Tag Archives: affordable care organization

Not Your Mama’s Recipe for Healthcare

This article is about opening minds, eyes, hearts and futures. I’m going to take you on a journey into a world where I shine my flashlight into dark corners, challenging norms, introducing ideas and connecting different areas of current players and practice.  

Thanks in advance for sharing, caring and daring to think in ways that transform.

– Steve

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Imagine if we could just wave a magic wand and all enjoy mutually delicious sips from the same icy cocktail of healthcare reform. The solutions appear to be so clear and obvious — to everyone except the major players that engage in healthcare.

Why would health systems, medical facilities and specialists willingly leave the B2B payer system and depend on consumer payments?  Why would hospitals, big pharma and providers want to compete on price when they can use their political influence and retain greater certainty in a regulated pricing model?

If large self-insured companies contract with health systems directly, could we count on these companies to pass savings directly to their employees, rather than pocket them as profit? Moreover, what would be the fallout on payer pricing to the individual and the fully insured markets? If payer competition was lessened through direct contacting, could health systems ultimately wield pricing leverage in these relationships?

Check out the latest reports on wellness plans and seniors’ use of digital health tools. Why would patients who feel good or are not remunerated financially want to make these consistent, long-term behavior changes?

In a country with a proven history of high obesity and chronic disease rates, why would patients choose to change their lifestyles en masse? What is the motivation for long-term adherence and results?

Okay, then, how do we disassemble a massively interconnected, for-profit health model that is complete with individual and institutional shareholders and bondholders? What about the leftover millions of employees from payers, brokers and insurance agents who are not able to be repurposed into other jobs?

What happens to the rest of the economy when consumer spending from all this unemployment and loss of investment money drops our GDP into the toilet? How would this affect future tax rates for individuals and companies?

We need payers, drug companies, providers and hospitals to lower healthcare costs. But, if they do lower costs, what then?

Instead of being motivated by satisfying shareholders and taking in more profit, will these companies choose to willingly pass on new savings as a result of lower pricing to healthcare consumers? If that’s the case, why haven’t we seen any major industry players going on record to say this?

Enter Will McAvoy from the HBO show “The Newsroom.”  The fake TV anchor from ACN said it best with his famous utterance: “The first step in solving any problem is realizing there is one.”

See also: Consumer-Friendly Healthcare Model  

Increased healthcare costs, lower quality, worsening outcomes, fraud, waste, abuse, mass unaffordability, stagnant wages, overutilization, defensive medicine, uber-administration and physician burnout are all too obvious, painful and expensive realities. Yet these are largely the emerging effects of a largely missed core problem:

The chief reason for our healthcare crisis has been political leaders’ lacking the guts to make the tough decisions for our future.

If our current weak, spineless, clueless, ego-driven, special interest capitulating, partisan robots led America during WWII, I fear we’d today be speaking Japanese or German. But the leaders in the 1940s recognized and decisively drew upon the need for all Americans to pull together for the greater good. Our citizens and businesses believed in the vision and greatness of perpetuating a better America for the next generation.

As much as I never thought I’d say it, we actually need greater government oversight in several key areas. It is obvious that large healthcare industries and public players are not simply going to go away or let their built-up leverage shrivel up. Consumers and employers need to stand on more equal footing, which cannot be accomplished solely by the Triple Aim (simultaneously improving the experience of care, bettering the health of the population and reducing per-capita costs).

When I think of great decisions that shaped our country, I think of John F. Kennedy’s decision to land a man on the moon. I think of Lyndon B. Johnson getting the Civil Rights Act passed. I think of Abraham Lincoln’s Emancipation Proclamation. I think of Congress passing the 19th Amendment. I think of Franklin Delano Roosevelt’s New Deal with 100 days of full bipartisan support. And I think of the way America rallied together, had conservation drives and raised war bonds during WWII.

We need those same leadership qualities to better position and deliver affordable, quality healthcare for the next generation. Consumer initiatives and bold plans are good — until special interests hit politicians.

Apart from aspirations of greater political leadership, we need to have a viable model for bringing fairness, accountability and affordability to the current status quo of health care.

ENTER: THE ‘HIT-IQ’ PLAN

HIT-IQ = Health reform by Intelligent augmentation, Transparency, Incentive and Quantity.

HEALTH REFORM: To speed up the ability for all players in the U.S. health system to benefit from reform, the HIT-IQ plan fills the cracks in healthcare reform. It is composed of the following:

INTELLIGENT AUGMENTATION (IA): Also known as intelligence amplification. Think of IA as a computer system or technology that supports and enhances human thinking, analysis, planning and decisions. Yet it allows the control and oversight to remain with humans. An example is Google’s search algorithm that allows us to find what we want online, in just a matter of seconds.

Contrast this with artificial intelligence (AI), where machines are meant to fully reproduce human cognition within a system that functions and learns autonomously in its own domain. True human-free AI is not fully here yet, though portions of AI are coming forward in new technology and solutions.

We now live in a world where much of our data has moved from paper to digital. Big data offers great benefit, yet it still has to be organized, analyzed, prioritized and optimized for a specific purpose. IA is the generator, and when coupled with massive computing power and speed, it allows humans to become far more accurate and efficient in their business and life activities.

See also: The Search For True Healthcare Transparency  

In a previous article on AI, I wrote about different companies, each with emerging technologies meant to improve accuracy and efficiency in different facets of healthcare. This includes medical imaging, mental health, risk management, drug discovery, genomics, hospital monitoring and lifestyle management. IBM’s Watson is a great example of IA in healthcare, where doctors can better diagnose and employ the latest personalized evidence-based care.

