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.

Read Full Post »

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.

Read Full Post »

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.

Read Full Post »

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.

Read Full Post »

ACOs: Good News for Skeptics

As TripleTree continues to cover the rapidly evolving opportunities associated with health reform, I have remained an optimist about the potential for the many health reform experiments included in the healthcare reform bill to create meaningful healthcare savings in the long term.   In particular, I have been hopeful about the various shared savings programs to meaningfully impact cost and quality in the healthcare system, and momentum has continued to build, with CMS naming 32 organizations to the Pioneer ACO program in December.

This is what makes the recent news from CBO disheartening.  Last month, they released an analysis showing that ten different demonstration programs – six disease management and four value-based payment approaches – have usually not had any meaningful impact on reducing Medicare spending.    One of these value-based demonstrations “allowed large multispecialty physician groups to share in estimated savings if they reduced total Medicare spending for their patients.”

Sound familiar?  Troublingly, this program had little to no effect on Medicare expenditures.  (The only program of the four that did have an effect on costs used bundled payments for heart bypass surgeries.)

Adding to the bad news, Leavitt Partners released a study late last year showing that of the 164 accountable care organizations (ACOs) they have identified (note that the Leavitt definition of ACO overlaps with – but doesn’t perfectly align with – the CMS definition), were somewhat evenly distributed across 41 of 50 states.  However, these same 164 were found in just 144 of the 306 hospital referring regions (HRRs) – a benchmark of regional health care markets where patients are referred for care.   While a number of these HRRs had three or more ACOs, large swaths of the country had yet to see even one yet suggesting that perhaps ACOs are springing up largely to compete with each other, rather than focusing on finding geographic areas where a new care delivery model could meaningfully reduce costs.  This is one of the issues that skeptics of the model are concerned about, as my colleague highlighted recently.

In any case, critics of the healthcare reform have certainly gotten some new ammunition in the past few weeks – we’ll be keeping an eye out for some good news to highlight in a future post.   As before, I still remain optimistic about the change in mentality that CMS’s ACO program seems to have brought in how payers and providers are rethinking the traditional and rigid zero sum game of treatment and reimbursement, allowing new ways for commercial payers and care delivery organizations to partner to deliver quality care.

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.

Read Full Post »

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.

Read Full Post »

Hospital Readmission Stats Can Have a Meaningful Impact on Reimbursement

With the New Year fast approaching, and the start of the Centers for Medicare & Medicaid Services’ (CMS) fiscal year shortly behind us (it began October 1, 2011), it seems appropriate to evaluate the major initiatives implemented by CMS in FY 2012.  When doing so, one program stood out more than many others—the implementation of the hospital readmission reduction program. In short, CMS has implemented a program—consistent with its value-based purchasing program—designed to improve the quality of medical treatment provided to patients by penalizing hospitals that are deemed to have an excessive number of Medicare inpatient readmissions.

CMS’ program to curb readmissions, which began in 2009 when it started publicly reporting 30-day readmissions, is part of its overall effort to reduce costs and improve the quality and coordination of patient care.  The premise of the campaign against readmissions is to punish and dissuade providers from releasing patients that will likely need follow-up care for the same ailment as they were just treated, which, theoretically, will cause providers to make sure patients are provided with the necessary treatment the first time they are treated and, as a result, reduce the number of expensive follow-up trips to emergency rooms.  The program, which currently only covers readmissions for pneumonia, acute myocardial infraction (AMI) and heart failure, takes a step forward in FY 2012 from being a program that is intended to “shame” providers by making the 30-day readmission information publically available, as was done until now with CMS’ pay-for-reporting program, to being a true “penalty” program.

Beginning October 1, 2011, providers’ 30-readmission data will be collected and used to generate an overall score for each hospital for FY 2012.  This score will then be used to determine if a hospital’s readmission rate is higher than the Medicare-calculated “baseline” readmission rate (which was calculated by CMS using reported readmission information from July 1, 2008 through June 30, 2011).  If so, the total operating payments due to the hospital will be reduced by CMS, with the maximum reductions being as follows: FY 2013 =1%, FY 2014 = 2%, and FY 2015 = 3%. In addition, beginning in FY 2015, CMS can expand the list of covered conditions to broaden the impact of the program.

While the reimbursement risk associated with this program may seem insignificant to some, many providers are operating under very thin margins, which will make even a 1% reduction in Medicare reimbursement meaningful.  For example, if a hospital’s total inpatient operating payments for FY 2012 were $25mm, that hospital will have $250k at risk for reimbursement reduction pursuant to this program. With the maximum penalty increasing 1% per year until FY 2015, the penalty and dollars at risk will undoubtedly heighten providers’ focus on their readmission rates. It stands to reason that many will also look to new solutions, technologies, and programs to help them avoid being penalized. New solutions aimed at patient engagement as well as remote-patient monitoring are areas of opportunity that we think will continue to be instrumental in addressing the readmission dilemma providers are facing.  

Have a great week.

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

Read Full Post »

Preserving the Quality of Care amidst Surging Hospital M&A

Over the past 18 months, the healthcare industry has experienced a tremendous uptick in the volume of hospital mergers and acquisitions. Since January, over 60 transactions have been announced, a 65% increase year over year. While the barrage of activity can be attributed to a number of structural changes stemming from healthcare reform (e.g. emergence of ACOs, reimbursement cuts, reporting requirements etc.), it is clear that non-profit hospitals under mounting financial pressure have become prime acquisition targets for for-profit hospitals and private equity investors.  Vanguard Health’s purchase of Detroit Medical Center and Steward Health’s purchase of Charitas Chrisiti in 2010 marked the beginning of a wave of acquisitions that will likely roll on through 2011 and into 2012.

