Would a Simplified Doctors Bill Reduce Patient Confusion?

With increasing frequency, the trend toward healthcare provider “transparency” is in the news.

One vocal and prominent proponent of the concept is Dr. C. Martin Harris of the Cleveland Clinic, whose goal is improved transparency and patient access across our health care system.  Conceptually it sounds great, but would a better patient understanding of the financial aspects of their care (i.e. bills) influence their behaviors when selecting a care provider?

Dr. Harris is pushing for the development and utilization of patient-centric financial management tools that will expose the true costs associated with patient care.  Such tools could allow patients (consumers) to analyze their “actual” medical costs as well as their insurance coverage to help them better understand, in real-time what is owed for a given treatment.

Dr. Harris is shining a light on the patient confusion surrounding what to pay, who to pay and when to pay it. His view calls for a simplified system of transparent billing (the financial side of healthcare transactions) which “would clearly optimize the value of care to patients.”

Approaches such as specialized cards that initiate any healthcare-related transaction and then connect to online portals might be a starting point; and could even include connections to Centers for Medicare & Medicaid Services (CMS) via its Consumer Assessment of Health Providers and Systems (CAHPS®).   But will that be enough to entice consumers (patients) to gravitate toward a specific healthcare provider if they could deliver:

• Better value (i.e., the same or better medical care for cheaper)
• Enhanced customer service (i.e., overall patient experience), or
• Improved medical outcomes?

These three post reform drivers seem to be reasonable predictors of consumer preference – however its less clear whether a consumer would compare two or more healthcare providers based on billing statement transparency (clarity) alone.

Provider billing transparency is for now likely a “nice-to-have” rather than “must have” component of patient experience – and without the urging of consumers or employers the solutions envisioned by Dr. Harris won’t likely emerge.   Rather, patient experience trends, improved outcomes and calculating value for healthcare dollars spent, will likely persist as the near term focus of vendors serving the healthcare provider market.

Let us know what you think.

Jamie Lockhart

Jamie Lockhart is a Vice President with TripleTree covering healthcare software and service providers with a focus on consumer directed healthcare.  You can contact him at jlockhart@triple-tree.com

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Healthcare: Survival of The Fittest

According to Levin and Associates, mergers and acquisitions in the healthcare industry totaled over $227 billion, an 11% increase over 2010 and the fourth-largest year of the past decade. Even more interesting, is that the value of healthcare services deals increased 43% while technology decreased 2%. Hospital systems are moving into new communities, integrated health systems are acquiring additional delivery system assets, managed care networks are growing, and specialty care service businesses are expanding their footprint—to be well-positioned for survival in a post-reform world.

This is the type of data we shared with TripleTree’s Health Executive Roundtable–the investment bank’s “think tank” comprised of a diverse group of health industry executives with backgrounds ranging from banking, medical device, education and life sciences; to food services, technology, human capital management, and compliance.

We asked each Roundtable member: “What are the key trends that will emerge from this consolidation?”

Their independent and unique perspectives are published in:

Viewpoint: A Kaleidoscope of Insights Regarding Growth Opportunities amid Consolidation in the Healthcare Industry.

You can view and download the report here.

In addition, you are invited to participate in a webcast on Wednesday, February 29, 2012 from 12-1 pm CST where we will discuss the highlights and key themes from the report. You can register for the webcast at: https://www2.gotomeeting.com/register/771534410. After registering you will receive a confirmation email with information about joining the event.

As a preview. the following are the highlights and key themes from the report:

1. Healthcare costs will increase. It’s all about supply and demand. Market consolidation sets the stage for increasing healthcare costs as fewer, large, hospital and healthcare systems leverage their size and strength during unit cost contract negotiations with payors.
2. Contraction of the delivery system = expansion of demand for meaningful innovation to combat the pressures of #1. However, the only “new new things” that will survive are those that solve real problems with a scalable, cost-efficient solutions that integrate with the existing healthcare infrastructure.
3. B to C solutions require B to B revenue streams. Consumer adoption is critical for demonstrating relevance, but consumers don’t typically fund high growth enterprises.
4. “Health and Wellness” will transition to “Life and Well-Being.” Payers and employers will seek innovations that support life and well-being as the distinction between work, home and health become increasing blurred.
5. Healthcare gaming will emerge–actually, it will explode. Gaming platforms that integrate entertainment, interaction, and achievement will be a transformational solution for driving consumer engagement and behavior change as well as provider education, training, delivery, research and cost containment.
6. Electronic health records will evolve into smart health information technology ecosystems. These ecosystems will (finally) enable the coordination of care and drive shared accountability among healthcare providers.
7. Doctors will be loyal to a single system. (Smart) hospitals and health systems will attract and retain doctors with mobile and wireless software applications that enhance personal income and lifestyle.
8. The most disruptive solutions are likely to come from outside the traditional healthcare industry. The core assets and capabilities that fuel retail, consumer packaged goods, banking, and telecommunications, for example, can be translated into unique and meaningful healthcare solutions by companies and individuals not trapped in parochial “we’ve always done it that way” thinking.

