Tag Archives: kaiser

5 Steps to Profitable Risk Taking

The really bad thing about risks is that they almost never lead to a loss. Why would that be bad? Because risk aversion is responsible for so much lost opportunity. Risk aversion allows us to shoot down ideas faster than we build them up. It is easier to cite a risk that a project or change effort will fail than to undertake it.

But getting ahead means change, and change means risk. Those who prosper in business, take risks. The list of leaders who wouldn’t take risks is a very short one.

The biggest risk is not taking any risk… In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks. – Mark Zuckerberg

In other blogs, we’ve written about the price you pay by not adapting. It’s not a question of whether you should take risks, but how to do it well. Nearly all great advances come through leaders’ appreciating an opportunity and understanding how to manage its risks. So often in our discussions with companies, we encounter leaders who acknowledge the opportunity we present, but who are stymied by perceived obstacles to acting on it. The focus turns too heavily to what lies in the way rather than the path. These obstacles become risks – “unknowns” – that inhibit desired transformation.

See also: 4 Steps to Integrate Risk Management  

Risks are an integral, essential part of improvement. They force us to think, to adapt, to learn. Companies that advance don’t do so by avoiding risk. They don’t do so in spite of risk. They do so in conjunction with risk. The question is not how to avoid risk, but how to embrace it. Leaders love risk as a thing to be conquered, not feared. Here’s how they do this.

Define your goals in detail before you define your risks.

It’s easy to get sidetracked by anxiety. The mention of a potential goal is more often met by caveats about it than by building out the path to the goal. Leaders focus first on the goal and the value of achieving it.

Act on risks constructively.

Draw up a list of risks that could materialize on your way to your goal. Define each risk (what it is), what impact the risk can have, the probability that it will occur and what should be done to manage it. Most often, the risk is much smaller than you imagine. For example, if we more aggressively negotiate medical cost reductions, we might generate more litigation. That might cost us $2,500 per case. This might happen on 10% of the cases.

Don’t stop there….compare your risks to your upside – Our plan will result in reductions of more than $1,800 on 80% of all cases…..The upside is positive. Keep moving forward.

Enlist people in problem solving…not problem identification.

When engaging with others on a project or change effort, dwelling on risks leads to managing against a fear of failure. Get people involved in answering this question: “How can we achieve [name the goal]?” – rather than “what do you think of [name the goal]?” For example, how might we successfully achieve medical-cost reductions without generating litigation?”

Plan for success and manage your way there.

Managing risk doesn’t mean playing defense against potential disaster. On the contrary, it means keeping a clear eye on what you want. When we implement with a client, we have a detailed list of action items to be accomplished by our customers and us. Tedious? Not really. Critical to success? Absolutely. We know the critical success factors and we plan for and execute on them.

Use risk to learn.

We all know that stuff happens. Recognize it. Learn from it. Move on. Peter Drucker, the famous management guru, said it best…..

“People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.”

See also: Are Portfolios Taking Too Much Risk?  

If you’re feeling hemmed in by risks, take a different approach. Embrace it. It’s the only way to master it.

A Blueprint for Casualty 2.0

Casualty 2.0 is a claims management blueprint for bringing together technology, data, skill development and process to control loss costs in measurable, strategic ways. It is also a path to building strategies for operating expert casualty organizations.

The property and casualty industry pays out more than an estimated $100 billion a year to resolve personal injury claims. Numerous factors affecting the investigation, evaluation and resolution of these claims have been changing, making them more complex and more expensive. These factors include inflation in medical costs driven by higher pricing, more services and complications in evaluating pain and suffering, driven by multiple injury diagnoses. New laws and legal doctrines create nuances for adjusters and managers to consider. Containing the cost of settlements is not getting easier.

In the midst of this rapidly evolving environment, leaders operate without effective reporting and measurement, with aging and disjointed technology, in the absence of formal training and proven practices. Casualty organizations are falling behind. Casualty 2.0 combines four disciplines that must work together for effective containment of settlement value. These disciplines are data and reporting, technology, process and adjusting skill.

