Lessons Learned, What s Next

Transcription

1 Provider Sponsored Risk: Lessons Learned, What s Next AHA Leadership Summit July 28, 2017 San Diego Paul H. Keckley, Ph.D. The Keckley Report

2 Provider-Sponsored Risk: The Big Picture Realities: Insurers are in the drivers seat in DC Hospital margins have improved, esp. in large systems & consolidation has not resulted in cost savings The public is alarmed by health costs and looking for relief Congress is dysfunctional: hawks control $$$ Costs are going up faster than GDP, wage, CPI and medical inflation Employers are shifting costs or exiting altogether The ACA is here to stay Complicating Factors: Physicians aren t happy and 33% are our employees Household discretionary spending is tight Value is not systematically defined in U.S. health policy The ACA repair effort is in suspense Campaign 2018, 2020 underway Debt is mounting & the debt ceiling is near

3 Per Capita Spending: Government Spending less than Private Enrollment growth in Medicare, Medicaid not as profitable as private market Providers see declining margins as utilization by Medicaid, Medicare increase 3

4 Total spending: 25% of US GDP health + social services 40 Health care Social care FR SWE SWIZ GER NETH US NOR UK NZ CAN AUS Notes: GDP refers to gross domestic product. Source: E. H. Bradley and L. A. Taylor, The American Health Care Paradox: Why Spending More Is Getting Us Less, Public Affairs, 2013.

5 Public View: Concern about costs 5

6 Public Trust: Consumers Trust Physicians, Not-for-Profit Entities Trustworthiness of Industries Total (Top 2 Box: Very/Somewhat Trustworthy) Physicians Nonprofit voluntary health organization Non-profit hospital systems Centers for Medicare & Medicaid Services (CMS) US Food and Drug Administration (FDA) 73% 70% 82% 82% 91% But trust in hospitals & health systems does not translate to advantage for PSP Plans: the insurance market Is price driven for Individuals and employers, and employers blame hospitals along with drug companies for avoidable costs For-profit hospital systems 61% Health insurance companies 53% Pharmaceutical companies 45% Prepared for: Strategic Health Perspectives Base: All US Adults (2016 n=10000 split sampled) Source: Q565 In your opinion, how trustworthy is each of the following industries?

7 Employer View: Concern about Costs, esp. Hospitals, Drugs & Cancer Care Level of Concern for Healthcare Cost Drivers (Top 2 Box: Extremely/Very Concerned) Hospital inpatient prices % Specialty pharmaceuticals 47% 54% 55% Cancer care 54% 56% 54% Hospital outpatient prices 47% 49% 50% General pharmaceuticals 46% 50% 50% Physician prices 54% 53% 48% Obese patients generally 45% 53% 48% Health plan fees for care management 45% 44% 44% Diagnostic imaging 43% 47% 41% Hospital outpatient utilization 40% 50% 40% Innovative, breakthrough treatments/cures for disease - 46% 40% Orthopaedic surgery (hips/knees/etc) 41% 44% 39% Diabetes patients % Physician utilization 45% 45% 37% NICU/early childhood disease costs 0% -- 36% Low-back pain treatment 43% 40% 34% Maternity care Base: All Employer Health Benefit Decision Makers (bases 41% vary) 40% 32% Q1707: Please indicate your level of concern for the following drivers of health care costs.

8 Health Spending continues grow Insurer View: Customer Base Shifting from Employer to Government $2,000 $1,000 $0 Industry Premium Revenues (2015 versus 2023) $295 $453 Commercial (Marketplace) $512 $ Commercial (Off-marketplace) $833 $1,465 Government (Medicare and Medicaid) Source: US Centers for Medicare and Medicaid Services, "National Health Expenditures, Amounts and Average Annual Growth from Previous Year Shown, by Type of Sponsor, Selected Calendar Years April 2015 Number Uninsured in US vs. Percentage of Workers with Employer Sponsored Plans, Number Uninsured 60,000 50,000 40,000 30,000 20,000 10, ,702 36,586 38,023 39,776 41,949 41,752 43,035 Number Uninsured in US 45,214 48,985 49,951 44,088 44,780 48,613 47,951 Axis Title % Worker Employer-sponsored Plans 41,953 72% 70% 68% 66% 64% 62% 60% 58% % of Workers with Employer Plans Source: US Centers for Medicare and Medicaid Services, "National Health Expenditures and Selected Economic Indicators, Levels and Annual Percent Change: Calendar Years April 2015

