Innovative Provider Models Reveal Glimpse into Future of Care Delivery

A new topic we’ve been monitoring in the debate over healthcare spending has been the alarming shift from traditional cost centers such as inpatient care, pharmaceuticals and administration to outpatient care.

While outpatient settings appear on the surface as  more cost-effective alternatives, the limitations of the healthcare system  to establish incentives limiting utilization negates any potential for cost savings. Arguments in support of and against the shift have merit and must be considered as outpatient care is among largest and fastest growing healthcare spending categories.

In an attempt to limit the cost drivers of overutilization and overuse, various initiatives to balance care costs, quality and efficiency have been introduced. The most likely transition that will occur over the next few years will be the continued build-out of a provider capitation system designed to limit cost and utilization yet maintain quality. As the outpatient market braces for this shift, all eyes are on a few of the more progressive models where cost savings and outcome improvement under a provider capitation model are being demonstrated.

Over the past ten years, CareMorehas established itself as among the most vertically integrated Medicare Advantage plans in the country. Through its network of employed physicians and outpatient primary clinic care centers,  they are essentially “at risk” and therefore incentivized to efficiently deliver care – thus shifting the risk from health plans as in  traditional network models. Through a system of care coordination spearheaded by individual care managers who monitor primary and follow up care, Caremore has been able to generate outcomes far superior and more profitable than traditional Medicare Advantage plans.  CareMore has validated that the provider capitation model has potential to generate cost savings if operated effectively.

Perhaps the most comprehensive example of a system that has implemented a provider capitation model is the Department of Veterans Affairs (VA) health system through its network of Community-Based Outpatient Clinics (CBOCs). Over the past 20 years, the VA system has transitioned away from a pure hospital-based system to an ambulatory and primary care based model. In doing so, the VA has established CBOCs in order to improve care access and control spending by minimizing instances where non-acute conditions are treated in an ambulatory setting. Over the course of this transition, the VA has begun a process of soliciting outside groups to provide primary care to veterans in non-VA facilities on an individual capitated basis through the CBOC program. Valor Healthcare (Valor) has established itself as the leader in the contract CBOC market, both in terms of market share and clinical excellence.  Much like CareMore, key to the success of Valor has been their provider incentive system. Valor employs a robust pay-for-performance system for its physicians based on evidence-based guidelines and clinical performance. This program has driven clinical outcomes that exceed the benchmarks established by the VA. In addition to performance incentives, Valor’s use of several innovative care approaches to increase patient engagement and adoption contributed to consistent utilization levels.

With cost continuing to be a key issue across the healthcare system, it is likely that payers will continue to experiment with new incentive models aimed to improve the distribution of care yet maintain quality. As this occurs, innovative care models like CareMore and Valor will serve as building blocks as we continue to refine our delivery approaches to more effectively balance care quality, efficiency, safety, and cost.

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.

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Electronic Medical Records Are Not a Cure-All

We regularly work with clients that have developed innovative solutions to vexing, long-term problems confronting healthcare.  Some examples include:  enabling hospitals to quantify patient satisfaction, managing the release of patient chart information from the hospital, and providing meaningful drug and disease content to physicians in the course of their daily work.

In discussions with potential buyers and investors for these types of businesses, we regularly hear the following:  “Won’t widespread EMR adoption make this business obsolete?”   In the minds of many thinking about the HCIT industry:

Increased EMR Use = Fully Electronic Records = Integrated Data Whizzing Back and Forth

This is a welcome goal – and it’s theoretically possible that we could live in this world one day – but there are so many barriers to this future state that it’s very likely that none of us will be around to see it.

Consider the following:

• EMRs were first created in the 1960s and 1970s, but as recently as 2011, only about 1 in 3 of office-based physicians reported use of an EMR with basic functionality in place (i.e., medical history, electronic ordering, drug interactions, etc.)  Just over half of the respondents were using any EMR at all (to record basic patient demographics, for example).
• On the inpatient side, with more than $3.1B in Meaningful Use incentives paid out as of 2011, only 35% of U.S. hospitals have now adopted EMRs.
• CMS has been paying incentives for e-prescribing for the past two years.  In the framework of potential healthcare data described above, this is one of the most basic electronic transactions possible:  passing an error-free prescription from a provider’s EMR to a pharmacy.   As of the end of 2010, CMS reports that e-prescribing has grown tremendously – to where fewer than 12% of the nearly 700,000 eligible providers are now receiving incentive payments.

