group with the most favorable views of healthcare reform.
Another consumer confidence survey conducted earlier this year found that uninsured medical expenses was second on Americans' list of financial concerns, only barely behind concerns about funding their retirement.
Improving follow-up appointments is often considered one of the key strategies for reducing costly hospital readmissions, but a new study suggests that better discharge processes don't reduce 30-day readmission rates at all.
While previous research has found that follow-up appointments reduce readmissions for special patient populations, the latest study, which was conducted by Mayo Clinic researchers and appears in the latest Archives of Internal Medicine, examined nearly 5,000 dismissal summaries for general medicine patients discharged in 2006 from Mayo Clinic hospitals in Rochester, MN. While most (60%) patients were discharged with instructions for follow-up appointments, there was no difference in hospital readmission rates, emergency department visits, or mortality rates 30 days after the discharge.
At 180 days, those who had a follow-up appointment were actually more likely to be readmitted or have an adverse event than those who hadn't.
The results suggest that hospitals and physicians still have work to do in determining how to reduce hospital readmissions and even "call into question the concept of using readmissions as a quality indicator for the original hospitalization" because most readmissions were unrelated to the original admission, the authors said in their report.
Reducing re-hospitalization has been a major goal of CMS and the Obama administration, as well as many specialty societies, payers, and state agencies. Just this week, the New Jersey Hospital Association announced a statewide effort to reduce readmissions related to heart failure and CIGNA Corp. contracted with an East Hartford, CT, home health business to tackle the issue.
Readmissions are a big target in the healthcare industry in part because they represent what many consider to be an unnecessary driver of spiraling costs. Return visits to hospitals cost the government nearly $17 billion every year, according to a 2009 report.
But increasing follow-up visits without further studying their efficacy could cost even more money, the authors of the Mayo Clinic study suggest. "As an example, consuming resources for hospital follow-up for a young, healthy patient hospitalized for an acute exacerbation of back pain may not be beneficial."
Focusing on follow-up visits for patients with multiple comorbidities or longer hospital stays may be more effective than a blanket approach to follow-up care, according to the report. However, the researchers caution that more research is needed and acknowledge that the study was limited in scope and did not look into factors such as compliance with follow-up instruction.
Recent pilot projects have succeeded in reducing readmission rates by involving patients in their care and improving quality during the hospitalization, according to a Boston Globe report. For example, the University of Colorado has developed a program to teach patients self-management skills, and the University of Pennsylvania School of Nursing is training nurses to prevent infections and coordinate care during the hospitalization, and then visit the patient at home after discharge.
Although effective discharge processes and timely follow-up is "good medicine," the authors conclude that, "healthcare payers must exercise caution when implementing financial incentives for initiatives that have not been clearly shown to improve outcomes."
When Congress passed the HITECH Act last year and changed how physicians, hospitals, and most of the healthcare industry must approach the adoption of electronic health records, health plans weren't a primary target of the legislation. But that doesn't mean the soon-to-be released final definition of meaningful use won't affect how insurers do business.
In fact, many insurers are already looking into ways to follow in the government's footsteps with their own incentives and penalties that will closely mirror the final meaningful use criteria, according to a report from American Medical News.
And they should. Many of the pay-for-performance and cost-control programs that payers are developing depend on providers using health information technology to collect and submit data.
"Adoption and meaningful use of HIT by providers that results in improving the availability and interpretation of clinical quality indicators and measures will certainly improve the efficacy of these types of programs," according to a new report, "Meaningful Use for Health Plans: Five Things to Consider," by technology firm CSC.
In addition, implementing HIT may strain provider resources and lead to cost-shifting to commercial payer contracts, the report says. The more private payers can help physicians and hospitals make the transition, the better off both will be in the long run.
And health plans may be able to have a significant impact on the adoption rate. Although physicians are eligible for up to $44,000 in Medicare incentives over five years, and hospitals can receive millions, many providers still believe that the government payments will not be enough to fully cover the technological and administrative expenses associated with implementing a system from scratch.
But if private payers are developing similar financial incentives that piggyback on the government's payments, the gap between what providers need and what they will receive is suddenly a lot smaller.
"Payers and plans that ignore the challenge that meaningful use and EHR implementation create for hospitals and providers risk missing significant opportunities," according to the CSC report. "Healthcare reform and the ongoing transformation of the healthcare industry are raising the stakes for the payer sector when it comes to successful implementation of EHRs and the demonstration of meaningful use."
There's one more reason payers should be familiar with meaningful use requirements: Medciare Advantage plans will be eligible for quality bonuses beginning in 2012, and it's possible that HIT implementation and meaningful use could somehow be included in the yet-to-be-determined requirements for receiving the bonuses.
Private payers have a long history of following Medicare's lead, and it looks like the same will happen regarding HIT adoption and the development of health information exchanges. But plans aren't just following Medicare blindly. There are clear benefits to encouraging HIT adoption within the meaningful use framework.
This is meant to be an industry-wide transformation. So as we approach the finish line for the initial stages of the program, health plans should be watching what comes out of Washington as closely as physicians and hospitals.
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