This article appears in the May 2012 issue of HealthLeaders magazine.
It seems like each week brings yet another announcement about some combination of physicians, hospitals, and even health plans that are forming collaborations or partnerships, and calling them accountable care organizations. The ACO moniker carries a lot of weight these days. It signals that providers and payers are committed to coordinating healthcare to achieve the vaunted triple aim of improving the experience of care, improving the health of populations, and reducing per capita costs of care.
It's estimated that there are 160 commercial ACO or ACO-like organizations at some stage of development right now, according to Leavitt Partners, a Salt Lake City–based health intelligence business. Add to that the 32 Pioneer ACOs named in November 2011 and the 27 Medicare Shared Savings Program ACOs named in April by the Centers for Medicare & Medicaid Services, and still more are expected to be named later this year.
Aside from the healthcare reform legislation, among the factors driving interest in ACOs is industrywide acceptance that the current system is simply unsustainable. "Our transaction-based system doesn't make sense," says Hal Teitelbaum, MD, the CEO and managing partner of Crystal Run Healthcare, a 250-physician group in Middletown, N.Y. "We're not in the business of selling mammograms or colonoscopies. We're in the business of improving health and outcomes."
Others are looking to ACOs to help push more of their revenue stream into a value-based model. "Living with a bunch of different payment models is challenging," explains Chuck Lehn, vice president of managed care for Banner Health, a Phoenix-based system with 23 hospitals in seven states. "We think getting paid for adding value will make it easier for us to have a more rational system." The system formed Banner Health Network, an ACO that is involved in commercial projects with Aetna and Health Net as well as Medicare's Pioneer ACO program. BHN includes Banner Health–affiliated physicians, 13 Banner hospitals, and other Banner services in Arizona.
And some players are approaching commercial ACOs from a defensive posture. Andrew Croshaw, a partner at Leavitt Partners, notes that uncertainties remain as to the extent of the ACO movement and when it might mature. To protect their negotiating strength, some hospitals are making acquisitions to expand their care continuum and increase their leverage with payers; Croshaw points out that these services will be useful to have as the ACO movement matures, but in the meantime it positions hospitals to negotiate more strongly with payers.
Whatever the motivation, C-suite executives across the payer and provider sectors of the industry are considering how they should approach this opportunity. Whether your organization is ready to jump on the ACO bandwagon or is still trying to figure out if it's the right move, here are some of the key questions your leadership team needs to consider.
What do you want to accomplish with an ACO?
The basic tenet of an ACO is to create a delivery model with processes, financial incentives, and technology systems to deliver quality care in a cost-efficient way.
The best way to start, suggests Lehn, is to look for simple ways to add value to something you already do and then move forward from that. There's been growing concern at Banner Health about the increasing number of Arizona residents who either lack healthcare coverage or lack coverage that provides access to quality care. It's a bottom-line issue. Banner Health Network has teamed with Aetna, a diversified healthcare benefits company that serves 36.4 million people, to offer a shared-risk product, Aetna Whole Health, which covers coordinated care only at Banner Health's Arizona facilities. The incentive for employees is reduced cost of care. The ACO will base compensation and rewards on reduced hospital readmissions, expanded access to primary care physicians, and increased use of preventive screenings. The effort builds on the health system's extensive investment in electronic medical records and health IT.
The partners in the Northwest Metro Alliance, an ACO in Minneapolis, have focused on clinical care process changes and designs to improve quality and reduce costs for 27,000 at-risk members. A review of prescribing patterns helped increase the use of generic drugs and produced a $1 million savings. "We also looked at high-tech imaging to see when it really benefits the patient and where might it be overutilized without clear benefits," explains Penny Wheeler, MD, chief clinical officer at Allina Health Hospitals and Clinics, which collaborates on the alliance with Bloomington, Minn.–based HealthPartners.
What makes the collaboration unique is that the four-hospital HealthPartners and the 11-hospital Allina are competitors in Minneapolis market.
How should your ACO be organized?
The short answer to the question of ACO organization is: Any way you want it to be. While CMS-deemed Pioneer and MSSP ACOs must follow a prescribed set of organizational requirements and meet specific quality and cost-containment goals, commercial ACOs have more flexibility. Organizers of commercial ACOs are working their way through what they want their ACO to become and how they want to serve their markets. For some commercial ACOs, the triple aim is a loose concept, while others are developing specific strategies to meet those goals.
The National Committee for Quality Assurance is trying to establish some order to the ACO process through a three-tier accreditation program that will verify ACO competence. Crystal Run Healthcare is among the early adopters of the NCQA process. "The NCQA provides external validation … It says we'll achieve what we say we will," explains Teitelbaum.
Pointing to BHN's mix of commercial and Medicare projects, Lehn says he likes the freedom of different models of ACOs. "The free market, with different ideas and different markets, is really healthy for the industry. I hope we don't end up with monolithic models [of ACOs]. I hope this results in a lot of innovation and creativity."
Do you need a partner?
Commercial ACOs are being formed by physician practices, hospital collaborations, and health plans. Some providers and payers are in multiple ACOs. Your organization's decision should take into account the goals of the ACO as well as your technology and human resources capabilities.
