Seeing 2014 Through the Fog: Anticipating the Impact of Personal Incentives Under Obamacare

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health

So what is it?  Will premiums go up by double digits or will they go down?  Is it possible that for a small group of people in some states, premiums will go down, but for a larger group of people on some exchanges or in some states, the premiums may be fairly criticized as “sky-rocketing”? 

It’s really hard to understand if any side in the health care debate is completely lying when the news headlines on what is coming are so completely polar opposites.  Is it possible that recent media “spin” on Obamacare’s health exchanges are fairly characterized as “lies, deceit and untruth”?  The political stakes are high, to be sure, but as people ask you for advice on what to do in their own personal situation, it would certainly be nice to be able to go somewhere and actually “see through the fog” on their behalf.   My premise is this:  people will do what is in their best interest, assuming they can see it. 

On Friday, Senator Harry Reid admitted to a PBS audience in Nevada, that the Accountable Care Act was always just a step toward a public system, getting there by pushing private health care insurers out of business.   At least now, the truth seems to be coming out as some portions of the new law (widely panned by experts and consultants on all sides of the political spectrum as a failure in process.)

An article by CNN Money noted that under the health care reform act, insurers must offer a package of essential benefits -- including maternity, mental health and medications -- and they must cover all who apply. The imposition of these richer benefits will cause price hikes in some states where a lower cost, bare bones policy may have been sufficient for coverage for young, healthy people in the past. Isn’t it logical then, for a primitive student of human behavior, to predict that some young, healthy people won’t want to take on the increased cost because they don’t “need” the additional benefit or the additional cost?  They’ll pay the $95 per year or 1% of their income to avoid a cost that may be $3,000 per year or more. 

• “Our analysis found that 21-year-old men will pay a lot more for an exchange plan, but 42-year-old women and 62-year-old men will shell out less for a silver-level plan that comes with a $2,500 deductible and a roughly $25 co-pay for office visits.”

It may be that part of what must happen as this mess unravels is that we must better understand what happens in terms of individual incentives.  If a premium increase is unaffordable and if the individual has other alternatives (including doing nothing), then young, healthy people can be expected to forego coverage, and older/unhealthy people will sign up for lower cost coverage.  Predictably, then the exchanges will fail under the weight of insufficient premium to cover incalculable risk.  And people will be begging for something to be done. 

Is this, therefore, given Harry Reid’s recent comments, an unintended consequence of a well-meaning public policy or is it the success that was anticipated all along, leading the country to a federally controlled, single-payer system?  

Link:  http://finance.yahoo.com/news/where-obamacare-premiums-soar-095700316.html?CFID=24988291&CFTOKEN=70696857&jsessionid=2e302825861375967192417   

http://www.forbes.com/sites/theapothecary/2013/08/10/sen-harry-reid-obamacare-absolutely-a-step-toward-a-single-payer-system/

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers, clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Health Care Reform as a Technology Innovation Stimulus

---Paul Dausman, CEO, Valiant Health  See also http://www.valianthealth.com/blog/health-care-reform-as-a-technology-innovation-stimulus/

The regulatory and compliance requirements emanating from the Affordable Care Act, coupled with incentives for providers to move manual processes to automated ones has stimulated the growth of technology and service vendors to enable health care businesses to stay in the game.  Some entrepreneurial vendors are aiming their innovative solutions at the patient; others are focused on the doctor’s office and the information which is needed while care is being rendered.  Many are focused on cost management, fraud detection, or waste reduction at the population health or plan level.    

It has occurred to me, however, that solutions that consume the publicly available data and that data gathered by the doctor or member at the point of care will afford only a part of what is needed. 

In fact, the change (as described in the New York Times Opinion piece link below) that is coming will require a complete re-engineering from the top to the bottom of the existing health plan and provider care models.  Healthcare Performance Management (HCMP) systems will enable all parties within a program to be on the same page in terms of developing priorities and sound action plans. 

Thomas L. Friedman noted in his NYT article that while the US has had the best but most expensive health care in the world, the goal of the new health care law is to “flip this fee-for-services system (which some insurance companies are emulating) to one where the government pays doctors and hospitals to keep Medicare patients healthy and the services they do render are reimbursed more for their value than volume.”

Proving that the “flip” is successful or just “cheaper” is going to require data, fed into HCMP systems that will shine a light on what health care organizations need to do first and whether or not they are risking failure over the course of time in any specific measurable area or for any specific patient.

http://www.nytimes.com/2013/05/26/opinion/sunday/friedman-obamacares-other-surprise.html?ref=thomaslfriedman&_r=1&

Paul Dausman is the CEO of Valiant Health, LLC, and has an extensive history as an entrepreneur in the health care and information technology areas.

