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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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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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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Data Aggregation and M&A Activity Bookend Outlook for Health Information Exchanges

Health Information Exchanges (HIEs) have been a hot topic in healthcare IT dating back to 2009.  HIEs are so often mentioned with interoperability platforms, data exchanges and integration engines that it has been difficult to sort out the actual services performed by an HIE, much less the relevant vendors and their solutions.

TripleTree defined HIEs as aggregators of electronic patient-centric, clinical information from disparate, unconnected information systems into a common repository for translation in a common format.  HIEs eliminate the need for patients having several EMRs for their health information – in some ways it becomes the virtual master patient record.

Three measurable benefits from the ability of providers to pull patient information from an HIE for a more accurate, real-time view of the patient’s health history resulting in better patient care and reduced costs include:

• Enhanced care coordination
• Prevention of harmful drug interactions
• Elimination of redundant tests and procedures

The mixture of consumerism and reform in healthcare is forcing this inevitable shift toward HIEs – and since Q1’10 we’ve seen four market proof points:

• Harris acquires Carefx: Feb 2011 – Harris acquired Carefx for $155m to expand Harris’ capabilities in government healthcare, provide an entry into the commercial healthcare market, and strengthen its position as a provider of interoperability solutions.
• Aetna acquires Medicity: Dec 2010 – Aetna acquired Medicity for $500m as a potential counter to Ingenix’s acquisition of Axolotl and a way for Aetna to become more relevant in the provider market.
• Ingenix acquires Axolotl: Aug 2010 –  Ingenix continued its 2010 buying spree and picked up a leader in the HIE space with Axoltol.  With Ingenix’s growing portfolio of HIT assets, we’re closely watching how they integrate Axolotl with their other clinical assets.
• Lawson acquires Healthvision (Cloverleaf): Jan 2010 – Lawson made a move to expand their healthcare presence “beyond just an apps vendor” to become a more integrated HIT player.

Despite this consolidation, a number of standalone, pure play HIE vendors (Wellogic, Informatics Corporation of America (ICA), MobileMD, HealthUnity, Orion Health) offer relevant solutions.  Aggregating patient and clinical data into a common repository is (and will be) relatively simple.  Complexity will come from those vendors who begin to build new applications that leverage the patient-centric, rich clinical data to create “data assets” on the backs of HIEs – a key to feeding the insatiable appetite around Accountable Care Organizations (ACOs) and the marketplaces growing need to influence:

• Care coordination
• Decision support and evidence-based care protocols
• Real time monitoring and event-driven triggers
• Longitudinal patient reporting
• Provider quality reporting and benchmarking
• Unified patient dashboards

The winners won’t be “data plumbers” or “just integrators” but will focus on adding the applications that leverage data into new business models.  It’s still too early to tell if the consolidators can beat out the specialist pure play providers, but if you have any thoughts or would like to hear more about this sector let us know.

Thanks and have a good week.

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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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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A Simplified View Of The Healthcare Informatics Landscape

Our team is closely watching the most recent moves in Washington D.C. regarding the healthcare overhauls destined to impact healthcare business operations and related software applications.

Specifically, we’re focused on the investments being made in technologies that bring payers and providers closer to better care via informatics and analytics.  The applications for informatics in healthcare are vast and will profoundly impact care delivery – as such, its the central theme to a research effort we recently launched and which will culminate in a report scheduled for publication in Q2.  Looking at technologies in the healthcare provider sector alone, significant opportunities exist for operational efficiencies that touch areas like:

• Patient Identification: The ability to appropriately integrate healthcare data into a master data management / enterprise master patient index (EMPI) is mandatory for making data meaningful and actionable.
• Patient Surveillance: Drug safety, infection control and real-time patient monitoring are only possible with advanced data collection and processing against mass databases of content.
• Predictive Analytics:  Predictive analytics applied throughout the administrative and clinical functions within a hospital (care coordination, A/R management, and revenue cycle) enables clinical decision support that can increase staff productivity and enhanced care.
• Computer Assisted Coding:  Incorrect medical coding and billing costs millions of revenue dollars to healthcare providers. Using sophisticated technology, such as computer assisted coding, to help manage clinical information and allow hospitals and clinics to appropriately code treatment will become increasingly important as the industry transitions from ICD-9 to ICD-10.

As analytic capabilities continue to evolve, a full spectrum of valuation metrics have been achieved spanning from 8x (TEV/EBITDA) to 75x multiples via recent M&A transactions.  Content centric global acquirers made the first bets – Elsevier acquired MEDai, a predictive analytics and data mining company in 2008, and last year ThomsonReuters acquired Healthcare Data Management (a healthcare data analytics for self-insurance health benefits plans) and ProfSoft (a physician and hospital performance analytics provider to payers).  Additionally Wolters Kluwer acquired PharmacyOne Source at the end of last year.   Traditional healthcare players like Ingenix, Cardinal Health, and Medco all made similar moves in 2010.

As the proliferation of value-based purchasing continues across CMS and the private sector (just last week CMS issued a proposed rule that would establish a federal value-based purchasing program), the demand for informatics to better manage healthcare will continue to grow.

As TripleTree assesses the market and builds out our perspectives for the upcoming report, let us know what you think. Thanks and have a great week!

Emma Daugherty

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.

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