Help in efficiency can come none too soon. Recent reports show the last three quarters of U.S. worker productivity are at the lowest levels since the pre-stagflation period in the 1970s. According to popular economists, something very interesting is happening. The last six years of great technology has not helped overall productivity — in fact, it has gone backward in a hurry.

This becomes extremely important for healthcare, which, at the end of 2016, will have the highest employment pool of any U.S. sector. Moreover, the pricing of healthcare and health coverage has become unsustainable for many individuals and small to mid-size employers.

A big game of “financial musical chairs” now exists between employer profits, consumers who want to afford healthcare and retain their current standard of living and health companies that want to satisfy shareholders with ever-surging profits.

The big fear of robotic automation and AI is that computers will replace human workers. But I believe IA efficiency makes job elimination en masse an absolute necessity in bringing down the cost of healthcare. Any company’s purpose is to make profit, attain customers and stay competitive — and that does not include keeping people employed. That is, unless the replaced quality, accuracy and value becomes less than when current high levels of human capital were involved.

With what I continue to see coming in IA solutions, I believe it will not be long until we see deep learning and pattern recognition being applied to hiring, work flows, management and core operations — as well as patient intake, diagnosis, m-health data, patient marketing, population health and chronic and acute remote and in-house care management.

The fact that interest rates remain low also bodes well for healthcare companies to make investments in greater levels of integrated technologies that will replace bunches of humans with greater accuracy, efficiency, fewer errors and greater predictability. Let’s not forget this technology operates 24/7/365 with fewer salaries, benefits, sick days, arguments — or the ability to file lawsuits.

But wait…there’s more!

Look for malpractice rates and defensive medicine practices to come down significantly, as expertly designed, optimized, scalable and proven algorithms come into play. As medical malpractice rates drop, health systems and providers will capture that cost difference — and not add them over current net salaries. Et voila! Still lower costs!

It’s not magic, folks; we’re trading off large inefficiencies and human-based error inherent with a large employment pool. There’s a reason medical error is the third-largest killer in America, and big data analysis, predictability, accuracy, greater monitoring and efficiency are precisely what is needed for lower costs, higher quality, greater safety and better outcomes.

Best of all, the system will still be run by humans.

TRANSPARENCY: This is one area where the government must make a mandate across all states. We have seen that without mandated public and easy-to-access transparency, health consumers and employers have absolutely no chance of greater affordability.

Healthcare companies have no interest in making healthcare more affordable to consumers. And, please, don’t be lulled into thinking that just because payers, plans, medical device companies and big pharma/PBMs are working to lower healthcare costs and increase care quality that the savings will be passed on to the consumer in the form of lower, more affordable pricing.

Look at this: United Healthcare’s PATH program is a joint effort for better care outcomes. In 2015, 1,900 providers hit their program marks and were paid a bonus of $148 million, near $78,000 per provider. Sick and diseased consumers are going into bankruptcy and medical debt or are holding holding off seeing doctors because financial constraint — and United is paying doctors bonuses to lower costs that should have never been that high to begin with?

Is this a joke? Providers are being rewarded for doing what is expected anyway, and the consumers (errrr, paying customers) get regularly increased premiums? Take a look at the PATH consumer website; with all the accolades on improving health, help me find where it says United will reward customers by delivering lower prices for their plan’s premium pricing.

Here are needed areas of transparency:

1. An all-claims reporting mandate, from every payer, hospital, facility, doctor, self-insured company and government agency. While the recent ERISA ruling by the Supreme Court caused some setback, the Department of Labor could — and should — push through self-insured entities to report payments through state-mandated requirements.

2. Every hospital, facility, health system and provider should have their full fees, within 90 days for every product or service, be freely and easily available to the public. Any website or app could tie into the API or data to create patient or employer comparison shopping tools.

3. Every individual and company must be able to see what underwriting factors and specific influences went into a payer deciding upon their fully insured plan premium. Line-by-line calculations, each fully explainable.

4. All pharmacy benefits managers (PBMs) should be required to be fully transparent on all fees, kickbacks and bonuses.

5. There must be increased safety when it comes to providers and facilities. There is no reason that circumstances involving doctors, hospitals or medical facilities that have been found guilty of state law violations or have lost or settled in malpractice suits shouldn’t be made clear to consumers.

6. People should be made aware of drug companies’ R&D costs. We’re all sick and tired of the moaning relating to big pharma’s R&D and how our demands for price cuts will kill future new cures and drug development. Okay, then, let’s open those books so we can share in your pain. Hey, greater public appreciation and demand for IA in drug delivery will keep profit margins while bringing down prices.

INCENTIVES:  I’d like to meet the geniuses who believe that a healthcare population that is 40% obese, full of chronic disease and is constantly tempted by fast food and sedentary online entertainment is going to make (wait for it) long-term consistent changes by using wellness programs.

Will they do so because doctors (who are compensated by financial incentives or are punished by financial withholding penalties) tell them to do so?

Here’s a toughie: What if we asked doctors and practices to lower their cost to provide care, make less in profits and lower their salaries. Then, we told them they would willingly pass on these newfound monies to reduce pricing for patients because it would be financially healthier for the country’s future.

How do you think our white coat paladins, hospital administrators and health system executives would respond?