Crystal Run Healthcare is a single-participant ACO, which means the physician group is clinically and financially integrated. Teitelbaum says the advantage of the single-participant ACO, which does not include a hospital, is that Crystal Run's physicians are free from the constraints of partnering with a single hospital. The physicians are free to shop around for facilities that offer the best care at a cost-effective price. "We don't have to worry about supporting one particular hospital."
Teitelbaum says most physicians don't have the scale, capital, infrastructure, or management in place to take this approach. Teitelbaum points out that Crystal Run already has in place a sophisticated IT structure as well as care and utilization management and the quality assurance teams that characterize ACOs. It also has database analysts who work with the business intelligence team to manage care and costs. In other words, the group isn't starting from square one.
Teitelbaum leaves open the possibility that, depending on its needs, the physician group may decide to partner with another organization as an ACO or just on a contract-for-services basis. "Just because an entity doesn't want to be at risk for costs, quality, and outcomes doesn't mean we can't work with them. But they won't be inside the ACO."
Mountain States Health Alliance, meanwhile, a 13-hospital system based in Johnson City, Tenn., opted for a more extensive structure for its ACO: Mountain States is the umbrella company that includes Mountain States Medical Group and Integrated Solutions Health Network. ISHN is the parent company of Anew Care Collaborative, the ACO, and CrestPoint Health, the third-party administrator that will contract with Anew Care as its payer.
As part of the ACO, Mountain States is partnering with four other physician groups that aren't part of MSHA. If you decide you need a partner, Wheeler says the most important consideration is a shared vision that drives outcomes. It was that shared vision that helped Allina and HealthPartners, competitors in the Twin Cities market, develop their collaboration in the Northwest Metro Alliance.
Wheeler adds that in considering a partner, you "can't underestimate the ability to marry claims information with really good clinical data" to develop a full picture of care. In the alliance, HealthPartners is able to provide Allina with data for its 27,000 patients. The ability to track those patients improves care by reducing the variability of practice patterns. "We know what is going on with them. We know when they fill their prescriptions, and we know when they are admitted to a hospital that's not in our system. When a patient arrives at our hospital or clinic we already have that information in our medical records so we don't duplicate tests. That's information that Allina on its own couldn't know."
What financial and human resources will you need?
"There is no way to underestimate the dollars and organizational time it takes," says Marvin Eichorn, senior vice president and CFO of Mountain States Health Alliance, which began developing its ACO from scratch 18 months ago. He estimates his group's investment is $5 million, which doesn't include soft dollars like employee time on the project. He says it could take another $5 million over time to get the ACO where it needs to be. Mountain States contracts for its back-office capabilities to lower costs; Eichorn estimates that the investment could easily triple or quadruple if it had to buy all the information systems, hardware and software, plus hire staff to run the operation.
Lehn at Banner Health says forming an ACO is a costly proposition, but because his organization already had the infrastructure in place, it didn't view the cost as prohibitive. Wheeler describes a similar situation at Northwest Metro Alliance: Together, Allina and HealthPartners already had many of the components in place when they began their ACO. "Where a lot of people are still talking about implementing the system, we're talking about optimizing the system," says Wheeler.
Despite that advantage, Wheeler notes that changing the system and having a significant impact on total cost of care, even with the components in place, requires a lot of hard work, collaboration, and true commitment to the triple aim of healthcare.
Teitelbaum warns that the human and financial cost "isn't discrete. It's ongoing."
According to the April HealthLeaders Media Intelligence Report on ACOs, 54% of healthcare leaders whose organizations are or plan to be part of an ACO estimate that annual infrastructure investment for their ACO will amount to more than 1% of attributed patient costs each year.
Are ACOs Too Good To Be True?
Accountable care organizations certainly aren't a panacea for poorly run organizations, and even well-oiled ACO machines encounter difficulties.
Wheeler says that while the collaboration between Allina and HealthPartners hasn't been a problem, the Northwest Metro Alliance has faced other challenges common to coordinated care efforts:
Lack of timely claims data. The alliance works with adjudicated claims, but there is typically a two- to three-quarter delay in receiving the information. The group keeps its own quality measures but needs timely claims data so it can assess outcomes in terms of cost efficiency and quality improvement. Wheeler says the alliance is working to receive some feeds on commercial claims that are pre-adjudicated, meaning they aren't completely settled up. CMS has agreed to provide monthly feeds of adjudicated Medicare claims.
Overwhelmed physicians and medical staff. Wheeler explains that much of the care savings achieved by the alliance involves providing patient care in different ways. That means getting the clinical involvement of the providers who know the patient best. "But they are often loaded up with patient care and improvement initiatives of their own, so we have to try and sync those things up to make sure we aren't overtaxing them." She notes that within the Allina system alone, providers are responsible for more than 700 quality measures requirements from regulatory agencies and different commercial payer arrangements.
Migratory nature of health plan members. Wheeler would like to work with the same patients throughout the collaboration, but the reality is that health plan members come and go, so it's impossible to develop perfect cost or quality comparisons from year to year.
She says entering into an ACO-like strategy allows providers to really look at and understand all of their clinical practice patterns. It puts a focus on developing efficiencies and improvements around staff, work flow, and clinical performance—all to the benefit of patients.
Still, she cautions that "there's no quick fix to the total cost of care, so things like collaboration and joint commitment to the mission become even more important and take time."
