2017 Healthcare and Insurance Industry Outlook

Stability Proves Elusive in Healthcare Arena

Ten days after the U.S. House of Representatives scrapped its first Trump-era attempt to replace the Affordable Care Act, a score of health-care and insurance professionals gathered at the Kansas City offices of CBIZ for a discussion that became, in part, a post-mortem on healthcare policy.

The good news, they generally agreed, was that the ACA hadn’t been replaced by something rushed into place with consequences that could be worse for insurers, providers and, of course, patients.

The bad news? The ACA hadn’t been replaced. As Matt Tritz of Lockton precisely summarized, “it is still the law of the land.” Efforts to repeal it, however, aren’t likely to go away—the current resident of the White House isn’t a man known for suffering setbacks gladly.

The effects of that non-action in Washington helped frame the discussion April 3 at the Healthcare and Insurance Industry Outlook assembly. For two hours, participants examined the aftermath of the ACA action/inaction, and dove deep into the financial and clinical challenges created by that current law, abetted by market forces, demographics and global factors.

Polly Thomas, president of host CBIZ, served as co-chair, along with Gregg Laiben, MD, Vice President Innovations of Blue Cross Blue Shield of Kansas City. They steered a discussion that focused on innovative approaches that employers are bringing to cost containment within their employer-sponsored health and pharmaceutical coverage, and tried to anticipate where these two vital sectors might be headed in the coming years.

ACA: Now What?

For most in the room, the opening question about the impact of ACA withstanding a House challenge produced a sense that healthcare delivery and the means to pay for it had secured a certain measure of stability. ACA might not be popular, but at least insurers, employers and covered employees know what they’re dealing with for the time being.

That’s less true for those covered by individual policies.

“In addition to the employer-sponsored healthcare programs we administer for our clients, we’re probably the only one at this table that does a lot of individual policies, and the anxiety in the marketplace is there,” said Cary Hall, president of Benefits by Design. “Those are the people on or off the exchanges, who do not know if they will have coverage next year, and do not know if they will be able to afford that coverage next year.”

The reason, he said, is that insurance carriers have largely abandoned the market, outside of BlueKC. “We have 2,700 clients with a tremendous amount of anxiety about this bill being repealed and where they will end up next as we roll toward open enrollment—and will there even be open enrollment,” Hall said. Those people, in gen-eral, are mom-and-pop business owners.

ACA generally isn’t a source of amusement in any sector, but Ed Barker, senior counsel for the Husch Blackwell law firm, generated chuckles around the table when he called the law “employment for the rest of everyone’s life, plus actuaries, any kind of consulting firm or people coming up with the new secret sauce to make this work.” The firm is trying to forecast for clients who, he said, “can’t stand still and wait for something to happen—how to be flexible to become involved in a particular transaction, then have enough flexibility to be able to move agilely when change happens.”

BlueKC, the largest insurer in the market, isn’t likely to change much of what it does, said Greg Sweat, who recently
was appointed chief medical officer. “We will continue to work toward value,” he said.

Like many around the table, Jon Corbin of KVC Hospitals didn’t think the business plan needed to change much at this point. “The majority of the youth referred to us have some sort of psychological illness,” he said, and the inpatient facility, with operations in Kansas City, Kan., and Hays, plus half a dozen other states, would continue to focus on psychiatric care and child welfare.

Amy Castillo is the CEO of Ability KC—the union of the Rehabilitation Institute of Kansas City and Children’s TLC. As with KVC, she said, “for us, there are not a lot of changes.”

Stability with regard to ACA-related operations is one thing, but market forces are another, and they will not yield to congressional inaction. Susie Oliver, senior vice president for GEHA, said that in the absence of such action, “I would be concerned about the plans still participating and the risk that goes along with those plans because of the prices they have to put their premiums at. It’s getting outrageous what the premiums have to be set at just so they can run their business.”

It’s up to insurers and brokers, she said, to help companies trying to navigate those challenges, and “we have to figure out a way for people to be on the exchanges and be able to support them and give them the insurance where needed.”