See also: Examining Potential of Peer-to-Peer Insurers  

Data and Reporting: Build data for measuring “what” and “why”

Most casualty organizations are confined to very limited and not-so-useful data. Measurement, when it is available, is confined to items like average payment, average cycle time and counts of new and closed claims. These measures are starting points but leave so much unanswered that they are poor guides for improving performance. For example, if average payments have gone down….is that an indication that accuracy has improved? Or that easier cases are settling, leaving the more difficult and expensive cases in inventory?

Peter Drucker, the famous management expert, put it succinctly when he said, “You can’t manage what you can’t measure.” Without measures, the management process is reduced to focus on one case at a time. Strategic insight cannot be developed from this level of information.

In Casualty 2.0, we examine the core data and measures that every company needs to lead.

Technology: Use technology to build and resolve a holistic, integrated case

Technology is the window into data and the mechanism for aligning process. It is also a means to developing skill. Casualty organizations are significantly challenged in using technology this way as they work in a fractured environment of point solutions. They use a combination of core claim systems, document management systems, Word documents or Excel files and other ancillary applications like ISO’s claims indexing. In some cases, medical bill review systems are also used. This mixture tends to generate activity about the parts of a claim without building a picture of the whole claim.

The result is claim information residing in many different applications. The sum of these parts doesn’t add up to the whole. It is not possible to systematically evaluate performance by looking at claims investigation, evaluation and negotiation holistically. For example, what do you pay in settlements for medical bills and why? Pain and suffering? How frequently does liability play a factor? How much variance is there? Which adjusters produce the best results and why?

Not only is it difficult to use the data your adjusters have spent so much time compiling, but the current approach also mandates “processing” activity over “adjusting decisions.” The use of “unstructured” data like claim notes not only harms data insight but also is not useful in managing process.

Casualty 2.0 moves technology from documentation and data collection exercises to supporting judgments in a single, integrated solution. Creating a holistic and integrated view of liability, pain and suffering, medical, etc. isn’t convenient, but it’s necessary to controlling the overall settlement value AND building adjusting expertise.

Process: Work from a core skill set

Casualty organizations look for adjusters who are experienced in casualty handling. Training is seen as beneficial, but most organizations lack the budget to build effective programs. The result is skills that are developed “on the job.”

The lack of structured training makes tenure attractive. But tenure is not a standard of skill. Tenure, in our experience, is far from a guarantee of a good result. Most claims leaders we speak with agree. With tenure comes a mix of adjusting approaches as well as knowledge of uncertain origin, not a consistently reliable claim outcome.

See also: One Foot In Healthcare: Property And Casualty Payer Integration  

Some standards for knowledge and skill are needed. For example, in an industry more and more driven by medical inflation, demonstrated knowledge of the process and guidelines for assessing and treating a patient are “must haves.” (Also see our blog on “Injury Evaluation Tips.”) We’ll be writing about the core casualty skill set and how to turn this knowledge into real cost containment.

Adjusting Skills: Implement practices with proven impact on controlling settlement costs

In the thick of multiple applications and demanding productivity expectations, adjusters end up “processing” claims rather than “adjusting” them. Procedures are developed that outline the tasks that should lead to a good solution. Each procedure makes sense in its own right, but they often don’t lead to effective decisions that contain settlement value.

Best practices are not just “logical,” they are practical and measurable. For example, checking ISO for prior
claims and challenging the legitimacy of an injury in low-impact cases are good practices. The practices that convert this information into measurable cost containment are the best practices.

Standards and practices that produce the best results are developed by addressing how judgment should be applied, capturing the use of this judgment and using it to demonstrate, through data, that it produces better results. Standards are not a matter of design, but of demonstration. Casualty 2.0 uses proven practices as best practices.

New Healthcare Brawl, Different This Time

For the thousands of healthcare consumers reading this post…and the millions in attendance across this great country…lllllllllllllllet’s get ready to rummbulllllll!

In this corner – fighting over a period of 68 years, with a track record of unaffordable and ever-skyrocketing premiums, causing long-term wage stagnation, plus lower rates of savings for individuals all over the land. The largely unchallenged, reigning champion in U.S. healthcare coverage for nearly all Americans under 65…….the third-party payers!