This article appears in the May 2012 issue of HealthLeaders magazine.
A vote by the Republican-dominated House Ways & Means Committee has set the stage for the full House to consider the repeal of provisions that would provide billions of dollars in funding for the Patient Protection and Affordable Care Act.
In votes primarily along party lines, the committee voted Thursday 23-11 to repeal the excise tax on medical devices and 24-9 to repeal ACA provisions that prohibit using health savings accounts to purchase over-the-counter remedies such as cough syrup and pain killers.
Combined, the two provisions are expected to contribute an estimated $30 billion in funding for ACA.
The debate in the House Ways & Means Committee shed some light on how Republicans and Democrats plan to make their respective cases about healthcare reform over the course of this election year.
The medical device industry launched a substantial lobbying effort to remove the 2.3% excise tax from medical devices such as stents and MRI machines used by healthcare providers. Consumer items such as eyeglasses and contact lenses were never subject to the tax. If it survives the repeal effort, the excise tax will become effective on Jan. 1, 2013.
Supporters of HR 436 (Protect Medical Innovation Act of 2011) cited familiar arguments about losing jobs, taxing innovation, reducing access to healthcare, and increasing healthcare costs. In his opening statement to the committee, Rep. Erik Paulsen (R-Minn), the chief architect of the bill, positioned the excise tax as "an attack on American innovation" that would "push research and development and manufacturing abroad and put American jobs at risk."
Opponents of the bill stressed the cost of the repeal—about $29 billion over 10 years, and the 30 million additional people healthcare reform is expected to help but wouldn't be able to if the excise tax is repealed.
They argued that the negative effects were exaggerated and nothing more than an effort to discredit healthcare reform. They also accused the medical device industry of reneging on the agreement it made in 2010 to support ACA if the excise tax was reduced from a proposed 5% to the current 2.3%.
Rep. Sander Levin (D-MI), the top Democrat on the committee, said in his opening remarks that Republicans were doing nothing more than "resurrecting a familiar foil healthcare reform." Are these bills "the best use of scarce federal dollars in times of fiscal austerity?" he asked. He called the excise tax repeal effort "deceitful" because Republicans offered no way to pay for the lost revenue.
He also challenged the contention by supporters that the excise tax would open the industry to foreign competition and encourage medical device manufacturers to shift jobs overseas. "That is not true. Imports will be taxed so foreign companies will have no advantage. It will make no sense for American companies to move abroad."
Levin quoted from a May 2009 letter in which the medical device industry pledged to "do our part to make healthcare reform a reality." He noted that the letter was signed by representatives of many of the associations now fighting the excise tax.
While Levin contended that the industry originally supported the tax because of the potential expanded market, Rep. Paulsen responded that many of the 30 million newly insured would be young workers who probably wouldn't need to use medical devices. He noted that several companies have already announced potential layoffs of thousands of workers in anticipation of the excise tax.
Rep. Paulsen, who also serves as co-chair of the congressional medical technology caucus, made the case that because the tax is on sales and not profits, start-ups in research and development would be hard hit.
Democratic efforts to force committee Republicans to identify off sets or other spending cuts were met with procedural objections. Rep. David Camp (R-MI) said there is no requirement to identify offsets at the committee level.
In the end, the bill easily passed with two Democrats, Rep. Ron Kind from Wisconsin and Rep. Shelley Berkley of Nevada, breaking ranks to support the bill.
Supporters of HR 5842 (Restoring Access to Medication Act) deftly positioned the ACA disqualification of expenses for most over-the-counter medications under HSAs as a tax. OTCs are only covered if they are prescribed by a physician.
The bill's sponsor, Rep. Lynn Jenkins (R-KS), noted that holders of HSAs now need to use after-tax dollars to pay for OTC medications and suggested that amounted to a tax increase on families.
Rep. Shelly Berkley (D-Nev) said HSAs and similar accounts enabled individuals to have more control over their healthcare decisions and where to seek care. She noted that requiring a prescription for OTC drugs increases healthcare costs for many individuals who must take time away work to obtain prescriptions. "Plan participants should have the ability to use the dollars they set aside for healthcare expenses for pay for the cost of over-the-counter medications."
Rep. Levin wondered if increasing access to health savings accounts was how Republicans planned to replace the existing ACA. "That falls far short of the needs of America families. Neither FSAs nor HSAs provide comprehensive coverage. They are not real solution to the problems facing our healthcare system."
HR 5842 gained easy approval with three Democrats—Rep. Kind, Rep. Berkley, and Rep. Joseph Crowley (D-NY)—voting in favor of the bill.
Rep. Eric Cantor (R-VA), the House majority leader, has placed HR 436 and HR 5842 on his priority list for quick votes and they are expected to hit the House floor sometime this week. As of May 31, HR 436 had 240 co-sponsors but only a handful of Democrats had signed on to the bill. HR 5842 had seven co-sponsors all Republicans. Like several bills passed in the Republican House, HR 436 and HR 5842 are not expected to see a vote in the Democratic-controlled Senate.
If a medical device bill does come to a Senate vote, it will place some high-profile Democratic senators in the difficult spot of possibly voting to dismantle part of the payment structure for ACA. Sen. Al Franken (D-Minn), for example, is on record as supporting healthcare reform. But Minnesota is home to Medtronics, the giant medical device manufacturer, which has already estimated that taxes would cost the company $125 million in 2013. The senator's website notes that he will "be fighting hard to continue to further reduce the unfair burden on the medical device industry."