9 Premiums in Private Market: Above Wages, Increased Cost Sharing Plan Premium revenue will grow due to increasing numbers of insured Total Private Health Insurance Premium Spending (In Billions) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Projected Spending and Growth Rate for Private Health Insurance Premiums ( ) 3.4% $ % 4.7% 6.1% 5.6% 5.4% $1,082 $1,191 $1,330 $1,489 $1, % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Private Health Insurance Premium Spending in the United States Rate of Growth Source: US Centers for Medicare and Medicaid Services, "National Health Expenditures and Selected Economic Indicators, Levels and Annual Percent Change: Calendar Years April 2015

10 Investor-owned Plans: Since passage of the ACA, the Big Five have maintained predictable earnings, improved market value

11 EBITDA Performance for Big Five: United has outperformed its peers; Cigna, Humana have under-performed $16,000,000,000 EBITDA Payors $14,000,000,000 $12,000,000,000 $10,000,000,000 $8,000,000,000 $6,000,000,000 $4,000,000,000 $2,000,000,000 $ EBITDA 2011 EBITDA 2012 EBITDA 2013 EBITDA 2014 EBITDA 2015 EBITDA 2016 EBITDA Aetna Anthem Cigna Humana United Health Group

12 Provider-Sponsored Plans (PSPs): recent studies show increased activity among major systems via JVs; Medicare, Medicaid focused Sponsor Objectives & Questions Robert Wood Johnson Foundation: Analysis of Integrated Original research-assessing the Financial Condition of Provider- Delivery Systems and New Provider-Sponsored Health Plans Sponsored Health Plans: Michael J. McCue, DBA. published in (June 2017) Author: Baumgarten A. Managed Magazine (June 2015 Update). Atlantic Information Services (AIS) Health Plan Survey New PSHP performance : quality, profit, competitive Performance: strong v. weak cash flow Growth/Scale: enrollment Mcare,Mcaid,Comm Examined the goals of new or acquired plans since 2010: (1) Are the new health plans growing and moving toward profitability? (2) Are they having impact on competition, cost, and quality in their respective markets? Key Findings Few new plans have gained enough enrollees to effectively manage risk, achieve economies of scale in plan administration, or have an impact on competition and price in their local markets. Since 2010, of the 37 new health insurance companies and five acquired health plans, only four were profitable in 2015, five have gone out of business, and two are in the process of being sold. Methodology More than 25 Interviews conducted with: leaders in provider systems and their sponsored health plans, academics and consultants. Analyzed a data set containing information on ~145 PSHPs operating in 2015 and NAIC data - plan financial and enrollment data. Conclusion The current health plan environment is not conducive to profitability for new provider-sponsored plans. The key to success for PSHPs is the ability to enunciate and then deliver on a value proposition. Some of the new plans are among the lowest priced plans for individuals and small groups, and their presence is adding competition and benefits. The plans reviewed are only able to price competitively by paying their own providers below market rates - not a sustainable strategy. Assessed the performance of health plans sponsored by provider organizations, with respect to plans generating strong positive cash flow relative to plans generating weaker cash flow. A secondary aim was to assess their capital adequacy. Overall medical loss ratios have increased from 83.5% in 2011 to 86.4% in The profit margin ratio of provider-sponsored health plans with strong cash flows declined from 2.5% in 2011 to 0.4% in Identified 24 PSHPs with an average positive cash flow margin from 2011 through 2013 at or above the top 75th percentile, compared with 72 PSHPs below the 75th percentile. The study conducted a t test mean comparison between strong and weak cash flow PSHPs across an array of financial performance and capital adequacy measures. Strong cash-flow margin PSHPs are managing their medical costs. Although their medical loss ratio increased by almost 300 basis points from 2011 to 2013, it was still statistically significantly lower than the weaker cash flow PSHP group (P<.001). In terms of capital adequacy, both strong and weak cashflow margin PSHP groups possessed sufficient capital to ensure the viability of these plans. Examined the growth among provider-sponsored plans based on enrollment numbers to determine the largest areas of growth b/t LOB-Mcaid, Mcare, Commercial and public exchange market. The number of health insurance policies sold directly to consumers for 2016 increased by 9.3 million people, or 10% over last year. Individual (non-group) commercial risk-based enrollment increased 3.5% overall, but the number of those people who enrolled via public exchanges increased 48%, to a total of 9.7 million people. Compared membership b/t PSHPs and Non-PSHPs based on enrollment growth; Identified where plans were seeing the most growth-commercial-medicare- Medicaid using data from 2016 AIS Directory of Health Plans on 270 PSHPs and survey results from half of all U.S. health plans; data from exchange enrollment was included. A combination of trends contributed to a significant shift away from employer-sponsored health insurance in the last year: Provider-sponsored plans are on the rise. The total number of these plans increased from 256 in 2015 to 268 in Membership in these plans jumped from 32.8 million to 36.3 million. There is a shift from group coverage to individual plan membership, which grew almost 4 percent from 16.1 to 16.7 million. "