Dueling Data Games: Demographics vs. Provider Patterns?

---John Campo, Vice President, Business Development, Valiant Health  (see also http://www.valianthealth.com/blog/dueling-data-games-demographics-vs-provider-patterns1/)

Various forums like Health IT, academia, and the health care bloggers are abuzz with a fascinating, but controversial study released on May 28, 2013 that addresses the long held belief that some regions have wasteful medical practice patterns. The new paper concludes that individuals’ health differences around the country explain between 75 percent and 85 percent of the cost variations.  When the primary author, Dr. Patrick Romano, noted that “People really are sicker in some parts of the country,” he set in motion a debate with the conventional wisdom against the work of the Dartmouth Institute for Health Policy & Clinical Practice.  Dartmouth’s three decades of research has propagated a theory that regional differences in Medicare spending is mostly due to the aggressiveness of the medical community (and attributing it mostly to individual profit incentives).

The answer to this question is critical because it is driving CMS strategies to reduce Medicare spending.  The Institute of Medicine, at the request of Congress, is continuing to investigate the question.  

Regardless of whether the new study turns out to be correct or if the IOM substantiates the findings of the Dartmouth group, it makes for an interesting debate with high stakes in terms of CMS payment strategies.  Plans, ACOs, and all types of providers will be involved in looking at data in various ways like local/provider specific analyses to regional/national benchmarks.  Providers should expect to conduct patient and population level analyses and measure results, comparing them to expected norms and explaining the variances.

 This will be particularly important as providers and plans engage in any kind of pay-for-performance or risk sharing arrangements, such as those expected under Accountable Care Organizations.  They must have systems in place to offer point-counter-point perspectives that establish quality results and justify the occasional outlier.  Link for different perspectives:   

• http://www.healthcareitnews.com/news/pop-health-explains-medicare-disparities?topic=04,28,19
• http://www.kaiserhealthnews.org/Stories/2013/May/28/medicare-state-geographic-variation-costs.aspx

John Campo is responsible for Valiant Health’s growth, including client engagement and satisfaction. He brings over 15 years of diversified healthcare experience to Valiant Health. Prior to joining our leadership team, John founded and owned the CAMPO Group: Strategic Managed Care Consultants where he engaged leading pharmaceutical, biotechnology, specialty pharmacy, and health insurance clients. John’s background includes healthcare contracting, trade relations, reimbursement, specialty pharmacy distribution, quality improvement and Medicare. His leadership background includes working for a Fortune 500 PBM, HMO, and Specialty Pharmacy organization in leadership roles as well as being responsible for Managed Markets National Account Management for a large ethical US Pharmaceutical firm. He holds a BS in Business from Brescia University. 

Hospital Readmission Penalties Create Continued Policy Debate

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health (See also:  http://www.valianthealth.com/blog/hospital-readmission-penalties-create-continued-policy-debate/ )

 

A by-product of CMS’ cost reduction efforts associated with payment (or penalty) for quality results, is the much vilified Star Rating measure on All-Cause Hospital Readmissions. These efforts hit the Medicare Advantage plan’s Star Ratings results but also impact hospitals Medicare reimbursement rates directly. 

Two-thirds of hospitals are now facing readmission penalties totaling approximately $280 million in 2013, according to experts.  These 2,271 U.S. hospitals were found to have readmission rates higher than the CMS models predicted, and each of them will receive a penalty this year, as high as 1% of their reimbursement for Medicare patients. (Penalties will increase to 3% by 2015.)

The number of hospitals penalized is much higher than most observers would have anticipated on the basis of CMS's previous public reports, which identified less than 5% of hospitals as outliers.  (See NEJM Article by Drs. Karen E Joynt, MD & Ashish K. Jha, MD)  Path Forward on Medicare Readmissions at http://www.nejm.org/doi/full/10.1056/NEJMp1300122 )

The debate includes concerns that the safety-net hospitals caring for a higher proportion of members with socio-economic challenges are those least able to afford a penalty. Most agree, however, that setting a lower quality standard for these hospitals would not be ideal.   Many hospitals (and associated Medicare Advantage Plans) now have placed special focus on “helping patients make the transition from inpatient care to outpatient or community settings”.  A key part of this coordination is the ability to identify and intervene early in the hospitalization and post-discharge course.