Efforts to reach Department of Health & Human Services officials for comment were unsuccessful Friday.
Some 13.5 million Americans had health savings account/high-deductible health plans in 2012, an increase of 18% from 2011, according to the latest annual census from America’s Health Insurance Plans, an industry lobbying group.
The large group market, which dominates HSA/HDHP enrollment, grew by 26% to 7.9 million members. The individual and small group markets posted enrollment gains of 5% to 2.5 million members and 9% to 3 million, respectively.
Employers are attracted to HSAs and high -deductible health plans as a way to control burgeoning healthcare costs, explains Larry Boress, president and CEO of the Midwest Business Group on Health. HSAs and CDHPs allow employers to “develop their healthcare budget once a year. They know what that line item cost will be.
The consensus is that employees with controlled spending amounts are more likely to be prudent buyers, cost compare for healthcare services, and spend less.
A recent Aetna study of its HealthFund plans supports that contention. HealthFund members spent 7% less overall on healthcare costs but received more preventive care from their primary care physicians and preventive screenings than members with traditional PPOs.
AHIP has conducted the census survey since 2004 when HSAs first appeared. The first census recorded only one million HSAs. Membership has steadily increased and has tripled since 2007.
Among the census findings:
An estimated 51% of all HSA/HDHP enrollees in the individual market (including dependents covered under family plans) are less than 40 years old.
Lives covered by an HSA/HDHP are evenly split between males and females.
PPOs are the most popular HSA/HDHP product
States with the highest portion of HSA enrollees are Vermont (20%), Minnesota (14%), and Montana (12%).
States with the lowest proportion of HSA enrollees were Alabama (1.3%), West Virginia (1.8%), and New Mexico (2%).
What accounts for the differentiation among states is unknown. Robert Zirkelbach, spokesman for AHIP, explains that while there could be a number of reasons, including the number of large employers in a given state, the exact cause is beyond the scope of the survey.
The census includes responses from 97 health insurance companies. It does not include coverage associated with health reimbursement arrangements (HRAs), which are most commonly offered in the large-group market.
For the first time, the census takes a look at the consumer decision support tools available with HSAs/CDHPs and the online availability of those tools. According to the findings, 93% of companies offer access to HSA information to track spending and 95% offer online access to that information.
Health information is provided by 97% of companies; healthcare cost information, such as negotiated rates from procedures and drugs, is offered by 84% of the companies.
Major health plans continue to develop and implement growth strategies that focus on health and wellness solutions to address improvements in quality and costs. Insurers are redefining themselves to take full advantage of a market that is shifting from single products to more integrated and comprehensive solutions.
During first quarter of 2012, C-suite executives at the major public health plans outlined during earnings calls the steps they are taking and the progress they are making on strategies to expand their Medicare and dual-eligible footprint, as well as programs to expand physician engagement and accountable care organizations.
Here are some of the highlights:
Aetna
Aetna is pricing new and renewal business for a higher level of utilization in 2012. It expects to add about 300,000 new members and end the year with 18.2 million members. The projected growth will be across its Medicaid, Medicare, and commercial business lines.
The insurer continues to look for opportunities to expand its Medicaid footprint. Aetna was one of three plans selected to administer Medicaid services statewide in Missouri beginning July 1. Although Aetna has offered Medicaid plans in parts of the state for 14 years, this will be its first statewide offering. The contract is projected to add 50,000 members in 2012.
Aetna also has a new Medicaid risk contract in Ohio, which is expected to boost Aetna’s chances to participate in Ohio's dual eligible demonstration pilot program.
Its accountable care solutions business has nine contracts in place and 16 letters of intent.
In March, Aetna realigned its Medicare, Medicaid, public and labor, and federal benefit planned businesses into a single operating unit, Government Services. Aetna officials say the change will help the insurer better serve its government customers, advance its retiree solutions and position it for the dual-eligible market.
Although Aetna continues to look at acquisition targets, officials say they haven't seen anything in a price point that makes sense for Aetna.
CIGNA
CIGNA now provides real-time pricing for more than 200 common medical procedures, which represent 80% of its medical claims.
Its collaborative accountable care program (CAC) is a physician engagement program that provides physicians with actionable patient information to close gaps in care, financial incentives, and assistance from care coordinators to help patients follow prescribed treatments and improve their overall health by participating in coaching and lifestyle programs. Humana has 22 of these initiatives in place in 13 states. It plans to have 100 in place by 2014.
CIGNA acquired HealthSpring, a Medicare plan, in 2011 and is leveraging its larger business footprint to expand HealthSpring's senior offerings into new markets.
CIGNA is also preparing for an increase in utilization in 2012, although the first quarter increase was "muted" according to company officials. The insurer continues to see targeted increases in what it calls "good utilization," including some prevention, wellness, and diagnostic procedures as well as higher medication compliance around evidenced-based care for members in chronic programs.