This is progress to be sure, and adoption is up significantly in the past few years.  However, EMR vendors still face a long road to achieving widespread adoption for basic functionality before they dive into the other challenges like data interoperability, clinical analytics, and payer-provider convergence.

In our view, new value-based reimbursement models via prospective population health management and coordination at the point of care simply have to run through the clinical data living in the EMR.   So, as stimulus dollars trail off in the coming years, we expect the more forward-thinking EMR vendors to start looking for tangential acquisitions outside of their core business that will help them make progress toward accelerating these reimbursement initiatives.

In other words, we expect that leading EMR vendors, in an effort to create differentiation in a still-crowded marketplace, will increasingly look to absorb – rather than displace – these innovative businesses that we see every day.  What is still an open question is whether the EMR vendors will be the buyers best positioned to reap the biggest benefits of owning these companies, or if other HCIT participants will put together the pieces that move us toward that future state where healthcare data moves around effortlessly.  In either case, we don’t see much evidence yet that EMRs are the standalone panacea that some seem to think they can be.

Let us know what you think.

Conor Green

Conor Green is a Vice President at TripleTree covering the healthcare industry, and specializing in revenue cycle management and tech-enabled business services. You can email Conor at cgreen@triple-tree.com.

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Does 3M’s Acquisition of CodeRyte Represent a Defensive Strategy?

This week’s announcement that 3M has acquired CodeRyte was a surprise as much as it was completely predictable.  On one hand, 3M Health Information Systems has had enjoyed what seemed at times to be a near ubiquitous presence in the coding solutions market for years and has been noticeably absent in the M&A arena since 2006 when it acquired SoftMed Systems (note: the $230M acquisition of Attenti in 2010 sits within 3M’s Track and Trace Solutions division).  However, with the impending move to ICD-10 in October 2014 as well as a broader trend toward greater levels of clinical documentation granularity and improved data management and analytics capabilities in healthcare, it is completely understandable that 3M had to make a provocative move to both protect its market share and strengthen its ability to deliver value to its provider customers in a highly regulated, increasingly complex healthcare environment.  The fact that 3M has had a reseller arrangement with CodeRyte since 2009 is further evidence of the existing relationship and fit between the two organizations.

With that being said 3M’s move to acquire CodeRyte represents, in our opinion, a potential defensive strategy to maintain its leadership position in coding and documentation improvement.  While not conclusive, there are a host of data points that seem to support this assertion:

• Heavy reliance on legacy encoder and grouper technologies – 3M’s leading flagship products provide a lot of financial stability for the organization, but these technologies are becoming dated amid the industry’s ongoing evolution and other, more nimble solutions coming to market
• Success and momentum of Optum and A-Life – Optum’s acquisition of A-Life has been very successful in the marketplace as of late, further challenging 3M’s existing position in computer assisted coding (CAC)
• Uptake of point of care workflow tools – While 3M’s 360 Encompass System provides an intriguing bridge between customer’s financial and clinical data at the point of care, this solution is relatively new and has presumably not had the sort of uptake that meaningfully impacts the division’s top-line
• Limited success in penetrating adjacent markets – 3M has struggled to extend its solution set into growing opportunities with payers, Health Information Exchanges (HIEs), and Accountable Care Organizations (ACOs).  Payers, for one, represent a huge counter-market to the providers as the entire healthcare industry looks to neutralize the impact of the ICD-10 transition

This isn’t to say that the combination of 3M and CodeRyte isn’t innovative – in fact, the addition of CodeRyte’s Natural Language Processing (NLP) and CAC capabilities could greatly improve the workflow efficiencies at the end-user level.  However, the need of 3M to bolster and extend its coding capabilities is apparent as emerging clinical, financial, and compliance objectives increasingly require a more pervasive data management and analytics platform delivered at the point of care and throughout the healthcare ecosystem (providers, payers, EMR vendors, consumers, etc.) to solve a range of increasingly complex and intermingled challenges.

 

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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Expanding Services Portfolios and M&A Defining Payer Landscape in Government Healthcare

The third generation of TRICARE contract RFPs celebrated turning four years old and the contracting process is still ongoing. While the initial contract awards were announced in 2009, heated negotiations are underway for the last remaining TRICARE contract. The last two weeks saw the five year $20B TRICARE West Region contract awarded to UnitedHealth Group – which was promptly counter protested from the incumbent, TriWest. Contract awards and protests are common, and to better understand the driving forces behind the highly combative and contentious atmosphere around TRICARE contracts, it is important to look at the broader market.