13 Recent Performance for 5 biggest PSPs: enrollments up, margins thin Health Plan Name Total Revenue 2015 Total Enroll Total Revenue Total Enroll 2014 Indiv Enroll 2015 Group Enroll 2015 Mcare Enroll 2015 Mcaid Enroll 2015 Enroll Change 2015/ 2014 Margin Kaiser Permanente Health Plan 61,048,359,000 57,533,106,000 8,064,511 7,531, ,775 5,520,984 1,041, , % 3.1% HealthFirst 4,807,584,443 1,053, ,997 36, , % 0.7% UCare 3,513,929,868 3,053,290, , ,586 9,890 85, , % 0.8% Superior Health Plan 2,882,056,810 1,856,762, , ,601 63,151-10, , % 0.5% MetroPlus Health Plan 2,596,876, ,623 21, , , % 13

14 Looking in ahead, shared Risk in the ACA: Most will continue In the ACA, demonstrations & pilots target savings in Medicare/Medicaid programs Most are 5 year programs that are Reviewed, modified annually Most will continue, but on a voluntary basis Patient Centered Medical Home are Embedded in various Medicaid, Medicare Shared risk arrangements Shared Risk Demonstrations, Pilots in ACA Medicaid Demonstration Pilots (4) Hospital Value-based Purchasing 3001 SNF, Home Care Value-based Purchasing (3006) Value-based Modifier for Physician Fee Schedule 3007 Hospital Acquired Conditions 3008 CMMI 3021 Medicare Shared Savings Program 3022 Bundled Payments 3023 Independence at home 3024 Hospital readmissions 3025 Outlook

15 Hospital activity in shared risk: Hospital shared risk activity varies considerably by market, caution is evident 45% 40% 35% 41% 30% 25% 20% 15% 31% 30% 29% 25% 28% 19% 26% 27% 10% 5% 0% No plans to take risk beyond modest shared savings and pay-for-performance arrangements Experimenting w/risk arrangements, but small part of revenue Committed to clinical integration organization strategy for contracting w/payers 10% 12% 9% 1% 8% 6% Building an ACO model that Committed to moving the is capable of taking risk such majority of revenues to fully as Medicare Advantage or at risk within 5 years employer direct contracting Base: All Hospital-Based Execs (2016: n=205; 2015: n=200; 2014: n=202) Q980: Which of the following best describes your hospital s/hospital system s risk bearing strategy?

16 Key Question for Hospitals & Health Systems: Will accountability for affordability mean hospitals must assume insurance risk? Inpatient & Post Acute Services Professional Services Retail & Community Health Destination? Regional Systems of Health Financing & Delivery Planning & Strategy MSO Network Services Medical Management Real Estate Member Services Finance Marketing & Communications Analytics & Decision Support Risk & Compliance Insurance Advocacy Leadership & Governance Key Business Units Key Operational Functions Page 16

17 Market dynamics Payments: from fee for service to value Scope of services: care delivery to delivery + financing Scale of operations: from local to regional Customers: from patients to consumers Operational Focus From Community Hospital Management Focus to Systems of Health Unit Costs Inpatient, Outpatient Services, Physician Services Medical Staff, Employed, ACO Safety, Outcomes, Patient Experience, Allopathic Campus Orientation Facility Locations Affiliations Technology, Facilities for Inpatient, Outpatient Core Screenings, Social Services Annual Negotiation Reputation, IP-OP Locations Costs Business Units Physician Organization Clinical Orientation Network Design Access Provider Network Capital Deployment Community Benefit Focus Insurer Orientation Value Proposition Total cost of care Acute, Primary, Post Acute, Retail + Insurance Exclusive Network + Alternative Providers Effectiveness, Efficiency, User Experience Regional Sites of Care Facilities + Digital Connectivity Narrow, Formal Regional Hubs Social Determinants Partnerships Scale, Scope, Outcomes, Affordability, Locations, Copyright: The Keckley Group

18 Provider-Sponsored Risk: Lessons Learned, What s Next Lessons Learned: Scale is an advantage: clinicians, IP & OP services, telemedicine, retail et al Market conditions competition, payer expectation, cost and demand characteristics define share risk strategy Managing consumer adherence, creating high performing post acute networks & implementing digital health key competencies necessary to shared risk Start slow Focus on costs & execution, inside and outside risk agreements What s Next: Expanded opportunities in managed Medicaid & Veterans Health Simplification of reporting requirements State action for drug cost containment Insurer consolidation Integration of delivery & financing (insurance) among providers

19 Contact Paul H. Keckley, Ph.D. Managing Editor, The Keckley Report Subscribe to report FOR FREE: Follow: