Revisiting the Health Cooperatives Morass

By Clive Riddle, January 22, 2016

A new Wall Street Journal article, Obama Administration Works to Fix Health Insurance Co-Ops, covered Andy Slavitt’s - acting CMS administrator – testimony to the Senate Finance Committee regarding how to recoup federal loans from failing co-ops, how so many co-ops failed, and what future fixes are planned for the cooperatives, including reducing funding restrictions. A graphic accompanying the article re-hashes the $1.5 billion lent to co-ops that have failed, which range from $265 million in New York to $60.6 million in Oregon. Yesterday’s edition of Inside Health Policy  reported that Slavitt has indicated risk adjustment changes proposed for 2017 may come sooner. The natural fallout from the failed and failing cooperatives continue to surface in the news. For example, this week it was announced the failed Kentucky Health Cooperative was placed in liquidation.

What CMS can do to mitigate the tenuous position the remaining cooperatives are in is news. But the bulk of current media discussion of cooperatives continues to beat the dead horse of the number of failed cooperatives, their cumulative losses and unpaid federal loans, all which was significantly covered in the fall. There was plenty of blame to go around: co-ops underpricing themselves in the market, CMS policy restricting their abilities to capitalize, CMS risk adjustment policy and congressional reduction in funding for said policy. The dead horse will continue to be beaten in the news – after all it is an election year.

But perhaps a more fundamental issue that wasn’t talked about enough was simply that start-up health plans are going to initially lose significant amounts of money in new markets even under the best of circumstances, and the start-up losses weren’t adequately budgeted, capitalized or communicated in setting stakeholder expectations.

If you’re keep tabs of the continuing status and travails of the cooperatives, two sites are worth bookmarking: U.S. Health Policy Gateway's Co-op Performance by State and the National Conference of State Legislature’s Health Insurance Purchasing Cooperatives and Alliances: State and Federal Roles.

Henry Loubet on Three Immediate Trends Impacting 2016 Healthcare

By Clive Riddle, January 15, 2016

What’s in store for 2016? Henry Loubet, Chief Strategy Officer for Keenan, tells us “The business of health care has experienced both evolution and revolution through the decades. Innovation and transformation are driving dramatic developments in the health care industry at a rapid pace these days. While the major insurers' merger and acquisition activity will draw plenty of speculation about the health care landscape, I believe there are other, more immediate trends that will influence policy and financial decisions in 2016.”

Henry Loubet

Here’s three trends Henry points to for 2016:

The 2016 Election could potentially hold transformative Affordable Care Act impacts, with a new President and approximately 470 seats in the House and Senate to be decided. We don't know who will ultimately occupy those offices or whether the partisan balance will spell the possibility of the ACA being modified or repealed. Even with a strong Republican shift, there are significant barriers to repealing a law that now provides health insurance to millions of Americans. Some elements that would be easier for Congress to change about the ACA include risk corridors reimbursement, Cadillac Tax modification or deferral, or provisions affecting Medical Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

Disruptive start ups will continue to alter how health care is delivered as more members of the Millennial generation become health care consumers and entrepreneurial purchasers. Companies like Oscar, Zenefits, and Omada Health all appeal to those who are most comfortable functioning in a connected environment. These organizations have realized growing valuations as they've acquired market share at unprecedented rates. Their approach to care access should make telemedicine more mainstream, promote adoption of wearable devices for wellness and condition management, and expand utilization of "minute clinics" and other alternative treatment venues.

Not frequently discussed, but a growing area for health care is the application of non-occupational medical, pharmacy, and wellness/condition management principles to workers' compensation. Inflationary increases in occupational medical have prompted steps toward implementing drug formularies, preferred provider networks, and wellness/population health management as risk management strategies to reduce paid claims as well as the incidence and severity of workers' compensation claims. Though maybe not in 2016, we will be monitoring whether the line between occupational and non-occupational medical becomes less distinct or eventually eliminated.

Henry’s comments originally appeared in in MCOL’s December-January 2016 issue of ThoughtLeaders

“Fateful Eight” Trends to Watch in 2016

by Clive Riddle, January 8, 2016

With apologies to Quentin Tarantino, here are a “Fateful Eight” collection of trends to watch in the business of healthcare for 2016, in no particular order:

1. Prescription drug slice of the cost pie

While the overall healthcare cost trend has been relatively fit and trim for more than a decade, prescription drug costs are consuming a growing portion of the healthcare cost pie, and threaten to send the entire cost structure back to more obese levels.  Watch for a continued shift in priorities and resources towards managing this sector. A December MCOL e-poll on managing prescription costs, co-sponsored by Keenan, found that 41% of respondents felt the prospects for managing prescription costs going forward will be somewhat difficult and challenging, and 56% felt the prospects will be very difficult and challenging. 71% would place a higher priority on dedicating new or additional resources in managing prescription costs, compared to dedicating resources to managing other components of health care costs, and another 16.5% would place the highest priority in this regard.

2. Aftermath of health plan consolidations

There really can’t be the same level of mega health plan mergers in 2016 to follow up on the 2015 Aetna-Humana; Anthem-Cigna; and Centene-HealthNet deals, because we’re running out of separate mega health plans to merge with each other. But 2016 is a key year regarding health plan mergers none the less, as regulatory review of these deals gathers steam, individual health plan markets shake out, and the merged mega plans unveil a more detailed vision of health plan life post-merger.

3. Onward march of health system m&a

But merger and acquisition activity will still flourish in 2016, on the health system side, particularly as systems continue paths towards integration as they acquire and manage more and more medical group practices.

4. Private sector embrace of two ACA concepts

For all the political pushback the ACA continues to experience, its noteworthy that two ACA concepts have morphed over into the healthcare private sector with gusto.  Private health insurance exchanges and commercial accountable care arrangements have both evolved from the ACA primordial stew to become significant private sector initiatives that will play in increasing role in 2016.

5. Pay for Value Initiatives

But as significant as the rise in public and private accountable care arrangements have been, the biggest action in the provider reimbursement and care delivery arena is cast in the wider net of pay for value. While encompassing a range of type of initiatives, all things pay for value will be what to watch for in payer-provider relationships in 2016.

6. Healthcare Political Theatre

It’s a presidential election year. ACA opponents will continue pushing back on all possible fronts. While public opinion polls show the country is still quite divided on the ACA, polls also show it is slipping some in relationship to priority of other national issues.  But this won’t stop healthcare from being a featured actor in political theatre for 2016, casting ripples of uncertainty for the prognosis of the healthcare environment post-2016.

7. Quiet but big adoption progress for all things mHealth

Perhaps all the big things that can be said for the moment about mHealth have been said. While 2016 might not be the year that big new, new shiny things will be touted to change the face of healthcare forever, a more quiet revolution will take place in 2016 as more and more consumers continue to adopt various apps and technologies that are out there already, just waiting to gain traction.

8. The ever growing burden of consumer cost sharing

The ever upward spiral in the burden of consumer cost sharing is not news. Perhaps though, this growing burden might relate to the parable about the frog in the frying pan, who just sits there if the temperature is just increased one degree at a time. While things aren’t boiling over yet, the pace of marketplace and regulatory reactions to this issue should pick up in 2016.