Humana
Humana projects that it will add 330,000 to 340,000 new Medicare Advantage members this year. It has targeted these growth opportunities:
Medicare age-ins as baby boomers retire
Group Medicare business
Longer-term Medicare/Medicaid dual-eligibles
It has formed an alliance with CareSource, a Dayton, Ohio-based Medicaid health plan, to serve dual-eligibles in several states. CareSource operates primarily in Ohio and Michigan, but through this alliance is expected to expand its geographic footprint.
UnitedHealth Group
The utilization trend that began in 2011 continues with the first quarter showing a "modest" increase across Medicare, Medicaid, and its commercial lines of business. Outpatient and inpatient each posted increased utilization with inpatient "very restrained." Hospital bed days were flat to down in each business line.
The pending acquisition of two South Florida health plans will help boost Medicaid and Medicare Advantage membership. Miami-based Preferred Care Partners and Coral Gables-based Medica HealthCare Plans will add about 12,000 Medicaid members and 85,000 Medicare Advantage members. The acquisition also includes eight primary care centers.
WellPoint
WellPoint says its CareMore strategy is taking shape. While the June 2011 acquisition added about 54,000 new Medicare Advantage members to WellPoint’s rolls, the real focus was CareMore’s healthcare clinics in Arizona, California, and Nevada. The clinics, which are staffed with physicians and other healthcare professionals, specialize in delivering care coordination and intensive treatment to the chronically ill.
The clinics are critical to WellPoint’s participation in Los Angeles County's dual-eligible demonstration project. The insurer will subcontract with L.A. Care beginning in 2013 and the CareMore delivery model will mean that WellPoint will be more able to manage the cost of specialized care for this fragile population.
WellPoint operates 29 CareMore facilities, which it now calls neighborhood care centers, and plans to open at least 12 more in 2012. Seven of the centers will be located in expansion states, which will be new to the CareMore model, but familiar WellPoint markets. WellPoint officials declined to identify the expansion states.
WellPoint has introduced several hospital contracting initiatives, such as value-based contracting, which it credits (at least in part) with lower increases in unit cost trends in 2012. The insurer will begin introducing to select markets in third-quarter 2012 value-based contracting to its primary care physician network. The goal is to expand value-based contracting across its entire primary care network by the end of 2014.
Aetna and Costco have expanded into nine states with their cobranded health plan. Two additional states will be added pending state regulatory review.
The Costco Personal Health Insurance program offers five Aetna health plans with major medical benefits and dental coverage in Arizona, Connecticut, Georgia, Illinois, Michigan, Nevada, Pennsylvania, Texas, and Virginia.
The partnership between the giant health insurer and the major warehouse merchandiser establishes a beachhead for Aetna to a "nice cross-section of individual and small business customers," says Tory Wolff, a partner at Recon Strategy, a Cambridge, MA-based consulting firm focused on healthcare strategy.
He sees the partnership as one more indication of the movement taking place in the health insurance industry. "There's a lot of experimentation taking place right now as insurers test different channels to bring their products to customers."
As health insurance sales shift from B2B to direct-to-consumer models, the Costco deal means Aetna can tap into the company's successful retail strategy. Meanwhile Costco, which has wanted to expand its health insurance business line in a big way, has gained a well-established national player for its efforts.
Barbara DeMaio, who heads individual business at Aetna, says the Costco membership base has been very strong for Aetna. She notes that the typical Costco member is similar to Aetna's existing book of business. They tend to be value-based shoppers, have families, and be sole proprietors or business owners. While declining to cite sales figures, DeMaio says Costco's reputation as a first-class retailer and its loyal customer following are helping sell the insurance products.
DeMaio reports that feedback received so far indicates a "very high level" of customer satisfaction, with about 86% of members enrolled in these products reporting that they are very satisfied with their purchase. "We see this as a huge opportunity to service these customers over the long term," she says.
This is not the first time Aetna has sought to expand its brand by partnering with a major retailer. In January it announced a pilot program with Chicago-area Best Buy stores to sell online wellness programs in the retailer's health technology department. The programs from Aetna's LivingWell line focus on fitness, smoking cessation, stress management, and weight management. The line also includes products such as pedometers and blood pressure cuffs.
The Aetna-Costco health insurance products vary slightly from state to state but are based on five comprehensive offerings: a health savings account model, two traditional high-deductible plans, and two value plans. A dental option is also available. Deductibles range from $3,000 to $7,500. Costco personnel were very involved in the product development, says John Conlon, its director of insurance services. "This isn't a typical affinity relationship like some businesses might offer. Costco is involved in the [insurance] product and we're careful about what we offer."
From Costco's perspective, he says, the goal of the partnership is to enhance the value of the Costco membership. DeMaio refers to "integrated points of value" available at Costco, such as pharmacies, that make it easy for people access their health insurance services.
The average Costco-Aetna policy has two members and is priced at about $350 per month. Typical benefits include a discount when members fill their prescriptions at a Costco pharmacy, unlimited lifetime coverage, and online interactive wellness programs. The nationwide provider network includes more than 921,000 healthcare professionals, more than 528,000 primary care physicians and specialists, and more than 5,100 hospitals.
The insurance policies aren't sold through on-site kiosks. Instead in-store signage refers customers to the Costco-Aetna website. Other marketing includes e-mails, ads in Costco's Connection magazine, direct mail, and advertising inserts. Conlon says it expensive to sell health insurance on-site. "It's hard to demo a health insurance policy," he laughs, referring to the common practice of food vendors of providing free samples to warehouse customers. Furthermore, selling insurance requires a license.