And in this corner – fighting for more than 25 years. They’ve captured and controlled healthcare populations, acquired and limited provider competition, all the while driving up costs, consumer medical debt and personal bankruptcies. With a long history of mass overutilization, lower care quality and high administrative salaries……the hospital and health systems!

Ladies and Gentlemen…this same fight took place back in the 1990s, for the purse strings of nearly all the private pay healthcare market. The hospital and health systems took on the risk of creating traditional health plans, and many of them took it on the chin. There were too many operational nuances, such as claims, underwriting administration and attracting sicker patient pools. Not to mention the ire of health payer executives.

The environment is different today. The stakes are far higher. The outcome may determine the direction of more than $1 trillion per year in consumer and employer-directed healthcare payments, transforming the model of U.S. healthcare into one of needed, sustainable long-term growth.

Today’s payer profits are limited, not only by the medical loss ratio rule, but now with provisions of the ACA to accept all patients with pre-existing conditions.

On the other side, health and hospital systems have successfully acquired a significant and well-diversified care “umbrella” over large populations. Many achieve greater leverage in securing higher payer reimbursement rates, all the while still capturing local practices, doctors and newly minted med school graduates, who willingly trade off past, present and future administrative headaches for more patient engagement and a steady paycheck.

See also: Keep the Humanity in Healthcare  

Yet within their growing mini-monopolies, hospitals and health systems, like payers, are also having a come-to-Jesus moment. Medicare quality scores give only 2.8% of all hospitals their highest, 5-star rating. Nearly 70% received only between two to three stars!

There is argument on the factors for these ratings, yet administrators clearly understand that future Medicare payments will be based on value of care, where quality of care is very important. This is especially true as health systems and affordable care organizations (ACOs) will continue to dominate healthcare delivery in the U.S. And yes — future private insurer payments are likely to follow suit.

Let’s Give Health Plans Another Shot

More than ever, we’re seeing health systems creating their own provider-sponsored plans (PSPs) and simply becoming their own payer, even where they can compete for covered lives in the growing Medicare Advantage and Medicaid Managed business.

PSPs come in multiple varieties, depending on the questions asked and resulting strategies formed: Starting fresh or acquiring an existing plan? Partnering or not partnering on risk with existing insurers and provider networks? Covering care only in their care system or with other systems and providers?

Though previously unsuccessful, PSP results appear more promising today. Atlantic Information Services (AIS) data shows there are more than 270 PSs in existence. This is up from 107 just two years ago — and more than one-third have more than 10,000 members. If the trend continues, predictions are that about 70 million Americans could be enrolled in PSPs in five years.

While that is happening, we are seeing payers such as Harvard Pilgrim and others seeking to go the way of Kaiser, adding medical facilities to create integrated care systems. Hence, both payers and health systems are blending more than ever, driving toward integrated care in smaller pockets of populations.

These smaller pockets of integrated care appear to offset more risk, especially when they seek to merge. We are then likely to run into a microcosm of the same anti-competitive pricing fears as with Anthem-Cigna and Aetna-Humana.

Let’s Bypass the Problem…With Direct Contracting

This option allows self-insured employers to work around health payers, by contracting with large, geocentric health systems to deliver care to their employees. By using third party administrators (TPAs), contracted transparent care and drug fees and in-house actuaries and risk managers, employers can also lower claim administration costs. Plus, employers gain other savings by working around payers.

Just a little wrinkle here…What about the many millions of individual members who remain under fully insured payer plans?

Well, we have the growth of health insurance captives, which pools together smaller companies to gain self-insured benefits. But the question still remains…

When health plans get further cut out of the self-insured employer client loop, what happens to pricing for the rest of the remaining payer risk pool? The revenues and profits for payers will need to come from somewhere.

See also: Healthcare: Time for Independence  

We know payers are not getting onto ACA exchanges to acquire more customers. That leaves subsidization from the government to fill in the affordability gap for the fully insured.

