Healthcare and Insurance Outlook

When Ingram’s started its Industry Outlook series 15 years ago, we worried that an annual review of a given industry just might get repetitive. Then Sept. 11 happened, and we were reminded of just how susceptible to change even the most bedrock of industries could be.

As we gleaned in our annual Healthcare and Insurance assembly this past month, no industry has been subject to more change more profoundly than health care. We were fortunate to have as guides Rick Kahle, president of the benefits division at Lockton Companies, and Danette Wilson, chief marketing executive at Blue Cross and Blue Shield of Kansas City. Kahle and Wilson ably chaired the assembly, which was sponsored by their organizations.

As Rick Kahle explained, Lockton has added significant high-level re-sources on the compliance and analytics side to help its clients make sense of the Affordable Care Act, the source of the industry’s current unease. “We’re trying to help bring as much certainty as we can to a very uncertain environment,” said Kahle.

“Affordability is the No. 1 thing we hear from our customers,” said Danette Wilson, “and that pressure continues to mount.” As she explained, customers are demanding affordability, saying that they cannot pay any more, and providers are saying they need more money to handle the ACA and to continue to invest in their businesses. “That’s a very tight rope and a major challenge for us,” Wilson added.

The Medicaid Gap

Rick Kahle spoke to the gap between those patients eligible for Medicaid and those eligible for ACA subsidies. “The providers were supposed to give some and get some in return,” said Kahle, “but that has left a pretty significant hole.”

Bob Finuf, a vice-president at Children’s Mercy Hospital, observed that Children’s is relatively fortunate in that both Kansas and Missouri have higher-than-average levels of eligibility from an income perspective, particularly in the Children’s Health Insurance Program. The lack of expansion for adults is, as he sees it, “a significant issue when we already start at such a low place.”

Tierney Grasser, senior vice president of finance and chief financial officer at Olathe Health System, spoke to the “huge gap” between Medicaid and the subsidy-eligible population under ACA. Asked Kahle, “So somebody making be-tween $4,000 a year and $12,000 a year, while the intent of the ACA was to help those individuals get access to coverage, the fact is, it doesn’t?” Confirmed Grasser, “A lot of people are saying they can’t afford the gap.”

For Olathe Health System, this means finding resources in the age of added technology and added regulation. “In fact,” said Grasser, “the uninsured have actually increased the first part of the year.”

Danette Wilson noted that one of the biggest disappointments about the ACA was that it had been developed to help provide health insurance to all people who were without it, “but it really hasn’t put much of a dent into the uninsured at all.” Only about 20 percent of those enrolling in Blue Cross’s individual plans did not have insurance before.

Cost Issues

Joseph Galate, a physician and medical director of Metro Spine & Rehabilitation, posed a “stupid question” that was not stupid at all. “I really don’t know where the health-care dollars are going,” said Galate, “I don’t know how it breaks down. I mean, they’re saying our health-care costs keep going up every year. Where are they going? I know I’m not being paid more.”

As Rick Kahle explained, the rate of health-care cost increases has actually been lower in recent years than in the past. As to why the prices continue to rise, Danette Wilson noted that there had been no downturn in utilization at all. “So we continue to see prices go up because of technology, number one.”

Added to that is the pressure from an aging population. This means more tests and more services. “So we’re not seeing a flattening of claims,” said Wilson. Pharmaceuticals play a large role in upward cost pressures as well, especially biologics, which Brian Burns, senior vice president at Blue Cross Blue Shield of Kansas City, described as the “eighth wonder of the world.”

“There absolutely are providers being paid less for the same services,” said Kahle. “It’s not universal, but that’s absolutely the case.” He asked whether costs were being shifted from the government to the private side. Jean Hansen, CEO of Kansas City Internal Medicine, explained that providers had worked hard on cost effectiveness, “But there comes a point where there isn’t much to get out.”

Galate observed that his clinic’s accounts receivable had been “climbing astronomically.” Said Galate, “Patients can’t pay. So you have to decide are you still going to give good care and take the hit, or are you going to force these people to pay what they’re supposed to.” He added, “It’s hard to be a doctor—I didn’t get into this to go chase people’s money. I got into this to take care of patients.”

Danette Wilson asked her colleagues whether physicians, hospitals and other providers had the ability to take on additional risk from the payers.

“I don’t think, if you were to make a generalization,” said Bruce Bagley, president and CEO at TransforMED, “that we’re ready for that.” There has been noticeable consolidation and integration among providers, but Bagley sees that as a kind of a foundation for the ability to manage performance risk. “We were so ingrained for so many years about creating revenue,” said Bagley, “and now we have to create value to patients, not value to a client organization.”

Bagley raised the issue of “excess.” Summarizing various studies, he argued that 30 percent of what physicians order for patients has no effect on outcomes, and yet, “nobody is talking about reducing the total amount of stuff that we buy.” Said Bagley, “We have created the patient’s expectation that more is better because it’s better for us.”

“It all goes back to the question,” said Kahle, “what does reimbursement need to look like from a provider’s standpoint to reduce waste to create quality outcomes?”