This is not rocket science — it is common sense. Studies are very clear that loss aversion related to money is a far better motivator, even than giving them money. Moreover, only 25% of employees find their wellness programs at work to be effective.

In a recent study of 7,600 businesses by Payscale, 73% of employers believe they pay fairly, while only 36% of employees feel the same. And just 21% of the workers believe the company is transparent about pay.

Catching my drift, employers? You can kill three birds with one stone: gaining healthier employees, potentially lowering healthcare costs and improving engagement through greater levels of trust and feeling appreciated financially.

Reward healthcare consumers by tying wellness goals to financial rewards or punishments. (We are talking cash here, folks — not trips, massages or points). Health plans? Same thing. If you want to balance out the risk of sicker members, per enrollment with the ACA mandates, hit up your chronic, pre-chronic and younger members. See how financial incentives and disincentives work there.

If they use wearables and contribute data to you or their provider, they are rewarded financially. If they hit goals on medication adherence, weight loss, lowering cholesterol or blood sugar, give them a paid check rebate. If they have a yearly physical, reward them.

Better yet, show them that future check with all applicable bonuses added together for their rewards. It is a nice, juicy number. Now, deduct 2% of that cash every week they don’t execute — like a melting ice cube. Keep showing them as often as possible what they are going to be missing. Catching my drift?

QUANTITY: Care delivery professionals, facilities and systems will soon have outcomes, patient satisfaction and cost numbers pitted against their service reimbursement levels — and, eventually, against each other.  Consumerism is growing and, whether healthcare stays largely regulated in its pricing or not, reimbursement levels at all aspects of the care supply and delivery chain (including on many prescription drugs) will likely decrease.

Moreover, reimbursement via bundled, value-based payments will come to replace the old, perverse, fee-for-service model. Hence, lower payments for the same work means the number of people engaging in healthcare products and services must grow if revenues are to grow.

Healthcare businesses will have to optimize every possible aspect of their business for new and repeat customer engagement and to retain their customer base. Especially important here will be those successful companies who focus on their intangible assets. These include advertising, marketing, sales, goodwill, customer relationships and various expertise that hospitals, providers, payers, drug companies and facilities have, which they can, and should, capitalize upon to their economic advantage.

The companies that get this will shape their precise outcomes through mastering the art of optimization. Learning how to maximize their intangible assets to drive more engagement of current and prospective consumer clients, thus increasing quantity of services and products. They will look at every consumer and business relationship, every past and present contact, every opportunity in current consumer interactions, every supply and distribution channel, every employee and every piece of capital or human capital they have.

See also: Is Transparency the Answer in Healthcare?

Many healthcare companies suffer from tunnel — instead of “funnel” — vision. They believe they provide products or care and are paid for such — and that’s it. But the organizations that recognize they can not only offer more but be more than their basic business offerings will derive greater revenue and profit.

Population health is a great example. It is about more than capturing data from wearables; it is about recognizing the interplay between chronic disease and genetics and the need for screening those who don’t currently engage in healthcare services. It is about tying in mental health for those who are caregivers and don’t take care of themselves. It is about recognizing that, if you work out a medical debt with more than a negotiation but perhaps a thank you card sent after, your name will be more gold than mud.

For direct primary care doctors, it is about offering a rebate to customers who bring new members to your practice. For a health system, it might be coordinating a telehealth counseling visit to a family member grieving because of a loved one’s illness. What about making that extra call to check up on how a patient is doing at home the day after they get home from the hospital?

Perhaps it’s giving a free service. Often, the most self-serving thing a company can do is actually to be selfless. Maybe it is a doctor’s office sending flowers after a successful surgery outcome or even upon a loved one dying. Maybe it is a call from a drug company outbound customer coordinator, just to see how the new medication is working.

Health companies of all types and sizes that replace current limiting beliefs with empowering ones will find themselves on a track toward capturing greater community value, engagement and increasing their market identity. In short, companies that get people to want to engage and help others engage with those same companies will thrive.

Players in healthcare must not forget that consumerism is not a dirty word; it is people putting up their hands saying, “I want to be cared for and find value in that care so that I can feel good about my time and money spent.”

If they have to be cared for because of sickness or an emergency, then that is all the more reason to make patients feel good about you.

It is no longer a healthcare world where providing the service, billing and receiving payment suffices. People and employers are smartening up and recognizing that lower reimbursement, more competition and new options for care and coverage are developing.

Those healthcare companies that can integrate the intangibles in a meaningful, ethical and value-added manner for their current and prospective healthcare consumers will thrive. Increasing quantity of consumers and identifying and rendering necessary services is key (especially in a healthcare business environment that has properly integrated lower costs, greater efficiency through technology and better outcomes).

It will make — and keep — current and future healthcare consumers far happier in the long run. Now that’s some of the best risk management I know about.

Consumer-Friendly Healthcare Model

Best-selling Author Og Mandino once said:  “Always seek out the seed of triumph in every adversity.”

It appears that a small, yet growing number of America’s front line health providers are doing just that. Instead taking on increased risk, greater healthcare bureaucracy and more administration headaches, these medical mavericks have drawn a philosophical line in the sand.

I’m speaking of direct primary care (DPC). For the uninitiated, DPC is an emerging model where general practitioners elect to disassociate from, and no longer bill services to, health payers, including Medicare. DPC practices average between 600 and 800 total patients (vs. the national 2,300-patient average for traditional primary care provider (PCP) patient panels).