A “perfect storm” is brewing where science and technology have no boundaries, and the convergence of reform and unsustainable medical costs are generating opportunities for change. I can’t think of a more exciting time to be in healthcare.

I look forward to your feedback via blog post comments, personal email, or during the webcast.

Archelle Georgiou

Archelle is a Senior Advisor and Chair of TripleTree’s Healthcare Executive Roundtable, and focused on creating health through innovation.  You can follow Archelle on Twitter, on her blog, or email her at ageorgiou@triple-tree.com.

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Utilization Sits at the Forefront of Recent and Future MCO Performance

As a host of leading managed care organizations (MCOs) roll out their most recent earnings reports, it is important to analyze some of the key drivers of plan performance. A key driver of success for MCOs recently has been low utilization, which has driven earnings that exceed market expectations.

Utilization: As indicated, utilization has been a primary driver of recent MCO performance upside; in addition to the important role it plays in setting future pricing, capitation rates and earnings expectations. So what exactly drives utilization among managed care plans? In short, utilization refers to the use of services by members or the patterns of rates of use of certain services such as hospital care, physician visits and prescription drugs. Utilization has long been viewed to be driven primarily by the economy, which has benefited MCOs in the near-term.  The current economic climate has been beneficial to many of the MCOs in terms of utilization in that people have deferred medical care. For example, given the current economic climate, it is likely that consumers are more than likely to wait it out a few days rather than going to a doctor and incurring a co-pay plus a prescription charge. As people have put off medical care, MCOs have benefited from lower than expected medical expenses. Lower medical expenses relative to premiums collected equal more profitability (all other things like MLR rebates aside).

One of the big questions right now surrounding MCOs has to do with what future utilization will look like.  MCOs have benefited greatly from the recent 3-year cycle of lowered utilization rates starting in 2009. Perhaps the biggest question is whether the broader implications of this trend should be accounted for in setting future plan pricing or earning expectations. Is the trend of lowered utilization correlated to the recession, unemployment and economic concerns or is there a fundamental change in how people look at medical care, especially related to consumer-directed health, higher deductible plans and the cost shift to the consumer?

Given the current economic impasse in the United States and abroad, one would expect that trend is expected to continue driving continued earnings upside among MCOs. However, this has not been the case in the guidance provided by many leading MCOs. Several MCOs are predicting higher utilization for 2012. This higher utilization will have a direct impact on the earnings performance among these plans and have been a key topic among analysts and industry commentators. These recent utilization suggestions have been supported by analyst estimates that utilization rates will increase by up to 50-150 basis points in the near-term. As analysts are just now updating their 2012 models to reflect increased utilization, it is likely that model updates will lead to lowered 2012 analyst earnings forecasts and related price downgrades in the MCO sector. The analyst community generally has taken a hard stance on MCO utilization and it is likely that we will witness several MCO downgrades in the near term as analyst work to assess the impact of increased 2012 utilization assumption.

Several counter viewpoints exist that utilization rates will not move increase as much as the carriers are suggesting. The prevailing viewpoint from this camp is that although there might be marginal utilization increases this year, the profit spread will remain as pricing increases will exceed the expected increases in medical cost spending as a result of increased utilization. This stance prevailed in 2011 as utilization last year was below expectations, leading to overall MCO sector public market performance that exceeded other healthcare sectors.

While low healthcare utilization is generally beneficial to MCOs, it generally has the opposite effect on other healthcare sectors, including hospitals and healthcare IT and services companies. These groups generally benefit from the consumption of services, which was the focus of the most recent HCA earnings release. During this release, HCA cited a rise in same-facility admissions to be a key driver of their earnings increase despite a decline in domestic surgery admissions and revenue-per-equivalent admission fell amid Medicaid reduction.

However, it is important to note that role that several other factors play in formulating earnings expectations and guidance. Almost equally important to some MCOs as utilization (particularly those with Medicare enrollment) are factors related to new member enrollment and Medicare Advantage conversion rates. In addition, several MCOs face huge earnings upside related to expansion of Medicare / Medicaid dual eligible enrollment as well.

