If millions of Americans drop their healthcare coverage, providers will be forced to bill patients directly and see fewer collections. They also will see more and sicker patients in emergency rooms, already a cost center for hospitals.
Eliminating the individual mandate in the Affordable Care Act would likely result in lower revenue for physicians, hospitals, and health systems while driving patients to more costly treatment options such as emergency departments, an industry insider predicts.
Negotiators on Capitol Hill are trying to settle on a tax bill, but both the versions from the House and Senate would eliminate the portion of the ACA that requires individuals to buy healthcare insurance or face sometimes substantial fines.
If the final bill emerges without preserving the mandate, the healthcare industry should brace for a major revenue loss, says Sean McSweeney, founder and president of medical billing company Apache Health.
According to estimates from the Congressional Budget Office, losing the mandate would result in 13 million fewer insured individuals, which means more billing the patient directly for services rendered, he says.
"While it is not easy to get money out of insurance companies, it is even harder to get it out of patients, with lower average net collection rates," McSweeney says. "We can anticipate a drop in revenue for physicians and hospitals, which could be significant for those who are billing a lot of patients covered under ACA plans."
McSweeney points to the commonly held notion that there is a downward spiral associated with what is called adverse selection in healthcare. The theory is that healthy individuals who are not mandated to purchase insurance will opt out, which leaves a pool of overall sicker individuals left getting health insurance. In order to pay for more services for these, on average, sicker individuals, insurance companies raise rates for remaining consumers.
As rates go up further, the healthiest individuals opt out of insurance and the cycle continues. Ultimately, the sickest people are left and pay the highest rates, while a large portion of the population is uninsured and pays cash or does not pay at all after receiving services.
"One significant implication for revenue cycle management is that as fewer people have insurance and a larger portion of the poor are left uninsured, people are likely to avoid preventative care and general healthcare services that are not acute, and potentially wait until their condition is more severe," McSweeney says. "This results in a larger number of patients shifting their care from outpatient services to the emergency room. Fewer insured patients in the emergency room means that emergency billing, as a whole, will do less insurance company billing and more patient billing."
Hospitals are obligated under EMTALA to provide emergency care even if the patient does not have the ability to pay, so, emergency providers are likely to see an increase in unreimbursed work, McSweeney says.
"Additionally, since urgent care billing is not covered under EMTALA, we will likely see fewer patients going to urgent care, shifting instead to the emergency room," he explains. "Most urgent care facilities have gotten pretty adept at billing for cash patients and charge a simple flat case rate, so this will hurt urgent care providers financially, as well."
The financial drain could be made worse by consumers being unable to afford healthcare insurance even if they are willing to buy it, notes Dan Ehlke, PhD, assistant professor of health policy and management at SUNY-Downstate School of Public Health.
Repealing the individual mandate will leave insurance risk pools older and sicker, which will prompt insurers to further increase premiums across the country for 2019, he notes, and some may drop out of the ACA exchanges altogether.
"This will mean many more bare counties in which there are no plan options available on state exchanges. The individual insurance market could begin to resemble what it did before the ACA, when it was largely residual, and financially out of reach for most Americans," he says. "One potential mitigating factor is the continued presence of tax credits to ease the cost of premiums. That could have the effect of placing a ceiling on the number of younger, healthier Americans who drop coverage, but it is still thought many will still make that decision, in the absence of any requirement to remain insured."
A recent survey shows that more than half of consumers determine the price before receiving healthcare. Physicians and health systems will need to respond to the movement toward price-based decisions in healthcare.
Consumerism has reached a tipping point, becoming pervasive enough that the healthcare industry must develop better ways to respond to the cost and quality concerns of patients, one analysis concludes.
Consumer-driven healthcare, urging insured consumers to choose the most effective and highest quality care by providing financial incentives, has become the predominant strategy that employers are using to try to save money on healthcare expenditures, says John Young, senior vice president of consumerism and strategy at Alegeus, a company providing services for the administration of healthcare benefit accounts to health insurance plans, third party administrators, and others.