See Links:  http://www.chrt.org/blog/the-aca-and-the-hospital-readmissions-policy-debate/

          http://www.nytimes.com/2013/03/30/business/hospitals-question-fairness-of-new-medicare-rules.html?pagewanted=all&_r=0

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years of experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Health Systems Around the World Could Learn From MA

John Campo, Vice President, Business Development, Valiant Health (See: http://www.valianthealth.com/blog/health-systems-around-the-world-could-learn-from-ma-plans/)

A new study by the Boston Consulting Group (BCG) suggests that health systems around the world can learn a lot from the care-delivery models used by private payers in U.S. Medicare Advantage plans. 

BCG concluded that Medicare Advantage plans, which impose classic managed care techniques to an elderly population, as compared to traditional Medicare fee-for-service plans, vary in a couple of key ways. 

1. Focused on mechanisms designed to encourage the delivery of cost-effective quality care
2. Identify  and focus on clinical best practices
3. Tap into a selective network of providers
4. Apply active care management strategies based on prevention to minimize expensive acute care

BCG’s study included an analysis of claims data for 3 million Medicare patients. They concluded that on three internationally accepted dimensions of health care quality—single-year mortality, recovery from acute episodes of care requiring hospitalization, and the sustainability of health over time—patients enrolled in Medicare Advantage plans had better outcomes than those participating in Medicare on a traditional fee-for-service basis.

Medicare Advantage plans in the US are under continued scrutiny to “prove” quality by meeting established benchmarks for various domains, including patient satisfaction, quality outcomes, access to care, and use of preventive services.  MA plan executives are faced with fee reductions if quality metrics are not met under “Star Ratings” programs imposed by CMS.

See Links:  http://finchannel.com/Main_News/Business/127573_Managed_Medicare_Advantage_Plans_Demonstrate_Better_Outcomes_for_Patients/
http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-134145

John Campo is responsible for Valiant Health’s growth, including client engagement and satisfaction. He brings over 15 years of diversified healthcare experience to Valiant Health. Prior to joining our leadership team, John founded and owned the CAMPO Group: Strategic Managed Care Consultants where he engaged leading pharmaceutical, biotechnology, specialty pharmacy, and health insurance clients. John’s background includes healthcare contracting, trade relations, reimbursement, specialty pharmacy distribution, quality improvement and Medicare. His leadership background includes working for a Fortune 500 PBM, HMO, and Specialty Pharmacy organization in leadership roles as well as being responsible for Managed Markets National Account Management for a large ethical US Pharmaceutical firm. He holds a BS in Business from Brescia University.

Achieving 5 Stars on the Rx Side—The Secret?

---Terri Bernacchi, PharmD, MBA,  Senior Partner, Valiant Health (www.valianthealth.com )

http://www.valianthealth.com/blog/achieving-5-stars-on-the-rx-sidethe-secret/

To succeed in an increasingly challenging reimbursement environment, Medicare Advantage plans must work in close collaboration with physicians to identify at-risk populations and facilitate interventions that that improve quality and lower cost.  That is true for both the Part C & Part D portions of the program.

Some Medicare Advantage plans will thrive at the top of the quality ratings heap no matter what happens in the surrounding environment.  Those plans have some common elements that give them a weighty advantage in terms of statistics and actual results.  The common themes?  Cooperative providers, clean data management processes, enabled clinical teams and executive leadership, and a clear, prioritized plan.  In a phrase, they are able to exert maximal control over the variables that drive results which drive reimbursements.  

Kaiser Permanente, for example, attributes its success to “a deep understanding of the star measures along with internal and external organizational processes and protocols”.  They believe this has allowed the plan to achieve a Part D summary rating of 5 in 7 of the 8 regions. 

Matt Nye, the vice president of Pharmacy Care Support Services, National Pharmacy Programs and Services of Kaiser Permanente spoke at the Academy of Managed Care Pharmacy’s spring meeting in San Diego in April 2013.  His discussion included a brief company overview: coverage of 9 states and D.C. with 8.9 million members, 165,000 employees, 15,000 physicians, 36 hospitals and medical centers, and 1.05 million Medicare members. Nye noted that Kaiser’s program includes outpatient, inpatient, and ambulatory care pharmacies and services, home infusion, drug distribution, mail order and central fill operations, and centralized services.

Kaiser has some advantages in drug therapy management relating to its business model:  it is an integrated practice model.  He noted that they have placed an emphasis sharing accountability between physicians and pharmacists to ensure the appropriate use of medications. 

Even if a plan does not have the benefit of “owning” the full scope of clinical, distributive, and practice infrastructure, the lessons learned from Kaiser can still be applied.  Using technology and data management techniques, internal and organizational processes can be aligned to create common incentives and opportunities to maximize quality results to assure success in the current and future years.