This return to front-line doctoring — “sans insurance” — translates into a cost-reduction of as much as 40% in staffing and reduced administrative complexity. Electronic health records (EHR) software finds itself replaced with lighter applications to track, schedule and bill patients. Practices may also choose to use mhealth/telehealth technology to monitor/connect with patients.

Patients in these practices are often those with low to middle incomes, with high-deductible health plans (HDHPs). For this reason, DPC doctors develop network relationships with other local medical specialists and services. The result is patients gaining access to discounted medications, imaging and labs, plus lower service fees from local specialists — all on a cash basis.

And presto! We have a true two-party care relationship, where doctors focus purely on patients, instead of blending in payers as their second healthcare customer.

The median monthly DPC fee for an adult is about $70; and fees for kids are priced between $10 and $20 per child. Many DPC practices also cap monthly family fees. Pricing is independent of pre-existing conditions and current health status and allows for more face-to-face time, as often as needed.

These practices report reducing urgent care and ER visits, plus hospital admits and re-admits. Quality and outcome data has apparently started reaching malpractice insurers, now quoting lower rates for direct vs. traditional primary care practices.

Here is where it gets sticky. DPC is rightly considered a “health service,” both by the Affordable Care Act (ACA) and by 16 states. However, under section 223(c) of the U.S. tax code, the I.R.S. wrongly considers DPC a “gap,” or secondary, health plan. Therefore, DPC is not a qualified medical expense — and fees paid by patients are not reimbursable by health savings accounts (HSAs).

Changes are in the works, per the introduction of Senate Bill 1989 – The Primary Care Enhancement Act of 2015, which would make DPC fees a part of HSAs. The bill, with strong support from the American Academy of Family Physicians, also seeks to require the Center for Medicare and Medicaid Innovation (CMMI) to create a new payment pathway for DPC as an alternative payment model (APM) in Medicare and with dual eligibles.

The plan is for DPC to show Medicare its mettle — and eventually receive a modest flat fee payment for primary care services offered by a DPC medical home. The legislation includes allowing qualified physicians who have opted out of Medicare to participate in the program. It also serves as a partnering catalyst with Medicare Advantage, in an affordable care organization (ACO)-like structure.

DPC is a disruptive “hot knife” model, whose entry is well-timed to cut through the cold stick of butter called high health costs.

Today, PCP co-pays have gone up to $45, and deductibles are sky high. Many consumers have no idea that at or around the same per-visit patient fee, DPC exists as an option. Employers are just beginning, on a larger scale, to integrate DPC with other options such as HDHPs and self-insured health coverage. Using this new model with self-insured companies makes sense, to hedge risk, lower health costs, improve outcomes and improve quality of care.

One county in North Carolina, which employed a DPC option, saved nearly $1.5 million on yearly medical expenses — on just 800 covered lives! It may surprise you that, apart from HSA standing, there are already early employer adopters who have chosen to pay the monthly DPC fees for employees themselves.

A British Medical Journal study showed patients of Washington state DPC provider Qliance coming in with 35% fewer hospitalizations, 65% fewer emergency department visits, 66% fewer specialist visits and 82% fewer surgeries. DPC benefits appear to not only reduce primary care costs, but lessen the healthcare costs and utilization outside of their practices.

Payer transparency is a significantly important strategy to the future growth and integration of DPC.

We talk about the importance of transparency in hospital pricing to patients, and for drug companies to reveal their true R&D costs. But have you ever stopped to consider the importance of transparency in how payers calculate and price plan premiums for each covered member? Just how much of the premium payment can be carved out as estimated primary care services to be received?

More than ever, healthcare consumer groups and fully insured employers should push health payers for transparency. Because I’ll bet what payers have estimated for per-person primary care usage and costs, adding in the associated patient responsibility portions (co-pays, and any applicable deductible or co-insurance fees) will be much more than an $840 yearly DPC payment.

But wait…there’s more. Don’t forget to have payers deduct an additional…let’s be conservative…1/3 of the Qliance savings percentages for the estimated care cost savings relating to carved-out estimated care outside of primary services.

Next, look at Medicare and do the same thing. But…instead of the wallets of health plan members, think federal budgets, taxpayers, subsidies, growing liabilities and the potential to hold off future tax increases.

Then look at Medicaid for the same reasons, remembering that DPC would certainly create a greater improvement of care quality than Medicaid care providers and facilities. Remember the “triple aim” — cost, outcomes and quality — and that doctors are happier.

DPC injects disruption and greater consumerism into healthcare.

Something interesting happened along the way to transforming our healthcare system. The ACA fell far short of its goals, and America’s care delivery and coverage became even less affordable for millions of employers and individual consumers.

We should know by now that improving quality and pricing for all will not come from laws — specifically, from those who force people into lower-quality Medicaid coverage, and insurance plan exchange options with punishing deductibles; in essence, giving people a broken Christmas toy with a pretty bow on it and pretending they will enjoy it.  

No matter how you dress it up, and much money you throw at it: Healthcare coverage is not the same as affordable healthcare.

In the heart of even the toughest situations, there are innately driven people who make bold, fresh choices and take stands — efforts that emphasize principles we know to be just and right, rather than gaining financially on the backs of others’ misery. My hope resides in what Lincoln called “the better angels of our nature.”

DPC offers a free-market “injection” into healthcare’s regulated pricing model. If Senate Bill 1989 or a similar law passes, it will provide individuals and companies a better chance to gain better quality, more affordable care. Unlike some DPC purists, I see a future inflow of Medicare dollars to non-enrolled DPC qualified providers as stimulating a transformation where coordinated care begins from outside of the umbrella of big medicine ownership.