“People are starting to listen to the messages that all stakeholders are giving to them about how the healthcare dollars allocated to their accounts can best be optimized,” Young says. “They are starting to make decisions about healthcare based on the information they can obtain from doctors and hospitals about what it will cost them and what they are getting for their money in terms of quality.”
Consumers are steadily focusing more on the cost of their healthcare, according to the company’s 2017 Healthcare Consumerism Index, based on a survey of more than 1,400 U.S. healthcare consumers . Consumers were asked to assess their attitudes and behaviors for healthcare spending decisions on a 0-100 point scale and this year’s overall spending index of 60.1 represents a modest, yet steady, improvement over last year’s index of 54.4.
The survey found that 55% of consumers find out the price before receiving a medical service, up 15% from last year, and 60% research physician and facility quality ratings, up 11% from last year. Sixty-four percent say they understand the cost obligations of their insurance coverage, which is 9% higher.
“Doctors and hospitals are going to be getting more and more questions around cost and quality, and in the early stages of consumer-driven healthcare they often looked at the patient and said they no idea what this service would cost or how to measure quality,” Young says. “That is becoming less common today as doctors and hospitals develop better mechanisms for answering those questions, which in some cases means having a specific department or person to refer the patient to. The healthcare industry is realizing that they must respond to this consumerism that is growing steadily every year.”
Prior year data suggested that consumers were increasingly focused on cost and value, the report says, but their purchase behavior had not substantively changed. “Although we still have a long way to go, this year’s data shows that consumers are increasingly taking action to reduce costs and get better value for their healthcare dollars,” the report says.
Merging a pharmaceutical line with a major insurer creates a huge player in the industry but not a monopoly. It also opens the possibility of CVS Health buying hospitals and other outlets.
The acquisition of Aetna by CVS Health is likely to go through without antitrust challenges by federal regulators and could spur more vertical integration of healthcare entities, one analyst says.
The size of the merger is not enough to make it a problem for the U.S. Department of Justice, says Randal L. Schultz, a partner at the law firm of Lathrop Gage and chair of the firm's Healthcare Strategic Business Planning Practice group.
The deal is different from the $48 billion deal to merge insurance giants Anthem and Cigna that was halted by a federal judge in February, Schultz says. That proposed merger ran into antitrust concerns because the resulting company would have monopolized too much of the healthcare insurance market. The other potential antitrust concern is price fixing, and that does not seem to be likely with this merger, he says.
Unlike the horizontal merging of two large health insurers, combining CVS and Aetna will be vertical integration, and that makes all the difference, Schultz says.
"CVS Health is a pharmacy buying network. That's their big power, where they're really a big player and capture the market, even though they're in the business of retail drug stores too," he says. "This has the potential for changing the healthcare industry because it introduces entrepreneurial ideas into the healthcare marketplace, and we don't have that now. It doesn't create a horizontal monopoly that would violate antitrust laws, and it doesn't create a system in which this one large player is able to control prices across the board."
Schultz notes the prominence of the CVS Minute Clinics in the company's drug stores, which serve a consumer need for efficient and convenient healthcare services while drawing customers in for more profitable retail purchases. More Aetna customers will be driven to those clinics for care, Schultz expects, because it is more cost effective for the insurer and can be more appropriate than patients going to emergency rooms and other expensive settings.
The vertical integration streamlines a decentralized healthcare delivery system that is full of waste and duplications, he says. Other players in the market could follow the lead of CVS Health, which also could build on this initial step, Schultz says.
"If you're huge in pharmaceutical distribution and you buy a big insurer that controls lives and where they go for care, you're creating a more lean, mean, efficient machine," he says. "It's almost backwards because if the insurers were smart they would have bought the pharmaceutical distribution organizations and the physician practices. They're the ones with all the data you need to guide patients to more cost-effective delivery models."