Provider Collaboration – Bundled Payments Top Survey Results for Impact on Medicaid Transformation

by Clive Riddle, December 11, 2015

MCOL has just released results from its second annual Medicaid Transformation e-poll of stakeholders interested in Medicaid transformation. Last year, when respondents were asked to a rank of topics for their impact on Medicaid Transformation, with 1 being the top rank, Provider Collaboration/Engagement and Risk Sharing virtually tied with State Medicaid Funding and ACA participation for the top spot (based on weighted average rank). This year, there was some separation between the two, with Provider Collaboration taking the top spot. Breaking down these results by category of respondents, providers definitively gave collaboration the top ranking, while purchasers and vendors/others results were more mixed.

When asked which type of provider collaboration would have the most impact, last year’s results were mixed, but this year bundled payments and other new payment models emerged as the clear top choice. Interestingly, perceived Medicaid ACO impact reduced this year from last, with providers seeing ACOs having less impact than purchasers or vendors/others.

Below are table of the results broken out by respondent category, along with 2015 and 2014 totals:

Taking an early Post ICD10 Transition Pulse from Five Surveys

by Clive Riddle, December 3, 2015

As time ticks by after the October 1st ICD10 transition, early survey results are coming in regarding the impact and implications for providers. Let’s take a look at these initial findings:

KPMG has just released results from a survey of 298 attendees of a Nov 9th ICD10 webcast for providers, which found:

• 28 percent saying the transition has been smooth
• 51 percent found “a few technical issues, but overall successful.”
• 11 percent described the transition as a “failure to operate in an ICD-10 environment.”

 Survey respondents listed challenges they see with ICD-10 as:

1. rejected medical claims
2. clinical documentation and physician education
3. reduced revenue from coding delays
4. information technology fixes

The survey found 42 percent of respondents said all of these challenges are part of ICD-10. 11 percent of claimants said they did not expect those challenges to arise.

46 percent of respondents said they were thinking of pursuing initiatives in clinical documentation improvement, revenue cycle optimization, and electronic health record and IT system optimization. 25 percent were pursuing none of those options.

Last month, Healthcare Informatics reported on a survey from Himagine Solutions that found “Large hospitals have reported a 30 to 45 percent productivity reduction on the inpatient side and a 20 to 40 percent productivity reduction on the outpatient side since implementation the ICD-10 codes.”

Also last month, the vendor Kareo announced that 99 percent of client claims submitted in the first month of the ICD-10 coding transition were successful, and 87 percent of clients have already been paid for at least one submitted claim. 11 days was the average time to payment for ICD-10 claims. Kareo also surveyed its customer base directly to gauge its experience with the transition. Based on customer responses, 57 percent of respondents considered the ICD-10 transition “easy” or “very easy.” Just three percent of respondents considered the transition “difficult,” or “very difficult.” The remaining 40 percent considered the event “moderate.”

Executive Insight reported that “in early October, Navicure, a claims management and patient payment solutions provider, only processed 50% of the medical claims processing it would've in pre-ICD-10 months, which could have been a result of providers' caution along with a mix of ICD-9 claims from the previous month. Towards the end of October, however, data showed that claims gradually increased to 90% of the pre-transition volume. Rejections, too, are staying in a manageable range rather than spiking like many healthcare experts anticipated.”

Finally, Information Management reported on a SERMO survey in which “physicians were asked if the new requirement to use ICD-10 has taken away time from patients. Two-thirds of responding doctors said yes. The poll of 1,249 physicians was conducted from November 20 to 30. Although doctors strongly indicated that the code switchover has detracted from patient care, that percentage is down significantly from a SERMO poll last month that asked members if ICD-10 was taking their time away from patient care. At that time, 86 percent said it had negatively impacted patient care while only 14 percent said it had not.”

The Prescription Drug Locomotive and the U.S Big Slice of the Global Rx Pie

by Clive Riddle, November 20, 2015

With prescription drug spending now having taken over the locomotive of the healthcare cost train, it behooves stakeholders to better get to know what lies on the tracks ahead. The IMS Institute for Healthcare Informatics has just released the 47-page report: Global Medicines Use in 2020:  Outlook and Implications in which they examine the global use of medicines and spending levels in 2020, including small and large molecules, brands and generics, those dispensed in retail pharmaceutics as well as those used in hospital or clinic settings.

IMS tells us the report “found that total global spend for pharmaceuticals will increase by $349 billion on a constant-dollar basis, compared with $182 billion during the past five years. Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes and other adjustments that affect net sales received by manufacturers. The impact of these factors is estimated to reduce growth by $90 billion, or approximately 25 percent of the growth forecast through 2020.”

The report also tells as that “developed markets will contribute 63% of the spending, led by the U.S.  Original brands will represent 52% of spending and 85% of global spending will be for medicines to treat non-communicable diseases.” 

A pie chart exhibit in the report is telling in how large the U.S. slice of the medicine spending pie is projected for 2020 – 41% of global spending, with the next closest slice being the entire European Union at 13%.

Report findings on spending impacting U.S. costs include:

• Brand spending in developed markets will rise by $298 billion as new products are launched and as price increases are applied in the U.S., most of which will be offset by off-invoice discounts and rebates. 
• Patent expiries are expected to result in $178 billion in reduced spending on branded products, including $41 billion in savings on biologics as biosimilars become more widely adopted. 
• Many of the newest treatments are specialty medicines used to address chronic, rare or genetic diseases and yielding significant clinical value. By 2020, global spending on these medicines is expected to reach 28 percent of the total.
• More than 90 percent of U.S. medicines will be dispensed as generics by 2020. Generic medicines will continue to provide the vast majority of the prescription drug usage in the U.S., rising from 88 percent to 91-92 percent of all prescriptions dispensed by 2020. 
• Spending on medicines in the U.S. will reach $560-590 billion, a 34 percent increase in spending over 2015 on an invoice price basis. 
• While invoice price growth – which does not reflect discounts and rebates received by payers – is expected to continue at historic levels during the next five years, net price trends for protected brands will remain constrained by payers and competition, resulting in 5-7 percent annual price increases. 

Some international findings include:

• Global medicine use in 2020 will reach 4.5 trillion doses, up 24 percent from 2015.
• Most of the global increase in use of medicines over the next five years will take place in pharmerging markets, with India, China, Brazil and Indonesia representing nearly half of that growth.
• Generics, non-original branded and over the counter (OTC) products will account for 88 percent of total medicine use in pharmerging markets by 2020, and provide the greatest contribution to increased access to medicines in those countries. 
• Newer specialty medicines, which typically have low adoption rates in pharmerging countries lacking the necessary healthcare infrastructure, will represent less than one percent of the total volume in those markets.
• Global spending will grow by 29-32 percent through 2020, compared with an increase of 35 percent in the prior five years. 
• Spending levels will be driven by branded drugs primarily in developed markets, along with the greater use of generics in pharmerging markets—offset by the impact of patent expiries. 

A Definitive Study and Reference Resource on Healthcare Cost and Utilization

By Clive Riddle, October 30, 2015

The Health Care Cost Institute (HCCI) has just released its free 26-page 2014 Health Care Cost and Utilization Report, and 92-page Appendix, which provide a definitive examination of detailed U.S. health care cost and utilization component line items and demographics. Their study – as with other major cost studies released this year – put a lot of focus on increases in prescription drug prices.

