What About Patient Accountability?

The debate between payers and providers over the responsibility and accountability of healthcare costs certainly didn’t begin with the drafting and eventual passage of the ACA, nor will it end. Like the Hatfields and McCoys, a war of words (and figures) has been waged between these primary stakeholders in the healthcare industry for decades. There is a fundamental distrust and disagreement regarding who is responsible for the unsustainable growth in healthcare costs – and who should ultimately be responsible and held accountable for the standard “healthcare system” objectives of increasing efficiency, decreasing costs, and improving outcomes.

To bend the cost curve, many of the recent conversations and reform efforts have been focused on population health management, care coordination, compliance, and engagement. New technologies and regulations are emerging daily with a promise to increase the efficiency and effectiveness of healthcare. New business and care delivery models (and old ones with new names) are being developed and deployed, such as ACOs and Medical Homes. And, most of these new ideas and solutions are being described as “consumer-driven,” “patient-centric,” and “integrated,” yet most are failing to produce the results that politicians, employers, and consumers are aggressively demanding.

Meanwhile, the heavily scrutinized leaders of health insurance companies and hospital systems continue to blame each other for the meteoric rise in health care costs – and they should be – but not as healthcare executives but rather as healthcare consumers… and consumers of cigarettes, alcohol, hamburgers, and home entertainment.

To clarify this point, I recall my experience at the 2010 World Health Care Congress in Washington DC (April 12-14). It was the first major industry conference shortly after the ACA passed (March 23). A morning panel of shell-shocked CEOs from leading payers and providers engaged in a “healthy” yet intense discussion about conflicts of interest, cost-shifting, risk-sharing, accountability, insurance exchanges, consumerism, fee-for-service vs. value-based, supply/demand imbalances, the aging population, end-of-life, fraud and abuse, technology integration and interoperability, industry consolidation, regulations, EHRs and meaningful use, and the economy, among other timely topics.

As soon as the session ended, the industry leaders charged with creating solutions for our national healthcare crisis flooded out of the auditorium into the hallways of the convention center. I observed in dismay as many shuffled outside for a smoke break in finger-numbing temperatures while the masses consumed sugar-loaded pastries, donuts, coffee drinks, juices and soft drinks from well-catered tables. Did I mention that we had all been sitting in chairs all morning?

If we really want to get serious about “bending the cost curve,” then we need to address our society’s apathy regarding unhealthy behaviors and environments. There is overwhelming evidence that prevalent yet preventative consumer behavior, such as smoking, alcohol abuse, poor nutrition, and lack of physical activity, are imposing enormous costs on our society. Chronic conditions that are caused or worsened by unhealthy lifestyles, such as heart disease, diabetes, asthma, obesity, and cancer, account for more than seventy-five percent of U.S. healthcare expenditures. To truly solve our healthcare crisis, patients and consumers of healthcare must assume more accountability.

Surely, that is one thing payers and providers should agree upon!

Together, these key stakeholders need to redesign our healthcare system with new solutions that will drive patient accountability and reward healthy behavior. Just as banks utilize credit ratings and the automobile insurance relies upon driving records to help manage their risks, the healthcare payers and providers need a standard means to help manage their risks. It’s quite simple in these other scenarios I referenced. If we are financially irresponsible, then it costs us more to borrow money. If we drive irresponsibly, then it costs us more to purchase car insurance.

There is overwhelming evidence that individuals with unhealthy habits pay only a fraction of the costs associated with their behaviors. Most of the expenses caused by their decisions and lifestyle are passed on to the rest of society in the form of higher insurance premiums, taxpayer-funded government expenditures for healthcare, and disability benefits.

Many payers, particularly self-insured employers, are already leading the charge to shift the risk and responsibility associated with healthcare directly to individuals. A recent survey by Hewitt Associates found that nearly half (47%) of employers either already use financial incentives or plan to use financial incentives during the next three to five years to penalize and/or reward the health-related behavior of their employees.