Possible next steps
The next step for the newly combined CVS Health and Aetna could be buying hospitals or ambulatory surgery centers, Schultz says.
"Why not? You could have a vertically integrated healthcare organization that is driven by business people," he says. "There will be concerns that the healthcare professionals don't know each other and people are separated geographically, but the industry will work that out. Just look at how telemedicine is advancing and erasing some of those concerns about distance and separation."
Schultz supports the CVS Health move, saying the healthcare industry has long needed this type of change. CVS is filling a niche, he says, by providing a medical service through the combination of minimal professional care, the pharmaceutical line, and a financing vehicle.
"If I were running CVS Health, I would have one big multispecialty clinic in every area where we operate, and I'd have a contract with a hospital instead of building my own brick-and-mortar facilities," he says. "We'd have our own procedure rooms at the hospital tied to that multispecialty clinic, so we could do the procedures that hospitals don't need to do and let them focus on the kind of care they deliver best. That could be the direction this is heading."
CMS may appear to be slowing the path to value-based care by ditching some bundled payment models, but a new program could revitalize the effort. The new initiative will draw in more physicians who were not attracted to the earlier versions.
The CMS decision to eliminate two mandatory bundled-payment models and reduce participation in a third should not be taken as a sign that value-based care has lost momentum. To the contrary, the upcoming Bundled Payments for Care Improvement (BPCI) Initiative will actually speed up this shift and be a catalyst to end the fee-for-service model altogether, one analyst says.
CMS recently finalized plans to cancel mandatory hip fracture and cardiac bundled payment models, as well as the Episode Payment Models and Cardiac Rehabilitation Incentive Payment Model that were due to go into effect on January 1, 2018. The rule also reduces the geographic areas required to participate in the Comprehensive Care for Joint Replacement Model from 67 to 34.
CMS also published its third annual evaluation of BPCI Models 2 to 4, which found that during the first two years of the BPCI model, Medicare payments for major joint replacement of the lower extremity fell $1,273. However, there were few statistically significant quality changes during the first two years of the BPCI initiative under Model 2.
These moves raise questions about whether the shift to value-based payments will continue at the pace of recent years, but the imminent release of the next incarnation of BPCI should increase momentum, says Keely Macmillan, general manager of BPCI with Archway Health, which assists healthcare providers with bundled payments.
The original BPCI program will end in September 2018 and CMS is expected to announce plans for the next phase any day now, she notes.
“The BPCI Advanced program will be a major catalyst for the adoption of value-based payments because it will bring so many new participants to the market,” Macmillan says. “There is a lot of pent up demand because at first physicians weren’t ready for BCPI and now it’s been several years. There is a better understanding of the program and a recognition of the outside revenue that can be earned.”
Hospitals have been the primary focus for value-based payments but the Medicare Access and CHIP Reauthorization Act (MACRA) is compelling physicians to consider value-based payments more than ever before, she says. For many specialists, BPCI Advanced will be the only way to quality for the advanced Alternative Payment Model (APM) track under MACRA and avoid the less desirable ranking mechanism of the Merit-based Incentive Payment System (MIPS), Macmillan explains.
CMS Administrator Seema Verma has been vocal about prioritizing physician-driven APMs, Macmillan notes.
“CMS has been under a lot of pressure to offer a way for specialists to participate in advance APMs in Medicare,” she says. “MACRA adds a new element that was not in the market the first time BPCI was announced.”
The next generation of the program will have outpatient bundles, which will draw more participants because the first iterations of BPCI were all focused on inpatient admissions, Macmillan says.
“The new BPCI will generally be more sophisticated because CMS has learned a lot. The target pricing and risk adjustment methodology will be more sophisticated, and it will involve a quality adjustment for shared savings,” she says. “The outpatient bundles and the increased sophistication of the program will combine to pull in many more participants who have been waiting for BPCI to take a form that works for them and promises them a successful transition to value-based care.”