Link:  http://www.ajmc.com/conferences/AMCP_Spring-2013/Optimizing-Care-Deliver-with-Medicare-Star-Ratings-The-Successes-and-Challenges-of-Managed-Care-Organizations

Terri is a Senior Partner at Valiant Health, LLC, and founder of Cambria Health Advisory Professionals.  The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Valiant Health colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA. 

Cambria Health Advisory Professionals is proud to publish a new white paper!

Jumping New & Higher Hurdles--How US Pharmaceutical & Device Manufacturers Can Stretch Resources to Achieve Success in Today’s Post Health Reform Environment

---Terri Bernacchi, PharmD, MBA,  Cambria Health Advisory Professionals, Senior Partner, Valiant Health, & Managing Partner at Quo Magis Partners

Introduction

Pharmaceutical and Medical Device Manufacturers doing business in the United States are dealing with an unprecedented level of change. Even for seasoned managers, this requires ever greater attention to operational and compliance details at the very time when innovation and revenues are under extreme pressure.  This demands thoughtful and determined leadership, willing to consider “outside the box” ways to get things done.  This paper is intended to provide practical advice on ways to achieve results in today’s environment by engaging in flexible teaming, using large or small consultancies and service providers.

The Rules Have Changed

With health care reform and today’s economic chaos, factors outside your control are changing the rules of engagement, from how to get your product to market to how to report your results, to how to manage your people. 

Product commoditization and price pressures present critical challenges to the top line.  It’s not just you---it’s your customers.  Today’s health plans, hospitals, and medical communities are plagued with their own versions of “change hell”, with regulations coming out in thousands of pages, impossible to consume, much less to implement, in tight timelines.  Employers and consumers are just beginning to understand the implications of health reform and the regulatory environment.  Nothing was ever this hard before.  Quitting is not a good option for most of us,—and certainly some will find a way to thrive in the “new normal”.

Six Challenges That Rock Your Boat

In order to succeed, manufacturers need to think differently.  Today’s burdens emanate from at least 6 sources:

1)    Pressures on Revenue

2)    Access to the Market

3)    Cost of Operations

4)    Regulatory Overload & Unpredictability

5)    Customer “Shape-Shifting”

6)    Talent Acquisition & Retention

Given Today’s Reality, What Now? 

Manufacturers doing business in 2013 can still take a few steps forward:  

1)    Understand your budgetary certainties

2)    Choose your priorities, streamline operations

3)    Don’t expect miracles 

4)    Identify new ways to partner with each customer segment

5)    Use data to inform your decisions

Recruit talent to your teams.   The last few years may have created too much rapid turnover in some companies; the “old timers” with valuable experience and perspective that informs and trains the younger executives may be depleted.  An alternative way to meet your needs, yet maintain control is to optimize the use of short-term, experienced contractors/consultants or service organizations to get results on an ongoing basis.

Remember the "Fail Fast" Rule   If the project is going to be delayed, has the wrong scope, or is doomed from the outset, don’t pour money down a hole.  Similarly, if the contractor is a bad fit, end it quickly and seek a replacement.

Boutique vs. Big Box Partners? 

You can choose from a variety of consulting or service organizations---large or small, generalist or specialist.  If you are looking for results at the lowest price in the shortest timeframe, you may want to consider mixing it up a little---using both kinds of companies to extend your own teams. 

Included in this paper is a list of some example boutique firms with an edge on talent and experience that may be just what you need to make traction, with some suggestions on how to engage them.    Download the paper here, free of charge:  Jumping New & Higher Hurdles:  How US Pharmaceutical & Device Manufacturers Can Stretch Resources to Achieve Success in Today’s Post Health Reform Environment

Terri is the founder of Cambria Health Advisory Professionals and a Managing Partner at Quo Magis Partners, and a Senior Partner at Valiant Health. Among her current clients: a large health sciences firm serving payers, pharmaceutical and device manufacturers and other stakeholders. a small special needs health plan as a 5 Star Consultant, and several other health related clients. The thoughts put forth on these postings are not necessarily reflective of the views of her employers or clients nor other Health Thought Leader colleagues. Terri has had a varied career in health related settings including: 9 years in a clinical hospital pharmacy setting, 3 years as a pharmaceutical sales rep serving government, wholesaler, managed markets and traditional physician sales, 3 years working for the executive team of an integrated health system working with physician practices, 4 years as the director of pharmacy for a large BCBS plan, 12 years experience as founder and primary servant of a health technology company which was sold to IMS Health in late 2007.  She has both a BS and a PharmD in Pharmacy and an MBA.