Thought-Leaders newsletter

Perspectives on a selected key topic December 2019

s there a trend or issue for 2020 that could potentially have a significant impact for healthcare stakeholders that might be flying under some organizations’ radar?”

Lindsay Resnick
Executive Vice President,
Wunderman Thompson Health

Expect the healthcare community to step-up efforts in cross-industry collaboration. While we’ll continue to see vertical and horizontal M&A reshape the landscape, collaborative partnerships will thrive. These approaches can broaden access to care, enhance customer experiences, improve patient outcomes, and bring efficiencies that lower overall cost.

Over the last several years there’s been alliances never before thought possible…retail giants as insurers, providers as payers, pharmacies as primary care clinics, ride-sharing companies as medical transportation hubs, and pharma as MedTech disruptors. Whether its competitors playing defense, regional players seeking national scalability, or others simply wanting to take advantage of an industry in transformation, expect it to ramp-up in 2020.

Collaboration among different parties with different interests and sometimes conflicting business drivers isn’t easy. Addressing shareholder expectations, balancing financial goals, and servicing customer demands takes extraordinary discipline. It requires a combination of cross-functional compatibility and a fair, open value exchange. Success means parties have established common vision, trust and transparency.

For those willing to make the right investment, alliances or partnerships can yield big rewards: open-up new markets, extend product offerings, expand customer base, accelerate innovation, and reap collective financial gain. For healthcare consumers, when an industry comes together to figure out how to align interests, break down barriers, eliminate friction, and create mutual incentives the result is better care and better access at a better cost.

William DeMarco
Founder and President, Pendulum HealthCare Development Corporation

The issues that are under the radar for many organizations who see only one or two options, are the vast variety of CMS models which are emerging and reemerging in different forms that are altering reimbursement as well as delivery of care.
Successful ACOs are morphing to successful Medicare Advantage plans while ACOs that are striving for success are finding just how hard it is to keep juggling all the variables before they are forced into risk under the new ACO laws. Adding to this are the new direct contracting and Primary Care First models that represent more opportunities for physicians who are in regions where ACO benchmarks are low but they still believe they can take on clinical improvement responsibilities to create a way to make Medicare a solid payer in their practice.

While the imperative for clinicians is to participate in value based contracting, the imperative for Medicare is to bring more and more clinicians into a shared risk contract with Medicare. Employers and third parties are picking up on the opportunity but are still at a disadvantage by using the insurance networks instead of a high performance network that employers can designate. The question for clinicians is which models offer the best return on their efforts. In some health systems the Primary Care First may yield an additional $20,000 annual payment while other practices may be better off in the direct contracting model earning additional payments and patients.

The under the radar part of this is that this is an election year. Out of 435 house representatives the vast majority are facing the fact that the health care industry and hospitals specifically represent the largest employers in their communities and therefore the largest chance at success in terms of economic development. In many of our market assessments for employers, the health care employed workforce represents 8 to 10 % of the employees in a city or town.

What this means is that unfavorable treatment of laws affecting health care will create a phone call from the hospital administrator or the AHA lobbyist saying that a cut in reimbursement means layoffs for staff including doctors and nurses. This translates to less access, and the state representative will be called out if these cuts force unemployment and reduced access to care in the region. This slows the economic development because many of these workers are highly skilled and paid well.

The discovery that health care organizations on a state by state basis are very powerful is something that may be new and under the radar to elected officials. At the federal level there are states gathering to change laws and make the transition to Value Based Care easier for hospitals and hopefully their respective medical staff. The recent SITE NEUTRAL legislation is a good example of how a strongly supported proposal can be totally shot down by hospitals working with legislators. We can go back and trace changes like this in the recent past, but in an election year you will need to watch closely the under the radar maneuvering in which everything intensifies and the end result may not always be patient friendly.

Neal Hogan
Director, BDC Advisors

Those of us working in healthcare are burdened with our own unique “original sin.” We are reminded of it constantly: US healthcare per capita costs are about double the costs of the next nearest industrialized nation, and our quality is worse.