Other options are: 1) creating a single pay government plan; 2) providing government incentives to PSPs to be competitive in more local pockets or 3) offering incentives for the formation of fully insured and PSP plans, so payers and health systems can cover more with greater risk sharing.

Healthcare 3.0: Increased quality, better technology, higher taxes, greater unemployment and remaining unaffordability

Health systems have grown by implementing effective leadership, making strong IT investments, reducing geographic competition and employing better risk solutions and strategy. They are going to get stronger with direct contracting, mergers and acquisitions, growth of PSPs, improved care coordination and the use of new technologies in the emergence of value-based care.

Solutions in areas such as predictive analytics, mhealth, patient-generated healthcare data, diagnostic accuracy, supply chain management, population health, chronic disease management, telehealth and artificial intelligence will promote greater efficiency, better outcomes and increased patient satisfaction and drive down cost in key healthcare industries.

But driving down cost DOES NOT mean pricing for care, coverage and drugs will plummet for consumers. I expect mass unaffordability will largely remain.

Look, the first order for businesses in any for-profit sector is to make profit, grow customers and remain competitive. While healthcare consumers and advocates believe in reforming our system to a fairer, more affordable solution for care, coverage and medications, equally for all Americans….businesses don’t.

And they’re not going to succumb to guilt or public shaming, or be willing to give themselves significant salary haircuts to do so. In fact, I would expect that early cost-reduction successes will translate into healthcare companies largely funneling the differences back into themselves as re-investments or profits, while holding prices steady to claim consumer-friendly positioning.

“Hey, at least we’ve put the brakes on higher prices. We’ll try to figure out how to do more…but look, this is great news for now. Be in touch soon!”

The only path I see toward future consumer affordability is to push and provide incentives blending our three-party into a two-party system. With enough healthcare players, greater transparency and relatively equal levels of care quality, free market forces will ultimately work to create a greater downward push for consumer pricing.

A free market system would be painful in the beginning. Healthcare players will not only have to invest in and implement new technology, but also utilize augmented and artificial intelligence solutions. This would drive efficiency and accuracy to the obvious point where industry leaders would greatly reduce and replace their greatest expense…employees.

By the end of 2016, the healthcare sector will be the largest employment pool in the U.S. In a free market, you cannot have bloated employment with acquired technology capable of creating massive efficiencies to drive down cost and consumer price. However, today’s price-regulated market would allow that to happen, where excess expenses are simply passed down to healthcare consumers and employers in the form of higher prices.

Free market healthcare is for now a far-off dream. So as the market slowly transforms and reshapes itself, we will likely see personal and corporate taxes going up.

See also: Is Transparency the Answer in Healthcare?  

With no foreseeable surge in GDP, new jobs or average worker wages, we’re seeing the middle class slipping. Healthcare costs are not likely to translate into significant consumer price decreases. Add to that the past, current and future growth of healthcare subsidies per the ACA exchanges and ever-expanding Medicaid programs. Folks…that big nut will have to be covered at some point.

Parting Thoughts…

Woodrow Wilson once said, “The seed of revolution is repression.” Healthcare has operated on a model outside of free market forces, where consumers have paid the price, literally for decades. In the next era of healthcare, consumers carry an obligation, not just to continue funding this juggernaut, but to take on greater responsibility for their health choices and results.

No matter how this emerging fight changes healthcare, the patient, through greater engagement and care, should be at the center. I see population health management as both educating and necessarily empowering healthcare consumers. Not only to recognize poor past choices and grow from new healthier ones, but to appreciate and value how much they truly need healthcare services, coverage and medications that are simply out of their financial reach.

Perhaps their own transformations will turn large-scale frustration into massive targeted determination, demand and revolution, where elected politicians begin to cower and capitulate, not to special interests, but to a population of healthy Americans who recognize the importance of an affordable and sustainable health care system. So they and future generations can embrace the American dream – and live healthier, less stressful lives while doing it.

I hope to live to see that day.

1 Myth, 2 Truths, 5 Hot Trends in Health IT

There is a myth out there that healthcare providers are unwilling to adopt new technology. It’s just not true. In the last few months, I have spoken to dozens of healthcare leaders at hospitals both small and large, and I am amazed at their willingness to understand and adopt technology.