The announcement of the rule will be accompanied by a time period in which healthcare providers and hospitals can state their intentions to participate in the new BPCI, and Macmillan expects the response to be swift.
“You’ll at least see a lot of response from physicians and hospitals that want to look at the data the same way CMS will and see what the opportunities are,” Macmillan says. “The industry has not given up on bundling for value-based care by a long shot. They’re looking for a way to make it work for them, and BPCI 2.0 could be the path a lot of them will want to take.”
Similar services for mental health are reimbursed differently according to the treatment setting, a report finds. Mental health services also involve more out-of-network coverage than other healthcare.
The setting in which mental healthcare is delivered has a significant impact on reimbursement for providers, even when the treatments are very similar, according a new report that suggests mental health professionals and their patients are not getting a fair deal from healthcare insurers.
In addition to the payment disparities found in 46 out of 50 states, "out-of-network" use of addiction and mental health treatment providers is extremely high when compared to physical health care providers, the report found.
The report was prepared by Milliman and released by a coalition of mental health and addiction advocacy organizations. It was based on three years of insurer claims data, 2013-2015, covering 42 million Americans, including inpatient and outpatient services, primary care office visits, and specialist office visits, comparing in-network and out-of-network claims in all 50 states and D.C.
The analysis “paints a stark picture of restricted access to affordable and much-needed addiction and mental health care in an era of escalating suicide rates and opioid overdose deaths,” the advocacy groups report. “Further, these disparities point to potential violations of federal and state parity laws, which require insurance companies to treat diseases of the brain, such as clinical depression and opioid addiction, the same way they treat illnesses of the body, such as cancer and heart disease.”
One of the most dramatic disparities outlined in the report is the low reimbursements paid to behavioral health providers when compared to physical health providers, a factor the report says is likely influencing network access and overall practitioner in-network availability. Physical healthcare providers were paid, on average, about 20% higher rates than behavioral health providers for the very same office visits billed under identical or similar codes. In many states, the disparities in payment rates were two to three times greater, the report says.
While payments to mental health and addiction providers were lower in comparison to physical healthcare providers, out-of-network visits for inpatient and outpatient behavioral health services were dramatically increasing, the report says.
The researchers also found that 31.6% of outpatient facility behavioral healthcare was accessed out of network, while only 5.5% of outpatient facility medical/surgical care was accessed out of network. In 2013, the out-of-network outpatient facility use for behavioral health was 15.6%, showing a doubling of access restrictions during three years of parity regulatory oversight, the report says.
For behavioral health, 18.7% of office visits were accessed out-of-network, while only 3.7% of primary medical/surgical office visits were accessed out-of-network.
Also, 16.7% of inpatient facility behavioral health care was accessed out-of-network, while only 4.0% of inpatient facility medical/surgical care was accessed out-of-network.
The numbers tell a painful story for those seeking treatment for mental illness or addiction, says Mary Giliberti, CEO of the National Alliance on Mental Illness.
"Behind those numbers are millions of Americans who can't get the care they desperately need,” she says. “We are confident that this Milliman analysis has uncovered a key barrier to network access—unfairly low reimbursement payments to mental health and addiction providers.”
As of 2015, out-of-network use of behavioral health inpatient care—as compared to medical care—was about 800% higher in California, New York, and Rhode Island, and over 1,000% higher in Connecticut, Florida, New Jersey, Pennsylvania, and New Hampshire, the report says. These states collectively had a population representing 30% of the U.S. population.
In 2015, there were 24 states with reimbursement disparities ranging from 30% to 69%, including Washington, Kentucky, and Virginia.
American Psychiatric Association CEO and Medical Director Saul Levin, MD, MPA, says the report indicates insurers are not maintaining adequate mental health provider networks and psychiatrists are reimbursed less than primary care doctors for the same services.
“We call upon state and federal regulators," he says, "to ensure that insurance companies are abiding by parity laws already on the books to correct what remains an unequal health care system for patients with behavioral health conditions."
