Friends, family, colleagues and our valued clients:
To say that we live in interesting times is an understatement. Having just completed a very challenging election season, many in our nation feel vindicated and excited while others are saddened and maybe even frightened.
As a firm, I feel the need to share that we’re proud of the rich diversity of our team, the teams of our clients and the members and patients we all serve. We are 100% committed to supporting this diversity and remain deeply committed to our core values, including access to care and wellness services. We also believe that it is our job to work side by side with our clients and their teams to ensure success amidst market changes, both creating strategies and implementing large scale transformation to achieve a successful return on investment for the limited premium dollars from CMS, states, employers and members/patients.
For those of us in health care, we don’t have the luxury of sitting on the sidelines and watching change occur; we are part of a dynamic industry that doesn’t “hit pause” while appointees are determined, new laws and regulations are written, and success criteria shifts. How this all gets implemented impacts our day-to-day lives and livelihood, as well as the hundreds and thousands of folks on our teams and who we serve.
I’m writing you to share our firm’s thoughts about what the election will mean for all of us. I’d like for you to consider this to be an ongoing conversation; we’ll write to you occasionally as we gain clarity on new appointees, laws and regulations to share our thoughts on what this means for you, your team, your providers and your core business.
To jump to specific topics in the letter, please click here:
For now, I have to begin with the thought that as much change there is on the horizon, it is also true that many of the core drivers of our business are likely to stay the same or only become more important – irrespective of the administration.What likely will not change and instead will become even more important for health systems and health plans going forward:
- Doing more with less: reducing global premium spend. This was not a concept born from the Accountable Care Act. It is a requirement for Medicare and Medicaid to remain solvent, for businesses to be able to continue to afford to cover their employees and for the individual and small group market to survive – and even thrive. Those hospitals, health systems, physician groups and clinics that take the lead in organizing care and reducing global spend will be leaders and will have control over their financial and quality destiny – others will be forced to survive as vendors, constantly fighting denials and shrinking payments.
- Demonstrating quality and complexity through dependable and reliable data. At the top, the available premium will continue to be impacted by quality and some type of patient/member complexity or risk score. Having the ability to collect, analyze, report on and impact the right data will continue to be a critical success factor.
- Financial risk pushed down to both providers and to members/patients. CMS, states, self-insured employers and health plans will continue to look, perhaps even more aggressively, for health care providers that can effectively accept financial risk for members/patients. This requires not only the necessary license(s) and funds set aside to bear risk, but also care management, utilization management and other systems to succeed in reducing overall medical spending from the available premium.
- Need for acute care providers to think strategically about how their core business shifts from being procedural and admission-driven to running or being a key player in a coordinated network whose drivers are quality, customer satisfaction and wellness/prevention. The shift from hospitals to “health systems” is an acknowledgement that episodic care for a patient is not as sustainable in the long-run as whole-person care for a member. While it’s unclear if some of the recent mega-mergers will add value and survive in the long run, those systems that are truly focused on creating value-add comprehensive networks that can both reduce total cost and improve clinical quality will continue to have the competitive edge going forward. Providers across the continuum need to continue to build or join integrated delivery systems with a strong ambulatory care focus. Those networks that place an emphasis on population health management and wellness, behavioral health integration, team-based primary care delivery that co-manages with specialists, and care coordination will be more effective in reducing global premium spend and succeeding under financial risk arrangements. This is not easy – providers will need to do some soul-searching and make the right investments to shift their core business (and workforce) away from procedural care to wellness care to be a successful steward of the premium dollar. The market has, and will continue to, reward the providers that make this paradigm shift.
- Continued consumerism. Providers will continue to win when they can influence consumer choice through delivery of high quality care, member/patient satisfaction and transparent price data. Health care is becoming more akin to other industries – competing on price and quality for customers. This trend is likely to accelerate under the new administration. Providers will need to clearly and consistently demonstrate the value that they bring to wellness and lifestyles of their members, as well as the return on investment for the increasing portion of the cost (premium, deductibles and co-pays) that will be out-of-pocket for the consumer under all lines of business. Consumers demand and deserve information about the services they are receiving and how it compares to other providers. They will leverage social media and government-supported information tools, so providers will need to get engaged with and leverage these tools themselves in order to compete and demonstrate value.