That sense of stability may be short-lived. “We don’t think this is dead this year,” said Matt Tritz. “We think it’s going to come back up this summer. Whether it goes anywhere, I don’t know, but the administration is not just going to roll over and move on to something else.” As a result, Lockton is going to continue to talk to its customers about things it believes will change and put them in a position to be flexible when things do change.

“I think that healthcare is still going to value innovation and change, and quality  outcomes are still going to be a conversation, regardless of what infrastructure takes place,” said Jessica Lea, CEO of Tria Health.

And irrespective of the regulatory structure, said Corrine Everson, vice president of business developing and marketing for Research Medical Center, one of the largest HCA Mid-west Health medical centers, “there needs to be more of a focus on prevention and wellness, and we need to figure out a way to incorporate that into the payer system that exists.” 

The Need to Innovate

Polly Thomas segued to a question of how employers might be innovating to attack the cost issues, and how providers might be innovating to improve efficiencies and lower costs.

“I see employers embracing technology in an effort to get their arms around healthcare costs, especially the larger, self-funded customers, latching onto all the information they can,” said Matt Tritz. “I think they’re learning how to use it.”

The imperative to control costs is clear, he noted: Even if a company is able to hold its projected plan costs to a 10 percent annual increase, the pharmaceutical side is growing even faster. In the insurance world, “they’re looking for any information via better technology to manage that drug spend,” he said, using data analytics, population-health systems, pharmacy contracts—“any type of data they can get their hands on and communicate to their employers.”

It might not sound innovative, but simple communication, and improvements in it, can go a long way to helping employers more effectively manage costs, participants generally agreed, because the value of a cost-reduction strategy is lost if an employer can’t effectively communicate its benefits and processes to covered employees.

Mike Heckman of Cerner Corp. said precision analytics were becoming in vogue, leading to more direct provider-employer relationships than in the past. But on the data front, he said, “while there’s more and more access to data and information, there’s still a wide range of ability to use that data on the part of the providers, frankly.”

CBIZ’s Greg Callahan said “we’re hearing and seeing a great deal of noise about alternative provider reimbursement models, where I’ll say they’re outside the norm.” He believes there is a tremendous volume of activity in the traditional insurance brokerage community around what is sometimes referred to as reference-based pricing or matrix-based pricing, where facilities are being reimbursed in a different way. “That certainly causes angst for everybody involved,” he said.

Under reference-based pricing, plan sponsors limit their contributions toward the cost of a specific service, or pay a fixed amount for it; consumers then pay the dif-ference if they opt for a more costly provider or service. It’s pushing the notion of consumerism into healthcare.

But it also, as Gregg Laiben noted, “gets to the notion of a network (of providers) and probably a narrowing of that network.” That’s a shock to the system of those who believe their insurance should entitle them to see any physician, anywhere, regardless of cost.

Another innovation still emerging, said Bob Finuf, is with virtual care and telemedicine. “We see this as the next generation of care, and there’s a lot of activity in this community already, a lot of activity nationally,” he said. “But for a lower price point, better alternative care for the patient, taking advantage of the tech most people have now, we see that as revolutionary.”

For Susie Oliver, the next innovations are grounded in “data, data, data.” When you look at emergency-room and ugent-care visits, she said, telemedicine can decrease those costs.

Mike Heckman said the rise of interest in telehealth may signal in consumers a higher tolerance for smaller provider networks. “The idea of ‘I need to be able to see anybody available that I want’ is being overtaken by a willingness to trade choice for costs,” he said. As a consequence, consumers might be willing to say they’re fine with choosing between two specialist, as opposed to 10. The problem with it is that it breaks down in primary care.

That’s significant, because as Corrine Everson said, “the thing we hear repeatedly is ‘how can you help my employees get a  primary care provider.” In some cases, employees have not been to a doctor in eight or 10 years, she said, “and are suddenly faced with issues related to an obesity problem that’s gone on for years,” with the effect of vastly increasing the costs of treatment. 