Aetna rids itself of group life and disability before CVS Health announces plans to acquire the insurer. The merger would connect Aetna to a major pharmacy benefit manager.
CVS Health’s move to acquire Aetna positions the retail pharmacy giant as a major player in healthcare just as Aetna abandons the notion that its members benefit from the integration of health and welfare insurance products.
The planned merger is the latest in a series of moves making over the traditional lines of healthcare business.
Aetna announced recently that it will sell its group life and disability business to The Hartford Group, and the health plan is now in discussions to be acquired by CVS Health. CVS Health signaled that it aimed for becoming more than a retail pharmacy with its acquisition of Caremark in 2007, and the likely acquisition of Aetna will be another huge step in that direction, says Suzanne McGarey, senior vice president of insurance consulting firm Ascende – A Division of EPIC.
CVS Health would connect Aetna to a pharmacy benefit manager (PBM), Caremark, and the combined entity would produce a bigger warehouse of data for healthcare analytics, McGarey notes.
“By joining CVS Health, Aetna gains new advantages in the market for actual healthcare dollars, in addition to healthcare administration and insurance revenue,” she says. “In return, Aetna’s members would be positioned to have efficient pricing and access to downstream healthcare services and supplies, such as prescribed over-the-counter medications, walk-in clinics and specialty pharmacy services.”
Potentially, CVS Health and Aetna could have a closer relationship with consumers by helping them spend healthcare dollars wisely in tax-advantaged consumer health accounts, McGarey says. The combined entity would be more accessible for regular health needs and better support members in monitoring and adhering to doctor’s orders for ongoing health conditions.
“Health insurance companies are often seen as a barrier to healthcare. Maybe this business venture is an opportunity for CVS Health and Aetna to become an avenue to better healthcare,” McGarey says.
The proposed CVS Health/Aetna partnership, and others like The Cleveland Clinic’s alliance with insurance company Oscar Health, are blurring the lines within the traditional healthcare industry, says Bruce Carver, associate vice president of payer services at MedeAnalytics, which provides data analytics to the industry.
“As the industry looks to reduce inefficiencies and improve care coordination, providers and payers need to work hand in hand. These partnerships enable that collaboration while eliminating some of the contract barriers around value-based care,” he says. “If the merger between CVS Health and Aetna is approved, healthcare executives will likely need to rethink traditional industry competitors as this would establish market competition against national payer UnitedHealth Group and its ownership of OptumRx.”
PBMs have historically been viewed as the drug purchasing middlemen to negotiate lower prices, Carver notes, but questions have arisen as to whether actual savings have been passed on to employers and consumers. As a result, the market is demanding more price transparency. Carver says new integrated models similar to the one created by the CVS and Aetna merger may help facilitate that transparency.
“This is only the beginning of major mergers as the industry looks to mirror the markets that operate outside of traditional health care and address consumer needs, like Amazon.com,” Carver says. “The way in which consumers access goods and services has radically changed over the past few years. These mergers are a way for the healthcare industry to address this.”
Clinicians and consumers may not benefit from the mergers, and care could suffer, says, Alejandro Badia, MD, a hand and upper extremity surgeon in Miami, FL, and CEO of OrthoNOW, an orthopedic urgent care franchise.
"As a clinician, I have great concerns about major mergers between the current entities that control healthcare. Frankly, this would be a very good idea if there was collaboration with the people that actually provide the health care and have the correct expertise to do so,” he says.
Healthcare is perhaps the only industry where the players involved do not have their incentives aligned, Badia says.
“If the goal is to improve quality, that will lead to decrease cost and help ensure our country remains on the top of the healthcare latter in terms of quality,” Badia says. “However, accessibility has been an issue and I believe a dialogue with clinicians during these proposed mergers is critical to have an ideal outcome."
After rising in past years, IT budgets are showing signs of flattening out for some hospitals. Health leaders will have to decide whether their goals require spending more.