They found the costs increased 3.4 percent in 2014, with overall utilization decreasing somewhat, while prices for all categories of services rose.  Average spending per person was $4,967, up $163, including out-of-pocket spending of $810 that grew 2.2%.

With prescription costs standing out, they note that “despite a nearly 16 percent decrease in use of brand prescriptions, spending on these prescriptions jumped by $45 per capita in 2014—an increase four times larger than in 2013. Much of this increase was due to use of high-priced Hepatitis C drugs Olysio, Sovaldi, and Harvoni, which became available starting in late 2013.”

Here’s some other key findings:

• “In 2014, the largest decline in use (-2.7%) was for acute admissions, which fell by 1 admission per 1,000 individuals. The smallest decline in use (-0.9%) was for outpatient visits, which fell by 3 visits per 1,000 individuals.”
• “The smallest average price increase was for professional services (3.1%), an increase of $3 per service. The largest average price increase was for acute inpatient admissions (4.6%), an increase of $831 per admission.”
• “Spending out of pocket on acute inpatient admissions (–$1) and on brand (–$9) and generic (–$4) prescriptions decreased by $14 per capita in 2014 compared to the previous year, while spending out of pocket on outpatient ($16) and professional ($15) services increased by a total of $31 per capita in 2014.”
• “Every year between 2010 and 2014, out-of-pocket spending was higher by women than by men. This difference grew every year, reaching $237 in 2014.”
• “The difference in spending between the oldest and youngest age groups studied increased every year studied: from $6,281 in 2010 to $6,806 in 2014. In 2014, spending was $2,660 for children ages 0-18 and $9,466 for pre-Medicare adults, ages 55-64.”

The Nexus of Payviders

By Clive Riddle, October 16, 2015

To what degree will the mega-merged health plans dominate the landscape in the balance of this decade? We’ve recently discussed the topic: will health plan start ups and provider sponsored plans fill the competition gap? We noted then, that the airline industry demonstrated opportunities that might apply in the current health plan environment,  “where the post-merger environment after established airline joined forces didn’t prevent the emergence or growth of carriers like Southwest, Jet Blue, Virgin America  and many others.

It’s looking more and more like the gap won’t be significantly filled by co-ops, with theKentucky Health Cooperative being the latest co-op to bite the dust. Much attention, and Wall Street dollars, is being given to the venture-capital backed startups. But it remains to be seen if they will take over the world or suffer the fate of a number of the co-ops.

In the meantime, regional independent plans, a large portion being provider sponsored, have much more of a track record and maturity to fall back on. A Reuters article this week, As U.S. insurers aim to get bigger, hospitals eye health plan entry, discusses established integrated delivery systems such as Kaiser and Geisinger, as well as the re-entry into this business by hospital companies such as Tenet, who now owns six health plans with about 100,000 members. Companies like evolent health are also covered, who are doing big business working with hospitals on developing new plans and risk-bearing networks.  

During the course of 2015, a term emerging into the lexicon around the country has been “Payvider”, which hopefully is self-explanatory. Let’s listen in a discussion about Payviders from Cathy Eddy, President of Health Plan Alliance:  

“….we met with the research firm KLAS. They are conducting a survey with “Payviders,” or health systems that have their own health plan.  This is a new term for a concept that has been around for more than 30 years, but seems to be gaining traction again as more providers move into value-based reimbursement (don’t call it capitation – that is so 90s), and more are leveraging their existing health plan, partnering with one, or even starting a health plan. I’ve been working in the space between payers and providers since 1982 and running the Health Plan Alliance for nearly 20 years.  What seems different now is the level of strategic alignment between the plans and their provider sponsors.  The expertise that exists in a health plan is a great (essential? necessary? logical?) resource for a health system that is moving into Population Health, establishing ACOs and negotiating contracts for value-based payments and incentives. Many of the competencies it takes to run a health plan are critical elements for health systems that are taking on risk.”

The Health Plan Alliance represents almost fifty provider-sponsored and independent health plans, that range in size, from less than 50,000 members to more than I million members, and operate in all lines of business, including commercial, Medicaid, and Medicare. Perhaps they are the nexus of the source of competition in the health plan industry for the rest of this decade.

Consumers and Physicians and Technology in 2015

by Clive Riddle, October 9, 2015

 

The Deloitte Center for Health Solutions has just released a survey report, Health Care Consumer Engagement: No One-Size-Fits-All Approach, which they say shows 'that Americans are increasing their use of technology to improve their health, navigate the health system and flex their shopping muscles in acting like consumers instead of passive patients."

 

Overall, how "techy" are American healthcare consumers? They found "22% used technology to access, store and transmit health records in the last year, up from 13% in 2013. Use was higher for those with major chronic conditions: 32% compared to 19% in 2013."

 

Deloitte’s findings are that consumer engagement is increasing three ways:

1. "More consumers today prefer to partner with doctors instead of relying passively on them to make treatment decisions"
2. "Consumers’ trust in the reliability of information sources is rising"
3. Consumers are increasingly relying Relying on technology

Here's some of the numbers behind their report, regarding the oercentage of survey consumer respondents: 

• 28% have used technology to measure fitness and health goals, up from 17% in 2013 (45% of Millennials this year)
• 23% have used technology to monitor a health issue, versus 15% in 2013
• 40% of the surveyed technology users have shared their fitness or monitoring information with their doctor
• 39% with major chronic conditions use tech-based monitoring (22% in 2013)
• 63% of the surveyed technology users say their use of fitness or monitoring technologies has led to a significant behavior change
• 13% who take prescription drugs receive electronic alerts or reminders
• 48% prefer to partner with doctors rather than have them make decisions for them, up from 40% in 2008
• 34% strongly believe doctors should encourage patients to raise questions
• 58% feel that doctors should explain treatment costs to them before decisions are made
• 16% who received care report asking their doctor to consider treatment options other than the one initially recommended.
• 52% report searching online for health or care-related information; 
• 16% who needed care went online for cost information, up from 11% in 2013 (27% of Millennials this year)
• 71% of all those surveyed said they have not gone online for cost information but are "very" or "somewhat" likely to use a pricing tool in the future
• 25% used a scorecard to compare the performance of doctors, hospitals and/or health plans, up from 19% in 2013 (49% of millennials this year)

What do these numbers mean? Harry Greenspun, M.D.Director of the Deloitte Center for Health Solutions, tells us "not all consumers are alike in how they engage the system, and a large segment still remains disengaged. Companies likely won't take a one-size-fits-all approach in their marketing and operations, but a tailored strategy that considers the unique characteristics of the segments they are most interested in."

 

Greg Scott, Principal, Vice Chairman and national sector leader for Deloitte's health plans practice, adds "the specter of a more customer-driven industry is causing many health companies to transform into retail-focused organizations, impacting everything from strategy and scale to operations and human capital. For the enterprise, this is about more than a cool app – this is about making the end-to-end changes needed to better identify and engage a more empowered purchaser."

 

So at the other end of the stethescope, how do doctors feel about using technology in their practices? Geneia just released survey results on this topic - not addressing physician interaction with consumers as discussed above, but rather how physicians relate to EMR, data and analytics.