We are told that this “original sin” is the result of providers being paid for each unit of service they deliver, and if only incentives could be aligned, health systems reorganized, and a new form of payment instituted, lower costs and higher quality would ensue. In the 1990s everyone talked about the whole industry becoming like Kaiser. In the past decade Obamacare has focused increasing industry attention on the goal of population health as the antidote for original sin of volume-based fee for service.

While much good work has been done - for example better integration of physicians, and better care of patients with chronic conditions – but the dramatic shift to population health (now sought for over 30 years) has not arrived. Our industry rhetoric about population health simply does not match the reality of our market situation: studies show that fewer than 15% of health systems in the country are getting more than 10% of their revenues from risk. After 30 years of talk—and lots of effort--- we are still largely a system based on fee-for-service.

Insurers have been unwilling to part with risk, because they believe that they can reduce costs of care, and thus keep that arbitrage for themselves, or they simply do not believe that health systems will be effective at managing risk. Instead of risk, we see much more of a move to “value-based payments.” Payment to the provider is still “fee-for-service,” but layered on top are added bonuses and penalties designed to improve quality or penalize excessive costs. The fee-for-service payment is the cupcake. The bonuses and penalties from value-based payments are only the frosting. Most of the money comes from an additional unit of service. A tiny fraction of the money comes from the bonus. If you have a 5% penalty – you can get that penalty for 20 patients – and make up for it with just one new admission.

Winning bonuses and avoiding penalties requires a different system than pure fee-for-service, but it is also quite different from managing global risk. Value based payment (which looks a lot more like the traditional fee-for-service model than risk) seems to be a signpost on the road to population health---if that is where our system is truly heading.

We need to start matching the reality to the rhetoric so we can be clear about how to win in an era of consumerism and transparency. As one board member mentioned to me, “At our board meetings we spend most of the time talking about population health – until we get to the finance report. Then it is all about profits from inpatient procedures.” Health systems need the capabilities for “winning the frosting” of value based payments, and should look into specific populations to manage (Medicare Advantage is a great start), but with a recognition that the cold, hard reality is that the vast majority of our revenue comes from fee-for-service, and will likely do so for a long time.

There is a lot of talk in the industry about “straddling the two canoes of fee-for-service and risk-based payment.” Turns out that most providers are still firmly planted on the fee-for-service canoe (though it is morphing into value-based payment), and are just gingerly dipping a toe into the risk-based canoe. Many are not even doing that.

By and large health insurance companies are paid for “managing a population” and health systems are paid for treating individual patients. For many systems winning in today’s market is less about population health and more about the fundamentals of lower cost, better care for each patient who presents to us. Systems should not be ashamed of pricing aggressively when they can, increasing market share, and giving patients all the treatments that they need. We want to win the bonuses and avoid the penalties (and we need new capabilities to accomplish that), but more importantly we want to serve patients, lots of them, and get paid appropriately for each service we provide.

In other words, we need to match our rhetoric—and actions--with the market reality.

Mark Lutes
Chairman, EpsteinBeckerGreen, PC

An important emerging trend is attention to serious illness management (“SIM”) in the subacute settings—ideally the home. The trend is embryonic yet terribly important — both from quality and cost perspectives. There are significant opportunities to improve patient satisfaction and to optimize the application of resources by focusing on the development of appropriate care models.

Ideally SIM care management teams are led by geriatric (or palliative care oriented) primary care physicians. These physicians “reach” is expanded by teams of nurse practitioner, clinical social workers and other professionals. There are new codes available for advance care planning and chronic care management which are the beginning of what it will to take to make SIM feasible for traditional (FFS) Medicare beneficiaries.