Conlon says "several thousand" policies have been sold and sales are "meeting expectations." He says many of the policies are for what he calls "micro groups" of two to three employees.
Costco has made previous forays into health insurance sales. Conlon says several years ago the company recognized the potential of the individual market and signed with what was then PacifiCare to sell individual health insurance policies in California. Costco enjoyed some success in the market and began looking for a single partner to develop a national product. Aetna had been though a similar experience with AARP, where it offered a custom program. "We saw a lot of similarities and a good fit,"DeMaio says.
The two companies have been rolling out their health insurance program for two years. Conlon admits that expansion is slow as Costco waits for approval to act as an insurer in various states. The company collects commissions on the health insurance policy sales.
Costco is interested in continuing to expand its competitive position in the insurance and healthcare business. It has a laundry list of possibilities, including the potential to develop a private health insurance exchange.
The Mayo Clinic announced on Wednesday that it has added Heartland Health in St. Joseph, MO to its Mayo Clinic Care Network. The addition brings to four the number of hospitals and health systems that are members of the network.
Heartland Health is an integrated health delivery system, which includes Heartland Regional Medical Center and Heartland Clinic. It primarily serves northwest Missouri.
The MCCN is part of the venerable Rochester, MN-based clinic’s strategy to extend its geographic reach without building costly new facilities, spending cash to acquire hospitals, or consolidating with another health system.
The other MCCN affiliates are Altru Health System (North Dakota and Minnesota), ASU Health Services (Arizona), and Kingman Regional Medical Center (Arizona).
Mayo doesn't hold an ownership position in any of the individual affiliates, which will continue to operate independently. The financial terms of the Heartland Health affiliation were not released.
Most patient care will continue to be provided at the affiliate facilities, but MCCN members will have access to Mayo Clinic physicians, continuing medical education, and Mayo's disease management protocols. Clinical trials and clinical care guidelines may be added later.
As is typical of the other network affiliates, Heartland Health and Mayo Clinic already have a relationship. Heartland uses the Mayo Telestroke Network in its emergency department. It enables Mayo neurologists to remotely evaluate patients who have had acute strokes and make treatment recommendations to Heartland physicians.
As a consequence of the affiliation with Mayo, Heartland will forgo its longstanding relationship with MD Anderson Cancer Center in Houston. Mark Laney, MD, president and CEO of Heartland Health explained during a media conference that the Mayo relationship will include all of its employed physicians regardless of specialty. "We had a wonderful relationship with MD Anderson for three years. This is simply an opportunity to do something for all of our patients and all of our departments."
In recent years Mayo Clinic has made no secret of its desire to expand the Mayo brand to like-minded facilities that share its culture and patient focus. It expects to name a number of MCCN affiliates this year, including a site in Florida, according to David Hayes, MD, medical director for the network.
Last year it launched the Mayo Clinic Cancer Care Network with the goal of expanding nationwide. Coborn Cancer Center in St. Cloud, MN, is the first and only member. The cancer network is an extension of the MCCN and includes many of the same services.
Mayo Clinic remains in the hospital ownership business. Mayo Clinic Health System includes 17 owned hospitals in Minnesota, Iowa, and Wisconsin, as well as two owned hospitals in Phoenix and Jacksonville.
In March, Mayo Jacksonville acquired Satilla Health Services in Waycross, GA. The 231-bed hospital was renamed the Mayo Clinic Health System in Waycross.
The advent of private health insurance exchanges may provide employers with the opportunity to shift from defined-benefit healthcare coverage to defined-contribution. That's a paradigm shift that can be likened to the corporate shift from defined-benefit pension plans to defined-contribution plans such as 401 (k) retirement accounts.
For private exchange operators such as Aon Hewitt and Highmark, the defined contribution health insurance model is a way to address employer concerns about healthcare costs.
What we can expect to see is employers offering premium assistance through health savings accounts. Employees would have the option to select from a menu of essential benefits available through the HIE and would use the defined contribution option to help cover premiums and other medical expenses.
The model would enable employers to cap their healthcare costs. This would improve control of current expenses and future liabilities, while offering opportunities for employees to customize their healthcare benefits.
So, it may come as a bit of a surprise that employers are hesitant to embrace this new model.
A new whitepaper, the second in a series by analysts from Booz & Company, takes a look at the evolution of healthcare exchanges and the implications for healthcare industry stakeholders. This one focuses on how defined contributions may influence HIE development.
Ashish Kaura, a partner in the North American health practice at Booz & Company and a co-author of the white paper, says there's a "strong defined-contribution bias" in the Patient Protection and Affordable Care Act in terms of the "kinds of functionality exchanges could provide" to enable side-by-side product comparisons and advice on plan selection.
The whitepaper looks at defined contributions in single-carrier and multi-carrier private exchanges. Minoo Javanmardian, PhD, a partner in the North American health practice at Booz & Company and a co-author of the whitepaper, explains that for multi-carrier exchanges, a private exchange operator like ADP would act as a broker to sign up multiple payers to provide a range of product options in the exchange.
The operator would also serve as an intermediary between employers and insurers. In the single-carrier model the health plan offers its products directly to employers, who play more of a role in product design.
