State Health & Wealth Benefits Administration: Simple Coordination…Millions in Savings

As government’s role in the provisioning of health care and welfare benefits continues to increase, the number of participants in state administered benefit programs and the burden of supporting those programs is also growing.   Anti-poverty spending as shown in the graph below, has reached 4% of GDP, of which healthcare entitlement programs represent more than 1.5% (and is speculated to be the largest risk of runaway spending). Given the demographics of the low-income population served by these programs, a high level of duplicative efforts are taking place on a state administrative level in order to manage and administer these benefits.

Below are a few more details –

What types of state funded programs potentially have significant overlap in addressable market?

• Medicaid
• Medicaid Transportation Payments
• Low Income Energy Assistance Program Payments
• SNAP (Supplemental Nutrition Assistance Program)
• WIC (Women, Infant & Children Program)
• TANF (Temporary Assistance for Needy Families)
• Child Care Time and Attendance
• SCHIP – State Children’s Health Insurance Program

The tip of the iceberg

In most states, individuals qualifying for food stamps, welfare, Medicaid, etc., must separately apply to different state agencies for these programs.  An individual enrolling in multiple programs is just the beginning, as separate departmental processes, eligibility compliance checks and inevitable movement in and out of various programs compound the issue.

Finding an efficient path

As with any inefficient system, waste evokes opportunity. The ability to bundle benefits and combine or transfer the management of those benefits across state agencies will be extremely important in the lowering of administration costs and streamlining the benefits distribution across the states. As states realize the efficiencies gained from this exercise, they will likely invest in solutions that help manage multiple benefit plans and technology that is able to track eligibility and even auto-enroll the appropriate individuals to the appropriate programs. Unfortunately, this is much easier said than done.

Clearing hurdles

The main obstacle in this situation is the lack of administrative and payment capabilities to enable the states to provide the benefits to the eligible consumer (enroll and administer the programs), track usage/transactions, and appropriately distribute the funds. While this will not happen right away, once the public health insurance exchanges are established, it would make a lot of sense to use that exchange infrastructure to allow people to enroll in not only Medicaid, but other government benefits.

This area of compliance in health care is a focus for our team and is rife with opportunities – let us know what you think.

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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Humana Bolsters Care Management Capabilities with Acquisition of SeniorBridge

Humana announced an agreement this past week to acquire SeniorBridge, a New York-based provider of in-home care services to the chronic care and senior populations. The acquisition marks the latest example of Humana’s attempt to position itself as a more retail-focused company through a series of acquisitions and strategic initiatives.

Over the past eleven years, SeniorBridge has established itself as a leader in managing complex chronic conditions for seniors in the self-pay (or private-pay) market. Through the acquisition, Humana will be presented with a host of opportunities to leverage SeniorBridge’s model across a broader market base:

• Medicare – upon receipt of Medicare certification, Humana will be able to leverage SeniorBridge’s suite of care management capabilities across its nearly 2 million Medicare plan members.
• Humana Cares – SeniorBridge bolsters the Humana Cares segment of the company, which provides on-the-ground care management services to over 185,000 chronically ill plan members. The Humana Cares segment of the company has been vital to Humana’s emergence as a leader in the Medicare Advantage Special Needs Plan (MA-SNP) market.
• Other Payer Groups – several reform related initiatives, such as reimbursement reform and medical loss ratios, have positioned in-home care to be a large growth area for SeniorBridge given its significance to payers as a cost-saving tool (managed care has traditionally only contributed to a small portion of SeniorBridge’s overall business).

Humana has been among the most progressive payers in promoting member self-management and wellness through a number of initiatives, including:

• Humana Guidance Centers – “store-front” hubs located in select cities provide members with access to a suite of wellness and self-management products.
• Remote Medical Monitoring – provides real-time condition monitoring solutions to help address member health challenges in real-time.
• Humana Center for Health & Well-being – Humana’s LifeSynch subsidiary provides face-to-face health coaching resources to plan members. In addition, the Company has established a partnership with MinuteClinic to provide quick-access to routine treatments.