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Like the plunging penguins who emulate the courageous actions of others, I believe many primary care physicians are looking for the right time to enter a DPC model. Whether that happens individually, through groups, or by strategic partnerships, is up to industry forces. It’s the beauty of filling consumer demand.

Making healthcare services, drugs and coverage affordable to consumers appears completely disconnected from the industry’s mission to improve care quality and outcomes, and lowering health “costs.”

Free market forces are what bring down consumer prices in most every market. Their introduction into U.S. healthcare will likely cause short-term fallout and financial pain within healthcare industries, but it would leave us, and future generations, with a more sustainable, stronger system. We’ve gotten to the point where healthcare bloat and unaffordability will require sacrifice from all involved.

By allowing consumer-friendly models like DPC to enter the regulated world of healthcare, perhaps slowly through the back door, we will see transformation come from within. History has repeatedly shown us that better models fueled by consumer desire rise to the top.

Keep the Humanity in Healthcare

A part of my life allowed me the privilege of treating nearly 10,000 individual patients. Their openness and trust let me partner with them, deciding on and helping enact a course of care, which often helped change lives.

We lived life together.

Owning a practice means more than just providing necessary healthcare — through ethical and legal means. It allowed me to bring out a greater level of transparency and humanity, while remaining professional. It taught me to always put on a happy face, especially in times of personal stress or upset. I learned to make that one patient in that one moment of time feel like the most important person in the world.

Some may think the majority of patients can’t tell the difference in care and just want their symptom or disease treated. News flash — you’re wrong.  

It may seem as though patients are just putting out their time and money, but really they are giving us a high level of trust and control. Depending on the person and problem, we can have significant influence over the course and quality of their lives, as well as the lives of those closely attached to them.

See also: Key Misconceptions on Health Insurance

Too often, we forget nine out of every 10 patients makes less than $33,000 in income (see below). Nearly 40% of patients carry medical-related debt, and one-third of those must choose between payment for that debt versus rent, housing or heat. Many of these cash-strapped individuals will only come in and choose to make health a priority within later, irreversible stages of chronic disease.

Most everyone knows our healthcare is in crisis. The solution appears clear: improve care quality, reduce cost, increase safety, grow healthier communities and deliver all this with greater consumer affordability. The advent of healthcare technology will certainly help make much of this possible.

But we must not make the mistake of thinking patients will have the same level of dedication to population health, wearables and medication adherence as we do. Patients care about themselves and those they love. They care about money and their financial future. They care about feeling good and avoiding pain — but the pain can be more than just their symptoms and condition.

Health payers acquired a longstanding, terrible reputation for not caring.  Many plan members, who suffer physically, emotionally and financially, felt as though they were treated like just another accounting line item, as if they were just commodities that made the business of healthcare payments go ’round.

We’re at a tipping point. As more risk shifts onto the shoulders of hospitals, providers and affordable care organizations (ACOs), we must not make the same mistakes. Tomorrow’s healthcare will involve and require patient compliance and participation to get the best results.

It is one thing to put technology in place that captures patient-generated health data, but it is quite another to show patients you care about the data. Patients deserve to feel the compassion, caring and humanity in our hearts and actions.

See also: Innovation: a Need for ‘Patient Urgency’

I’ve retired from practice, my career now shifting into the business side of healthcare. I am carefully seeking my next path for the right healthcare company, where I can blend my experience, talents, skills and years of front-line patient experience. The healthcare sector is a target-rich environment, whose underlying industries, more than ever, have a tremendous ability to shape the course and outcomes of human lives.

Technology, big data and Triple Aim aside, we must remember the human condition is more than just condition. It is a place where people reside because they often have lost hope and human support.

In the future of patient data, we must recognize that behind the numbers lives a human life and heart and the potential for physical and emotional improvement.

Hey, Pharma! It’s Time for a Change

As Bruce Buffer, voice of the UFC, would say, “IIIIIIIIIIIIIIIIIIIIIIIT’S TIME!”

In this case, it’s time for big pharma to stop just defending its prices and to start to tap into the consumerism that is transforming healthcare.

Check out these stats (mostly from Google and Decisions Resources Group):

  • One in 20 online searches is for health-related questions.
  • According to comScore, health topics are the No. 1 search category on mobile.
  • 72% of people with pre-existing conditions searched for medical info online.
  • Half of all patients and caregivers already turn to digital channels to look up formulary or dosing information.
  • After a diagnosis, 84% of patients searched for options.
  • In a report by Decision Resources Group of 1,000 physicians, more than 50% reported their patients are more actively involved in treatment decisions — and these doctors called on pharma to support affordable options, provide relevant information and make online information more understandable.

The latest survey from Medical, Marketing & Media (MMM) shows 76% of pharma respondents use digital marketing, but the channel segregation below shows respondents devoted the greatest percentage of their marketing budgets to professional meetings/conferences and sales reps/materials. Digital channels — including websites, digital advertising and social media — lagged behind.

More surprising is that only half of both large and small pharmaceutical companies see the growth of consumerism in healthcare as an opportunity. But that’s EXACTLY where the opportunity for growth lies. To thrive in the new era of value-based care, pharma companies will need to change their marketing strategy toward partnering and will certainly need to focus far more on the individual consumer.