“Part of the problem,” said physician Eric Justin, chief medical officer and vice-president at Lockton, “is we don’t know the costs very well.” He cited the various studies that showed somewhere between 15 and 35 percent of all imaging was unnecessary. There would be a value to going back to the table with the payer and reviewing the numerous variables that affect cost and outcome.

Electronic Medical Records

Adding to the burden on physicians is the conversion to electronic medical records. “There’s no doubt that the EMRs are necessary,” said Jean Hansen. “They’re necessary for patient safety, to be able to integrate information, but all that workload has fallen to the physicians.”

Bruce Bagley noted that more than 80 percent of doctors use EMRs of some kind. “That doesn’t mean they do everything they’re supposed to do with them,” said Bagley. The real problem, he observed, is that the vendors have not kept up with the workflow changes. Vendors started off selling computers to doctors based on what the doctor wanted, and that was about billing and coding, it wasn’t about workflow or about communications. “It was about all the other stuff that we have to do every day.”

“From a physician perspective,” said Eric Justin, “the frustrating part is just the amount of time that [EMRs] have added to the end of the day.” Although his own background is in IT, Justin could spend two to three hours an evening on documentation. He argued for standardization of workflows on a national scale, not just on a local scale.

For all its burdens, the new technology has its upside. “We have always known we take fantastic care of patients,” said Hansen, “but now with technology behind us, we actually can track these outcomes to prove it.” According to Hansen, the tracking also helps keep the patients informed and educated. The problem remains, conceded Hansen, “the financing of it.”

Ryan Mullins, a physician with Liberty Hospital, suggested that the way providers measure quality may not be the way patients do. For many patients, intangibles like physician courtesy can matter as much as test results. “This has not been translated by ACA, and it’s causing mixed messages to the physicians and creating a little bit of burnout for them. That will be a continuing struggle as we define quality.”

Kristie Arthur, with Mosaic Life Care in St. Joseph, the new brand for what had been Heartland Health, spoke to the value of the Cerner medical record program that her group has been using to target patients and track their progress. Mosaic has been taking some of the same quality metrics used for years at Heartland and employing them at the clinics. “We’re still in our infancy yet,” she acknowledged.

Patient Involvement

What has impeded the effectiveness of EMR technology across the board is the failure of patients to get with the program. Bruce Bagley objected to where the onus had been placed.

“I’m on a campaign to get the term ‘noncompliant patient’ removed from our vocabulary,” said Bagley. “We’ve used that far too long as an excuse for either our inability or unwillingness to engage patients to help them take part of their care.” He saw the need for pro- viders to engage patients and motivate them.

“But we still find some patients choosing between health care and food and that’s where our financing piece has to be brought up,” said Kristie Arthur.

“One of the challenges we all share is from an engagement with the patient perspective,” said Bob Finuf. Despite all the advances in technology, almost none of it allows a patient to speak to a clinician remote-ly. “We all need to figure out those things and talk about how we engage patients.”

Tierney Grasser addressed the difficulty of getting her own staff to participate in a wellness program. She worried that they might fail to interact with patients because they don’t believe in it themselves. “That’s a challenge,” she said, “not only from a health-care perspective, but as an employer: How do I get my staff to engage in this as well?”

At Metro Spine & Rehabilitation, the most salient outcome measurement is pain reduction and quality of life. “I think people are non-compliant, either financially or otherwise,” said Joseph Galate. “They want to be done and get back to their lives.”

Rick Kahle asked how providers could incentivize patients to take more responsibility for health-care decisions. Bagley suggested a model in which patients are allowed to choose among treatment options presented in an unbiased way. In virtually every instance, “Patients choose less intervention, less pain, and lower cost. Employers can support that kind of work.”

Eric Justin admitted that it was difficult to pull physician bias out of the patient decision-making process—he called it “the hammer-nail thing”—but he thought it possible and useful to create a decision-making model directly focused on patients.

“Consumers are getting more savvy,” said Tierney Grasser. They are getting more involved in their care and more cost-conscious. They are more likely to challenge their doctors.

Much depends on plan design, said Jean Hansen. If patients have a “chip in the game,” they are more likely to get involved in the decision-making process.

“The vast majority of plans have copay for primary care and more for specialists,” said Danette Wilson. “It doesn’t do anything to encourage the consumer about whether or not to go. That’s another hurdle to getting consumers in the game.”

Patient-Centered Medical Home

Given the capabilities of the new technology, Kahle asked what kind of information the patients were receiving to make them better informed consumers.

Jean Hansen spoke to the promise of a patient-centered medical home model. At this stage, said Hansen, the communication was still largely one-to-one: “We’re not talking to the community about it, but we are talking to individual patients.”

“PCMH reads well in the magazine and looks good on paper, but it really takes leading practices,” said Brian Burns.

Burns noted that the PCMH program Blue Cross has today is different than the one rolled out in November 2009. “And that is good, because it does get to the continuous improvement.” According to Burns, the program has reached a new level in terms of quality measures and producing the metrics employers want to see.

“One of the things that I think is a positive about the PCMH movement is that we’re working in a more collaborative teamwork model with our patients,” said Eric Justin.