It appears that the uncertainty that plagued MCOs following PPACA’s passage has been pushed to the back burner as most MCOs have generally benefitted from the legislation. While there is still some fine-tuning on the edges of reform that still present an overhang for MCOs (namely, MLR limitations, administrative cost constraints), that is a topic for another day as the current focus appears to be squarely on near-term medical cost expenses and new opportunity capture (courtesy of dual eligible expansion, state Medicaid RFPs and commercial market pricing pressure).

Let us know what you think.

Joe Long

Joe Long is a Senior Analyst at TripleTree covering the healthcare industry, covering payer-focused healthcare software and service providers. You can email him at jlong@triple-tree.com.

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 Divide in the ACO Debate – Beltway Rhetoric versus Marketplace Cynicism

Amid the broader – and oftentimes highly opinionated and heated – ACO conversation occurring across Washington and the private sector, The Wall Street Journal published an interesting piece last week highlighting the specific views of three individuals:

• Don Berwick is the former administrator for CMS who just stepped down last December.  Don oversaw the creation of the ACO framework under the Medicare Shared Savings Program.
• Tom Scully is currently a General Partner at the New York-based private equity firm Welsh, Carson, Anderson & Stowe.  Tom formerly served as the CMS administrator from 2001 to 2004 and CEO of the Federation of American Hospitals.
• Jeff Goldsmith is a president of Health Futures, a healthcare consulting firm out of Charlottesville, VA and an associate professor of public health sciences at the University of Virginia.

What becomes immediately apparent in the three-way dialogue (done via email) is the lens through which various participants view the industry’s efforts to improve healthcare’s fundamental problem of shifting from the traditional fee for service to a value-based approach.  There aren’t any quick, silver bullet answers to the debate, but what is evident is the divide among those that represent Washington’s political rhetoric (Don) and those that must figure out ways to make the new framework work within a dynamic, private care delivery system (Tom and Jeff).

Several disagreements bubble to the surface related to:

The role providers will play

• Berwick: “The ACO premise is different. Beneficiaries don’t join an ACO; providers of care do.”
• Scully: “The biggest flaw with ACOs is that they are driving more power to hospitals—not to doctors. Very scary, and I am a hospital guy.” … “If the doctors had the capital to organize comprehensive ACOs to control their own fate and drive us to more efficient care, I would be bullish on ACOs. But doctors are again along for the ride, not driving the bus.”
• Goldsmith: “In practice, however, the ACO is more like asking the hungry horse to guard the granary. The major savings for Medicare are to be found by keeping people out of the hospital, and reducing the incomes of the specialists who dominate hospital politics. To get those savings, hospitals and their specialists have to turn their backs on five decades of making more by doing more.”

Emphasis on the patient

• Berwick: “…the formula for ACO success is clear: keep quality high, save money by improving—not by restricting—care, and remain attractive to beneficiaries, who could go anywhere for care.”
• Scully: “The best models for ACOs are doctor groups like Monarch HealthCare in Los Angeles or JSA HealthCare in Tampa. Give doctors lots of patient data, pay them to see patients more often, follow their drug use and health status more closely to keep them out of hospitals—and give them control of the cash!”
• Goldsmith: “The biggest problem with the ACO, however, isn’t the faulty business proposition, but the patient’s role.” … “In the ACO, providers are accountable to Medicare. Patients won’t get a dime of the savings, and no choice whether to participate or not.” “Despite all the rhetoric about ACOs being patient-centered, it is a paternalistic, “we’ll decide what you need” kind of model.”

Prospects for care improvements and financial success of ACOs

• Berwick: “Knowing full well the results of the PGP demonstration, the CMS office of the actuary estimated base-case Medicare savings of over $400 million in the first three years of the ACO program.”  … The “32 physician groups and health-care systems selected for the pioneer program, covering 860,000 Medicare beneficiaries, [are] projected to save $1.1 billion in health-care costs over the first five years.”
• Scully: “In the system we have, ACOs are conceptually right, in that the concept inches toward differential pricing for quality, and Don should be congratulated. But we need to step back out of the trees, look at the forest and question the financing system we have created.”
• Goldsmith: “Having each community, large or small, set up its own ACO is like setting up a backyard steel mill.” … “It is the incredibly heterogeneous 5% of the population that generates 47% of all costs that you need to focus on, and if you don’t have enough of them in your “attributed” population, you cannot concentrate the resources to change their care and lives.”