In addition, Humana’s recent acquisition of Concentra, along with several urgent care clinics from NextCare, signaled their entrance into the provider marketplace. These strategic moves have provided Humana with a mechanism to execute on their strategy to become more consumer-facing and the flexibility to adapt to some of the new realities established through health reform as they are implemented over the next few years.

Other recent investment activity in the payer marketplace signals that Humana might not be alone in their efforts to diversify and establish an “on-the-ground” presence (for example, UnitedHealth’s purchase of Inspiris, BlueCross Blue Shield of Florida’s investment in CareCentrix).  Payers appear to have realized the disconnect that has existed historically between themselves and their customer base. Given the “bets” that payers have made across the landscape, it is clear that payers are seeking to re-orient themselves around the consumer and provide consumers with an opportunity to take a greater role in controlling their healthcare. While a variety of strategies are being used, payers have been prioritizing investments and services around the “consumer experience” to increase overall access and transparency.

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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Successful M&A Exits in the Consumer Healthcare Device Market

Consumer healthcare devices are everywhere. They help people track physical activity, measure caloric intake, and play a vital role in personal health and wellness achievements.  Driven by consumer engagement, technology proliferation and a billion dollar-plus market opportunity – investors are pouring millions of dollars into this market with the hopes of a big return (see examples below).  Public exits (IPOs) are tough, so the path to liquidity for many of these firms will be acquisition.

• $70 million raised by Bluetooth headset maker to enter health monitoring market.
• $50 million raised by mobile consumer focused diabetes management system.
• Best Buy invests in mobile fitness ear bud technology.

Few companies have yet reached a size and adoption threshold to be deemed a success, but as the winners emerge product design, value proposition, access to customers, defensible intellectual properly and ability to integrate will factor into their strategic paths. Here is a check list for the CEOs who are considering an exit in the next 8-10 quarters:

• Competition – Separating from the pack of consumer health device companies is difficult.  There are dozens of credible companies and scores of wannabes (100+ according to our market definition).  While most of companies in this category are below $15 million in annual revenue, the strongest players have venture backing, cash reserves and relevant consumer and healthcare experience sitting on their Board.

• Customer Adoption – Consumers are tough critics and prone to device abandonment.  Winners in this category with figure out how to provide a consumer health device that is easy to use, convenient, and effective.  Also, given that consumer health devices today attract a narrow user based, successful vendors will figure out a way to expand adoption and find a broader audience of which to market and sell its product.

• Distribution – Signing a big distribution deal can be the best way to gain quick, sustainable market exposure. For these vendors it can be a great way to develop a strong, sustainable partnership that could lead to M&A down the road if the partnership is successful. Especially in the consumer market these major distribution channels can make or break a business in the early innings.  Acquirers will look for devices that can be sold effectively through multiple channels. Winners will maintain a broader sales strategy and not become dependent on a single distributor, which makes the business susceptible to channel risk and unattractive for a premium M&A event.

• Finding the Right Business Model – This is the biggest stumbling block for most consumer healthcare device companies.   In most cases, larger companies are less acquisitive when a business cannot demonstrate a scaleable business model.  Many vendors in this space simply want to achieve user adoption at the expense of a longer-term revenue plan, when they should be thinking about keeping customers over a five year (or longer) period.

• Recurring R&D costs – Companies in this market must continuously re-invent themselves with smaller, sleeker devices.  This can be the most taxing aspect of the market and certainly hurts a company’s chances of becoming highly profitable, especially when they are investing in growth.  Manageable cost structures, vertically integrated manufacturing models, web-based user interfaces and other features are all relevant to a complete product experience.

TripleTree has monitored the consumer health devices space for years and we’re bullish about the prospects for continued innovation and growth.  We’re watching the emerging companies address consumerism in thoughtful and innovative ways and look forward to watching the evolving strategic relationships between these innovators and global players.

Let us know if you have additional thoughts on this market or a different perspective.