The whitepaper notes that employers generally like the private HIE model because it is flexible, can be customized to address the needs of any employer group, and can offer a broader range of retail products, such as dental and life insurance, than state or federally run public exchanges.
A recent Booz & Company research study indicates that more than 50% of surveyed employers would gravitate to multi-carrier exchanges while less than 30% prefer the single-carrier option. However, less than 20% are interested in a pure defined-contribution model.
It's true that defined contribution exchanges have had spotty results. Kaura points to Massachusetts, which as part of healthcare reform built a small group business exchange around defined contribution. It never took off.
Kaura says employers want a system that functions well and is easy to administer and understand. Some of the Massachusetts problem could be attributed to the administrative back end of managing and providing products through multiple carriers. "Some of the administrative challenges can get very complex very fast," he says.
Among the other challenges: It's a new idea so there are questions around tax implications, the effect of the ACA on minimum benefit requirements, and what defined benefits mean in terms of the ability to retain and attract the best talent.
In terms of defined contribution exchanges, the emerging single-carried players include the Bloom Health-WellPoint-Michigan Blues-Health Care Service Corp. partnership, Highmark, and Towers Watson. On the multi-carrier side there's ADP, Aon Hewitt, and Walgreens.
Javanmardian explains that these defined contribution HIE are just beginning to develop so there hasn't been a lot of testing to understand the market and how it will operate.
The million dollar question: How will employees react?
Kaura says the answer could depend on employer size. For small and mid-size employers who don't already offer health insurance benefits, defined-contribution plans could provide a means to offer the benefit because costs will be more predictable.
The same goes for small and mid-size employers that face a significant cost burden by offering health insurance. Defined contribution will provide a way for those employers to continue to offer insurance.
Kaura says large Fortune 500 companies are looking at the defined-contribution model and trying to figure out where the market is going. "They may not want to be the first to adopt that model but they would like to be the second or third."
This article appears in the May 2012 issue of HealthLeaders magazine.
Mountain States Health Alliance, a 13-hospital system based in Johnson City, Tenn., began thinking about becoming an ACO back in 2010 when it was working on its 10-year strategic plan. There was a general agreement among its leadership that what had historically made the system a success wasn't going to carry it forward in the future.
They began to see the ACO as a more sustainable model for the group. Mountain States submitted an application to CMS to participate in the Pioneer ACO program, but the application was rejected because MSHA couldn't commit to kicking off the ACO in January 2012.
MSHA didn't let the rejection end its ACO dreams. Instead, it repurposed the organization it planned to use for the Pioneer program into a commercial ACO, Anew Care Collaborative, with CrestPoint Health as the payer.
The regional ACO will provide services in the Johnson City and Kingsport areas of northeast Tennessee as well as the Abington area of southwest Virginia. Beginning in July, the ACO will house a commercial component consisting of Mountain State's 9,500 employees and a Medicaid component comprising Medicaid beneficiaries in southwest Virginia.
Mountain States is also evaluating its opportunities in the Medicare Shared Savings Program and plans at the minimum to file a letter of intent. If selected for the program, those beneficiaries would be housed in a separate Medicare component of the ACO.
Early last year, the 15,000 lives associated with the employee group were transitioned into CrestPoint Health to begin the process of managing employee health and wellness in a coordinated manner. Care models developed around congestive heart failure, pediatric asthma, and diabetes will be part of the ACO.
Among the first steps was to put in place front-end incentives of $750 (individual) and $1,500 (family) as seed money for each health savings account. That effort increased participation to 48% from 18%.
Additional incentives will be introduced around the theme of "get healthy, be healthy, stay healthy," including:
Monetary rewards for using company wellness and fitness centers.
A freeze on annual insurance premium increases for completing a health risk assessment.
A copayment waiver for using MSHA's urgent care centers instead of the hospital emergency room.
There are no shared savings built into the first year of the commercial component of the ACO, but that may come later. It has negotiated increased payments, per member per month, to the primary care physicians to try to keep the population healthy and better manage patient health to avoid preventable hospitalizations or the use of other expensive healthcare services.
This article appears in the May 2012 issue of HealthLeaders magazine.
This article appears in the May 2012 issue of HealthLeaders magazine.
About three years ago two rival Minnesota health systems—HealthPartners and Allina Health—began exploring how they could combine their resources to accomplish together what they couldn't do alone.
HealthPartners and Allina each own several medical clinics and at least one hospital in the Minneapolis area. HealthPartners also has a commercial health plan.
The two formed Northwest Metro Alliance to focus on achieving the triple-aim of healthcare—better care, better health, and lower cost—for 27,000 high-risk HealthPartners commercial members who live in the northwestern suburbs of Minneapolis and receive their medical care at Allina's Mercy Hospital or at the nine local medical clinics operated by either HealthPartners or Allina.
The ultimate goal is to reduce healthcare costs and improve care by developing and refining services that can be scaled and applied to the 300,000 HealthPartners and Allina customers who live in the alliance service area.
Through Northwest Metro Alliance, the two organizations pool resources, share electronic patient data, mine claims data, and "agree not to duplicate services," explains Penny Wheeler, MD, chief clinical officer at Allina. Clinical, contracting, and executive teams from HealthPartners and Allina meet on a regular basis. One joint project director works across the organizations to align clinical practices. The alliance includes a collective shared savings model with both withholds and incentives. If it bends the medical cost trend below the market rate, then HealthPartners and Allina share in the savings.