And Bob Finuf pointed out that expanding the presence of telemedicine could prove to be a challenge for other providers in the region, because market prices have already been established for those services, and may not mesh well with other pricing models for care.

“We are launching our service a week from today,” he said. “It’s challenging. From a primary-care perspective, when you look at patient visits, it’s how many you can see in an hour, and to pay a physician or a nurse practitioner on call at $40 a visit, they can do three or four with documentation.”

But how many organizations out there, as a practical matter, can operate profitably with per-physician revenues of $120 to $160 an hour and still cover salaries and overhead? “You have to think about it in terms of what’s the real fixed cost and things that come into play,” he said.

The Role of Consumerism

Karen Johnson, whose career in insurance brokerage has led her to her current consulting role with BlueKC, said one way to help convert patients into more thoughtful consumers is by passing the financial responsibility on to them. And one way of doing that is with a form of defined contribution for healthcare costs, “where employers say, ‘I’m not paying your insurance any more; I’m giving you money to go shopping.’ All of the sudden, I become an individual purchaser,” Johnson said, and that changes the dynamics of a provider network.

Implicit in that, however, is the need for better data, and better sharing of it. And, as some noted, better processes for determining who owns patient data. There’s little question, though that the technological era we live in is empowering consumers to make more informed choices.

Citing research on females who are older Millennials and the youngest members of Generation X, Greg Callahan said that group constitutes “the single most-discerning buyers in the world, of anything—healthcare, cars or groceries. 

“They stalk their purchases and look for tremendous amounts of data in making their buying decisions,” he said. Therefore, “we need to have tools and resources available that can help us, but it needs to be more than easy. It’s got to be almost a no-brainer. Because there are these resources that can help get to that information, but I wouldn’t say they’re integrated into our healthcare delivery solution today.”

Addressing the generational aspect of patient care, Mike Heckman suggested that people in those younger cohorts interact with care when it involves their children or their parents, much more than for themselves. “I don’t know that you get that generational component because they are not consuming a lot of complex care,” he said.

Susie Oliver called for more price transparency to assist in those consumer choices. “If I do want to have a joint replaced, it would be nice to know who has the best outcomes, and what’s the best hospital for the best price or value,” she said.

Ken Bacon, CEO of Shawnee Mission Health, pointed out that the real costs of most care, such as emergency-room or doctor’s office visits, even MRIs, hadn’t changed much in recent years. “What’s changed a lot is the utilization of the expense of services,” he said. His hospital has 5,500 people covered in its self-insured plan, so “how do I mange utilization in a way that incentivizes people?”

The challenge, he said, is not just to manage the cost of needed care, but to help employees manage their health in ways that lower the demand for care. “That’s where the real opportunity lies,” Bacon said. “If somebody can figure out how to motivate individuals to manage their health more effectively, it’s the things we often talk about—eating the right things, and making the right choices. That’s where the big saving are going to come, and that’s what will make narrow networks high-performing. Otherwise, we just have fewer choices.”

For Polly Thomas, consumerism ties back to the earlier comments about the need for more and better communication. “For our clients that have adopted narrow-network strategies, it is done from an education standpoint, where you’re explaining the benefits to the member or employee and focusing on the enhanced quality or ability for decision- making that’s easier; that’s very different than just saying ‘we’re restricting choice.”

Karen Johnson cited a body of research that found a divide in the concept of consumerism. “There’s healthcare consumerism, which happens when you’re healthy, and then there’s healthcare use, which happens when you’re sick,” she said. “We talk about consumerism like it’s going to change something, but what really drives costs is that when we’re sick, we don’t shop, we just use it.”

The Pharma Factor

Addressing perhaps the most under-reported aspect of healthcare costs today—the price and availability of prescription drugs. Jessica Lea’s experience with Tria Health and pharmacy-benefit management and prescription drug adherence offered some special insights into the challenges there.