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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Consumerism in Healthcare

The U.S. healthcare system is entering a new era for consumers.  Consumers have become engaged ‘healthcare stakeholders’ and are demanding greater understanding of their options around care and costs.  As a result, consumers (aka patients, employees, and health plan members), are starting to realize that their influence (which has been steadily building over the last decade) have meaningful clout in the healthcare economy.  Below are four relevant initiatives we assessing:

• Health programs, care reminders, and incentives.  Consumers want easy access to online tools and resources that enable care direction and lifestyle management including programs like:
  • Medication Therapy Management tools that connect patients with physicians and pharmacists.
  • Care reminders that can be securely pushed to consumers through electronic messaging mediums such as phone, email, and text message.
  • Incentives can be a strong driver towards encouraging healthy behavior with insurance discounts for health and wellness activities like joining a health club.
• Better options, access to care, and transparency
  • Allowing patients to take more control of their care options and reviewing the costs associated with those procedures is a major factor in healthcare consumerism.
  • By providing education, pricing data, and easily accessible online content, patients can make more informed decision about care, which drives patient awareness, improves adherence, and transparency.
• A ‘retail-like’ healthcare experience
  • Customer satisfaction surveys typically rank ‘shopping for health insurance’ at or near the bottom of most industries.
  •  Traditional consumer expansion about a ‘retail’ shopping experience has been lost in health insurance, and consumers need online tools such as portals, comparison engines and programs for population health management (PHM). Opening this business-to-consumer (B2C) channel will create more clarity around cost, treatment options, and alternatives.
• Flexible payment options and improved customer service.  Most consumers would agree that managing the payment process for healthcare related expenses can be a nightmare. 
  • Wouldn’t it be great if a single trip the hospital resulted in one bill that included all charges and a single explanation of benefits (EOB)?   The lack of quality and continuity in customer service and support creates additional consumer frustration. Traditional customer relationship management (CRM) software tools that provide a 360 degree view of the customer in other verticals such as retail and financial services are only beginning to penetrate the healthcare market. Consumers want tools that provide more flexible payment options, simplicity around billing and cost, and an improved experience with customer service.

As consumers become more engaged healthcare stakeholders, the demand will increase for greater understanding of their care options, access, transparency, and costs.  Until recently there was little incentive for insurance companies and provider groups to change the model, and holding healthcare organizations accountable for these changes now is engendering consumer choice via competition, not legislation.  For more, check out our recent Principals Forum interview on the drivers of consumerism in healthcare and let us know what you think.

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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Wellness Now a Key Theme to the Healthcare Landscape Dialogue

Proactive preventive care is increasingly seen as a viable and in many cases necessary substitute to traditional reactive health care. Preventative offerings and wellness programs (including biometric screenings, care intervention, and health risk assessments) offer lower costs by addressing health issues prior to medical incidents, rather than after.

This psychological shift in our healthcare thinking has evolved around mounting healthcare costs and began entering consumer consciousness once it became apparent that we (the consumers) may soon be bearing more of our own healthcare costs.   Trends around wellness programs have shifted to a keen focus correlating healthy behavior and healthcare outcomes – all told, a broad societal “awareness shift” of the health effects of our individual behaviors.

Politicians and capital markets are taking note:

• Chicago mayoral candidate Rahm Emanuel’s recently announced that if elected he intends to implement an incentive-laden health and wellness plan for city employees projected to save Chicago $240 million over 4 years.
• 2010 saw numerous payer acquisitions of wellness companies, including OptumHealth’s acquisition of Wellness Inc., Humana’s acquisition of Hummingbird Coaching, and CIGNA’s purchase of Kronos Optimal Health, and, to name a few.

Much of this M&A activity has been driven by changing market regulations and broad government support. The Accountable Care Act of 2010 included many health and wellness provisions, including a potentially game changing provision altering prior HIPAA regulations. This provision raises the wellness incentives ceiling from 20% to 30% of the employee-only coverage portion of the plan (and includes the possibility of raising it to 50% pending review). The U.S. Department of Health and Human Services’ recently announced Healthy People 2020, a roadmap for public health and wellness that requires significant investment and utilization of wellness programs as a core component of national health goals.

This wave of public adoption is a key validation for “wellness,” a long-time healthcare “trend” that is now becoming a central theme in the broader healthcare dialogue.