See also: Checklist for Improving Consumer Experience  

Trying to scare politicians away from lower-price reforms with the “It will kill our R&D” excuse is becoming the “BOO!” that no longer scares the grown-ups. Both 2016 presidential candidates, Hillary Clinton and Donald Trump, plan to stimulate price competition through imports — and there is bipartisan pressure to lift the ban on Medicare’s negotiating drug prices. Apart from trade groups and shareholders, high-priced pharma doesn’t have many friends.

Payer pressure is bad enough, but if you don’t get into the value-based care game, you are going to be on the wrong side of a very emotional equation.

Patients have greater financial burdens because of higher deductibles and greater cost-sharing requirements, with varying medication tiers. Providers are ever-burdened with less time, and, now, a greater level of risk is being put on them to deliver higher-quality care, better outcomes and greater patient satisfaction — all at a lower price.

Patients are not just seeking advice from providers. They are increasingly online, and at all hours. Plus, we’re going to start to see greater levels of patient-generated healthcare data with wearables and digital technology. And, as we have seen, half of consumers spend their online time on social media. (HINT: Tap into consumers’ behaviors and beliefs, show that you genuinely care and engage them in ways that let them feel as though you are part of their health team.)

The writing is on the wall. Consumers are practically screaming out what they want and need from you. Partner with wearable and EHR companies. Start developing ways to capture and interact with your customers — specific to individuals, at the best times to engage. Find ways you can partner with hospitals, physicians and affordable care organizations (ACOs) to get into their care pathway in ways that help them lower costs to patients and payers.

See also: Stop Overpaying for Pharmaceuticals  

Say “yes” to predictive modeling, big data, analytics, lots of testing and customer segmentation. “Yes” to retaining some of the traditional marketing. Most of all, become human in your approach. Put yourself out there and let people know that you are no longer on an island, separate from everyone else. Let them know your port and beaches are open to more boats and more people than ever before.

End of Health Insurers As We Know Them

I want to start by saying that I am knowingly writing an article that is going to throw fuel on a fire. Being from New England, this article strikes me as the equivalent of writing an article in the Denver Post that says New England Patriots quarterback Tom Brady is better than Denver Broncos quarterback Peyton Manning. Letters will be written. Darts will be thrown. So, I will make sure I put on my steel vest before I publish.

I already started writing on this topic, in a recent article titled, “Apple HealthKit – The Next Step to the End of Employer-Based Health Insurance.” In this article, I will provide a more detailed analysis of why the premise presented in my first article may come true — that within five to 10 years employers will be out of the health risk business. I will then provide a plan for what I think benefit brokers should do to prepare. Taking action may be the difference between those that survive and thrive in this new health insurance world vs. those that may struggle or even fail.

What do I mean when I say employers will be out of the health risk business? To repeat what I said in my last article, “By health risk, I mean the cost of the employee’s health insurance will not be priced by the employer. It won’t be a function of average age of the employee population, claims experience or any of the standard underwriting/pricing rules today.” In fact, health insurance will most likely become an individually purchased product, and the insurers of the future may not be the companies that dominate the market today.

As a consultant to benefits brokers, I educate them on technology and advise them on how they can maintain a competitive position. My future depends on brokers’ remaining significant, so I am as concerned about their future as any broker would be. If you study the significant market events over the past few years, you get a picture of what the future may be like. While many may think Obamacare is the big market change, I believe that the health insurance market is going to change much more dramatically and that, while the government may be nudging things along, competitive market forces will drive the change.

So let’s get to the point. I believe that within five to 10 years health insurance will be delivered primarily through staff model health maintenance organizations (HMOs). These will be Kaiser-like plans where the providers of care will also be the risk takers/insurers. Individuals will pay a fee directly to a healthcare system that will be responsible for the health, wellness and treatment of the person. Employers may still give employees money to pay for some of the cost, but they won’t be in the “risk” business. We are beginning to see this evolution today through the expansion of what people are calling accountable care organizations (ACOs). However, the future will go well beyond the limited risk sharing of today’s ACOs.

Four Catalysts to Change

If you had been in the health insurance business in the ’80s, you would say we tried this before, and it didn’t work. Well, today, things are different. There are four major differences that will be the catalysts for the coming changes:

Changes in consumer buying behavior

In the ’80s, employers often paid for 100% of an employee’s health insurance and a large part of the family’s. When cost wasn’t an issue for employees, they looked at access to providers as the No. 1 variable. So, all the HMOs and preferred provider organizations (PPOs) tried to expand their networks to appease more people. Today, cost is the No 1 issue. As a result, we are seeing networks shrinking to save cost.

Expansion of government health insurance programs, combined with the reduction in Medicare and Medicaid reimbursements to providers.

If I am a healthcare provider and am getting less money to perform services on a growing population, then I need to do things differently. I need to get money from healthy people and from people needing less care. I would also need to keep people healthy or provide care in more cost-effective settings.

Advancing mobile technology

With advancing technology, it will be easier for providers to have real-time access to a patient’s medical information. Things like weight, blood pressure and blood glucose levels can be measured in the home, sent via Bluetooth to a mobile device, and immediately be available to the primary care physician in the individual’s web-based medical/wellness record. Other health metrics will also soon be possible. Systems can automatically notify the responsible physician of any changes in the metrics that warrant attention. Information will help provide proper treatment in a timely manner.

Change in tax laws, allowing personally purchased insurance on a pre-tax basis

With Republicans taking over Congress, the idea of making an individually purchased insurance policy tax-deductible is now on the table. While this is not a necessary catalyst for change, it certainly would put the nail in the coffin and get employers out of the health risk business.

