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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Medicare Advantage…Here Today, Here Tomorrow…

CIGNA put a stake in the ground for the long term prospects of Medicare Advantage (M.A.) with its recent announcement that it would be acquiring HealthSpring for $3.8B (a 37% premium over its closing price prior to announcement).

HealthSpring primarily operates as a M.A. plan covering over 340K lives across 11 states (including over 800,000 Medicare Part D members).  CIGNA previously had a very limited presence in M.A. with ~44,000 lives entirely in Arizona.

CIGNA has been focused on diversifying its core US healthcare presence, so the move isn’t too much of a shocker, although many thought its approach would include international expansion versus a bold move into the government market.  It’s likely the HealthSpring business model was too alluring for CIGNA to pass on when you consider HealthSpring’s:

• Tight integration with network physicians including a high level of capitation and risk sharing;
• Strong leadership team lead by Herb Fritch whom possess the experience and know-how to operate a unique, physician-centric, coordinated care model; and
• Consumer brand presence within the senior market.

There is a large opportunity for CIGNA to leverage and replicate HealthSpring’s coordinated care model across their commercial book of business to drive efficiencies and deliver better care.  Additionally, CIGNA will benefit from its ability to cross-sell HealthSpring into new markets.

CIGNA is not the only health plan making moves in the M.A. market – recent M&A activity within the sector over the past 18 months include:

• Wellpoint – CareMore (2011)
• Aetna – Genworth’s Medicare Supplement (2011)
• Humana – MD Care (2011) and Arcadian Management Services (2011)
• HealthSpring – Bravo Health (2010)

HealthSpring was one of the few remaining M.A. plans with size and scale, and CIGNA’s move could prompt additional consolidation within the sector over the coming 12-18 months.  The list of targets with viable M.A. populations (100K+ lives) is becoming quite limited.  Some of these include Universal American and Wellcare, public M.A. plans with 100K+ lives; and XL Health, SCAN, Aveta and Universal Healthcare as examples of private M.A. plans with scale.

There have been recent headlines about increased pressure on reimbursement rates and minimum medical loss ratio (“MLR”) requirements posing a threat to the future of M.A.  My view, however, is that M.A. will not only survive, but thrive going forward and recent M&A activity would suggest the same.  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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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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If you Google ‘health’; you will no longer find Google Health

In a culmination of a yearlong rumor mill, Google finally came clean in its announcement  late last week that it would discontinue its personal health record (PHR) program, Google Health.

In many ways it’s a shame that Google has pulled out of evangelizing the PHR.  We have long been vocal that healthcare would benefit from non-traditional players entering the market with tech based solutions despite our skepticism on PHR adoption trends; that an outsider like Google tried to use its vast resources to innovate the healthcare market was inspiring.

Ideally, Google would have brought fresh ideas and tried-and-tested approaches from other industries (financial services, e-commerce) to tackle issues like collaboration, workflow integration, and data silos – all bugaboos for healthcare which other industries have solved.

Our top five reasons why Google Health failed:

• Lacked executive support within Google
• Lacked an elegant user interface
• Never deployed a scalable business/revenue model
• Failed to capture physician support
• Lacked Integration capabilities to healthcare information sources

Perhaps if Google Health was more Google-like (social, able to leverage advertising or other information monetization models, always connected to underlying information sources, and much more consumer friendly), adoption would have been better.

It’s likely however, that Google Health was doomed from the start.

Outside of tech geeks and fitness enthusiasts, PHRs simply have not seen wide market adoption as the most patients haven’t aligned around a paradigm of managing their health information 24×7.  Google created an engagement tool without a strategy to “engage the unengaged” and bet on the come that user adoption would materialize around the strength of Google’s brand.

Over the past several months we have increasingly talked and written about a healthcare market where consumers want to and in fact are becoming more engaged in their health. The problem is that consumers don’t know how to engage in their own health, and physicians don’t offer the necessary catalyst to make it happen.