Next steps? Continuing the momentum of wellness themes into effective wellness programs that capture meaningful participation from employees.

• While many U.S. employers currently offer some type of incentives, (56% according to the latest wellness survey by Buck Consultants, driving measurable wellness results means offering substantial incentives that drive meaningful participation.  Without incentives, participation in wellness programs, regardless of offerings, typically falls in an anemic range of 20-30% that fails to include the most at-risk members who are responsible for driving the majority of healthcare costs.
• Meaningful incentives drive participation increases of three to fourfold, bringing participation to 80-90% of those eligible, including engaging the top at-risk employee segment. This is a substantive increase and one that promises to shape the evolution of future wellness programs.

Our growing spate of advisory work and broadening research agenda underscore that preventative care and wellness programs are more relevant than ever. As we assess the landscape of wellness vendors, we’re most impressed by those firms pairing well-designed wellness platforms with go-to-market strategies that creatively leverage the incentives supported by health reform, and onboarding models that garner consumer/employee engagement.

Our research team is working on two reports that include “wellness” as a central theme; a Q1’11 publication focused on the Senior’s market, and a Q2’11 publication focused on healthcare informatics.  In addition, the 6^th annual Wireless-Life Sciences Alliance Convergence Summit will explore compliance, chronic care and a host of other wellness related topics.

Let us know if you’re interested in learning more, and have a great week!

Marc Baudry

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

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Cord Blood Banking Further Legitimizes Health & Wellness Platforms

The US Healthcare industry is continually striving for innovative ways to curb rising costs.  According to the Centers for Disease Control and Prevention, healthcare costs for chronic disease treatment account for over 75% of national health expenditures.   More and more statistics are showing the potential cost reductions which could result if advances were made in preventing chronic conditions; consider the following:

• A one percent reduction in the adult smoking rate could result in 30,000 fewer heart attacks, 16,000 fewer strokes, and save more than $1.5 billion over five years [Circulation, 1997]
• $96 billion in total annual public and private health care expenditures are attributable to smoking [CDC, 11/18/2008]
• If just 10 percent of Americans began walking regularly, t he cost of heart disease treatment could be reduced by $5.6 billion [Critical Pathways in Cardiology, 12/2004]
• Jumping from 9.4 percent to 25 percent of total Medicare spending, obesity among Medicare beneficiaries doubled between 1987 and 2002, but the share of spending dedicated to treating obese beneficiaries tripled [Health Affairs, 2006]

Employers, payers, and providers are adopting preventative health and wellness solutions to curb these escalating costs.  The numbers are convincing and it is evident a cultural shift is underway.  Employers are adopting onsite healthcare clinics, providing incentives for coaching programs, and investing in multiple health and wellness offerings.  Payers are seeking to offer screenings, coaching, and fitness incentives among others, with this week’s news that Humana has offered to acquire Concentra for $790 million proving that prevention continues to be top of mind.

As a subsector of healthcare, health and wellness is thriving in large part because of preventative solutions.  Here is yet another data point on a lesser known (but equally effective) area of preventative care:

• More than 4 million babies born in the US each year and more than 70 disorders which can be treated by the stem cells from the blood of umbilical cords thus new industry has evolved; Cord Blood Banking.  To date, cord blood transplants have been used to treat leukemia, lymphoma, blood disorders and some genetic diseases.
  • Today, expecting parents are paying out-of-pocket up to $3,500 by the time a child reaches the age of 21.  Even the US Health Services budget for the past three years totaled more than $36 million to build up the public cord blood stem cell bank.
  • Many of the leading private bank companies have partnered with physician and insurance companies to provide counseling and education on the availability and opportunity at hand.  For example BlueChoice HealthPlan of South Carolina includes in its Medicaid plan for expecting women, cord blood banking counseling and education.   Further some states, like Texas require education and information to be delivered to women during gestation regarding cord blood banking and donation options.