Startup costs of an ACO

• Scully: “The start-up cost of a real ACO is probably $30 million and up in a midsize market.”
• Berwick: “The actual barriers to entry appear a lot lower than the $30 million cost that Tom Scully mentions; CMS estimates are only a fraction of that.” “… the CMS Innovation Center has proposed a program of advance payment to provide front-end capital and extra operating funds for care coordination, information systems and the like.”
• Goldsmith: “A more credible estimate of setup costs for a provider system with no prior managed-care experience to participate in the shared savings program: $10 million to $15 million per health system (consulting, IT systems conversions, new staff, etc.).”

 Prospects for success

• Berwick: “Smart entrants, focused on seamless care, outcomes and beneficiary satisfaction, will both reduce Medicare’s expenditures and reap financial rewards for themselves.” … “I hope and expect that ACOs will honor the trust they have been given by doing the job—lower cost through care improvements. If they violate that trust, the costs to them and to the future of seamless, coordinated care in America will be high indeed.”
• Scully: “Don’s vision is great, and who can’t like what he has tried to do with ACOs… Except that the incentives are very small, the change will be slow, and we are just nibbling at real system reform.”
• Goldsmith: “There were a lot of good ideas in the Affordable Care Act for saving money and improving quality. Unfortunately, the ACO wasn’t one of them.” … “By pushing this edgy idea from the policy world and ignoring the real-world evidence of its own trials, CMS picked the wrong horse.”

In a final from Jeff Goldsmith: “One of the most serious problems with the health-care world just now is the gap between the policy world and the real world. The ACO is Exhibit A in this yawning disconnect.”  Jeff is right to point out that there’s a divide between the public and private domains, yet progress, however small, has arguably been made.

The real question is whether “the vision” put forth by Don Berwick will ultimately evolve into a pervasive performance-based delivery model in which quality, efficiency, and choice are the driving factors behind private sector reimbursement and profitability.  To those outside of Washington, there certainly seems to be a long way to go – let us know what you think.

Seth Kneller

Seth Kneller is a Vice President at TripleTree covering the healthcare industry, specializing in revenue cycle management, clinical software solutions, geriatric care and healthcare analytics. Follow Seth on Twitter or e-mail him at skneller@triple-tree.com.

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HHS Reform Timelines…Wiggle Room In Sight?

Aggressive IT deadlines have left the healthcare industry scrambling to meet a host of regulatory mandates spanning HIT adoption, payment transaction methodologies, coding standards, and state-run health insurance exchanges.  Hundreds of new regulations have been implemented over the past couple of years, leaving the industry torn in how limited time and resources are utilized among care delivery, quality and cost reduction initiatives, process/infrastructure modernization, and increasingly stringent regulatory reporting requirements.

Hospitals and doctors have been especially overwhelmed with regulations and have been reprioritizing investments to support EMR implementation, Meaningful Use qualification, and what is expected to be a tidal wave of new entrants into the system once the 2014 health reform mandates become effective.

The American Medical Association (AMA) set newswires and the blogosphere abuzz last week when they publically voiced opposition to the transition to ICD-10 coding stating “the implementation of ICD-10 will create significant burdens on the practice of medicine with no direct benefit to individual patients’ care.”  Some dispute the AMA’s move as self-serving given their interests in maintaining the stature and importance of the Current Procedural Terminology (CPT) code set.  Nevertheless, whether the AMA’s move was defensive or not is irrelevant – the vast majority of providers and a meaningful cross-section of payers are ill-prepared to meet the ICD-10 transition deadlines that CMS currently has in place.

To the relief of payers, providers, vendors, and states, the department of Health and Human Services (HHS) and the Center for Medicare and Medicaid Services (CMS) have recently backed off from a few key deadlines.  While these announcements by no means cancel any existing mandates, at a minimum they buy the industry some time to comply with the overarching legislative intent of increasing coverage among the uninsured population, incentivizing IT adoption, and driving improved levels of care delivery.  Of note:

1. HIPAA 5010– CMS announced that it would hold off enforcing the HIPAA 5010 transaction sets until March 31, 2012, a 90-day extension to the original enforcement date. While the compliance date will technically remain intact, relaxing the enforcement date “encourages all covered entities to continue working with their trading partners to become compliant with the new HIPAA standards and to determine their readiness to accept the new standards as of Jan. 1, 2012,” as stated in a release by CMS’ Office of E-Health Standards and Services (OESS).HIPAA 5010 is widely viewed as a precursor to the impending transition to ICD-10 in October 2013. The enormity of that effort will dwarf HIPAA 5010. This week’s announcement foreshadows further delays yet to come.
2. Stage 2 Meaningful Use– HHS announced this week that it would delay its compliance date for Stage 2 Meaningful Use from 2013 to 2014. The extension specifically impacts eligible providers that qualified for Stage 1 Meaningful Use in 2011. Providers, vendors, and government work groups alike have noted the timing issues and inherent disincentive posed on early adopters attempting to adhere to criteria that have yet to be finalized. The Health IT Policy Committee, a federally-chartered advisory panel to HHS, recommended these changes earlier this year to the endorsement of Farzad Mostashari, M.D., ONC’s National Coordinator for Health Information Technology.HHS Secretary Kathleen Sebelius acknowledged the progress to date, referring to the reported doubling of HIT adoption over the past two years. In its move to extend the Stage 2 deadline HHS has smartly protected its initial success by attentively listening and responding to the needs of an overwhelmed provider community.
3. Health Insurance Exchanges – HHS (though the Center for Consumer Information and Insurance Oversight – CCIIO) has seemingly relaxed (or at least clarified) a critical deadline for the states to stand-up their Insurance Exchanges. This week, CCIIO extended a grant deadline by six months until June 2012 from December 2011. Also CCIIO has committed funding for the establishment exchanges beyond the previous January 1, 2014 deadline. Now states have until December 2014 to apply for grants for continued exchange development provided that at least a portion of the exchange is operational by January 1, 2014.

While it is not entirely clear why these significant changes coincided in timing – perhaps it had to do with the resignation of controversial CMS chief Don Berwick – these reprieves are no doubt welcomed within the industry. The extra time will give payers, providers, and states some extra time to meet their compliance mandates.

This extra time should not be squandered. Industry participants must continue to plan for and implement systems that support new EDI standards within 5010, the reporting requirements of Stage 2 Meaningful Use, and the complexities of insurance exchanges. Furthermore, the real value in any of these mandates is not meeting the minimum requirements of the mandate itself, but rather the powerful and compelling capabilities that each enables in terms of improved communication and workflow automation that will enable entirely new quality and cost initiatives.

We’re optimistic that the timeline flexibility of HHS regarding timelines will promote more thoughtful approaches, investments and implementations across all impacted organizations, 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

Seth Kneller

Seth Kneller is an Associate at TripleTree covering the healthcare industry, specializing in revenue cycle management, clinical software solutions, geriatric care and healthcare analytics. Follow Seth on Twitter or e-mail him at skneller@triple-tree.com.

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Steward Takes On Insurer Role in Agreement with Tufts

Cerebrus-backed hospital operator Steward Health Care System (Steward) made news last week by launching an insurance product. This announcement marks one of the most dramatic attempts by a provider to position themselves to profit from system wide efforts to better control care delivery and distribution.

Dubbed Steward Community Choice, this new plan will see all routine care provided through Steward-affiliated doctors and facilities (although certain exceptions apply).  Despite potential access limitations, the plan is designed to appeal to small businesses as it will be priced as much as 15% to 30% below comparable products and calls for Steward to bear all the financial risk for patients’ care. Tufts Health Plan of Massachusetts will provide administrative services (running call centers staffing, card issuance, etc).

This announcement is the latest example of providers financially aligning themselves with the care they provide.  Similar models have been introduced throughout the country as well:

• Carilion Clinic through a partnership with Aetna in Virginia
• Sutter Health through a partnership with Health Net in northern California

The broader implication of this risk transfer to the provider is how the consumer has been thrust to the center of healthcare delivery and decision making processes, which is forcing payers (and providers) to re-think their distribution and retention strategies and focus on consumers.

Cost is the driver.  Employers are actively seeking solutions to better control healthcare-related costs and as they continue to shift towards high-deductible coverage (which send a significant percentage of healthcare costs towards the consumer) products like Steward’s where costs can be controlled.

Payers view this as another method to introduce performance-based risk contracting and better track the experience of a patient’s care. Several of the larger payers are trying to control the distribution of care by investing in providers as seen by Optum’s acquisition of Monarch and Humana’s acquisition of Concentra.

Providers view the potential additional revenue as a benefit too.  Given declining reimbursement rates and the increasing administrative burdens that accompany care distribution; these types of arrangements can increase revenues, cover costs and apply a stronger focus on the provision of care.

Perhaps the most affected will be consumers, who have increased demands for greater transparency, access and information to control their overall healthcare spending.  Historical efforts to introduce similar products have failed because consumers viewed them as restrictive and of poor quality, but trends around health reform are changing the playing field.