Section 2705 of the Patient Protection and Affordable Care Act (ACA) is a provision that holds significant potential. In 2014, employers may apply up to 30% of the total amount of employees’ health insurance premiums (50% at the discretion of the Secretary of Health and Human Services) to provide performance-based wellness incentives. This represents an attempt by the government to rein in healthcare costs associated with unhealthy behaviors. The clear objective of this ACA provision and the political rhetoric behind it is to improve health-related behavior and reduce the prevalence of chronic disease caused by unhealthy lifestyles.

These incentive programs have drawn criticism from those concerned that holding individuals responsible for their health, particularly through the use of penalties, violates individual liberties and discriminates against the unhealthy. And, as someone whose mother suffered from Multiple Sclerosis, a dreadful chronic disease without a known cause or cure, I can surely understand their argument but there must be a logical set of conditions under which a new incentive-based system can be developed and deployed in a responsible, ethical manner to contain healthcare costs and encourage healthy behavior. This issue was central in the historic Supreme Court hearings on the constitutionality of ACA’s mandate that just wrapped-up.

Read our blog next week for a proposed measurement system that will help drive patient accountability and promote healthy behavior.

John Montague

John Montague is a Vice President at TripleTree focused on innovative companies and solutions that are shaping the future of healthcare. E-mail John at jmontague@triple-tree.com

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Insurance Exchange Enablement Heats Up as the Clock Ticks Down

Today’s news that Wellpoint and two other Blues (HCSC and BCSB MI) acquired a 78% stake in Health Insurance Exchange vendor Bloom Health is not the first – and won’t be the last – move in what is sure to be a consolidating market.

The Accountable Care Act (ACA or Obamacare) requires each state to establish an online shopping portal, known as a Health Insurance Exchange (HIX) for individuals and small groups to purchase health insurance no later than January 1 2014. We have written and blogged extensively on the topic. In our estimates, HHS and the states will need to spend in the neighborhood of $4-$6 billion dollars on technologies order to create these exchanges. In addition to the ACA HIX, there is perhaps a bigger market opportunity in the private sector to create non-government sponsored insurance exchanges, creating even a bigger market opportunity. Bloom Health is one of many vendors specializing in the private exchange market.

Wellpoint, the Blues, and in fact all health insurance companies are making the individual and small group markets a top priority for new business and growth initiatives. These markets will explode in growth due to the Obamacare legislation and the carriers recognize the opportunity and the challenge with tapping this market.

The insurance exchanges, both public and private, will be the primary vehicles to reach into the individual and small group markets. Wellpoint’s move on Bloom, and Optum’s acquisition of Connextions, is recognition of this fact.

In addition to the Connextions and Bloom transactions, the vendor community is also coming together to help create insurance exchanges. Accenture’s acquisition of Duck Creek, announced partnerships from Oracle, Microsoft, CSC and others such as Maximus’ partnership with Connecture, portend of additional transactions to come in the space.

Insurance companies need help in positioning into the individual market, and also need technology to help them more effectively participate in the public and private exchanges.  Several vendors are positioning into the market but only a few have broad, proven experience with exchanges.

Companies like eHealth and Extend Health, which have consumer engagement and online shopping capabilities from market adjacencies (a leading online brokerage for eHealth and a robust Medicare exchange from Extend) will be important players in the new world of insurance exchanges. Other players like DestinationRx are similarly active in the exchange marketplace, working with HHS and multiple insurance plans, and will have a meaningful impact on the public and private HIX marketplace.  These vendors already have a head start in exchange operations, plan comparison features and tools to help consumers sort through the confusing world of insurance costs and coverage.

TripleTree’s recent HIX research report lays out a number of vendors that are currently engaged in HIX solutions. The report concludes that no vendor provides a complete solution.  Given the importance of the exchanges and the immediate market opportunity, no doubt consolidation will continue.

Have a good week.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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The Clock is Ticking for Public Health Insurance Exchanges

The success of Obamacare relies entirely on every state having a health insurance exchange as mandated by the Affordable Care Act (ACA) up and running no later January 1, 2014.