So far the collaboration has focused on these strategies: increase generic drug use, reduce elective induction of labor before 39 weeks, reduce ED use by expanding urgent care options, and improved support for chronic care management.
In its first year of the seven-year collaboration, Wheeler says medical costs for the at-risk population were reduced by about $6 million, including $1 million by studying prescribing practices and shifting from brand-name to generic drugs. The total medical cost trend dropped from a 2009 growth rate of 8%, which was well above the area's average increase, to 3%, which is comparable to the area's average.
She credits a key investment in the development of advanced care teams as contributing to cost and outcome improvements. The teams, which consist of care managers and care guides, as well as social workers and pharmacists, work out of the alliance's primary care clinics. So far, the Alliance has reduced costly hospital admissions by 6% and contributed to a 5% reduction in ED use over the past year.
This article appears in the May 2012 issue of HealthLeaders magazine.
Parkland Health and Hospital System has made "measureable progress" in its effort to address serious quality and safety concerns, according to a report from its independent safety consultant. Still, the beleaguered hospital failed to meet the target completion dates for some tasks associated with resolving deficiencies in the ED and the psychiatric emergency department.
View the Monthly Progress Report for March, 2012
And the report warns that other "significant tasks and milestones may not be on schedule for timely completion."
The April 10 progress report is the first in a series of required monthly updates that will be submitted to the Centers for Medicare & Medicaid Services by Alvarez & Marsal Health Industry Group, a Washington D.C.-based management consulting firm that specializes in performance improvement.
The 61-page report has just been released by CMS as part of a freedom of information request by HealthLeaders Media. The report itemizes about 400 tasks and action items, as well as completion dates, from the safety net hospital’s corrective action plan. The CAP was approved by CMS in February, but has not been publically released.
While the accomplishments are important, the ED tasks behind schedule are central to the deficiencies identified during a July 2011 on-site review of Parkland by CMS. Those findings set into motion events that led to Parkland and CMS signing a rare systems improvement agreement and the hiring of A&M.
Specifically, Parkland has not yet implemented 100% concurrent case management of all ED admissions and consistent attending psychiatric physician coverage in the psychiatric ED.
Construction halted
Perhaps more troubling is a recent media report that ED screening problems could persist in the new $1.2 billion Parkland Memorial currently under construction. Federal regulators have halted work on the ED facility pending the correction of a design that would have resulted in patients being routed out of the ED to other areas of the new hospital without being screened for their medical conditions.
In an e-mail statement, Lou Saksen, senior vice president of construction, provided no timetable for the redesign stating only that "design changes to the emergency department are under way. Once design is completed, construction to that area will resume in an effort to complete the project on time." The new hospital is slated for completion in 2015.
Regarding other significant delays, the report says some delays are the result of the "need to acquire outside consulting assistance on some of the action plan items. Redoubled efforts and focus will be required in the month of April and May to ensure that these items are completed under the timetables required by the CAP." The tasks include:
Completing a plan to obtain and guarantee consistent psychiatric physician coverage in psychiatric ED
Recruitment of permanent nurse managers for the psychiatric ED and inpatient psychiatric unit.
Implementation of expanded ongoing professional practice evaluation for all medical staff members
Implementation of revisions and improvements to physician (attending and resident) call and attribution systems
Implementation of a new and improved technology platform to document resident physician competencies.
Changes to nursing competencies, tracking of competencies and new competency training procedures may be delayed due to the need to implement a new information technology platform to track the competencies.
Implementation of the reorganization/restructuring of the care management department and related services (case management, discharge planning, social worker services, utilization management/review) may be delayed given the time necessary to contract with outside consulting firm to assist with reorganization.
Contracting with an outside consulting firm to assist in HR efforts under the CAP.
Among the key activities cited as completed in the progress report:
Restructuring of the nursing department, which came under scorching criticism in the 300-page gap analysis report prepared by A&M. The hospital’s interim CEO, Thomas Royer, told HealthLeaders Media that about "75% of Parkland's problems involve inconsistent nursing practices across the system."
Creating detailed work plans for meeting the CAP requirements. Six workstream teams—governance, clinical operations, access and throughput, nursing, physicians and quality assessment/performance improvement—have completed this task.
Hiring of a chief implementation officer to oversee the implementation of the CAP. Ron Laxton reports directly to Parkland’s board of managers.
Hiring a governance consultant, Thomas O’Neil of The Saranac Group, to conduct a board effectiveness review and education program.
Hiring a search firm to fill the newly created post of chief patient rights and public safety officer. This senior level executive will report directly to the Parkland board.
Creation of a metrics management work group to capture the more than 100 metrics required b y the CAP.
Efforts to reach Debbie Branson, chair of the board of managers, were unsuccessful Thursday. But she released an e-mail statement highlighting the hospital’s CAP accomplishments to date and reaffirming the hospital’s commitment to resolving its problems.
"We know we still have a lot of work to do to improve this healthcare system that is so important to our community," she wrote, "But everyone from the board room to the emergency department is committed to improving patient safety and quality of care."