Bagley acknowledged that the ability to measure outcomes has improved, but, he added, “There isn’t a physician I know who thinks the current quality measurement system fairly evaluates their daily work.”

Accountable Care Organizations

Wilson asked a theoretical question of what a reimbursement system would look like, if given today’s technologies, the industry could start from scratch.

“We need to rethink what things are worth,” said Bagley. Many of the things that we pay for every day, whether it’s an X-ray or MRI, are priced in a way that’s not necessarily based around the value
to the patients.”

Bagley raised the issue of an Accountable Care Organization, a group of doctors, hospitals, and other providers who collaborate to coordinate care for their patients. “Each component has to demonstrate its contribution to the overall effectiveness and efficiency for the enterprise,” said Bagley. “And if they’re not able to do that, they won’t be asked to join.”

The basic concept of the ACO, Rick Kahle explained, involves moving from a discounted fee-for-service to another form of payment methodology.

“We are very progressive in the ACO world,” said Kristie Arthur. “We’re trying to be innovative in our approach to patient care and transferring that to where the patient is.”

Kansas City Internal Medicine did an ACO for reasons other than monetary. “It wasn’t at all about reimbursement,” said Jean Hansen. “It was really because we’re passionate. We think that’s the way care should be delivered.” As Hansen explained, her organization’s ACO is a Medicare shared savings plan, created after the fact. “You’re getting this pot of money, and you have to decide among your team how it’s going to be divided.”

“The promise of ACO was care coordination, care quality,” confirmed Brian Burns. He noted that the strategy behind ACO reimbursement is to foster and encourage coordination of care.

“I do like the competitiveness of it,” said Burns. He said that there are multiple ACOs forming, which he sees as good both for the industry and his own company. “If you can improve quality of care, improve access, and bend the cost curve, you’ve hit the trifecta,” said Burns.

Joseph Galate was less sanguine about the ACO model. The one example with which he was familiar proved to be “horribly flawed” when it came to distributing revenue. The patients, he believed, suffered most. “They didn’t get good care,” said Galate. “They were run around the system and when all the stuff was done, they were sent back to wherever.”

The ACA and its Effects

Rick Kahle addressed the effect of the ACA on small businesses. As he explained, many of the small businesses bought a year’s delay with early renewals. By the end of the year, however, the effect of community rating should be more obvious.

Before Jan. 1, 2014, the difference in the individual price for coverage on a healthy 18-year-old, as compared to an unhealthy 64-year-old, may have been as much as 25– or 30–1. Under the ACA, the community rating structure mandates that that band get narrowed to 3–1.

A small group whose employees are older and sicker, said Kahle, might actually come out ahead as this compression happens. Those with younger and healthier members might see a really significant bump in their insurance premium in that small-group marketplace. “We project that about 20 percent of small groups over the next couple of years are going to have a really hard decision to make and may actually jettison coverage and put people into the exchange.”

Kahle sees an irony in the drive to enroll young people. “They didn’t want to sign up when insurance cost $50–75–$80 a month, now it’s going to cost $170 or $400, and that young person is saying, “well unless I’m subsidized, thanks, but I’m out.’” Many of them think themselves bulletproof and, even if not, they can always present themselves at the ER and get care.

“The ‘transitional relief’ that the administration calls it exacerbates the problem,” said Danette Wilson, “but gets them past he mid-term elections.” Wilson believes that if Kahle’s prediction of a 20 percent defection rate by small groups occurs, it will only aggravate the uninsured crisis even more.

Joe Galate explained that, as an employer, he was offered early renewal last year. This represented a 35 percent increase, but if he did not accept that, he was staring at an increase up to 140 percent. As a small employer, he was almost being encouraged to “dump my staff on the exchange.”

“That’s the unsustainable issue form a small group perspective,” said Wilson. The individual issue is equally challenging as people no longer taken care of by their employer have to make decisions they’ve never had to make before. “You get back to who’s really going to continue that coverage? Is it only the older, sicker population?”

“The ACA has forced the concept of consumerism to become much more front and center,” elaborated Ravi Govila, chief medical officer at Blue Cross and Blue Shield of Kansas City. “I think a payer now has to be much more nimble with all the day-to-day changes.”

As Kahle noted, the incentives are not aligned right now to create the kind of risk pool needed to make this system work. The penalties are not enough to get people to buy insurance, and those who do buy will be subsidizing people at the other end of the spectrum that need coverage.

Complicating the issue, as Wilson notes, is that 20 percent of those who have signed up have not paid, despite the hiring of additional staff to help people understand what they are buying and how they are expected to pay.

“Health insurance has to be affordable if people are going to buy it,” said Wilson. “That means providers who want to continue to have access to those patients are going to have to figure out a way to deliver services at a lower cost.”

Wilson spoke to the “daunting challenges” that everyone in the industry faced, patients and providers included. “We’re open to collaboration,” said Wilson. “And most important, we want to do the right thing. With that type of perspective, there’s an opportunity for us here in Kansas City to really come together and make a difference for the members that we all serve.

“At a time of great peril and challenge, there’s great opportunity,” affirmed Kahle. “The innovators and people who figure this out and do things differently are probably going to have terrific opportunity to capture market share and be really successful going forward.”