Health system IT budgets are beginning to settle down after significant increases in the past decade, driven largely by the adoption of electronic medical records and concerns over cyber security, but 2018 could require even more funding for hospitals that want to be cutting edge.
That isn’t the only path, however. Hospital leaders will have to consider the role of IT innovation in their missions and budget accordingly.
A primary concern is the amount of “technical debt” carried by a hospital or health system, says Munzoor Shaikh, a director in the healthcare practice at Chicago-based management consulting firm West Monroe Partners, which recently published a report exploring the three main future approaches healthcare organizations can take when budgeting tech expenses. Technical debt refers to the extra effort and expense incurred when choosing an IT solution that is easy to implement in the short run instead of the best overall solution.
“Every health system has technical debt, and that’s not always something you can eliminate. The goal is to right size your technical debt given your mission and your objectives,” Shaikh says. “But I can tell you most hospitals have too much technical debt, way more than they should have.”
After rising for a period, IT budgets are flattening out more recently and don’t have to continue increasing for all hospitals, Shaikh says. Health leaders who are satisfied with their current IT might hold steady on their budgets, but healthcare organizations that want to be among the most innovative will face higher costs, he says.
The cost of IT is forcing healthcare leaders to make strategic decisions, the report says. Some health leaders are looking for a way to be proactive and more deliberate with investments rather than continuing the reactive mode of past years.
“With no monumental legislation or regulations to further direct IT spend, as [the American Recovery and Reinvestment Act] and Meaningful Use did over the last decade, technology strategy is now at the complete discretion of each health system,” the report says. “Executives now must decide where – and how much – to invest moving forward.”
There are three broad options, the report says. Health systems can:
Cut IT spending
Continue to invest in new IT solutions
Address accumulated technology debt from other neglected systems
The right choice will depend largely on how much a health system relies on IT innovation to fulfill its mission. Each approach will require different strategies for how much to spend on IT as a percentage of revenue, how to design a technology team, and determining the types of technology in which to invest.
Optimizing an IT budget requires first understanding where the health system stands currently with factors like technical debt, reimbursement pressures, and population shifts that will affect available revenue, Shaikh says. Then the hospital can set goals for growth and determine how its IT structure fits into those plans.
With regards to IT, Shaikh explains that healthcare organizations may be classified as traditional, meaning they use IT simply as a support function and nothing more, or as experimenters that take some steps to use IT to improve operations or drive revenue. The third category is the innovators, which the report describes as “consumer-centric, seeking to deliver a superior consumer experience via a superior provider experience, and one that is constantly innovating and leveraging technology.”
That sounds like a lot of hospital mission statements, but Shaikh cautions that IT investments should be grounded in reality.
“When you talk about target models for the future, most hospitals talk about how they want to be the biggest innovator on the planet,” Shaikh says. “The reality is usually more down to earth if you look at where they are now and what is reasonable in terms of where they want to go. That realistic assessment is key to determining their investment in IT and where they should devote their resources, especially when there are so many other financial pressures and questions about revenue.”
Some strategies are showing promise but require time for real change to occur. Recent CMS moves may be slowing the momentum.
The Center for Medicare and Medicaid Services (CMS) should continue refining existing alternative payment models that are showing genuine long-term promise, says an industry consortium of patients, payers, providers and purchasers.
The Health Care Transformation Task Force (HCTTF) says finding alternatives to the prevailing fee-for-service payment system should be a top priority as CMS reorients the Center for Medicare & Medicaid Innovation’s (CMMI) agenda.
The task force comments came in a letter responding to a CMS request for information about new directions for CMMI, the agency’s test lab for value-based payment models. HCTTF pushed for more innovation, noting that there are attractive private sector models that warrant consideration for testing in Medicare and Medicaid, while also cautioning that the agency should not abandon promising current models.
The healthcare industry has made progress that should be encouraged, says Jeff Micklos, HCTTF’s executive director.
“Transformation of this magnitude takes time, and the results from the current models are paying off,” he says. “The most determinative factor of success in value-based arrangements is the length of time in which a provider participates. More time allows for greater improvements in care delivery.”
