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Health Systems Becoming Payers?

Think Outside The BoxWhen it comes to healthcare, the government, employers and consumers demand more value. To provide this value, healthcare providers and payers increasingly negotiate payment contracts that are laden with payment incentives to reward higher quality. But is this approach working?

Not yet. It is much too soon to reach a consensus on any given delivery model that consistently controls costs and enhances quality of care. Payers and providers need to agree on quality metrics to use when determining bonuses or penalties and decide the details of shared savings agreements. This may be easier said than done.

Accountable Care Organizations (ACOs) are one of many initiatives emerging from the Affordable Care Act (ACA), with somewhat mixed results. ACOs seem to be a move in the right direction when it comes to care coordination efforts. However, I’m very skeptical about contractual arrangements between providers and payers that claim to solve a more deeply-rooted issue that fundamentally plagues our care delivery ‘system’ – disparate work environment cultures that do not foster a patient-centered mindset. Ultimately, it is the ‘culture of care’ that must be addressed before we can make inroads on quality and cost components.

Due largely to the ACA, there appears to be greater cost and reimbursement pressures on health systems to move toward ‘population’ health management – spurring health providers to think differently about their business models.

One initiative gaining interest is for health systems to launch their own health insurance plans within the markets they serve. According to a 2013 report by The Advisory Board Company, a Washington, D.C.– based research firm, 34 percent of 100 hospitals surveyed said they already own health plans, while another 21 percent indicated they plan to launch a health insurance plan by 2018. This is a small sample size, yet the results are, nonetheless, revealing.

In his recent book, ‘America’s Bitter Pill,’ Steven Brill writes that “Hospitals are already consolidating. It is happening all over the country…let’s let them continue. More important, as they continue, let’s encourage them to become their own insurance companies…so they can cut out the middleman and align these incentives. Let’s harness their ambition to expand, rather than try to figure how and when to contain their ambition.”

As the healthcare system continues to shift from fee-for-service care to value-based payments that bundle care in one sum amount, the financial risk associated with patient care may shift from insurers to providers. In other words, hospitals may eventually look more like insurance companies. But to do so, it will be in the best interest of hospitals and health systems to control the costs by pursuing long-term patient wellbeing.

So, can this work?

Health systems first need to hone their delivery skills to produce higher-quality outcomes BEFORE considering a whole new revenue source. Wearing too many hats without having laser focus on their core business objectives (e.g. delivering safe, quality care) will only cause greater problems than we already have today.

In our 2015 survey, we ask Iowa employers to sound off about hospitals having a greater incentive to control health costs (and ultimately premiums) they would charge to employers. Those results will be revealed in the next few months.

In theory, Brill’s comments may make sense, but can large health systems CONSISTENTLY deliver affordable care with (badly needed) high-quality results? To date, they haven’t been very successful. Like ACOs, this too will require more time to assess the desired outcomes, and – just as importantly – the unintended consequences that may follow.

One thing is for certain, in addition to covering more Americans, the premise of the ACA was that it would spur new approaches for care delivery models by thinking outside the box. Our fingers remain crossed.

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What’s Behind our Health Price Curtain?

Healthcare Cost CurtainWhy don’t we know the true cost of the ever-increasing healthcare that we’re required to pay? Who’s responsible? In 2014, we decided to ask the key payer themselves – Iowa employers.

It’s no secret – health plan deductibles continue to increase annually, thanks largely to consumer-driven health plans (CDHPs). Through CDHPs, employees and their family members now share a greater burden of health costs, a trend that we have been tracking for the last 16 years in Iowa.

Similar to the CBS game show, Let’s Make a Deal, where game contestants have opportunities to choose between prizes of unknown value (usually found behind curtains or large panels painted to look like boxes), patients are being asked to find their best ‘deal’ throughout the complex healthcare marketplace that is laden with curtains not meant to be opened. In healthcare, not even Carol Merrill, the iconic model for this popular game show, can navigate patients into making informed choices.

With ever-increasing financial exposure to healthcare costs, most insurance and healthcare experts agree that price transparency will become even more important to patients as they spend additional money on their own care. This makes sense.

Partly due to the Affordable Care Act, payment for healthcare services is morphing from fee-for-service arrangements (the more services provided, the more we pay for those services) to bundled payments or value-based arrangements that often includes added risk for those providing care.