Tools (like Google Health) are not enough.  Healthcare organizations need to put entire programs in place to engage a consumer with clearly articulated benefits (incentives, cost savings, better access to care, better care, etc.).  Once in place, more effective consumer targeting and engagement will follow.

In the coming weeks, we will be publishing research on consumer engagement platforms in healthcare and where innovative technologies will attempt to “engage the unengaged”.

Until then, 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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ACOs: Millions of Web Hits…Dozens of Theories…One Bottom Line

Nine million. That’s how many web hits are returned during a Google search for “Accountable Care Organization,” and reflects the countless articles, white papers and opinions that have been published regarding the potential successes and more likely pitfalls of the proposed ACO mandate. As highlighted in my colleague’s recent post, our team is continuously evaluating the business development opportunities being fueled by the demands and requirements of these new provider organizations.  Last week, the members of our Healthcare Executive Roundtable recently discussed and debated an element of the ACO equation that is not typically highlighted and could become a critical component of ACO success (or failure)…Trust.

In boardrooms around the country, health care executives are focusing on the technical requirements for their future ACO’s clinical and administrative systems. They are pouring over spreadsheets and attempting to understand the data and analytical tools that will be necessary for adequate financial and quality of care reporting. Getting these operational elements “right” is important; however, these business leaders should also focus on designing a culture – and the corresponding behaviors, communication, and incentives that will fuel strong and collaborative relationships between the ACO and its community of providers.

As Ed Brown, CEO of Iowa Clinic puts it, “People are unclear about what the value-based world looks like, and they’re unsettled on what clini­cal integration really means. And nobody has really made it work.”  This lack of clarity around the value-based model will make it challenging for providers to leave the financial security blanket of the traditional fee-for-service payment engine.  Moreover, influencing them to modify their approach to patient care for the benefit of the system and the promise of shared savings is a monumental effort. Success by any measure will largely depend on the trust established between providers and the ACO organization itself. ACO’s should prioritize establishing trust with providers in three key areas:

• ACO Operations and Management:  Providers need to trust that the ACO is well run. Understanding the organizational governance, expertise of the management team and core capabilities (strategic assets) will help generate confidence that the ACO is well-positioned to generate enough shared savings to make participation worthwhile. In addition, it is critical that the ACO measure and report management performance metrics that demonstrate its accountability to the providers.
• Compensation Incentives:  Providers need to trust that they are getting their fair distribution of shared savings. Clinical algorithms defining quality and outcomes must be evidence-based; and the financial tools and risk-adjustment methodologies used to distribute payment must be easy to understand. Above all, the organization’s compensation schemes must be highly transparent and accessible so that providers can validate that they are being treated as an equally valued business partner in the organization.
• Confidence in Provider Team:  Providers need to trust their ACO provider colleagues. If the right incentives are in place to bring members within the organization together, providers will need to trust that their peers will also be active participants working toward fully coordinated care within the ACO. Under an accountabilities and outcomes-based model, it will be important that providers view their care responsibilities as extending beyond the encounter. Active provider participants should be practicing first-class follow-up care, improving patient satisfaction, and reducing re-admission rates which will achieve collective rewards.

The inclusion of ACOs as a provision of the Patient Protection and Affordability Act is a strategy to realign delivery systems in the US so that they provide high quality, coordinated care.  The bottom line for achievement might simply boil down to whether providers can engage in meaningful and integrated relationships with the ACO and with each other. Since relationships are based on trust—predictability, integrity, and reciprocity–it is imperative that ACOs make trust a deliberate priority.  Our research and advisory agenda is 100% focused on the possibilities of ACOs, and moreover the innovations and business models which will be required to make them successful.

Let us know what you think!

Emma Daugherty & Archelle Georgiou

Emma Daugherty is a Senior Analyst at TripleTree covering the life sciences sector with a focus on provider technologies and patient safety.  You can contact her at edaugherty@triple-tree.com.

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 or email her at ageorgiou@triple-tree.com.

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