The Military Health System (MHS), which includes the TRICARE contracts, and the Veterans Health Administration (VHA) – represent the two largest opportunities for commercial health payers to expand their presence outside of Medicare and Medicaid. Unlike CMS, the MHS and VHA are relatively protected from government budget turmoil and political scapegoating. A decade of global military campaigns and higher combat survival rates have increased demands on DoD and VA care programs and driven combined spending to over $100 billion and counting, while persistent reimbursement challenges and healthcare reform uncertainties have spurred some payers to look elsewhere for diversification.

In order to better align with and pursue future opportunities in the government healthcare space, and recognizing the volatility of the TRICARE contracting process, commercial payers have revisited their government healthcare strategies and developed road maps for expansion going forward . With the most recent award to UnitedHealth Group, the three TRICARE contracts are all expected to be operated by large public commercial health plans, each with markedly different strategies for pursuing government healthcare expansion.

• Health Net operates a small portfolio of VA community-based outpatient clinics and has been a TRICARE North Region contractor since 2004.  It is also the contractor for the Military & Family Life Consultant Program, providing behavioral health and counseling services to youth and adults.  It wasn’t until this year that the Company identified the VA as a key opportunity and separate area of strategic focus going forward as it tries to diversify and expand beyond its TRICARE contract and grow its VA footprint.
• Humana has served as the TRICARE South Region contractor since 1996. Its MHS presence beyond that extends mostly to patient scheduling for some military treatment facilities. Within the VA, Humana has been a frontrunner in leveraging its expansive network of commercial providers to treat veterans through VA pilot programs Project HERO and Project ARCH.
  • Project ARCH (Access Received Closer to Home) is a VA care initiative designed to facilitate healthcare access for eligible Veterans by connecting them with care services closer to home.
  • Through Project HERO (Healthcare Effectiveness through Resource Optimization), Humana provides the VA with pre-screened networks of health care providers who meet VA standards for quality care when specific medical expertise or technology is not available inside the VA health care system. Critical for Humana in expanding its government presence will be continuing to find innovative ways to deploy its commercial expertise, and that of recent acquisitions Concentra and SeniorBridge, into government patient populations.
• While UnitedHealth Group may be the new kid on the block (its military and veterans services division was formed in 2007 to pursue the TRICARE opportunity), it has not spared expenses in clawing out a footprint. The recent TRICARE announcement was a massive strategic uplift for United, which had invested considerable time and resources since 2007 aimed at wresting a TRICARE contract from an incumbent.
  • UnitedHealth Group’s acquisition of Logistics Health Incorporated, a national provider of medical services to the federal government, instantly positioned the company as a government health leader.
  • At the time of LHI’s acquisition in June of last year, LHI’s operations were largely concentrated around the Reserve Health Readiness Program, providing medical evaluation and readiness exams to the military.
  • The contract win in March of last year to provide clinical disability exams to 31 VHA sites had a first year contract value of $120 million and a five year ceiling of $635 million.
  • With a substantial presence across the DoD and VA, a final decision on the TRICARE win would establish UnitedHealth Group as the undisputed government healthcare heavyweight.

The numerous program opportunities expected to enter the government health RFP pipeline in the next 6-12 months provide an impetus for commercial payers to aggressively expand their capabilities in the sector. Given the critical importance of past performance and quality of care in RFP processes, acquiring companies with government contract experience and a track record of superior results will be essential in expanding a government contract footprint in the healthcare sector.

TripleTree is closely watching a range of upcoming contracts to underscore any possible trend including:

• TRICARE for Life: $29B program providing supplemental coverage for two million TRICARE/Medicare dual eligible military/veterans projected to grow to $48B by 2021.
• TRICARE Overseas: TRICARE services for overseas personnel
• Military OneSource, a telephonic employee assistance program
• Reserve Health Readiness Program (RHRP), providing medical and dental readiness services to all Reserve forces

The competition for government contracts will increase in pace with government healthcare spending as more large-scale public players enters the market (i.e. Lockheed Martin’s acquisition of QTC) and the scarcity of independent quality assets with scale becomes more acute. The earlier and more meaningfully a payer is able to carve out a platform in the government healthcare services area, the more defensible such a position becomes down the road. We fully expect that in addition to the proactive interest defense contractors are displaying in expanding their healthcare presence, commercial players will continue to become more active and aggressive buyers as well.  Let us know what you think-

Marc Baudry

Marc Baudry is an analyst at TripleTree covering the healthcare industry specializing in government health, population health management, informatics, and facility-based services. Follow Marc on Twitter or email him at mbaudry@triple-tree.com.