By early 2013, the federal government (via Health and Human Services (HHS)) will make a determination as to each state’s readiness to bring their health insurance exchange online. Lack of readiness by the January 1, 2014 deadline means HHS will take over the implementation and operation of each exchange.

The clock is ticking…

We are following closely the progress that is being made by the states are convinced that only a handful will be ready by the deadline.   Moreover, we question whether HHS will be able to step in and offer their working version of an exchange either, or if that federal exchange will even be legally able to offer subsidized policies.

While we are not prepared to unilaterally conclude that ACA’s exchange deadline won’t be met by any state, a former HHS secretary is equally skeptical.

We want exchanges to succeed and believe they ultimately will (in some form).  Our reviews of the exchange initiatives have included studying the Early Innovator grants and interviewing state policy administrators and vendors selling into the exchange concept.  The amount of work that will need to be done in order to get the public exchanges stood up by 2014 is daunting.

TripleTree’s recent report on exchanges, HIX: An assessment of the complexities and opportunities emanating from the ACA’s public health insurance exchange concept introduces these challenges and some innovative solutions that could emerge as part of the solutions.  Since then however, the planning, procurement and testing are in the early innings; and operational integration is far from reality.   Unfortunately very few states have a demonstrated ability to pull off the kind of implementation prowess needed to come online, on time.

Putting politics and policy aside, there are at least three major challenges that each state will need to overcome (quickly) if the public exchanges have any chance of meeting the 2014 deadline:

1. States need more clarity on what they are building even though many states have RFPs out for technology and have drafted high level architectures.  There is universal uncertainty and lack of guidance from HHS on major issues such as to exactly how payments and subsidies will be processed  or how the carriers will integrate their workflow into the exchanges
2. States lack successful architectural models and commercially proven technical capabilities because there is no working model of an exchange. Those charged with building the models – the Early Innovator grantees – are far from ready, or have dropped out of the program and/or returned their remaining funds.  The often cited Massachusetts and Utah models fall short of the ACA requirements (as do the Medicare exchanges).   And no vendor has a turnkey solution.
3. States need more time – Given the massive scale and complexity of the exchanges and the integration that needs to be done with existing state and federal systems, it will be next to impossible to build an automated exchange as envisioned by the ACA in the next 16 months.

In our report, we also introduced the notion of private entities that may have the acumen and motivation to bring an insurance exchange online by the 2014 deadline.  We speculated that the private exchanges would start to roll-out in the second half of 2011 and even identified some of the likely players that would have compelling capabilities to drive the private exchange concept.

Our research asserted the real opportunities for the private sector to capitalize on the HIX mandate through a market-aligned solution that will have more impact to improve health insurance access than the federal mandates.  We are excited to see and will continue to watch the early launches of the private exchanges and believe the states and public HIX will benefit from modeling their efforts and approaches around the early successes from the private exchanges.

Let us know what you think.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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An Update on Electronic Payments & Healthcare Providers [Updated]

In today’s world of electronic connectivity and mobile payments (ePayments), the U.S. healthcare system lags not only other industries, but everyday consumers too.  Over the past ten years, nearly every component of the healthcare system has undertaken massive initiatives to transition from paper to electronic environments, but as shown below just 10% of provider payments are received electronically¹, in spite of the fact that 75% of claims are submitted electronically¹.

The laggard in the value chain prohibiting the transition is not the payers’ ability to submit ePayments, but the providers’ inability to accept them.  The benefits for providers getting on the ePayment bandwagon are real, and include:

• Improved working capital due to decreased time to post payments
• Reduced errors associated with manual, human processes
• Reduced costs associated with the additional paper, postage and manual activity (it is estimated that eliminating paper checks in healthcare could save $11 billion per year¹)

So why the slow adoption?  One reason could be that ePayments, also known as electronic funds transfer (“EFT”), add a layer of complexity due to a lack of standardization and lack of operating rules across payers and their EFT submissions.  Multiple payment submissions from multiple payers using different systems and submitting at different times all around a single claim makes reconciliation very difficult for the provider office.