As healthcare costs continue to shift towards the consumer, these restrictive arrangements are likely to persist as the “closed” nature of provider networks offer cost relief by limiting access to certain doctors and hospitals.

Let us know what you think.

Joe Long

Joe Long is an analyst at TripleTree covering the healthcare sector, with a focus on the approaches and technologies surrounding health insurance exchanges.  You can email him at jlong@triple-tree.com.

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Does Highmark’s Move Portend a Payers’ Path to Financial Health?

The  recent acquisition by Highmark, Inc. of the five-hospital West Penn Allegheny Health System brings into focus an emerging healthcare provider model in which payers are assuming direct control of medical facilities. Payers, seeking to curb costs amid U.S. health reform are motivated by numerous factors, including:

• Gaining an early leadership positioning in developing a self-sufficient ACO model that can be leveraged nationwide.
• Providing direct insight into best practices they can use in contracting with other medical groups.
• Allowing the capture of new efficiencies in the healthcare system by accruing part of the costs that would have gone to providers

Over the years, payers have attempted a number of different cost control mechanisms ranging from preferred drug lists to performance incentives – but have had minimal success. This feet-on-the-street approach is their most direct attempt to control spending through managing the doctors directly. The thought is that the Payer-Provider Facility strategy will truly “incentivize” doctors to control spending as it affects their direct employer; as opposed to other historical financial incentive arrangements that have failed to hold ground.

In the mid ‘90s managed care failed in its attempt to take a greater role in the care delivery as consumers rebuffed limits on provider choice and treatment options. This time around (and as depicted the graphic below), insurers adopting this strategy appear to be focused on the controlling the provision of services and owning providers as opposed to network or treatment restrictions.

Source: TripleTree, LLC

A recent Washington Post article analyzes the ongoing transition of the major managed care players – namely UnitedHealthcare, WellPoint, CIGNA and Humana – into the provider space.  Further analysis by TripleTree underscores that the strategy appears to be driven by the insurers’ desire diminish the financial pressure of health reform, however, this could also viewed as a long-term strategic move by insurers to position themselves as the central hub of future ACOs.

Source: TripleTree, LLC

Highmark’s acquisition is unique in that it is one of the only significant payer-hospital acquisitions to occur in well over a decade.  Payers (such as Humana and Wellpoint) have routinely purchased clinics in recent years in an effort to push care further outside of the hospital towards more efficient, less costly outpatient settings. The acquisition represents a bold strategy to align Highmark with their hospital provider base. However, the move also poses the risk of competitive backlash from competitors who choose to not use West Penn and withdrawal from customers fearing provider choice and location limitations.

In the coming months, TripleTree will be spending a considerable amount of time monitoring the movement of payers to reposition themselves as “clinical” and “provider-focused” as ACOs develop.   In addition, we will also be analyzing how each payer’s provider strategy aligns with their efforts to expand their clinical technology platforms into the provider market.

Let us know what you think.

Joe Long

Joe Long is an analyst at TripleTree covering the healthcare sector, with a focus on the approaches and technologies surrounding health insurance exchanges.  You can email him at jlong@triple-tree.com.

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Will Traditional Healthcare Providers Need to Become Consumer Friendly?

It is hard to believe that it has been more than seven years since the Medicare Prescription Drug, Improvement, and Modernization Act created health savings accounts (HSA).  In 2004, the pundits were espousing how consumer directed health plans (high deductible health plans tied to a HSA or health reimbursement account (HRA)) would put more healthcare spend into consumers’ hands and in-turn, consumers would demand more price transparency across the healthcare system.  Consumers were supposed to be able to use their new-found purchasing power to comparison shop and ultimately choose the healthcare services that provide the best value.

In a March 2005 report entitled Will Health Plans Profit from HSAs? Forrester Research projected that by 2010 there would be 15.9 million HSAs and HRAs holding $17.5 billion in assets.  Actual figures have trailed projections, but the move to HSAs and HRAs has continued to gain momentum.  Employee Benefit Research Institute® recently published that the number of HSAs and HRAs has grown from 1.2 million in 2006 to 5.7 million in 2010.  These accounts now hold $7.7 billion in assets, creating meaningful healthcare purchasing power for consumers.

Despite all of this growth however, comparison shopping for healthcare remains challenging.

• While employers have attempted to provide price transparency tools, they have struggled with getting detailed pricing information from providers that would enable informed employee (consumer) decision making.
• Health plans have been unable to provide their members with real-time adjudication capabilities that would allow them to understand in-network pricing for services.
• Services marketed directly to consumers (with features like convenience, affordable pricing for acute care, etc) tout health plan reimbursement as a secondary feature.