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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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Behavioral Healthcare: Five Key Factors Are Driving Sector Consolidation

Mergers and acquisitions, public equity financings and private equity investments in the Behavioral Healthcare industry closed with a bang in 2011, and the momentum has continued into 2012. Demand and access to behavioral healthcare services, including treatment for mental health and substance abuse disorders, has accelerated in recent years due to a number of favorable industry and legislative trends.

Within this highly fragmented industry, Acadia Healthcare Company, Inc. (NASDAQ: ACHA) has pursued an aggressive growth strategy in the last twelve months, executing a number transformative strategic decisions:

• Equity Offering: On December 15^th, Acadia completed a public equity offering of 9.5 million shares at $7.50 per share for total net proceeds of $67.5 million. Acadia plans to use the offering proceeds principally to fund its acquisition strategy. The Company certainly did not waste much time, announcing on January 5^th that is has signed a definitive agree to acquire three inpatient hospitals from Haven Behavioral Healthcare for $91 million in cash.
• Reverse Merger: On November 11^th, Acadia completed its merger with PHC, Inc., d/b/a Pioneer Behavioral Health (AMEX: PHC) and as a result became the leading publicly traded pure-play provider of inpatient behavioral healthcare services, based upon licensed beds.
• Add-on Acquisitions: Acadia purchased MeadowWood Behavioral Health System, an acute care psychiatric hospital, and Youth and Family Centered Services, Inc., an operator of 13 inpatient and outpatient psychiatric and behavioral health facilities, in July and April of 2011, respectively.

Private equity investors are also playing a meaningful role in this sector, accounting for roughly 30% of overall activity during 2010 and 2011. Just prior to the new year, Cressey & Co, a healthcare-focused private equity firm, acquired a majority stake in InnerChange, a residential treatment provider offering therapeutic services and accredited academics to young women with behavioral, emotional and substance abuse problems. This is investment marks the Cressey’s second investment in the behavioral healthcare sector; Cressey invested in Haven Behavioral Healthcare Inc. in 2008.

So what industry dynamics are catching the attention of both the public and private equity investors?

The following are a few of the more compelling attributes that in our view, will fuel the growth, investment and consolidation in the market.

1. Large and Growing Market. National expenditures on mental health and substance abuse treatment are expected to reach $239 billion in 2014, up from $121 billion in 2003, representing a compound annual growth rate of nearly 7%.The demand for behavioral health services has increased in recent years due to earlier and more accurate diagnosis of mental health conditions and the de-stigmatization of seeking treatment. It is estimated that approximately 6% of people in the US suffer from a seriously debilitating mental illness and over 20% of children either currently or at some point in their life, have had a seriously debility mental disorder. Moreover, the influx of returning US veterans from Iraq and Afghanistan will result in a growing percentage of veterans with serious mental and substance abuse disorders including schizophrenia, bipolar I disorder, PTSD and major depression.
2. Favorable Legislative Initiatives.  Recent legislative trends are increasing access to industry services as more individuals obtain insurance coverage in 2014. The Mental Health Parity and Addiction Equity Act (“MHPAEA”) of 2008, which went into effect in January 2010, requires health plans to provide coverage for mental health services on par with conventional medical health services and forbids employers and insurance companies from placing greater restrictions on mental healthcare compared to other conditions. This legislation not only expands coverage for the existing insured population, but also for the newly insured in 2014, a meaningful percentage of which are said to suffer from a mental health conditions.
3. Diverse Payor Mix. Compared to other healthcare services sectors, behavioral health is reimbursed by a diverse mix of public and private payors. With the exception of a few segments within behavioral health, no single payor type (state/local/federal, Medicaid, Medicare, commercial, private pay) dominates that market. That said, Medicaid represents a significant source of funds, so potential cuts to Medicaid funding should be watched closely.
4. Attractive Financial Model. Compared to general acute care hospitals, which typically generate mid-teens margins, inpatient behavioral healthcare enjoy margins in the range of 20-40% for acute hospitalization and 15-25% for residential treatment. Maintenance capital expenditures are minimal at approximately 2% of revenue.
5. Niche markets / delivery models… Downsize fitness. The behavioral healthcare industry includes a number of different sub-segments defined on multiple dimensions, including age, gender, illness severity, diagnosis, delivery model and payors. As a result, tremendous opportunity exists for providers to expand into attractive niche/specialty markets. Companies such as, Downsize Fitness, are pursuing the obesity and eating disorder market(s) by developing niche-specialized facilities. Downsize fitness is new to the fitness center scene and is designed specifically for the chronically overweight and obese individuals. Trim men and women are not allowed as members, providing a more welcoming environment than in most conventional gyms.