- Concierge medicine and other services not covered by health plan benefits. It is critical to serve the entire community well through leveraging what is covered under the payer premium division of financial responsibility (DOFR) while also selling services and products that are not covered but that have value to certain consumer market segments. This includes non-medically required ophthalmologic, dermatologic, and orthopedic treatments, for example. It will be critical for academic medical centers and integrated delivery networks with physician organizations to be more efficient and effective with the use of limited specialty resources in order to meet medically necessary member needs and those they are willing to pay for that are not covered under their health plan. Don’t lose that consumer’s paying business to someone else!
A very likely scenario is that states will receive block grants for Medicaid, and health plans will have the flexibility to sell across state lines while simultaneously establishing a Federal high risk pool for individuals having difficulties purchasing health coverage. It is not clear how the new administration and Congress will address the maintenance of more popular parts of the ACA (such as guaranteed issue for pre-existing conditions, and enabling children to stay on their parents’ insurance until the age of 26.) It is difficult to sustainably cover individuals with pre-existing conditions without the accompanying ACA requirements that keep risk pools solvent (such as the individual mandate and encouraging and subsidizing healthier members to enroll). The executive and legislative branches of our government will have to work together to address rising premiums. Though preliminary, the current potentials for Secretary of Health and Human Services that have been floated are Bobby Jindal, Newt Gingrich, Rick Scott and Rich Bagger
We are still learning about President-Elect Donald Trump’s full plan for health care once he takes office. From his campaign platform, we do know that he wanted to:
- Completely repeal the ACA (although since the election, Trump has since walked back on this platform promise and has stated that he would be open to revising or amending the ACA, to preserve components such as coverage for pre-existing conditions and dependent age limits).
- Allow the sale of health insurance across state lines
- Allow deduction of health insurance premiums from taxes
- Have tax free Health Savings Accounts for families and individuals
- Promote or require price transparency
- Stop incentive funding for Medicaid expansion to states (part of the ACA)
- Allow for easier import of medications
More detail on some of the specifics:
Medicaid block grants
Block granting Medicaid is touted as giving more control to the states and incentivizing them to eliminate waste in the state-run programs. Instead of an open-ended commitment to funding a state match, this would control costs for the federal government (and provide predictability for state and federal budgets). What is unclear is how the block grant funding levels would be determined, and therefore how much of the current Medicaid spend in each state would be capped or reduced.
First and foremost, block granting Medicaid would likely reduce federal government control over state Medicaid programs. Typically, CMS is able to require that states provide some standard level of access to care and manage the delivery of that care. Instead, states could potentially administer the block Medicaid funds as they see fit. This could result in less coverage for some populations but possibly more tailored coverage for others.
Under block grants, states would have to manage to deliver care with a fixed amount of dollars per person. The federal government will need to be willing to increase block grant funding for a potentially expanding Medicaid population (Medicaid populations tend to flux with the overall health of the economy).
Sale of insurance across state lines
It appears likely that the new administration and congress will grant the ability to sell insurance across state lines and create a national insurance market. The perceived benefit of removing state regulations from the insurance marketplace is that overhead costs would be lower and insurance companies would only have to comply with basic federal regulations. This would incentivize more insurance companies to offer more plans to a much larger eligible population.
Insurance companies would be incentivized to operate out of states with the least regulated markets. I would expect to see adverse selection from the lower regulated policies to the larger, national health plans. The smaller, local players would be stuck with the higher-risk members and would have to set a higher premium as a result. On the network development side, health plans will have little leverage with providers when they come in to negotiate the rates in their region because they will not have enough membership to leverage. This will result in the health plan paying a higher rate to providers and therefore increasing premiums (or the health plan will eat the cost and it will be a loss leader for them). A good example of how this played out in New York is with Health Republic. They went into the market with higher than market rates with providers and started out with a low premium to ‘buy’ membership. They then filed for double digit premium increases the following year because they lost money on the lower premium and then went out of business. This has happened across the country, and Aetna and United have pulled out of markets across state lines because of this.
From a network development perspective, providers should be prepared to negotiate with many more insurers who are looking to take hold in their region.
The President-Elect has also stated a desire to increase price transparency from providers – certainly not unique to his platform, but it seems that there will be a renewed push. Providers should be aware of potential pressure to release cost and price information, and how they will handle that requirement. This is not a new concept and many websites today already share pricing for certain procedures and some providers even post their prices publicly already. For example, Blue Cross Blue Shield of North Carolina decided to publish the rates it pays to specific providers. Providers need to assess their public image (compare their prices against the market). If they cannot compete on price, what other ways do they provide value in order to generate an overall better return on premium investment (quality and outcomes)?