This last trend started with retail clinics, such as CVS Caremark’s MinuteClinic and Walgreens’ Take Care Clinic; that effectively promote the price of services prominently at their clinics and on their websites.  In a market like Minneapolis, two large healthcare organizations (UnitedHealth Group and Health Partners) are taking similar but distinct approaches via recently announced online clinic, prescriptions and doctor-patient medical consultation services.

• UnitedHealth Group’s OptumHealth has launched NowClinic, which offers 10 minute online visits with clinicians for $45.  The service is now offered in five states, and while OptumHealth is offering discounted prices to contracted employer groups, consumers must pay for all services directly as OptumHealth does not currently accept health insurance.
• HealthPartners, a regional healthcare provider and health plan has launched a competing online service called Virtuwell.  At Virtuwell, online consultations cost $40, and the service accepts insurance plans from HealthPartners and CIGNA.

Both announcements tout convenience as the key feature and could be an easy purchase decision for some consumers.  Even if not reimbursed by insurance, consumers may opt to spend $40-$45 out of pocket without having to leave their home, when comparing the alternative of driving to a doctor’s office, paying for parking, and waiting in the waiting room with other sick people.  This decision would be made even easier for consumers that do not reach their health plan deductible during the year and thus would not get reimbursed if they visit a traditional doctor.

With HealthPartners as an exception, traditional healthcare services providers have been slow to adopt both price transparency and convenience.  As healthcare delivery models change and new players enter the market, it will be interesting to watch how traditional healthcare providers evolve to accommodate increased expectations from consumers who are more informed and demand options for where, when, and how quickly they can interact with clinicians.

There is no question that as more payment responsibility is placed in consumer hands, providers will change, the question is how quickly this will occur and which firms will benefit most.

Let us know what you think.

Jason Grais

Jason Grais is a Director at TripleTree covering the healthcare industry specializing in healthcare IT, population health management and emerging services in the life sciences sector. You can email him at jgrais@triple-tree.com

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Perpetuating the Increased Quality of Care Cycle through Value-Based Purchasing

With the majority of talk about healthcare reform centered on the individual / consumer mandate and universal coverage, many are missing another positive change proposed by CMS: value-based purchasing.

Value-based purchasing (VBP) has underlying implications on five themes:

• Measuring the patient experience
• Measuring clinical quality
• Market pricing, especially local market pricing
• Executive and clinician compensation
• The changing role of technology and technological requirements

The essence of VBP is that buyers of healthcare (including individuals and plans) should hold providers accountable for the quality of care provided.  Much like consumer satisfaction and pay-for-performance in other industries, healthcare providers are now being held accountable for not only providing the required care, but providing a quality product.  However, the question of rating the quality of care is a bit more difficult than showing compliance with a “Six Sigma” type of program.  By bringing together outcomes-based data with cost data, it is possible to show an improvement ratio such that increasingly positive outcomes are equated with reduced or targeted spending – below are a few considerations:

• Linking patient satisfaction and quality: Measuring the patient experience is trending toward monitoring key outcomes in 17 clinical measures (including patients’ views on communication with staff and doctors, cleanliness and quietness of the hospital and pain management) across five healthcare categories, including acute myocardial infarction, heart failure, pneumonia, healthcare associated infections and surgical care improvement.  Based on a hospital’s score across these measures and categories, this will impact diagnostics-related group (DRG) payments as soon as 2013.  By 2014, mortality outcome measures for additional health conditions and hospital-acquired conditions will be included.
• Clinical quality – another important VBP benchmark:   As providers are measured and compensated accordingly, top tier providers will begin to quickly separate from the pack.  However, critical access hospitals will need to remain accessible, regardless of their quality measurement.
• Market pricing and VBP:  With provider compensation schedules initially being implemented as a penalty rather than a bonus, areas with poor outcome metrics will see the cost of providing care rise. Additionally adding to the skewing of local market pricing, an incentives algorithm will be implemented, meaning high performing hospitals will continue to perform better than those being penalized, due to the financial incentives providing new resources for a high performing hospital.

The link between quality of care, the provider’s income statement, and executive and clinician compensation also becomes much more clear and real. As the provider receives additional incentives for increased quality of care, the employees of the provider will likely see performance compensation tied to the quality of care metrics for the hospital. A higher performing provider will attract higher paid experts with better backgrounds, perpetuating the increased quality of care cycle.

