Tag Archives: rbp

To See Healthcare’s Future, Look at Cable

The great unbundling is coming to the cable industry. For decades, the cable providers transformed the television industry, first as a substitute, and then ultimately as the disruptive force behind the demise of free television viewing. Since the 1990s, bundled packages have become the pervasive force in delivering movies, live sports and music. The cable industry, with the help of armed lobbyists, has changed the way local channels broadcast. The number of channels has skyrocketed as the way content was sold and programming was distributed resulted in vast volumes of content to sell. Bundles were created to package less popular and rarely watched content with popular programming. Size was a proxy for quality, and bigger was marketed as better. The business model has worked for decades.

Pre-Paid Bundled Pricing: a Dying Business Model

Subscribers of bundled cable receive hundreds of channels even though industry research finds that the typical viewer only watches 17 channels. Forget that they have hundreds of channels they don’t view. How many subscribers, in fact, don’t even know what they pay for in their bundle? As the internet has expanded in depth and breadth of services, wireless connectivity has become ubiquitous. Mobile smartphone technology is growing globally at exponential rates. People can watch video on their phones without a second thought.

Consequently, more people are demanding that they only pay for what they actually watch. Why pay for more than you use? And now you don’t even require a television to watch pay TV. Today, an internet connection means you can watch almost anything online. Websites like Netflix, Apple, Hulu, Amazon, YouTube and a growing list of new entrants are forcing change on the cable industry. The cable industry could see this new force and demand coming for years, but with typical stuck-in-the- past leaders, the industry has mostly chosen to lobby for anti-competitive legislation and incremental, slow change. The beginning of the end has already started for the old cable industry.

See also: To Bundle or Not to Bundle?

The writing is on the wall, and the industry players don’t like it one bit. Unbundling is here to stay. Pay-TV subscriptions are falling, and the rate of disconnect is increasing. Simultaneously, the rate of unplugged nontraditional non-subscribers is growing annually. The industry refers to the people who cancel their connections as “cord cutters”: and the people who have never subscribed as “cord-nevers’

Healthcare Is Unbundling Because Buyers Demand Change

Just as millennials, the internet and mobile devices are changing the cable TV industry, healthcare is being changed by the ACA, self-funded employers and a legislative shift to value pricing. Think about the parallels with the healthcare industry where the key players dictate terms and pricing, bundling unnecessary and ineffective care and then charging fees based on the volume of treatments with little or no transparency. Disrupting the status quo is already here; it’s just not evenly distributed – yet.

The healthcare buyers of today and tomorrow are controlling their costs and experience by flexing their demand muscles in local and regional markets around the country. Enrollment in prepaid fully insured health plans is dropping annually as employers learn about the advantages of self-funded pricing, taxes and cost of claims.

The most successful business purchasers of healthcare are predictably and measurably saving 30% to 50% off the standard provider-driven pricing. By focusing on the elimination and reduction of claims, smart health buyers are slashing hospital, surgical center, pharmacy, physician and ancillary expenses by double digits. Some of the tools have been successfully implemented for a decade and only now are gaining attention. Solutions like RBP, SIHRA, DPC, 100% audits, PBM re-contracting, fixed-fee bundled pricing, medical necessity, coordinated care, COEs and many more are saving organizations millions of dollars and changing the experience of health buyers, patients and providers.

See also: Ready for a New Consumer Channel?

Unlike the solution providers changing the cable TV industry with national virtual footprints, the healthcare industry is being disintermediated in local and regional markets. Because healthcare is 20% of the economy, reducing healthcare costs by billions barely registers on the meter, as hard as that is to believe,  but the results are enormous for employers creating EBITDA from healthcare.

Follow the smart money. Healthcare is an experience where every encounter with a patient is a market of one and the buyer is becoming aware of his power in this transaction with the healthcare supply chain. Other industries have recognized the efficiency and pricing economies that come with managing the supply chain because demand is elastic. Think how WalMart has changed inventory controls and Amazon has changed “last mile” logistics, to name a few.

Healthcare buyers can now negotiate, force transparency and control the cost of care. The cost of inaction and taking the path of least resistance will place your company in an uncompetitive position. Self-funded employers need to change because your employees’ financial well-being is ruined by the health care cost shift. The healthcare industry will never be the same.

When Leaders Don’t Lead on Medicaid

The big debate across the states over the expansion of Medicaid only deals with half of the equation.

The first half of the equation is political: who gets added to the entitlement rolls and who doesn’t. Wisconsin’s Gov. Walker, for example, decided to: turn down federal funds for expanding coverage; add 80,000 adults who are below the poverty line; and move some 70,000 residents who are above the line to the new federal exchange and subsidies.

But Wisconsin, like other states and the federal government, has ducked the rest of the issue: the staggering cost increases. Medicaid expenses, for which the states pay about 40% and the feds 60%, are crowding out funding for just about every other priority: K-12 education, the university system, environmental advances and economic development.

It’s the same story on health costs at the federal level. Medicaid, Medicare and the health bill for federal employees are the biggest driver of the crushing federal deficit. One recent secretary of defense said the department spends more on health costs than on weapons.

The void in the debate is the deafening silence on how to get the costs under control, with the exception of cutting people off the rolls.

It’s especially sad because there are solutions. Leading-edge employers in the private sector have put together a new business model for the delivery of health care that drastically lowers costs while improving health. Their best practices are applicable in the public sector, as some units of local government have discovered to great advantage.

Here are some proven, audited, beyond-debate cost-cutting moves that could be made with Medicaid plans:

  • Consumer-Driven Health Plans (CDHP) — Indiana has received a waiver from the Obama Administration to install Health Savings Accounts and to set higher deductibles for Medicaid recipients. Such CDHP plans cut costs by 20-30%. School districts and counties have deployed HSAs, as has Indiana for state employees and Purdue. Medicaid is rife with utilization abuse, because of an absence of such incentives and disincentives.
  • Reference Based Pricing (RBP) — CALPERS, the giant California pension fund that buys health care for 1.3 million members, has installed caps on procedures, such as $1,500 for colonoscopies and $30,000 for joint replacements. It’s easy to pay twice those maximums or more. But why do it? Why not RBPs for Medicaid? Note: A good number of providers have accepted the maximum prices.
  • Medical Homes — Another 20-30% can be cut from medical costs by offering proactive primary care. Many companies have set up on-site clinics to provide holistic care and keep people out of expensive hospitals. Why not set up medical homes where there are concentrations of Medicaid patients? Primary care is a lot less expensive than specialty care, the main offering of large hospital corporations. It’s also less expensive by far than care from emergency rooms, to which Medicaid entitlees often default. Obamacare provides some funds for community health centers, so there is a start for such medical homes.

The biggest problem for introducing aggressive and innovative management into Medicaid dynamics is the joint ownership of the program by federal and state governments. Differing agendas produce stalemate in most states. And, in the void, the costs scream upward.

Gov. Walker turned down the new federal dollars for a larger Medicaid program because of skepticism about the long-term availability of federal dollars. The soaring, unsustainable cost increases give substance to his position.

But his worry should be redirected to the costs. His concerns could be mitigated if the overall charges were sharply reduced.

He would look presidential if he followed the lead of private sector payers. That, again sadly, is in the political arena, so he probably wouldn’t get a federal waiver from the Obama administration for innovations, even if Indiana did.

Who loses in the managerial paralysis, when leaders don’t lead? In the case of Medicaid, it’s the taxpayers and poor people.