Medicare Advantage (MA) plans are stepping up to the cost and quality opportunities associated with innovation in this space using the new regulatory flexibility they are afforded in designing supplemental benefits. The passage of the CHRONIC Care Act has allowed MA plans, as of the 2019 plan year, to over supplemental benefits that help improve or maintain health function and allowed them to target those benefits to the portions of their enrollment that have the greatest need for them. CMS is specifically allowing MA plans to over adult day care services, home-based palliative care, in-home support services, home and bathroom safety devices and modifications and support for care-givers. In the 2020 plan year plans are permitted to target these benefits to those with chronic condition that are life threatening or limit function or have a high risk of hospitalization or otherwise require care coordination.

Health systems operating CINs have a real and growing opportunity to implement SIM programs in league with the leading MA plans in their service areas. Their incentive contracts can recognize the improvement SIM can bring on the cost side while improving Star Ratings. These systems also have opportunities with any FFS populations for which they realize MSSP/ACO type incentives.

Systems with hospice programs will want to think seriously about a SIM strategy, particularly with the Medicare FFS population. Hospice eligibles may be found during the course of a SIM course of care and they are probably more seamlessly introduced to hospice at the appropriate time by the SIM program care managers. Moreover, in 2021 MA Value Based Insurance Design pilot would allow participating MA plans to carve in hospice. Systems operating hospice alongside of a SIM program will be optimal partners to MA plans.

Hank Osowski
Managing Partner, Strategic Health Group LLC

Healthcare currently represents slightly more than 17% of the U.S. economy. Yet there exists a curtain of uncertainty that is masking what could potentially be one of the most impactful and disruptive periods in the industry’s history. This uncertainty is driven by two dynamics which will help to determine our future: a ruling on the constitutionality of the Affordable Care Act (“ACA”) and the likely turmoil to be created by the elections of 2020. The healthcare industry may not be prepared for the disruption.

On December 18, 2019, a three-judge panel of the Fifth Circuit Court released a split decision of an appeal of the case of Texas v. United States in which a Texas District Court held that, since the individual mandate is no longer an exercise of Congress’ taxing authority, the ACA in its entirety is unconstitutional. Though the majority opinion concurred with the District Court’s decision relative to the constitutionality of the individual mandate, the justices remanded the case back to the District Court for reconsideration of the severability of this unconstitutional provision (when passed, the ACA did not include a “Severability Clause”) from the remainder of the ACA. Any final outcome regarding the status of the ACA could remain uncertain through 2020.

The uncertainty of the constitutionality of the ACA has serious and dramatic implications for the entire healthcare industry and the population it serves. In jeopardy of being eliminated is Medicaid expansion which brought coverage and federal dollars to an additional 12 million beneficiaries in 36 states; health insurance marketplaces which provided coverage to more than 12 million individuals; essential health benefits as presently defined; protections for pre-existing conditions, and more. Every sector of healthcare will be negatively impacted. Doctors will lose patients and their associated revenue, hospitals will likely see a resumption of high levels of uncompensated care, and health plans will lose millions of enrollees who will rejoin the ranks of the uninsured.

In all likelihood, the final authority on this matter will rest with the U.S. Supreme Court should it accept the case on appeal. Depending on the timing of the Fifth Circuit’s decision and the Supreme Court’s hearing on the matter, a final decision on the constitutionality of the ACA could be a bombshell dropped in the middle of the 2020 elections, which will already have multiple controversies swirling about.

The simple truth is that healthcare is of significant concern to voters and, as such, will be a major issue in the 2020 campaign. Not surprisingly, voters look at healthcare not only as societal and moral issues but as a pocketbook issue as well and are deeply concerned with the increasing cost of drugs, overall out of pocket costs, rising premiums and surprise medical bills. Two of the leading Democratic candidates for President have proposed sweeping changes to the U.S. healthcare system that would eliminate private insurance, eliminate more than two million jobs, control provider reimbursement for providing care by budgetary mechanisms, and by various estimates cost between $35-52 trillion. Though other Democratic candidates have adopted more moderate positions, a central theme from the party seems to be an expansion of the federal government’s role in the payer space. Even the moderate proposals have the potential to trigger important unintended consequences.

As we know from our strategic planning work with clients around the country, it is nearly impossible to adequately plan for every contingency. What is important is designing a strategic plan with flexibility and the agility to maneuver in response to the possible environmental changes for 2020, whatever form they might take. For those who enjoy challenges, it’s a great time to be in healthcare.