“Unlike the medical side, in pharmacy, there’s a CVS on every corner, and from a network perspective, that can be good if you have a well-negotiated price model,” she said. But specialty drugs are emerging as a concern. “Everybody is nervous as we hear projections that by 2020, 50 percent of our spend will be on some fashion of specialty prescriptions.”

To manage that, as they did with other care costs, employers will push more of the cost to employees, and “as an employer, a small business owner or at a large business, if you’re paying for that, the biggest key is, are we getting the value and return on it,” Lea said.

The challenge reaching consumers, she said, is that they’ve been insulated from the true costs of medications for so long. “People thought they spent $5 on the drug and that was what it was.” But even with a generic drug, she said, in some instances the true cost can be $250, and consumers with a $5 copay “have no clue unless they have some skin in the game as well.”

Despite that, Cary Hall said his firm was advising corporate clients to make generic drugs a zero-copay benefit, as a means of ensuring adherence and more effectively managing disease. “If you’re diabetic, or have cholesterol or blood-pressure issues, we’ve seen usages as high as 87 percent on the generic vs. brand-name drugs, which drops the costs dramatically.” As silly as it sounds, with the difference between $5 and zero, he said, “you’d be amazed at what it means for people.”

Corrine Everson asked how the entrepreneurial background of President Trump might impact the process for FDA approval of new drugs. Ed Barker said Husch Blackwell’s conversations with FDA attorneys and lobbyists in Washington indicate a “significant acceleration of the approval process, and what you would argue would be safeguards associated with that will suffer based upon the acceleration. There will be a lot more drugs coming to market, which are not as tested as they might have previously been.” And those as well for medical devices, he said, and virtually all scientific approval by the federal government.

Looking Ahead

Karen Johnson holds out hope for a new initiative involving BlueKC, in collaboration with the Centers for Medicare and Medicaid Services, called CPC+, for comprehensive primary care-plus. It builds on some successes achieved by the patient-centered medical home concept, which focuses on a broader application of health-care resources to ensure that consumers are seeing physicians, getting treatment at the earliest possible stage of illness, and maintaining overall health.

Her consulting role was to help BlueKC launch the program, which now is part of a national effort covering 32 markets, with 165 provider locations and more than 800 physicians. A key piece, she said, is the federal commitment of $30 million a year that goes directly to private practices—something people around the table recognized as a “game-changer” in structure and financing. “We want to build this more robust primary care model, all built on a belief system that you can’t have a high-performing healthcare system without a strong primary-care system,” Johnson said. 

As for what’s to come, beyond potential changes in the ACA, Mike Heckman pointed to the evolution of entirely new business lines built around improving healthcare access for consumers and emphasizing wellness and fitness, with their respective abilities to lower the need for and costs of medical care.

“There’s a huge industry popping up that is tailoring to the consumer, focused on making it very easy to interact,” he said.
“Certainly, going and making a decision whether to buy a Garmin or a FitBit is far different than making a choice on an oncology drug, but I think the principle is the same: the more you can simplify things for consumers, the more we will get that engagement.”

It won’t happen tomorrow, he said, “but if you look at the trajectory of where it’s going over time, how you get consumers to engage, all of our work flows as consumers center around your mobile device. It may not be how the consumer starts to interact with the healthcare system, but how does the system translate over a period of time to fit the consumer’s work flow? That’s not a six-month project, but it may actually happen much faster than you think.”

As Matt Tritz suggested, “innovation comes wherever the pain gets bad enough, or where someone can see it will get bad enough in the next few years if we don’t modify the system.” Momentum exists, he said, to start organizing the healthcare community to address these issues. “It’s in alignment with what I believe employers are looking for—anything and everything—‘Turn over every rock and tell me what’s out there. If it’s an option, I want to know and understand what I need to do and what’s the cost-benefit analysis.’”

The alignment is there, he said; the desire from the employer market is there. “I think it’s going to come from the employers who are just tired of doing things the same old way.”