Not only is there a perfect storm forming for the coming changes, but I believe the majority of the participants in today’s healthcare market will welcome this change. We have all heard the saying that “healthcare should be between the doctor and her patient.” We know the government wants this. I think employers, employees and healthcare providers would want this, too. It is the insurers, and by extension benefits brokers, that may not want this. However, as we all know, there is little sympathy for the insurance companies.

Employers would want this because I don’t think employers got into the health insurance business after World War II to be in the position they are in today. While I don’t think they mind giving employees money to pay for health insurance, they don’t want their profit margins affected by the health of their employees. Bad claims experience, and their profits go down. Every year, they agonize over the health insurance renewal, deciding whether to charge their employees more or make changes in plans (delivering bad news, either way) or absorb increases in the business. I don’t think employers want to be in the wellness business, either. They may want to provide wellness programs to make people feel better, be more productive at work or boost morale, but not to control or reduce healthcare costs.

Employees want change, too. Do employees want their employers asking for things like health risk assessments? My health should not be my employer’s business. To me, there is a slippery slope as it is. I do want my physician to care about my health. I want my doctor to know my weight and blood tests and care whether I got a colonoscopy when I turned 50. I often joke that I get an email from Jiffy Lube saying that my car is due for an oil change, but my doctor never sends me an email to get a check-up, test or whatever is needed to keep my engine running the right way.

I believe doctors and other healthcare providers want change, too. They want to practice health care. This would include helping their patients make the right lifestyle decisions and keeping them informed about what is good for them vs. what is not. Providers don’t want the paperwork. They don’t want third-parties telling them what to do, and they are getting tired of reduced reimbursements from the government.

The Market Reacting

I am not the only one using the term “Kaiser-like.” Emanuel Ezekiel, one of Obama’s healthcare advisers, expects healthcare insurers to be obsolete by 2025. According to Ezekiel, “ACOs and hospital systems will become integrated delivery systems like Kaiser or Group Health of Puget Sound. Then they will cut out the insurance company middle man — and keep the insurance company profits for themselves.” (Source: New Republic – March 2014)

Now, I am not going to just listen to Emanuel as my source. I am listening to the market. Hospital systems have been acquiring physician practices and entering the insurance business across the country. In my own backyard, there was this acquisition highlighted in the Boston Globe.

State insurance regulators Friday signed off on Partners HealthCare System Inc.’s acquisition of Neighborhood Health Plan, a transaction that will put the state’s largest hospital and physician organization into the health insurance business for the first time.” (Source: Boston Globe September 2012)

In Massachusetts, this is very big news. Partners HealthCare owns some of the leading hospitals in the country, including Mass General and Brigham and Women’s Hospital.

Hospital systems getting into the health insurance business is not limited to Massachusetts. In New York, New Jersey, Pennsylvania, Maryland, Michigan and all across the country hospitals are getting into the health insurance business. (See Kaiser Health News.)

Concurrently, insurance companies are getting into the healthcare business. According to Hospital and Health Networks Magazine January 2012, the following insurers have made healthcare acquisitions:

  • WellPoint bought CareMore.
  • Optum bought Orange County’s Monarch HealthCare and two smaller independent physician associations (IPAs).
  • United Healthcare acquired a multispecialty group in Nevada in 2008.
  • Humana purchased Concentra, which provides occupational care and other medical services.

Aetna Making Moves

What I have find most interesting is the acquisitions by Aetna and some of the comments by CEO Mark Bertolini. Let’s first look at some of the comments Bertolini has been making over the past few years.

“The end is near for profit-driven health insurance companies. The system doesn’t work, it’s broke today. The end of insurance companies, the way we’ve run the business in the past, is here.”

“We need to move the system from underwriting risk to managing populations,” he said. “We want to have a different relationship with the providers, physicians and the hospitals we do business with.”

In his presentation titled “The Creative Destruction of HealthCare,” he states:

“Not too far away from now – in the next six to seven – 75 million Americans will be retail buyers of healthcare. And they’ll come to the marketplace with their own money and either a subsidy from their employer or a subsidy from their government. And it doesn’t much matter – they’ll be spending their money.”

Aetna is not just talking. If you look at Aetna’s acquisitions and partnerships over the past few years, you can see that Aetna is preparing for the future that Bertolini describes. The company has spent billions of dollars acquiring technologies that can be critical to the future in managing healthcare and healthcare information, including:

  • iTriage – Mobile App for employee to check symptoms – Find doctor – Make appointment
  • ActiveHealth – View and update personal health record (PHR) – Personalized alerts and content – Communicate with doctor
  • Medicity – Promotes coordination of care – Real-time patient data

(Source: Aetna 2013 Investor Presentation)

According to Aetna’s website, Aetna was ranked #52 on InformationWeek’s 2013 list of the 500 leading technology innovators, surging ahead of many of the top names associated with technological innovation. Aetna ranked first among health insurers.

To move to this new model, healthcare providers will need to add capabilities that insurance companies currently have. For example, hospitals provide care but don’t have the actuarial skills to price their patient population in the event they were to get into the risk business. Many also don’t have the capital to assume risk. Those with enough capital can simply buy an insurance company. Others will have to partner with an insurance company that has the capital and reserves to share risk and provide the needed services.