As preventative health continues to be top of mind for Centers for Medicare and Medicaid Services (CMS) and current health reform initiatives, TripleTree is closely watching emerging areas like cord blood banking and will include ongoing assessments of these types of treatment platforms in future blogs and research.  Some things to consider:

• Could payers in the future offer discounts for those parents who choose to store cord blood?
• Will the health and wellness industry continue to expand and thrive into other “out of box” industries as the way of life in the US shifts?
• Will preventative care be a solution for the US’s escalating healthcare costs?
• Is Humana’s acquisition of Concentra an early step toward preventative health for payers?

Let us know what you think and have a great week!

Joanna Roth

Joanna Roth is an 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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Humana’s Acquisition of Concentra Is A Multi-Pronged Move

Yesterday’s announcement that Humana has signed a definitive agreement to acquire Concentra represents a dynamic shift for Humana, diversifying the company from a healthcare payer to a large provider as well.   Perhaps the most interesting component of the transaction to watch will be how Humana can leverage Concentra’s footprint of more than 300 medical centers across the U.S. to grow revenues for both the payer and provider businesses.

As consumerism increasingly impacts the healthcare landscape and individuals have more choices and fewer obstacles for choosing health insurance, health plans are keenly aware they will need to significantly expand their consumer marketing capabilities.  Will Humana be able to use Concentra’s clinics as a storefront to sell Medicare Advantage and Prescription Drug Plans to seniors, or individual insurance products for other consumers?  Furthermore, how can Humana structure these plans to encourage the use of the Concentra medical centers while saving consumers money?

In addition to potential consumer implications, Humana joins Walgreens and Cerner, as large healthcare entities that have acquired businesses providing onsite health centers at large employer campuses.  As the first managed care organization with a large footprint of worksite health centers, it will be interesting to see how Humana can combine onsite services with the company’s provider network and population health offerings to attract additional business from large employers.  Concentra’s capabilities in occupational medicine add further employer-focused services that Humana can use to deepen employer relationships.  If integrated well, Concentra’s onsite and offsite medical centers, combined with Humana’s telephonic and online population health programs focusing on wellness and behavioral health, could help employers make a material impact on their healthcare costs.

TripleTree will continue to monitor how health plans continue to diversify their businesses through technology and healthcare services in order to stay relevant in the rapidly evolving healthcare landscape.

Have a great Thanksgiving!

Jason Grais

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

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Is a Healthy Workforce a Competitive Advantage? – 10/12/10

Speculation regarding the impact of health reform has run rampant across the United States, much of which has focused on whether employers will continue to offer health coverage to their employees or instead provide employees with cash to find their own plan. While the answer to this question may be important to health plans and third party administrators (TPAs), it is likely less impactful to population health management vendors selling directly to employers.

Regardless of the type of health coverage (or lack thereof) offered by employers, workforce health will continue to be a critical strategic and operational issue for companies to manage. In fact, there may be companies or whole industries that differentiate themselves as employers of choice through programs focused on improving and maintaining employee health.

How can a company that offers minimal health benefits to employees, or none at all, compete with a firm with a comprehensive health program? Health reform is driving employers toward comprehensive programs to not only attract and retain better talent, but drive higher productivity and have employees that feel more valued by their employer.

As we advise best-in-class wellness service providers, the benefits of a healthy workforce in a post-reform world remain top of mind, chiefly:

• Will the potential savings from not offering a health program truly outweigh the potential effects of that decision?
• How will the discontinuance of health benefits impact absenteeism, presenteeism and workers’ compensation claims?

Studies repeatedly show remarkable stats, including recent data from Indiana University-Purdue University, finding that 87.5 percent of health care claims costs are due to an individual’s lifestyle. The business case for successful wellness programs focused on improving participants’ lifestyles to prevent the onset of chronic conditions is significant and growing as healthcare costs continue to rise. Even if fewer employers are the direct payer of healthcare claims as a result of healthcare reform, optimizing workforce health will continue to be a direct benefit for employers.

Employer healthcare issues are central themes to TripleTree’s continued work in the broad category of population health management. Look for more insights here, and in an upcoming report scheduled for Q1’11.

Thanks and have a great week!

Jason Grais

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

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