Accountable Care Organizations (ACOs) are increasingly becoming more common around the country, and in Iowa. ACOs are payment and care delivery models that attempt to tie provider reimbursements to quality metrics for a given population of patients. The ACO is an organization of healthcare providers who agree to be held accountable to patients and third-party payers for the appropriateness and efficiency of delivering high-value care at reasonable costs. Since the passage of the ACA in 2010, a great deal of change continues to evolve in the healthcare and insurance industries.

For patients to make the most appropriate and efficient choices for themselves and family members, easily understandable cost and quality metrics are critical pieces to this healthcare puzzle. But can this really happen? Choosing between healthcare providers (comparison shopping) for any given procedure is very confusing and almost impossible. Outcomes are variable because different therapeutic procedures have dissimilar outcomes for dissimilar populations of patients. On top of that, we have inadequate information about the cost of these procedures, making our healthcare ‘markets’ nothing more than a price tag-less shopping adventure. In fact, according to the Healthcare Incentives Improvement Institute, only two states received an ‘A’ grade in quality, while 48 states receive ‘little to no transparency,’ by receiving ‘D’ or ‘F’ grades.  Iowa received an ‘F’ grade for both quality and price transparency information.

It was within this context that we asked Iowa employers this past summer a very simple question:

Who is responsible for lack of healthcare cost transparency in Iowa – hospitals/physicians or health insurance companies?

The response appears to be a justifiably confused tug-of-war battle.

Using a 10-point scale, with 10 being ‘Very Responsible,’ Iowa employers gave hospitals and physicians an overall score of 8.0. Employers obviously believe that our healthcare providers are a big reason that we do not have transparent costs. However, employers scored health insurers only an eyelash less, at 7.9. In short, employers believe that BOTH parties are responsible for lack of price transparency.

The results are found below. Due to the scale of this graph, it may appear that health providers have a much greater responsibility, but in reality, the scores are virtually identical to one another.

Lack of Price Transparency

Health providers and insurance companies’ scores are statistically similar.

What can we learn from this? The price transparency problem is perceived to have not one, but two, responsible parties. However, finger pointing is futile and counterproductive, and certainly not the purpose of this survey question or blog. Instead, new approaches must emerge that reflect true costs that are ultimately linked to quality of care.

For value to be determined, meaningful price and quality metrics are needed. One without the other will only leave us scratching our heads about which curtain to choose.

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A New Acronym in Iowa: ACOs

David P. Lind BenchmarkRecently, my interactions with the health care system have been up close and personal. I can tell you that my wife and I have experienced great frustration when seeking coordinated care for our daughter in recent months, both in and out of the hospital.

Having to reconstruct her medical history over and over and over for each new health care provider has been discouraging, annoying, and frankly, unnecessary. If you’ve been there, you know what I mean.

Lack of coordination between different health care providers for the same patient is a major concern in this country. Not only is it incredibly frustrating to the patient and family members, it’s potentially dangerous and very costly due to inefficiencies and duplication of services.

Your insurance premiums, by the way, are adversely affected by this current delivery of care.

What about ACOs

Accountable Care Organizations (ACOs) are the latest trendy model for delivering health care services by doctors and hospitals.

In a nutshell, an ACO is a network of doctors and hospitals who share responsibility for providing care to their patients.

Sounds good to me! However, I recently read that ACOs are being compared to the elusive unicorn: everyone seems to know what it looks like, but no one has actually seen one.

Imbedded in the massive new health law, ACOs were allotted only seven pages of provisions, but they’re causing a tremendous amount of interest with many stakeholders (patients being one!).

The intent of an ACO is to bring together the different aspects of care for the patient— primary care, specialists, hospitals, home care, etc.—and make providers jointly accountable for the health care of their patients.

Through the new health law, financial incentives will be given to providers to cooperate and save money by avoiding unnecessary tests and procedures. To do this, they must seamlessly share a patient’s medical information between themselves. So instead of the patient and family members having to educate each provider on the medical history, the ACO team would have all information at their fingertips.

Personally, I hope that ACOs (or something like them) become the “new normal” in our delivery system. It cannot come soon enough for this parent!

To learn more about the Final Regulations for ACOs, click here.