 

Heather Lavoie, Geneia's President & Chief Operating Officer, tells us that "seemingly, there is an inverse relationship between health IT spending and physician job satisfaction,..physician sentiment towards technology is surprisingly nuanced. Doctors are indicating that data and analytics tools have the potential to reduce time spent on recordkeeping, one of their primary frustrations, while also contributing to it."

 

24% of physicians said that EMR impact on practices was positive, 19% negative, 53% a little of both, and 5% said they do not use EMRs. 69% of physicians felt data and analytics tools positively impacted their ability to efficiently assess patient history and needs, 63% said they help them get value and improved outcomes from chart documentation, and nearly 60% felt they helped identify and triage the highest need patients and created greater efficiencies in office workflow.

 

But Geneia shares that "on the other hand, more than 60% of physicians say that data and analytics tools have negatively impacted recordkeeping time. In fact, when asked to identify the number one way data and analytics could improve their job, the most popular answer was to reduce the time spent on recordkeeping (41%) followed by more time with every patient (22%), better access to patients' complete medical profile and history (20%), and more time with the patients who require enhanced care (14%)."

The Patient Experience of the Very Elderly

by Clive Riddle, October 2, 2015

Press Ganey has just published a seven page white paper Patient Experience in the Very Elderly: An Emerging Strategic Focus, that in their words, “examines the clinical and strategic benefits for health care organizations creating targeted care strategies for the ‘Very Elderly’ population” which they  define as patients 80 years of age and older.

Thomas H. Lee, MD, Press Ganey’s Chief Medical Officer and a co-author of the paper tells us “most patients in this Very Elderly population claim a ‘poor’ or ‘fair’ health status and tend to have greater and more complex needs. The data suggest their needs are not being met reliably. Organizations that embrace a more focused, compassionate, connected care model have the potential to reduce suffering for this very vulnerable population and mitigate the impact of age and health status on patient experience ratings.”

Press Ganey points out that while only 3.5% of the U.S. population is over 80 years of age - this demographic is a dominant presence in hospitals, emergency departments and outpatient practices, representing “27% of medical service and 12% of surgical service admissions, and their lengths of stays are longer.” Press Ganey’s analysis examined HCAHPS data by service line and age group for 1.5 million patients.

Press Ganey uses HCAHPS patient service ratings as an argument that the medical needs of the Very Elderly are not being adequately met. They note that “the percentage of patients giving top ratings [to providers] steadily increases as patients get older—but then declines for patients above 80 years old. When data “change directions,” the reason is usually two different forces are at work. The most likely explanation for the data in Figure 1 is that the elderly patients have greater needs, and that, in the Very Elderly, failure to meet these needs overcomes the tendency of older patients to give higher ratings to their providers.”

Service ratings of providers that were a 9 or 10 (out of ten) increased by each age group (medical services from 58.6% for age 18-34to 71,2% for ages 65-79; and surgical services from 65.2% for ages 18-34 to 78.2% for ages 65-79; which fell to 69.2% for age 80+ medical services and 75.9% for age 80+ surgical services.)

Press Ganey also points out that “patients in poorer health give lower ratings to their hospitals than do those in better health, regardless of age,” and the HCAHPS data clearly shows a deterioration in reported health status by age. 83% of patients reporting excellent health rating medical service providers 9+ out of ten, compared to 61% reporting poor health. 86% of patients reporting excellent health rating surgical service providers 9+ out of ten, compared to 65% reporting poor health. Press Ganey provides graphs demonstrating that “older patients are more likely to describe their health as fair or poor, and few Very Elderly patients report being in very good or excellent health.”

Press Ganey emphasizes to providers that “taken together, these data demonstrate both an opportunity and a threat. The threat is the risk of losing the patient segments that account for a large proportion of the care delivered by most organizations—the sick elderly. Furthermore, hospital payments might be compromised by lower patient experience scores that result from having more sick Very Elderly patients.” Press Ganey concludes that “this group wants more thorough, communicative care that meets their needs for information, coordination, responsiveness and general hygiene;” and that “providers have the potential to reduce suffering for this very vulnerable population, improve patient experience and market share through focused efforts and team-based care.”

Royal Philips has also just published new study results relating to the elderly’s healthcare experience, with their analysis “demonstrating an insightful correlation between chronic conditions and falls risk. Their researchers” retrospectively analyzed the records of 145,000 seniors equipped with a standard Philips Lifeline medical alert service or a medical alert service with AutoAlert (automatic fall detection) between January 2012 and June 2014.”

Their findings, and national data they highlight in their report include:

• Seniors with chronic conditions fell and required emergency transport up to 54 percent more often, compared to their peers with no chronic conditions. (they note that one in three seniors fall each year and that 80 percent of the senior population has at least one chronic condition and 68 percent has two or more.)
• Seniors with physical conditions not typically tied to frailty, including COPD and diabetes, also were shown to fall more often.
• Among Philips users, seniors who self-reported suffering from three chronic conditions had 15 percent more falls that required hospital transport, and those with five or more conditions had 40 percent more falls than those with no chronic conditions.
• Within the study population, 72 percent reported having one or more chronic conditions, with 20 percent reporting five or more.
• The data shows that seniors fell more often and needed hospital transport when reporting the following: Cognitive impairment by 54 percent; COPD by 42 percent; Diabetes by 30 percent; and Heart condition by 29 percent.

Will Health Plan Start Ups and Provider Sponsored Plans Fill the Competition Gap?

By Clive Riddle, September 18, 2015

The AMA recently released a special analyses of commercial health insurance markets that found the "combined impact of proposed mergers among four of the nation's largest health insurance companies would exceed federal antitrust guidelines designed to preserve competition in as many as 97 metropolitan areas within 17 states," and that "all told, the two mergers would diminish competition in up to 154 metropolitan areas within 23 states."

Art Caplan, a professor at NYU and a correspondent for NBC News, responded to a recent New York Times editorial, Regulators Need to Scrutinize Health Insurance Mergers, with a humorous post in The Health Care Blog, entitled Merge Away!!!. Here’s the heart of Caplan’s argument: ” Blocking these deals is a terrible idea. The mergers should be allowed to continue. In fact they should proceed until there is only one private insurer left. Only, at that point should the government step in, declare the last company standing to be required to merge with Medicare thereby letting the free market produce what many reformers have only been able to dream of—a single payer system.”

Will the mega mergers result in a vacuum of competition, and perhaps a default single payer system, or perhaps as some noted healthcare pundits have wondered out loud: where health insurance becomes the new cable television provider? Or will emerging players fill the void left in the coming competition gap? This did occur in the airline industry – where the post-merger environment after established airline joined forces didn’t prevent the emergence or growth of carriers like Southwest, Jet Blue, Virgin America  and many others.

Two potential candidates to fill the health plan competition gap are provider sponsored plans and well funded health plan start ups. Provider sponsored plans have always been around, but with today’s environment is much more conducive for their long-term prospects: the growth in Medicaid strengthens the prospects of regional provider backed Medicaid plans; the proliferation of ACOs that can serve as health plan incubators; the emergence of value based payment systems and clinical integration that nudge health systems closer towards the purchaser end of the spectrum.

And then there’s the potential of VC backed health plan start ups. Everyone continues to write about Oscar Health. Here’s a typical headline from last month: Oscar's losses are huge but investors don't care - How one insurance startup with only 40,000 members is worth $1.5 billion.