Patrick Horine
CEO,
DNV GL Healthcare, Inc.

The push for more transparency of healthcare providers has reached an all-time high. The demands for transparency of pricing, coverage, costs, performance quality raises many challenging questions and concerns as to what should be shared.

Taking from the quote by Confucius, “To know what you know and what you do not know, that is true knowledge.”

Taxpayers financially support most healthcare providers through some means of insurance coverage, incentive payments, subsidies, etc. With this also comes the expectation that the quality of care within the safest of environments is demonstrated, to receive this financial support. The rationale for sharing information about healthcare providers is difficult to argue but better understanding behind what is shared is also very important.

I don’t want to necessarily challenge the rationale or fear the risk of taking a position on one side of this debate. However, I want to provide a perspective from the latter part of the wisdom of Confucius “…what you do not know” as it pertains to accreditation.

Many have read the annual CMS Report to Congress that addresses aspects of their oversight and what is demonstrated by accreditation organizations to ensure compliance to the requirements for quality and safety of healthcare providers. While there is a great deal of information communicated in the report, there is a lot of information that is not shared, thus not known to Congress or the general public.

We may never reach a level of perfection among the hospitals in the US based on the present metrics and it would be more rare than common for no findings of noncompliance to be discovered. Hospitals want to do what is right for their patients and they accept the accountability through the accreditation process for this to be demonstrated. At a minimum, with the authority accreditation organizations (AOs) have been granted, they have to ensure that CMS requirements have been met, but some AOs also have requirements that exceed that of CMS and these are not conveyed as part of the report to Congress.

As an example, the DNV GL Healthcare NIAHO® standard requires a hospital or system to demonstrate that they have an effective quality management system. This is important as it provides us with confidence when we grant our accreditation that they have processes and systems in place that will sustain their organization when we are not on site for a survey.

Quality is an evolution, a continuous process and never ends. As more organizations strive to instill high reliability, better consistency, this leads to better outcomes. It is important while on site to learn as much as possible about what is working but imperative to identify what is not working like it should. We label this a nonconformity, but it is translated as a means for making the organization better, to challenge the organization to get to the root of what led to it and to have a process that will not only correct but sustain the improvements made.

Herein is where transparency can be an issue. A nonconformity, a finding, a “ding” as it is commonly referred to can be interpreted differently to those that don’t understand the language, don’t understand the standards it is matched up against, don’t have the full context in which it is written. We come to these conclusions through discussions with management and staff, review of documentation, touring the facility, and engaging with patients. The staff are open to discussing all areas as they know we are doing this to identify those areas that can be improved by the organization. This is in the best interest of patients.

When such findings are shared in a public forum without an understanding of the standards and without context, they could be taken the wrong way, and not as they were intended, for the continual improvement of the organization. The push for transparency in this respect could stifle this process. The staff could be less willing to share information and there would be more yes/no responses. There would be more dependency on documentation alone and having to go to exhaustive lengths to discover any nonconformance against requirements. This will lead to less areas we can identify to help the organization improve. While I am an advocate for transparency, this would be an unintended consequence of making this type of information more available. It is important for the staff to feel they can be open and discuss what challenges them day to day, what aspects impact the processes by which they are measured and ultimately the impact on patients.

Hospitals want to do what is right for their patients. They are willing to assume responsibility and be held accountable to ensure they are meeting the expectations of the government and the community at large. Transparency is a good thing but if the information provided is not fully understood, could have the opposite effect than intended. The quality system implemented through the NIAHO® standard is a critical foundation for hospitals to ensuring more compliance with both regulatory and accreditation requirements. We have limited time while on-site at an organization to observe as much as we possibly can. At DNV GL we want to have the confidence in what the organization does day to day, not just within a given week. This is a level of transparency from the hospital to us as we are accountable to CMS that provides for the means of assessing hospitals and ensure the safest of care for patients.

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