Underpinning all of this is the increasing role that technology will play in the healthcare system. In order to document the quality of care metrics, a clear link to data will need to be established at the point of care. This means that data warehousing and analytics will be paramount. Sophisticated pricing and measurements of quality and satisfaction will be derived from the data and technology in use.

Value-based purchasing has the potential to radically alter how both providers and patients view healthcare.  Our team is actively advising business leaders and investors with some thinking about how healthcare will cease to be an intangible product that is provided at any cost, focusing instead on how to plan the market dynamics or “rankings” and “customer service”.

Have a great week.

Adam Link

Adam Link is an analyst at TripleTree covering healthcare delivery models, specializing in software and wireless health.  Follow Adam on Twitter at AdamJLink or email him at alink@triple-tree.com.

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Consumer Centric Social Tools Are Impacting Healthcare

A growing number of healthcare industry leaders are using social media tools to support their brand, enhance advertising campaigns, improve consumer communications and proactively address public perceptions.

The social networking landscape is fragmented and confusing for many healthcare organizations.  Just two years ago the vast majority of health plans, pharmaceutical, hospitals and government entities didn’t include social tools or platforms on their marketing roadmap.  In fact many viewed it as likely ineffective and difficult to measure, much less being fraught with legal and regulatory issues.

Things have changed in 2011. A growing number of these firms are now leveraging approaches to social technology and below we’ve posed a few examples:

Health Plans

• Example: Blue Cross Blue Shield (BCBS) of Western New York uses Twitter to advise and coach members interested in healthier lifestyles – the topics range from helping members quit smoking to maintaining work out regiments and nutrition.

• Social media tools for health plans are still in the early stages of adoption and most large / regional health plans have a meager 200 to 800 followers on Twitter.  These enterprising health plans seek to steer their population towards healthier behavior and a properly utilized online social presence can be part of the solution.  But for health plans social tools are not only about coaching and health advice. One major health plan is using social tools to advertise its online care service and recruit new members to sign up online to take advantage of the service.  Health plans can also get instant consumer feedback and address complaints at their source by communicating with members who are unhappy with or don’t understand care options or billing issues.

Pharmaceutical and Life Sciences Companies

• Example: Pfizer, the global drug manufacturer, has dozens of Twitter accounts, organized by country and region to deliver targeted news to specific groups. Pfizer also has Twitter accounts for activist causes such as Pfizer_Beef, which has a stated goal to “…share our passion for animal health and the productivity of livestock”.

• Rather than fueling the perception that drug companies are just out to sell the next pill, Pfizer is aiming to use social media to soften its image and become more visible to consumers for the right reasons, while providing helpful and targeted information across different subject matters, geographies, and languages.

Hospitals and Other Providers

• Example: The VA Maryland Health Care System launched its Facebook page in April 2010 and in less than one year boasts nearly 1,000 Facebook fans. According to its website, being a fan will allow users to share experiences, give “shout outs” to favorite doctors and nurses, and react to and be part of a discussion about topics posted on the fan page.

• Hospitals and other providers are beginning to see that social media tools are an alternative channel to provide quick and easy access to the latest news, telephone numbers, and other important information. These social media tools can provide tangible value to the hospital by facilitating collaboration between themselves and patients, volunteers, family members, and friends. Such a benefit should not be overlooked and could mean a more positive relationship with its surrounding community and more traffic through its doors.

Government

• Example: The Centers for Disease Control (CDC) launched a website called eHealth Metrics Dashboard to provide civilians with up-to-date facts on everything from flu season to salmonella warnings.  CDC disseminates its information through a variety of social channels including YouTube, Facebook and Twitter.

• According to Federal Computer Week, the CDC is seeing some serious traction. Mobile views of CDC social media and websites nearly doubled month-over-month to 263,000 last February and the agency has over 1 million Twitter followers. The CDC’s success serves as a shining example of how the government can improve communication and access to information to benefit the health of our national as a whole.

As the number of healthcare organizations who are establishing an online social presence grows, the positive benefits around real-time feedback and product / service improvements will be hard to ignore.

A focus on social media is impacting our research agenda for 2011, and has a unique role in the agenda for our upcoming Summit www.wlsa2011.com on mHealth in May.  We’ll keep an eye on the range of legal and regulatory issues being discussed in the market as private health information and data management disciplines mesh around social media, marketing, sales and service.

We welcome your feedback on this topic.

Michael Boardman

Michael Boardman is an associate at TripleTree covering the healthcare and technology industries, specializing in clinical software solutions.  Follow Michael on Twitter or e-mail him at mboardman@triple-tree.com.

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