Pretty much every hospital CEO, COO, CMIO or CIO I talk to believes two things:

With growing demand, rising costs and constrained supply, healthcare is facing a crisis unless providers figure out how to “do more with less.”

Technology is a key enabler. There is technology out there to help save more lives, deliver better care, reduce costs and achieve a healthier America. If a technology solution solves a real problem and has a clearly articulated return on investment (ROI), healthcare isn’t that different from any other industry, and the healthcare industry is willing to adopt that technology.

Given my conversations, here are the five biggest IT trends I see in healthcare:

1. Consumerization of the electronic health record (EHR). Love it or hate it, the EHR sits at the center of innovation. Since the passage of the HITECH Act in 2009—a $30 billion effort to transform healthcare delivery through the widespread use of EHRs—the “next generation” EHR is becoming a reality driven by three factors:

  • Providers feeling the pressure to find innovative ways to cut costs and bring more efficiency to healthcare delivery
  • The explosion of “machine-generated” healthcare data from mobile apps, wearables and sensors
  • The “operating terminal” shifting from a desktop to a smartphone/tablet, forcing providers to reimagine how patient care data is produced and consumed

The “next generation” EHR will be built around physicians’ workflows and will make it easier for them to produce and consume data. It will, of course, need to have proper controls in place to make sure data can only be accessed by the right people to ensure privacy and safety. I expect more organizations will adopt the “app store” model Kaiser pioneered so that developers can innovate on their open platform.

2. Interoperability— Lack of system interoperability has made it very hard for providers to adopt new technologies such as data mining, machine learning, image recognition, the Internet of Things and mobile. This is changing fast because:

  • HHS’s mandate for interoperability in all EHRs by 2024 means patient data can be shared across systems to enable better care at lower cost.
  • HITECH incentives and the mandate to move 50% of Medicare payments from fee-for-service to value-based alternatives by 2018 imply care coordination. Interoperability will become imperative.
  • Project Argonaut, an industry-wide effort to create a modern API and data/services sharing between the EHR and other systems using HL7 FHIR, has already made impressive progress.
  • More than 60% of the proposed Stage 3 meaningful use rules require interoperability, up from 33% in Stage 2.

3. Mobile— With more than 50% of patients using their smartphone to monitor health and more than 50% of physicians using (or wanting to use) their smartphone to monitor patient health, and with seamless data sharing on its way, the way care is delivered will truly change.

Telemedicine is showing significant gains in delivering primary care. We will continue to see more adoption of mobile-enabled services for ambulatory and specialty care in 2016 and beyond for three reasons:

  • Mobile provides “situational awareness” to all stakeholders so they can know what’s going on with a patient in an instant and can move the right resources quickly with the push of a button.
  • Mobile-enabled services radically reduce communication overhead, especially when you’re dealing with multiple situations at the same time with urgency and communication is key.
  • The services can significantly improve the patient experience and reduce operating costs. Studies have shown that remote monitoring and mobile post-discharge care can significantly reduce readmissions and unnecessary admissions.

The key hurdle here is regulatory compliance. For example, auto-dialing 9-1-1 if a phone detects a heart attack can be dangerous if not properly done. As with the EHR, mobile services have to be designed around physician workflows and must comply with regulations.

4. Big data— Healthcare has been slower than verticals such as retail to adopt big data technologies, mainly because the ROI has not been very clear to date. With more wins on both the clinical and operational sides, that’s clearly changing. Of all the technology capabilities, big data can have the greatest near-term impact on the clinical and operational sides for providers, and it will be one of the biggest trends in 2016 and beyond. Successful companies providing big data solutions will do three things right:

  • Clean up data as needed: There’s lots of data, but it’s not easy to access it, and isn’t not quite primed “or clean” for analysis. There’s only so much you can see, and you spend a lot of time cleansing before you can do any meaningful analysis.
  • Meaningful results: It’s not always hard to build predictive analytic models, but they have to translate to results that enable evidence-based decision-making.
  • Deliver ROI: There are a lot of products out there that produce 1% to 2% gains; that doesn’t necessarily justify the investment.