With healthcare reform just around the corner, TripleTree expects the barrage of M&A and investment activity to continue and even accelerate. We look forward to sharing our thoughts as this market continues to evolve – let us know what you think.

Jon Hill

Jonathan Hill is a Vice President with TripleTree covering the healthcare industry and specializing in population health management and facility-based services.  You can contact him at jhill@triple-tree.com.

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Focus, Economics and Patient Satisfaction…three keys to understanding Ambulatory Surgery Centers

Historically, surgical procedures were performed within the four walls of a hospital.  However, the past decade has seen a dramatic rise in surgery volume being performed in an outpatient setting—largely ambulatory surgery centers (ASCs).  As seen below, the number of U.S. ASCs is approaching 6,000, and overall procedure volume has shifted dramatically from inpatient to an outpatient setting.

Source: VMG Intellimarker 2011 and 2010

ASCs are outpatient facilities at which surgical procedures are performed on patients who do not require an overnight stay.  ASCs were originally established in 1970 and most commonly perform elective procedures with short anesthesia and operating times.  Typical procedures include eye, orthopedic, hand, plastic surgery, pain management, podiatry, ear-nose-and-throat, endoscopy, and laparoscopy at facilities usually ‘free-standing’ (not part of a hospital campus).  ASCs operate within a highly regulated industry with each facility being required to comply with rigorous oversight and certification.  Many of the same standards, constraints and requirements as inpatient hospital operating rooms apply to ASCs.

ASCs receive less of their total payments from Medicare/Medicaid than an average hospital – 37% for ASCs vs 61% for an average hospital which reduces some of the reimbursement pressure.  This makes sense as most of the procedures performed in this setting are elective in nature, which tend to come from the population not utilizing government health benefits.  We’ve assessed three key advantages offered by with the ASC approach to care:

• Compelling economics:  ASCs are able to provide lower-priced procedures because they have a lower cost structure than a traditional hospital setting along with a “focused factory” approach which creates efficiencies.
  • By shifting just half of all eligible outpatient surgeries to the ASC setting, Medicare could save an additional $2.3 billion annually (Ambulatory Surgery Center Advocacy Committee, 2010)
• Consumer appeal:  ASCs are generally free standing and located in the suburbs, which provide patients with better access.  Also, ASC schedules are better maintained because there is no possibility of emergency surgeries preempting a scheduled procedure.
• Focus, specialization and quality:  It’s difficult to track the quality of care provided in ASCs compared to hospitals because ASCs are not yet required to report comparable outcomes data – which will likely change in the near future.  We do know, however, that ASCs focus on a select number of procedures at a high volume, which allows doctors to perfect their craft and deliver high quality results to patients.

The advantages are not only for patients, but also for payers and providers.  Payers are able to negotiate more favorable rates for procedures performed in the ASC which lowers their overall costs of care.  Providers which are part of the ASCs have seen large economic gains as they’re able to take economic stakes in the operations.  Overall, ASCs have grown to become an important part of the care delivery landscape and as the three advantages listed above might dictate, this an area we predict will have an increasing relevance in the healthcare landscape.

Let me 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.

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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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A Look at Oncology Medication Management

Each day, in the U.S. alone, over 4000 more people are diagnosed with cancer. In 2010, there were 13.8 million cancer survivors alive and some 18.1 million people in the U.S. are expected to be living with cancer by 2020 (Journal of the National Cancer Institute).

Of the nation’s 10 most expensive medical conditions, cancer is the highest per-person price medical condition.  Medicare data and other sources show that in 2010, care for the 16 most common types of cancers in U.S. women and 13 common types of cancers in U.S. men costs the healthcare system $124.6 billion.

Correlating Cost Increases and Survival Rates:

With the escalating cost of living with cancer and the increase in cancer survivors, technologies and services are evolving to help individuals live with cancer longer, happier, and cheaper.  Cancer is becoming an area of focus for payers to lower the cost of care and improve patient outcomes.