CMS recently released the 2016 results of four Medicare Accountable Care Organization (ACO) programs, which reduced gross Medicare spending by $836 million that year, returning $70.6 million in net savings to the Medicare Trust Fund. HCTTF also urged CMS to recognize the major investments stakeholders have made in models such as the accountable care and bundled payment programs as it weighs its program mix going forward.
The task force also asked CMS to refine models to make a better business case for delivery system innovation, noting that providers who have already implemented measures to control cost and improve quality should receive credit when setting future benchmarks.
Even with data showing the benefits of value-based care, healthcare systems are adopting the approach at a modest pace, notes Neil Smiley, CEO of Loopback Analytics, a company that assists healthcare organizations with managing outcome-based care. Systems have been optimized for years around the way people get paid, and that creates a certain inertia, he says.
People are naturally wary of changing established systems upon which their livelihoods depend, he says. Most health systems that have affiliated ACOs or other value-based strategies are doing it as an R&D project, Smiley says, transforming care and gathering data only on parts of their population rather than on a large scale.
The organizations showing the best metrics from value-based care still have the largest part of their business in the more traditional fee-for-service world, Smiley says.
“The fee-for-service model, love it or hate, is not dying. The organism has adapted,” Smiley says. “For those that were aggressive early adopters of value-based care and really believed what they were hearing, and have gone fully after value-based care, some of them may feel a little exposed. If they go too hard too fast, they may suffer economically if they misjudge the pace at which this moves.”
In 2015, HHS set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements by the end of 2016, and tying 50% of payments to these models by the end of 2018.
With the recent unwinding of mandatory bundled payments, there is reason to question whether the commitment is still there to move to a value-based payment models, Smiley says. The bundled payments spurred significant movement toward value-based care among healthcare organizations, but the CMS backtracking has many thinking they moved too soon, he says.
“The pace at which CMS committed to rolling out value-based care is fundamentally different from the pace we’re currently seeing,” Smiley says. “The progress toward value-based care, instead of this steady momentum they expected, is more of a herky jerky fashion.”
Expensive specialty drugs are increasingly falling under medical benefits rather than pharmacy. This means health plans end up paying more for overutilization that could have been avoided.
Health plans are facing increased costs from specialty drugs, which are expected to represent 55% of all drug costs in a few years, with about half of that managed under the medical benefit and paid for the same way as medical services, according to claims data that was analyzed by CVS Health and cited in its publication Insightsfeature. That means many of those pricey medications are skirting the safeguards put in place to manage the cost of other drugs.
Drugs that are injected or infused in a medical facility often are billed under the medical benefit portion of a health plan rather than the pharmacy benefit, and that can complicate cost-saving utilization management programs, says Trip Hofer, vice president of CVS Health and president of Accordant, the company's disease management operation. The issue first arose about 10 years ago and has become more problematic each year with the development of improved medications that must be administered by clinicians, he says.
"This is a little-known phenomenon that continues to grow, with more of these specialty drugs managed under the medical benefit. The majority of these drugs are from oncology but also other categories like autoimmune," Hofer says. "Unlike the pharmacy benefit, which is fairly well managed through formulary, prior authorization, and other cost-utilization techniques, the medical benefit is more like the Wild West. It's not been managed as closely and health plans don't know what's happening until the claims come in and, even then, they don't really know if it was clinically appropriate."
One example is Remicade, an infusion therapy with multiple specialty indications such as ulcerative colitis. In its analysis of claims data, CVS found significant variation in dosing and medical claims pricing for the same indication, with dosing often exceeding clinically appropriate levels, Hofer says.
CVS is working with health plans to improve the process of prior authorization, Hofer says. The prior authorization process has typically been a manual process, but CVS has been refining its digital portals to improve effective dosing. Hofer says the improvements have the potential to save up to significant sums for a health plan.