So if I am an insurance company, I can either buy providers to stay viable or provide some products, services or capital that the new healthcare systems will need. Buying hospitals or physician groups across the country can be very expensive. So it may appear that a company like Aetna is setting itself up to be the technology, actuarial, reinsurer and other service provider for these future healthcare systems. I won’t claim to know if Aetna thinks the market will move as far as I am saying, to a Kaiser-like model, but the company certainly is preparing for a different healthcare model.

Some may think that this is somewhat what insurance companies are doing today. Here is the critical difference. Today, the risk-sharing arrangements are still in a fee-for-service environment. In the future, a hospital system may be in close to a 100% capitation environment (where the system receives a set amount per period for each person covered by the arrangement). Provider systems that purchase these services or develop a risk-sharing relationship with an insurance company in such an environment can’t have two such relationships. They will need a single risk pool to properly manage the population and risk. There won’t be a Blue Cross version, a United HealthCare version and an Aetna version of a local ACO/staff model system.

A good example of healthcare financing is my own healthcare. Since I moved back to Massachusetts 16 years ago, I have had the same primary care physician and used the same hospital facility on a number of occasions. Yet I have had seven different health insurance programs. Assuming an average insurance premium of $10,000 per year for my family, over the 16 past years I have paid $160,000 in premiums. I understand insurance, spreading the risk and all the other insurance arguments about where that money goes, but think of how it could be different if all $160,000 went to the system that was actually providing care to my family and me.

What Benefit Brokers Can Do

Okay, so the world may change. What would I do if I were a broker today to prepare for this change? First, change does not happen easily and overnight. The whole country of healthcare consumers, distributors and providers will need to adapt. As a benefits broker, your buyer may no longer be the employer but the employee. If this is the case, then some existing services may not be needed.

  • No more risk analysis/actuary and underwriting
  • No more claims analysis tools
  • No more wellness programs to reduce healthcare costs
  • No more disease management programs
  • No more company medical renewals

Before someone points out the obvious to me, I will say that I do know that most groups with fewer than 100 employees are community-rated and those with more than 100 employees are experience-rated. Small employers are still faced with balancing budgets based on their healthcare renewal. This anxiety will go away.

Most of these types of services are a core competency of many of the national benefits firms and the larger independent brokerage organizations. These services are viewed as key differentiators. For these firms, change may be even more dramatic because providing these types of analytical skills is part of their culture.

So let’s talk about the things brokers can do. I am going to break this down to a list of tasks.

1.       Understand what the players in your market are doing – Brokers should start analyzing their local medical market and see what the providers are doing in this area. Have they made acquisitions? Have they created new partnerships? What is their leadership saying publicly? Whatever they say or do, believe them.

2.       Add an employee call center – Employers will welcome the support in helping employees move to a new environment. Provider systems will welcome and pay for the support in helping those same employees navigate the market.

3.       Add personal financial consulting – It is estimated that close to 40% of employees lose some productivity at work because of financial stress. The healthcare insurance purchase is going to be a major decision for an employee, and it should be made in the context of an employee’s entire financial position.

4.       Understand the new technologies – How many of you who have read this up to this point understand what Aetna’s technologies for the consumer are? Do you know how to “Bluetooth” your weight from a scale to a smartphone? The place of employment can also be a great place to help employees with technology to track health information. Could an employer have a scale at work that is Bluetooth-enabled to send a person’s weight to their smartphone? Could the employer have a blood pressure machine at work? How about setting up a private room with teleconferencing capabilities so an employee can consult a doctor face-to-face via the web without leaving the place of employment? Could a broker make himself available to consult employees one-on-one as to how this whole system will work?

5.       Develop technology engagement and education strategy – After you learn what you need to know about the new technologies, are you ready to deliver? I believe the provider systems (the new Kaisers) will welcome the opportunity to educate the population through the employer. At the employer level, you can reach a large amount of people fairly easily. And the employers will care that their employees understand this new healthcare delivery system. Employers don’t want stressed employees, because stressed employees are not as productive. I believe employers and these new provider systems will pay to help these individual consumers.

6.       Invest in new internal technology and processes – If your entire infrastructure is geared around engaging the employer, then things will need to change. Can you record a phone call? Can you engage in online chat with an employee? Are you prepared to sell individual insurance? To sell a high volume of individual policies and service employees, you will need extremely efficient internal operations.

7.       Start thinking about helping employers exit the risk business – Rather than advise employers how to control costs and mitigate risk, should you start advising them on how to get out of the risk business? I guess private exchanges and defined contribution plans are the start. However, if the healthcare market changes, the pace will accelerate because there will be more options for the employer to get out.

8.       Engage new providers – Carrier reps are always calling on brokers, but these new organizations may not call on brokers in the same way. You may need to reach out to them. If you have something of value for the new provider system, you will need to engage the carriers.

To move to this new model, it will require that brokers invest in technology and people. To attract the provider systems benefits, firms will need to have the services, size and scale to deliver. Most independent benefits firms either don’t have the capacity or capital to move to this model. They will either have to sell to a larger firm or join forces with peers who share the same vision and are willing to collectively invest in preparing for the future. The national firms and larger independent firms with the capital and resources will need to have the will to change.

In today’s environment, many brokers may not feel the need to make these changes. Other firms have already started preparing for a much different future. For example, several national firms have opened call centers for employees. Whether that is for a future market I have described, or simply to service employees today, I don’t know, but the centers are a sign that the benefits game is changing.

I may not end up being right with my market predictions, but my advice is to pay close attention. There is change going on out there, and I think a picture of the future is being drawn that looks much different from the healthcare market today.