5. Internet of Things— While hospitals have been a bit slow in adopting IoT, three key trends will shape faster adoption:

  • Innovation in hardware components (smaller, faster CPUs at lower cost) will create cheaper, more advanced medical devices, such as a WiFi-enabled blood pressure monitor connected to the EHR for smoother patient care coordination.
  • General-purpose sensors are maturing and becoming more reliable for enterprise use.
  • Devices are becoming smart, but making them all work together is painful. It’s good to have bed sensors that talk to the nursing station, and they will become part of a top level “platform” within the hospital. More sensors also mean more data, and providers will create a “back-end platform” to collect, process and route it to the right place at the right time to can create “holistic” value propositions.

With increased regulatory and financial support, we’re on our way to making healthcare what it should be: smarter, cheaper and more effective. Providers want to do whatever it takes to cut costs and improve patient access and experience, so there are no real barriers.

Innovate and prosper!

Will Rubio’s Measure Undermine ACA?

Republicans stated goal is to “repeal and replace” the Patient Protection and Affordable Care Act. That hasn’t happened and won’t at least through the remainder of President Barack Obama’s term. So a secondary line of attack is to undermine the ACA. And Sen. Marco Rubio has had success in that regard.

As reported by The Hill, Sen. Rubio accomplished this feat by weakening the ACA’s risk corridors program. Whether this is a long- or short-term victory is being determined in Washington now. We’ll know the answer by Dec. 11.

President Obama and Congress recognized that, given the massive changes to the market imposed by the ACA, health plans would have difficulty accurately setting premiums. Without some protection against under-pricing risk, carriers’ inclinations would be to price conservatively. The result would be higher than necessary premiums.

To ease the transition to the new world of healthcare reform, the ACA included three major market stabilization programs. One of them, the risk corridors program, as described by the Kaiser Family Foundation, “limits losses and gains beyond an allowable range.” Carriers experiencing claims less than 97% of a targeted amount pay into a fund; health plans with claims greater than 103% of that target receive funds.

The risk corridor began in 2014 and expires in 2016. As drafted, if payments into the fund by profitable insurers were insufficient to cover what was owed unprofitable carriers the Department of Health and Human Services could draw from other accounts to make up the difference.

Sen. Rubio doesn’t like risk corridors. He considers them “taxpayer-funded bailouts of insurance companies at the Obama administration’s sole discretion.” In 2014, he managed to insert a policy rider into a critical budget bill preventing HHS from transferring money from other accounts into the risk corridors program.

The impact of this rider has been profound.

In October, HHS announced a major problem with the risk corridors program: Insurers had submitted $2.87 billion in risk corridor claims for 2014, but the fund had taken in only $362 million. As a result, payments for 2014 losses would amount to just 12.6 cents on the dollar.

This risk corridor shortage is a major reason so many of the health co-ops established under the ACA have failed and may be a factor in United Health Group’s decision to consider withdrawing from the law’s health insurance exchanges. (United Health was not owed any reimbursement from the fund but likely would feel more confident if the subsidies were available).

The Obama administration certainly sees this situation as undermining the Affordable Care Act. In announcing the shortage, HHS promised to make carriers whole by, if possible, paying 2014 subsidies out of payments received in 2015 and 2016. However, the ability to do so is “subject to the availability of appropriations.” Which means Congress must cooperate.

That brings us back to Sen. Rubio’s policy rider. It needs to be part of the budget measure Congress must pass by Dec. 11 to avoid a government shutdown. If the policy rider is not included in that legislation, HHS is free to transfer money into the risk corridor program fund from other sources.

Sen. Rubio and other Republicans are pushing hard to ensure HHS can’t rescue the risk corridors program, claiming to have already saved the public $2.5 billion from a “crony capitalist bailout program.” Democrats and some insurers, seeing what’s occurred as promises broken, are working just as hard to have the rider removed.

By Dec. 11, we’ll know whether the ACA is further undermined or bolstered.