Health plans have begun pilot programs with Biological Management Companies (BMCs) to assist in oncology treatment.  The traditional oncology medication management approaches are evolving and payers are looking to reduce inappropriate drug utilizations and inefficiencies in distribution without impacting quality.

According to market research company HIRC, two-thirds of plans will have clinical pathways for high incidence cancer conditions by 2012.  There are numerous payers currently piloting with BMCs to help develop decision tools, medication management, and physician reimbursement schemes. A few recent pilots include:

• Aetna with US Oncology and P4 Healthcare
• BCBS of Florida and Coventry with iCore Healthcare
• BCBS of NJ with Via Oncology / PathForward
• CoreSource and Employee Benefit Management Corp with Biologics
• Highmark and AmeriHealth with P4 Healthcare
• Humana with New Century Health

Payers aren’t the only ones concerned about cancer costs.  Employers rated cancer as the number one specialty area of concern in a recent survey by HIRC.  Specialty Pharmacy Programs for the management of oncology medications continue to rise with 60% expecting to use them by 2015.  Specialty pharmacy providers (SPPs) have begun to offer oncology-specific services, including oversight of distribution and tighter management of supportive care products.

As payers and employers continue to form strategies and evolve payment methodologies for cancer, healthcare IT companies are making their bets on this high cost area:

• In late 2010, McKesson acquired US Oncology Holdings, a services, resources, and tools for cancer care delivery system for more than $2 billion.
• Following McKesson, in September 2011 AmerisourceBergen acquired IntrinsiQ, a medical data and business analysis solutions for the oncology market for $35m

The potential costs continue to escalate with direct cancer care expenditures expected to reach $158 billion in 2020.  We are continuing to watch this market as new players emerge and global healthcare services and technology vendors seek to lower cost and improve outcomes for cancer patients.

Let us know what you think!

Joanna Roth

Joanna Roth is a Senior Analyst at TripleTree covering the healthcare and technology industry, specializing in education solutions. Follow Joanna on Twitter or e-mail her at jroth@triple-tree.com.

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Linking ICD-10 and the future of HCIT

With only 18 months left until the Centers for Medicare & Medicaid Services (CMS) ICD-10 implementation deadline, pressure to comply is mounting for a vast array of healthcare constituents.  ICD-10, or International Statistical Classification of Diseases and Related Health Problems 10^th Revision, is a medical code set used to standardize both diagnoses (ICD-10-CM) and procedures (ICD-10-PCS).  Mandated to replace the existing ICD-9 standards on October 1, 2013, its been well documented that ICD-10 will provide a level of clinical granularity far exceeding that of its predecessor; and as shown below a vast increase in the sheer number of codes.

The implementation deadline has spurred some debate.  James Madard, Executive Vice President and CEO of the American Medical Association (AMA), recently wrote a letter to HHS Secretary Kathleen Sebelius asking her to halt the ICD-10 implementation process.  “The timing of the ICD-10 transition…,” Madard wrote, “… could not be worse as many physicians are currently spending significant time and resources implementing electronic health records into their practices.”

Madard alludes to an issue that is central to both payers and providers which are that multiple Healthcare IT guidelines (ICD-10, HITECH, etc.) will need to be smoothly and quickly implemented to ensure proper reimbursement and avoid heavy government penalties.  The ICD-10 concerns for providers are becoming a boon to vendors, as solutions ranging from data analytics and terminology management to consumer focused solutions are enjoying strong demand.

In our view, vendors need not worry that an extended deadline will curb this demand.  As the healthcare universe shifts from fee-for-service to capitation and bundled-care reimbursement models, innovative technology will be a chief driver in achieving cost reduction.  In addition, we’re recommending that vendors align their business strategy and product offerings around three initiatives:

1. Effectively working with Channel partners to provide bundled “end-to-end” solutions that satisfy reporting requirements for multiple federal mandates
2. Creating flexible product platforms that can be easily integrated into legacy systems (and updated as necessary)
3. Stay out ahead of government regulation and build organizational agility that can meet changing client demands

Let us know what you think.

Jeff Farnell

Jeff Farnell is an Analyst at TripleTree covering the healthcare industry, with a specialization in revenue cycle management, compliance and tech-enabled business solutions. You can email him at jfarnell@triple-tree.com.

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