When will we see change?  The Affordable Care Act (ACA) of 2010 mandates that payers must make payments to providers by electronic funds transfer (EFT) and electronic remittance advice (ERA) by January 1, 2014 or face considerable federal penalties.

These potential financial ramifications will be a catalyst for change with providers.  However, success will hinge on new levels of standardization and operating rules for EFT which allow providers to uniformly accept ePayments from many different payers.  We’re predicting (and already seeing) a mad dash by the providers to implement systems that accept EFT before the 2014 deadline.

Vendors such as Payformance, Fidelity National Information Services (FIS), InstaMed, HERAE, Wausau Financial Systems and Emdeon seem well positioned to enable the shift and we’ll be watching this space closely.  Let us know what you think.

Judd Stevens

Judd Stevens is an associate at TripleTree covering the healthcare industry, specializing in the impacts and transformation of health plans in a post-reform world.  Follow Judd on Twitter or e-mail him at jstevens@triple-tree.com.

 

Update: Made adjustments to the chart.

Source:

1. U.S. Healthcare Efficiency Index©

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HIX: Finding the pony hidden within the ACA’s “exchange concept”

Change is coming to the U.S. health insurance market and the road will be bumpy.  Nowhere is the change more apparent than the current debate surrounding the state-run public health insurance exchanges. Our research underscores that the Affordable Care Act of 2010 underestimated the cost and complexity of establishing public exchanges. In spite of these issues, new and unforeseen opportunities are emerging relative to health insurance distribution. The application of retail, product design and customer service expertise could be transformational relative to the health insurance market for individuals.

As the Affordable Care Act (ACA) marks its first anniversary, a number of key questions remain. One of the largest revolves around the costs and benefits for the federally mandated and state-run competitive marketplaces called Health Insurance Exchanges (HIX), where individuals will be able to shop for and purchase health insurance. The public (state-run) HIX is one of the cornerstones of the health reform legislation, and for individuals without healthcare coverage today – an estimated 34 million people – the public HIXs are the intended mechanism by which individuals will acquire health insurance.

Our latest research report assesses the ACA requirement that each state build and operate a multi-channel (i.e. online, phone, and paper-based) marketplace where any qualified individual can shop for and buy health insurance.  The legislation provides some specifics as to what types of “essential health benefits” must be provided within the exchange, dictates guidelines and mandates as to how the states must run the HIX, and defines specific features the exchanges must possess. These include:

• A choice of certified and approved health plans from different carriers.

• Simple plan comparison tools that allow consumers to research and select the best policy for their needs.

• Enrollment assistance for those purchasing private insurance, and eligibility information for those qualified to receive government subsidies or Medicaid enrollment.

• A process for recouping operational costs of the HIX through surcharges in order to make them self-sustaining.

For these exchange-based insurance policies, federal and state law will closely regulate the products and benefits offered and the prices insurance companies can charge for their products. To keep the HIXs viable, insurance companies are forbidden from undercutting prices of products sold on a public exchange with competing products in the open market. They will also be required to pool risks across exchange and non-exchange participants. Further, the U.S. Department of Health and Human Services (HHS) will mandate a set of essential health benefits that must be provided under each policy, including coverage and deductible tiers for each plan offered.

While the public HIX concept seems simple and straight forward, our research predicts that their implementation will be fraught with costs, technical challenges, and sustainability issues that are neither recognized nor acknowledged, much less understood. Thus far, much of the debate about HIXs has focused on constitutional questions – and therefore political issues – related to the individual mandate which would compel citizens to purchase health insurance. As the states ramp their HIX implementation efforts in order to meet the 2014 deadline, we anticipate that several new challenges will come to the forefront. They will need to be addressed and will propel further change.

Healthcare reform and the resultant need for serving the individual market are propelling new approaches to capturing share in the insurance marketplace, and we expect that a range of new market entrants are just around the corner. Recognizing that it is still early in the progression of these alternative, free-market approaches, this report will review the concept of “private” insurance exchanges and reveal how they will likely serve a larger population than their public counterparts, and will provide more compelling insurance options and opportunities.

Thanks and have a great week.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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