Oscar Health has been held up as the disruptive innovator embracing tech and customer service for health insurance, in the manner the Uber entered the personal transportation scene. Now this week, you can add this headline to Oscar’s mantle: Google Backs Startup Oscar Health Insurance - Internet company’s growth-equity fund makes $32.5 million investment.

And Oscar isn’t the only VC darling health plan startup. Fortune magazine this week, in their article How this startup is trying to upend health insurance, profiled Clover Health, who just announced a $100 million round of equity and debt funding to expand its presence. Clover is focusing just on Medicare Advantage, and like Oscar, has started small. Founded in 2014, they currently operate in only six New Jersey counties. Also like Oscar – their vision involves embracing technology in a more disruptive means than the traditional health plan approach.

It should be a reasonable wager that Clover and Oscar won’t be the only VC backed startups making news a year from now.

Public Exchange Subsidies – A Snapshot with Distant Clouds

By Clive Riddle, September 11, 2015

Two item of note occurred this week with respect to public exchange subsidies and enrollment: CMS released their June 30, 2015 Effectuated Enrollment Snapshot, and federal judge Rosemary Collyer in an unprecendented ruling that congress has standing for litigation, has allowed United States House of Representatives v. Burwell et al, U.S. District Court for the District of Columbia, No 14-1967 to move forward. 

So the attempts to chip away at health insurance marketplace subsidies did not die with the Supreme Court ruling on King v. Burwell, and another cloud, albeit distant for now – as it will undoubtedly wind through an appeals process assuming it succeeds at Collyer’s level – hangs over the head of public exchange subsidies. 

But in the meantime, CMS has provided a current picture of what these subsidies entail. CMS announced  that “Of the approximately 9.9 million consumers nationwide with effectuated Marketplace enrollments at the end of June 2015, about 84 percent, or more than 8.3 million consumers, were receiving an advanced premium tax credit (APTC) to make their premiums more affordable throughout the year. The average APTC for those enrollees who qualified for the financial assistance was $270 per month. There were 7.2 million consumers with effectuated enrollments at the end of June 2015 through the 37 Federally-Facilitated Marketplaces (including State Partnership Marketplaces) and supported State-based Marketplaces (collectively known as HealthCare.gov states) and 2.7 million through the remaining State-based Marketplaces.”

Here is an infographoid MCOL will release next week, mapping the average subsidies by state:

CMS notes that “the ten states with the highest rate of consumers who received financial assistance through APTC were: Mississippi (95.4%), Wyoming (92.2%), North Carolina (91.6%), Florida (91.3%), Alabama (90.9%), Louisiana (90.7%), Georgia (90.0%), Arkansas (90.0%), Wisconsin (89.6%), and Alaska (88.8%). The states with the lowest rate of consumers who received APTC are: District of Columbia (10.2%), Minnesota (54.8%), Colorado (55.3%), Hawaii (61.4%), New Hampshire (62.8%), Vermont (64.2%), Utah (65.6%), Kentucky (69.8%), Maryland (70.7%), and New York (71.4%).”

With respect to enrollment by metal plan, CMS shared that 1% were enrolled in Catastrophic plans (63,174); 21% in Bronze plans (2,096,542), 68% in Silver plans (6,761,363); 7% in Gold plans (695,377); and 3% (332,624) in Platinum plans.

The issue of inappropriate marketplace enrollment has been increasingly raised by various parties. CMS released data regarding enrollment data matching initiatives, noting “During the time period from April 1, 2015 to June 30, 2015, enrollment in coverage through the Federally-facilitated Marketplaces was terminated for about 306,000 consumers with citizenship or immigration status data matching issues who failed to produce sufficient documentation of their citizenship or immigration status. In addition, during the same time period, about 734,000 households with annual household income inconsistencies had their APTC and/or CSRs for 2015 coverage adjusted. Overall, as of June 30, 2015 the Marketplace has ended 2015 coverage for approximately 423,000 consumers with 2015 coverage who failed to produce sufficient documentation on their citizenship or immigration status and has adjusted APTC and/or CSRs for about 967,000 households.”

Seven Things to Know About Medicaid Going Forward

By Clive Riddle, August 20, 2015

1. The most current CMS report indicates total Medicaid and CHIP enrollment of 71,637,638; with 509,082 additional people were enrolled during the past 30 days in the most recent reporting month (May 2015.)
2. Total Medicaid spending will be close to $500 billion going into 2016.
3. Since initial Marketplace open enrollment period began in October 2013, more than 12.8 million additional individuals are enrolled in Medicaid and CHIP as of May 2015, more than a 22 percent increase (Among states participating in Medicaid expansion, enrollment rose by 29.2 percent, while non participating states reported an increase of approximately 9.5 percent.)
4. Regarding where states stand on medicaid expansion decisions, 20 states are not expanding Medicaid; 25 states (count includes the District of Columbia) are expanding Medicaid ; 5 states are expanding Medicaid, but using an alternative to traditional expansion; and 1 state is expanding Medicaid; pending federal waiver approval.
5. According to the Center for Health Care Strategies, nine states have an active Medicaid ACO program (Oregon, Utah, Colorado, Minnesota, Iowa, Illinois, New Jersey, Vermont, and Maine) and ten states are pursuing Medicaid ACOs (Washington, Michigan, Alabama, North Carolina, Virginia, Maryland, New York, Massachusetts, Connecticut, and Rhode Island.)
6. The GAO recently listed four key issues facing the Medicaid program, in their brief MEDICAID: Key Issues Facing the Program, including (A) access to care; (B) transparency and oversight (lack of complete and reliable data on states' spending, and need for improved HHS management of state demonstrations; (C) program integrity (the program's size and diversity make it vulnerable to improper payments). ; and (D) federal financing approach (automatic federal assistance during economic downturns and more equitable federal allocations of Medicaid funds to states.)
7. Medicaid Managed Care now involves 39 states that contract with comprehensive MCOs for Medicaid, with around 74 percent of beneficiaries receiving care through these plans. CMS recently issued the first major proposed rule addressed Medicaid Managed Care since 2002, which addresses issues including Network Adequacy; Medical Loss Ratio; Actuarially Sound Capitation Rates; Quality of Care Standards; Appeals and Grievances ; Beneficiary Enrollment Protections; Utilization Management; Managed Long-Term Services and Supports; State Monitoring Standards; and Information Standards.

Pharmaceutical Industry in Transition

By Clive Riddle, August 7, 2015

KPMG has just conducted a survey of pharmaceutical and medical device companies, finding “their biggest commercial challenges coming from payers, surpassing hurdles posed by regulators, declining access to healthcare providers, and the move toward specialty drugs.”

Based on these findings, KPMG’s Bill Shew, Alison Little and Peter Gilmore have released a twelve-page report:  Change in pharma? Not optional; 10 Integrated imperatives for pharmaceutical commercial transformation.  Page two contains just these 35 words, in large font – which sums up the situation for pharma: “The pharmaceutical industry is caught between a blockbuster-driven past and a future  comprising precision medicine, curative therapies, and payment for outcomes. The years of consistent  double-digit growth and unconstrained pricing power are fading into memory.”