Source: Ponder & Co. and Irving Levin Associates, Inc.

We believe the hospital industry will continue to consolidate and undergo tremendous structural and organizational changes in the decade ahead. Perhaps Fortis offers a few key principals to emulate in order to ensure the preservation of high quality care. Nearly 80% of U.S. acute-care hospitals are non-profits and a significant portion of them failed to break-even in 2010. Amidst the financial crisis in 2008 and the subsequent sputtering of the U.S. economy, non-profit hospitals have been required to delay critical investments that could meaningfully enhance efficiency and profitability. Concurrently, revenue growth has been challenged by with both price and volume trends. In addition to cuts in Medicaid and Medicare, many Americans are electing to cut back on medical services and are forgoing elective surgeries, the most lucrative procedures for hospitals. With declining revenues and scarce resources for investment in modernized technologies, non-profit hospitals are seeking partnerships with competitors or other investors with much deeper pockets.

So what are the implications of this flurry of recent hospital M&A activity for you and me?

• How will the quality of our care change, if at all?
• Can the culture and mission of a non-profit hospital be integrated with that of a for-profit, often publically traded organization, and how can it affect coordination and communication across the continuum of care?
• Let’s not forget about the reaction of the individuals providing us care. Can these mergers agitate the physicians and result in significant turnover?

While the rationale for many of these transactions makes sense, in theory, integration can be the most critical and challenging component of a transaction. A botched integration plan can have tremendous consequences on the quality of care.

Fortis Healthcare – A Mini Case Study in Consolidation

Although there is not a standard playbook that each hospital can follow, one hospital system has successfully architected an aggressive M&A strategy and may be a model other hospital systems can follow. Fortis Healthcare, one of India’s largest healthcare hospital systems, has experienced tremendous growth since its founding in 2001. Fortis now has 54 hospitals within its system, one-third of which were acquired. Over the past nine years, Fortis has grown its patient capacity and revenue at CAGRs of 40% and 70%, respectively, and has also enjoyed significant margin expansion. What is most remarkable is that this explosive growth has not come at the expense of quality. Fortis continues to deliver clinical outcomes that rival those of Kaiser, Mass General and Mount Sinai.

Hospital	Mortality (%)
Beth Israel Deaconess Medical Center, MA	0.58
Fortis Health Care, India	1.13
Brigham and Women’s Hospital, MA	1.15
Massachusetts General Hospital MA	1.61
Kaiser Foundation Hospital, CA	2.03
State of New York aggregate, NY	2.09
Mount Sinai Medical Center, FL	4.20

Source: Data excerpted from Regina Herzlinger and Pushwaz Virk, MD, “Fortis Healthcare (A),” HBS No 9-308-030 (Boston: Harvard Business School Publishing, 2008), p. 13

• Shared Learnings. The target company should not always be forced into the acquirer’s model. The target company may possess superior “best-practices”, and the acquirer must be willing to accept and implement them into the combined organization.

• Patient Care Delivery. Be mindful of all patient touch points from admittance to discharge. Develop support systems that will guarantee a repeatable, high-end service that exceeds the patient’s expectations.

• Retain Top Talent. The acquirer should be prepared for cultural differences and implement the proper incentives and leadership development programs to retain the top talent. Effective leadership within a hospital system requires a delicate mix of senior clinicians and management professionals.

• Efficient Systems. Measure and quantify clinical and non-clinical processes, identify areas of improvement and eliminate variability. Develop standardized processes that are both replicable and scalable.

Let us know what you think. Have a great week.

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.

Read Full Post »

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.

Read Full Post »

5 MD’s, 4 CEO’s, a PhD and a CIO agree on “what”, they’re now focused on “how”

Last Friday, the TripleTree Health Executive Roundtable (HER) convened for their annual discussion and debate on this year’s theme…consumerism in health care in a post reform world.  In the spirit of giving you, our faithful reader, a glimpse into the upcoming research report from the HER, below I’ve summarized some of the opinions expressed during our day and a half gathering.

• Patients as consumers are emerging from being an afterthought to center stage…
  • “Getting consumers to understand price and its relationship to quality and value is important”
  • “In order to achieve customer loyalty, we must find a way to individualize care”
  • “Trust is key in driving change of consumers”
  • “Business focus is tough if the consumer isn’t at the center of decision making”

• Current health care models support (and create) dysfunction and call for innovation…
  • “Physicians are only paid through the tyranny of the office visit”
  • “Managed Care neither manages nor cares”
  • “Unfortunately, our current reimbursement model is inefficient, yet is at the center meaningful changes for patients to become consumers”

• For electronic health records (EHRs) and other technologies, start with the end in mind..
  • “EHRs must get the right info into the right hands, but there is no consensus on what that info is and that is where the question of purpose”
  • “It a stretch to think that technology alone will change practice, culture trumps strategy”
  • “Technology is ahead of the change curve and misaligned with reality”
  • “ICD-10 is akin to ‘academics gone wild’”

Needless to say, we witnessed a spirited and opinion filled day-and-a-half session!

While it’s not controversial to opine that innovation in health care is a fragmented pursuit, and as our roundtable focused on how best practices from financial services, retail and media can be applied to consumerism in health care; the often cited hurdles of reimbursement and physician-patient-payer connectedness remained as massive hurdles.

We will publish the collective viewpoints on consumerism in healthcare from our HER this quarter, including companion video interviews bringing each individual opinion to life.  We’ll host both on our web site, and would be happy to send you the link when published.  Let us know if you would like a copy of the report and have a great week!

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.

Read Full Post »