"With the improved prior authorization, we're seeing a denial rate of about 5% to 8%, and even that can lead to millions of dollars of clinically appropriate cost savings for a health plan," Hofer says. "There is the potential for millions and millions in savings even when the denial rate is that small, and you're not denying anyone appropriate care. This is only from weeding out the claims that are clinically inappropriate and directing them to other care options."
The improved prior authorization process also steers providers to less costly specialty-drug administering locations for their patients, such as an outpatient medical facility or even the home.
"Health plans are recognizing the importance of managing the medical benefit in the same way as pharmacy. The increasing use of these specialty drugs is driving health plans to adopt the same cost-utilization strategies for medical that are already second nature under the pharmacy benefit," Hofer says.
CVS is currently working with about 30 health plans representing 64 million lives to address specialty drug utilization.
"Health plans have woken up to this and are realizing that this is a major cost concern. They're looking at managing drugs under the medical benefit as one of their biggest concerns," Hofer says. "This is something that takes time to address because you have to communicate well with your providers about implementing any new tool or process for claims. You can't disrupt your relationship with providers, but health plans are realizing they have to do something about this."
A health plan model that rewards providers for meeting quality and cost targets saves money and improves patient outcomes, Humana reports.
Costs were 15% lower in Humana’s Medicare Advantage value-based plan than in traditional fee-for-service Medicare, and 4% lower than Humana standard Medicare Advantage settings for 2016. The company reports that the value-based approach saves money while also building stronger relationships between the physician and patient.
Humana’s “Making Progress, Seeing Results” value-based care report details the company’s 2016 results for Humana Medicare Advantage members affiliated with providers in value-based reimbursement model agreements.
Humana compared quality metrics for 1.65 million Medicare Advantage members who were affiliated with providers in value-based reimbursement model agreements to 191,000 members affiliated with providers under standard Medicare Advantage settings, and also those in standard fee-for-service plans. The value-based model offers financial incentives to providers who meet quality or cost targets.
In addition to the overall cost savings, the report highlights improvements in outcomes and reduced utilization. Emergency department visits were 7% lower under the value-based Medicare Advantage model versus a standard Medicare Advantage plan, and hospital inpatient admissions were 6% lower. Metrics for controlling blood pressure were 7% higher, diabetes care and controlling blood sugar were 7% higher, and medication adherence was 2% higher.
The number of preventive screenings was 8% higher for breast cancer and 13% higher for colorectal cancer.
The providers in value-based plans benefitted from the improvements. Primary care physicians in value-based agreements with Humana received 16.2% of the total payments Humana distributed to healthcare providers in 2016, the report says. Primary care providers in non-value-based agreements with Humana received 6.9% of the total payments Humana distributed.
Providers in value-based reimbursement model agreements with Humana had 26% higher Healthcare Effectiveness Data and Information Set (HEDIS) scores compared to providers in standard Medicare Advantage settings based on an internal attribution method.
Humana’s report also references the impact that social determinants of health -- such as food insecurity, loneliness and social isolation -- can have on an elderly Medicare Advantage member’s health and well-being. For example, Humana’s research has shown that an older adult who is lonely or socially isolated is four times more likely to be readmitted to a hospital within a year of discharge.
The report notes that as of September 30, 2017, Humana had reached its calendar year goal of having approximately 66% of Humana individual Medicare Advantage members in value-based payment relationships. Humana’s total Medicare Advantage membership is approximately 3.3 million members, which includes members affiliated with providers in value-based and standard Medicare Advantage settings.
“Based on our experience, the value-based care model helps physicians spend more time with their patients, which builds stronger relationships between the physician and patient,” says Roy A. Beveridge, MD, Humana’s chief medical officer. “The result is a bond of trust, which serves as the foundation for changing unhealthy behaviors and addressing social determinants of health. As we’ve seen at Humana, supporting physicians with actionable data gives them a deeper understanding of their patient − and that can result in more preventive care, which leads to better chronic condition management.”