Author Alison Little tells us "life sciences companies face increasingly high demands from payers to prove the value of their products in terms of improved patient outcomes and lower costs. This requires not only clinical and analytical rigor, but increased focus on account management and strategy. This is a significant part of the commercial model for the pharma, biotech and medical device sectors, which need to evolve to compete in the future.  These are dramatic changes in bringing drugs to market and are far removed from the blockbuster model of marketing drugs with large direct-to-consumer advertising budgets and extensive physician detailing. Newer brand name drugs are treating much more complex medical conditions and have more stringent handling and administration requirements than those a decade ago. Pharmaceutical and biotechnology companies need to consider 'beyond the pill' services to help with patient engagement and helping them adhere to treatment."

Their report cites challenges for the industry including a paltry one percent annual growth rate for top 25 life sciences companies in 2014, down from double digits five years ago; and that seventy percent of recent brand launches underperformed analyst forecasts.

Without further adieu, here’s The ten “Imperatives for Commercial Transformation” they elaborate on, in their report:

1. Use commercial tactics, not clinical data, to differentiate new products
2. Elevate pricing and contracting within the organization
3. Take a more holistic approach to stakeholder mapping and prioritization
4. Base sales models on a collaborative approach to improving outcomes
5. Play a larger role in the industry transformation from “volume to value”
6. Support providers in improving quality and patient satisfaction
7. Leverage data and analytics to enhance commercial strategies
8. Allocate commercial resources optimally across markets and brands
9. Evolve performance metrics and incentives to reflect new realities
10. Drive the transformation agenda throughout the enterprise\

The author’s sum up where the industry needs go from here:  “Pharmaceutical companies need to transform their commercial models so that they can continue to thrive. In our evolving healthcare ecosystem, power centers are shifting, quantifiable outcomes are expected, and companies must demonstrate value for every healthcare dollar spent. We are approaching a tipping point when pharmaceutical companies, no matter the size or therapeutic focus, will no longer be able to view commercial transformation as an aspiration. Instead, they will need to recognize that it is a critical imperative.”

The Most Difficult Part Of The Patient-Centered Medical Home

By Clive Riddle, July 31^st, 2015

The medical home transformation for primary care, incorporating a team approach, technology, elements of care coordination and much more, has been a significant driver of change and innovation this decade. In the about to be released August issue of Medical Home News, the Thought Leaders Corner asks the question:  What was the most difficult part of the patient-centered medical home transformation that you experienced or observed? Here’s what the panel shared in their responses:

Sam JW Romeo, MD, MBA, of Tower Health & Wellness Center in Turlock, CA says  “having surveyed many organizations nationally for accreditation as a Medical Home, including the USAF primary care centers, the two hurdles (difficult parts of the PCMH) that are most prominent are: (1) payer emphasis on case management, and (2) cultural transformation needs within the medical profession. With regards to the case management emphasis, the payers want to save money first and foremost (‘quarterly reports’) more than provide care for patients.  They create the economic incentives and support structures to minimize, for example, hospitalization and ER use and, if per chance, they transform the provider to be more patient centric vs disease centric, whoopee!!  This transformation, however, is not often seen. With regard to the cultural change requirements, there is the ‘upstream’ challenge of providers being trained in medical schools and residencies to care for diseases in patients and not patients with or without disease.  The PCMH transformation requires providing patients with prevention (beyond immunizations and screening and the typical PQRS measures), wellness and lifestyle support, along with the care of disease.  The PCMH care model includes coordinating all of a patient’s care needs.  These needs include caring for the whole patient, i.e., body, mind and spirit, and this is not often in evidence.”

Joseph E. Scherger, MD, MPH, Vice President, Primary Care at Eisenhower Medical Center  and the Marie E. Pinizzotto, MD Chair of Academic Affairs at the Annenberg Center for Health Sciences in Rancho Mirage, CA states  “the most difficult part of adopting a PCMH model is changing how physicians and other providers work.  Implementing a care coordinator is not hard.  Having an advanced IT system is part of modern medicine.  But getting providers off the treadmill of many brief visits and spending time in longer visits with complex patients and doing population care coordination is a difficult paradigm shift.”

R. Scott Hammond, MD, FAAFP, Family Practice, Westminster Medical Clinic and Clinical Professor, University of Colorado School of Medicine, in Westminster, CO shares that  “Westminster Medical Clinic was early to the PCMH movement, being recognized in 2009.  Our biggest challenge was trying to understand exactly what we needed to do to satisfy NCQA standards.  At that time, there were few tracks to follow. I do not believe that is an issue now, as NCQA has improved and clarified their implementation guide. In retrospect, the most difficult part of transformation was sharing our vision of the PCMH with our entire staff and changing the culture of our practice to meet the patient-centered principles of the PCMH.  Only then were we able to operate as a collaborative team. This was also the most rewarding part of the journey.”

Mary Takach, BSN, MPH, Senior Program Director, National Academy for State health Policy, in Washington, DC opines that “The biggest challenge is exercising patience in the PCMH model and not pulling the plug after the first year or even the second year if there is no return on investment.  This is difficult for policymakers on both the public and private side -- especially for those under pressure to deliver balanced budgets.  Waiting for practice transformation to take root and move the dial on desired outcomes requires firm resolve and belief that the current system is broken and that transforming primary care delivery is the right direction to go.”

Nancy Meisinger RN, MBA, PCMH CCE, Director Of Practice Transformation, Delaware Valley ACO in Radnor, PA feels that “the concept of population management and proactive outreach to patients vs. waiting till they come into the office for a visit is often a difficult concept for the offices to put into practice in a systematic way.  In order to be effective it involves consistently documenting preventative and chronic care services within the EHR and maximizing the use of the clinical decision support tools.  Training of staff and use of protocols so that the process is as systematic and accurate as possible can be a challenge no matter what size patient panel the office manages.”

Amy Mullins, MD, CPE, FAAFP., Medical Director, Quality Improvement, American Academy of Family Physicians in Leawood, KS tells us  “much like patients, patient-centered medical homes are all different and the process to become one presents different challenges to different practices.  However, looking from a broad national view, physician engagement has proven to be a challenge for many.  Physicians are smart, busy, and highly motivated individuals who want to do what is best for their patients and eliminate any unnecessary work. To increase their engagement you need to prove to them that PCMH transformation will not only benefit their practice, but will positively impact the health outcomes of their patients.  Once physicians are engaged, the challenge shifts to empowering care team members and integrating the patient in team-based care, which is integral to the patient-centered medical home.”

David Tayloe, MD, FAAAP, Goldsboro Pediatrics in Goldsboro, NC is of the opinion that “educating providers about community resources has been, and continues to be, the most difficult step in transition to the patient-centered medical home.  Many children are at-risk for poor outcomes because of social determinants of health (poverty, parenting, education, substance abuse, abuse/neglect, mental health issues of caretakers).  These children need support within the community from various agencies.  Primary care providers must identify these children and refer them to necessary support services.  Many primary care providers are not aware of the support structure available in their communities.”

Jaan E. Sidorov, MD, FACP, Chief Medical Officer, medSolis and Author, Disease Management Care Blog, in Harrisburg, PA  says “changing established workflows is often underestimated.  There's a tempo to patient ‘throughput’ and the diversion of patients into new pathways involving other clinicians requires new space, hand-offs, duties, policies, and templates.  Unless carefully planned, patients' additional waiting times in office can balloon or they'll be waiting at home for a call that is hours late.  Increasing ‘stops’ in an episode of care doesn't increase work linearly, it complicates it exponentially.” 

And finally, George Valko, MD, Gustave and Valla Amsterdam Professor of Family and Community Medicine and Vice-Chair for Clinical Programs and Quality, Department of Family and Community Medicine, Sidney Kimmel Medical College of Thomas Jefferson University, and Medical Director, Jefferson Family Medicine Associates in Philadelphia, PA shares that “sfter deciding to pursue becoming a PCMH, I think the initial application for recognition and all that it entails, was the most difficult.  To me, it was a forest vs. trees analogy -- the whole process, using the NCQA in our case, is quite overwhelming. However, while sifting through the standards and elements, it became clear that we, and most others, were meeting many of the requirements already.  And, if we were not already meeting some requirements, many were activities we should have been doing in any case.  Now, ongoing improvements to become a true medical home, including changing the culture of a practice, doing outcomes measurements, and creating a medical neighborhood are and continue to be time consuming and costly.”

You can check out Medical Home News at www.MedicalHomeNews.com.

Snapshots of the Mega-Mergers

By Clive Riddle, July 24, 2015

With Anthem and Cigna’s merger announcement, the dance card has been filled out. Here’s what they had to say about their deal:  

“Anthem will acquire all outstanding shares of Cigna in a cash and stock transaction and Cigna shareholders will receive $103.40 in cash and 0.5152 Anthem common shares for each Cigna common share. The total per share consideration equates to approximately $188.00 for each Cigna share based on Anthem's closing share price on May 28, 2015, valuing the transaction at $54.2 billion on an enterprise basis.”

So let’s take a look at the mega-health plan profiles, before and after these mergers, understanding that the “after” picture will undoubtedly change due to regulatory required divestures in certain markets:

    

Here’s a couple of edited graphics from by the plans that provide some additional insight into their merged companies:

It will be interesting to see how long the regulatory hurdles take for these three deals, and how many regulatory concessions, including specific market divestures, are required.

How National Thought Leaders View The Post SCOTUS Public HIX World

By Clive Riddle, July 10, 2015

Earlier this month, Health Insurance Marketplace News published a supplemental edition of their newsletter, providing commentary from 27 ThoughtLeaders around the country at the SCOTUS King v Burwell decision. They were asked: “What’s your gut reaction to the ruling? What happens next? What challenges will Exchanges face now?”

Here’s some excerpts from key ThoughtLeaders representing major stakeholders:

First off, not everyone was pleased with the ruling. Here’s comments from Michael F Cannon, Director of Health Policy Studies, Cato Institute, Washington DC, who was considered one of the primary architects behind the lawsuit brought before SCOTUS:  “So rather than respect the democratic process and the separation of powers, Roberts allowed himself to be intimidated into rewriting the law and writing Congress out of the legislative process….What happens now is that ObamaCare opponents will continue to fight to repeal this law, because so long as it remains on the books ObamaCare will continue to threaten access to care for the sick.”

Grace-Marie Turner, President, Galen Institute, Alexandria VA, a prominent opponent and champion of consumer driven care, tells us “ People want better solutions. The only appeal to a Supreme Court decision is to the American people. Health reform -- patient-centered, consumer-focused health reform -- will be a major issue in the 2016 elections as more and more people experience firsthand the problems with ObamaCare. Change is inevitable.”

Alain C. Enthoven PhD, Marriner S. Eccles Professor of Public and Private Management (Emeritus), Knight Management Center, Stanford (CA) University, a nationally prominent and oft-quoted  figure on health policy  says the decision was “the triumph of common sense. The case should never have been brought. Obviously the intent of the law was to cover every legal resident of the USA. What’s next is to face the challenge of excess healthcare costs, which are diverting resources from meeting other important needs -- such as education, infrastructure, national security and debt reduction The ACA did very little to change the fundamental cost-increasing incentives in our system of healthcare finance. Two good places to start would be to cap the exclusion of employer contributions from employee taxable incomes at the level of efficient health plans and to convert Medicare to a premium support model, so that practically everyone would have cost-conscious choices of health plan.”

Mila Kofman JD, Executive Director, DC Health Benefit Exchange Authority, Washington DC,  actually runs a state public exchange and was of course, a happy camper: “The Supreme Court decision was important for millions of Americans who now have access to quality, affordable health coverage thanks to tax credits provided through the Affordable Care Act. I am very glad that states that use Healthcare.gov didn’t have to scramble to try to protect millions of people who would have lost access to affordable health coverage. I am relieved that millions of Americans who need premium reductions to stay covered no longer have to worry about becoming uninsured.”

Meanwhile, Simeon Schindelman, CEO, Bloom Health, Minneapolis – one of the most noteable private exchange platforms – is a little pessimistic: “The individual market needed reforming. The ACA is an incredibly expensive and complicated way to accomplish some of that reformation, but it does seem to make health insurance in the individual market accessible to many more people -- and that is a worthy outcome. I’m not judging the method, only that portion of the result. Reduction in uninsured is largely a result of Medicaid expansion and we need to be clear on that. Financial (and potentially operational) sustainability of state Exchanges, while watching insurance premium rates in the individual market over the next couple of years as the environment changes a lot, could be the next two big issues. On the former, there seems to be some pretty rough sledding coming soon and in some instances already here. On the latter, we have an abundance of speculation, but it’s an important topic.” 

From the employer perspective, JD Piro, Senior Vice President and National Practice Leader, Health and Benefits Practice, Legal Group, Aon Hewitt, Lincolnshire IL, tells us “this case was the last major judicial hurdle that the Affordable Care Act had to clear before full implementation. As a result, employers should focus on reporting on compliance with individual and employer mandates for 2016, as well as determining the impact of the excise tax in 2018. Additionally, more employers may consider a strategy of transitioning pre-65 retirees from group-based insurance to the individual public Exchange to take full advantage of the choice, competition, favorable premiums and federal subsidies.”

Larry Boress, CEO and President, Midwest Business Group on Health; Executive Director, National Association of Worksite Health Centers; Chicago, echoes the excise tax concern: “Most employers had already planned to offer health benefits prior to the decision and will stay the course to focus on how to avoid the excise tax.”

And words from the man involved at the very start – with the Commonwealth Health Insurance Connector Authority that helped inspire the ACA - Jon M Kingsdale PhD, Managing Director, Wakely Consulting Group; Visiting Lecturer on Healthcare Policy, Department of Healthcare Policy, Harvard Medical School; Former Executive Director, Commonwealth Health Insurance Connector Authority; Boston: “The 6-3 majority interpreted the ACA in the only way that makes sense, notwithstanding clear (and clearly mistaken) wording to the contrary. This is actually a ‘win’ for all interested parties, except the actual plaintiffs: It preserves coverage for 6.2 million Americans of modest income; it strengthens the law; it averts chaos in the individual insurance market in 32 states; and it allows Republicans to continue rallying their base by attacking ‘Obamacare,’ while escaping the political fallout for succeeding. Both Justice Roberts’ ruling and Justice Scalia’s overwrought dissent point to a common need -- for Congress to move beyond political posturing to constructive revision of the ACA, if only to correct poor drafting. Of course, substantive improvements are also needed, first and foremost to simplify this outrageously complex statute. However, any opportunity to do so awaits the outcome of our next national election.”

Some Things to Know and Ask in the Aftermath of the CVS/Target Deal

By Clive Riddle, June 19, 2015

Here’s some things to know in the aftermath of the announced CVS/Target deal . We can start with this list of deal points that the two companies provided in their press release announcing the acquisition and strategic partnership:

• CVS Health will acquire Target’s pharmacy and clinic businesses for approximately $1.9 billion.
• CVS Health will acquire Target’s more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy.
• A CVS/pharmacy will be included in all new Target stores that offer pharmacy services
• Target’s nearly 80 clinic locations will be rebranded as MinuteClinic,
• CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction. The new clinics will be part of CVS/minuteclinic’s plan to operate 1,500 clinics by 2017
• CVS Health and Target plan to develop five to 10 small, flexible format stores over a two-year period following the deal close, which will each be branded as TargetExpress and include a CVS/pharmacy

Two new videos posted in HealthShareTV help explain the deal in simpler terms:  CVS, Target Merger Might Boost Health Of Both Companies and CVS Health Taking Over Target's Pharmacy, Clinics for $1.9 Bn.

Two new healthsprocket each list five reasons behind the motivations for the deal:  Fortune Magazine: Five reasons Target's deal with CVS Health makes it leaner and meaner and USA Today: 5 reasons why Target sold pharmacy biz to CVS. The two lists differ some – but what they have in common mentions foot traffic and that Target wasn’t in a position to excel at pharmacy.

One way of framing the deal from Target’s perspective, is that it’s just a part of their larger picture to streamline and focus. For example, in April they announced finalization of closure of all Canadian Stores. The big picture was their $2 billion restructuring plan announced in February which has included rounds of corporate layoffs from March through this week, with the Minneapolis / St. Paul Business Journal reporting that the “Minneapolis-based retailer, Minnesota's fifth-largest employer, has now cut 2,360 jobs in the U.S., 17,600 in Canada and 350 in India this year.”

A key statistic to note, is that sources cite only 5% to 7% of Target customers use the store’s pharmacy services. Thus -the difference for the two companies is that Target customers come to purchase consumer goods, and some incrementally purchase prescription and health items as long as they’re going to be at Target; while CVS customers come to purchase prescription and health items, and some incrementally purchase consumer goods as long as they’re going to be at CVS.

Does this signal a trend for chain supermarkets, or other big box retailers such as Costco, that offer pharmacy services? If more retailers do shed or partner their pharmacy services , what are the implications for the retail clinic industry? 

PwC and Milliman Examination of Medical Cost Trends

by Clive Riddle, June 10, 2015

PwC projects a medical cost trend for 2016 of 6.5%, netting down to 4.5% after benefit design changes. Milliman tells us that the 2015 actual trend was 6.3%, up from 5.4% in 2014.

PwC’s Health Research Institute this week released their tenth annual Behind the Numbers report, which includes a “projection for the coming year’s medical cost trend based on analysis of medical costs in the large employer insurance market. In compiling data for 2016, HRI interviewed industry executives, health policy experts and health plan actuaries whose companies cover more than 100 million employer based members.

Milliman released their fifteenth annual Milliman Medical Index report two weeks ago, which is “an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer’s share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads.”

With respect to 2015, Milliman found “the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $24,671”, up from $23,215 in 2014. The 2015 family costs works out to $2,055 on a monthly basis.

Milliman emphasizes the importance of the role the Rx costs play in the mix. They note “prescription drug costs spiked significantly, growing by 13.6% from 2014 to 2015. Growth over the previous five years averaged 6.8%. The 2015 spike resulted from the introduction of new specialty drugs as well as price increases in both brand and generic name drugs, increases in use of compound medicines, and other causes. Since the MMI’s inception in 2001, prescription drugs have increased by 9.4% on average, exceeding the 7.7% average trend for all other services. Prescription drug costs now comprise 15.9% of total healthcare spending for our family of four, up from 13.2% in 2001.”

Milliman also highlights the role of cost-sharing, citing that the “total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 43% from 2010 to 2015, while employer costs increased by 32%. Of the $24,671 in total healthcare costs for this typical family, $10,473 is paid by the family, $6,408 through payroll deductions, and $4,065 in out-of-pocket expenses incurred at point of care.”

PwC also keys on these two issues for 2016 as well, with drugs as an inflator, and cost-sharing as a deflator of the medical trend.  PwC spotlighted two inflators of the 2016 medical trend: (1) New specialty drugs entering the market in 2015 and 2016 will continue to push health spending growth upward; and (2) Major cyber-security breaches are forcing health companies to step up investments to guard personal health data, adding to the overall cost of delivering care.

PwC notes three factors that serve to "deflate" the 2016 medical cost trend: (1) The Affordable Care Act’s looming “Cadillac tax” on high-priced plans which is accelerating cost-shifting from employers to employees to reduce costs; (2) Greater adoption of “virtual care” technology that can be more efficient and convenient than traditional medical care; and (3) New health advisers helping to steer consumers to more efficient healthcare.

PwC also comments on the longer range medical trend perspective, citing four key cost growth factors H observed over the past decade:

• The healthcare-spending trajectory has leveled off but is not declining;
• Cost sharing slows consumer use of health services;
• Curtailing inpatient care lowers costs; and
• The ACA has had minimal direct effect on employer health costs.

Track 3 For Medicare ACOs

by Clive Riddle, June 5, 2015

CMS has just issued a 592 page MSSP ACO final rule resulting from their proposed rule issue in December, which received 275 stakeholder comments.

Here’s what CMS, in their own words, says the new final rule will accomplish:

• Creates a new Track 3, based on some of the successful features of the Pioneer ACO Model, which includes higher rates of shared savings, the prospective assignment of beneficiaries, and the opportunity to use new care coordination tools;
• Streamlines the data sharing between CMS and ACOs, helping ACOs more easily access data on their patients in a secure way for quality improvement and care coordination that can drive critical improvements in beneficiaries’ care;
• Establishes a waiver of the 3-day stay Skilled Nursing Facility (SNF) rule for beneficiaries that are prospectively assigned to ACOs under Track 3; and
• Refines the policies for resetting ACO benchmarks to help ensure that the program continues to provide strong incentives for ACOs to improve patient care and generate cost savings, and announces CMS’ intent to propose further improvements to the benchmarking methodology later this year. 

CMS notes that “over 400 ACOs are participating in the Medicare Shared Savings Program, serving over 7 million beneficiaries.” With respect to basing their new Track 3 on selected components of their Pioneer ACO model, they tout that Pioneer ACOs “generated over $384 million in savings to Medicare over its first two years – an average of approximately $300 per participating beneficiary per year – while continuing to deliver high-quality patient care.  The Pioneer ACO Model is the first that meets the tests to have its elements incorporated into other Medicare programs.” 

California Healthline reports that “the new track for ACOs will allow them to retain up to 75% of what they save but also be responsible for up to 75% of their losses (California Healthline, 12/2/14). ACOs in the new track also will be given a fixed set of beneficiaries for which they must provide care (Modern Healthcare, 6/4)….. CMS said that it expects the rule change will help ensure that 90% of MSSP ACOs stay with the program.”