Transcript Discussion Document - Navigant Consulting

NAVIGANT HEALTHCARE PRESENTS:
ACO, HEALTHCARE PROVIDER ALTERNATIVES AND
STRATEGIES IN PARTICIPATING IN HEALTH
INSURANCE EXCHANGES
Moderator: Cheryl Duva
May 02, 2013
NAVIGANT OVERVIEW
Who is Navigant Consulting?
» A 30+ years Global Consulting Firm
with 2,500 professionals located in over 45 U.S. / Global Based
Offices
»
Navigant’s Healthcare Practice brings together a team of more than 600 seasoned consulting
professionals and industry thought leaders. We help our clients design, develop and implement integrated,
technology-enabled solutions that create high-performing healthcare organizations.
Strategic Advisory
Operations Management &
Implementation
Outsourcing & Technology Solutions
Navigant provides healthcare executives
objective, practical, results-oriented assistance
to set strategic directions that enable long term
growth through the every changing industry.
Navigant has extensive experience, and a successful
track record, helping healthcare organizations
implement solutions to improve financial, operational
and quality performance.
Navigant provides outsourcing and technology
solutions to improve efficiency and help clients
make more informed decisions based on better
information management .
Health Systems
Physician Groups
Payers
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Life Sciences Companies
PROVIDER ALTERNATIVES IN PARTICIPATING IN
HEALTH INSURANCE EXCHANGES:
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Provider Perspective: Casey Nolan, Managing Director
ACO Perspective: Cynthia Peters Arnold, Director
A HIGHLY VOLATILE AND COMPLEX INDUSTRY
Key Trends Impacting Health Systems, Physicians and Others
Macro
Economic
Factors
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6.
Impact of demographic and disease burden trends
Increasing health care as percent of GDP, and highest cost globally
Global financial crisis, national debt crisis, state budget crisis
Health care reform and changing payment models, flat NIH funding, scrutiny on costs and impact of research
Growing regulatory burden and increased transparency
Natural disasters
Science and
Technology
Trends
7.
8.
9.
10.
Growth in interdisciplinary and team science
Growth of comparative effectiveness research and implementation science
HIT adoption/proliferation, evolving into database/statistical science, digital revolution
Blurring boundaries among academia, industry, government and funders
Workforce and
Education
Trends
11.
12.
13.
14.
15.
Generational shifts in leadership, faculty, staff, residents and students
Physician/nurse shortages and resident work hours
Team-based care and education/training
Diversity shifts in patients, trainees and faculty/staff
Evolution of maintenance of licensure and certification
Health Care
Trends
16.
17.
18.
19.
20.
21.
Growing payer concentration
Increased focus on outcomes, reliability, safety, cost and the patient experience
Increasing emphasis on prevention and population health
Health system consolidation and physician acquisition
Emergence of accountable care organizations to improve quality and reduce waste
Migration to lower acuity/cost settings
THE EVOLVING HEALTHCARE ENVIRONMENT
If you build it, they will
come.
 Reduce ALOS
 Build capacity
Wholesale Market
1980s
If you buy it, they will
come.
 Compete for
contracts
 Reduce
investments
Managed Care
1990s
 Purchase
technology
 Focus on process,
service, facility
design
Technology Market
2000s
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If you prove it, they will come.
 Compete based on data
to demonstrate value
(low cost, high quality)
 Optimize use of what
you have
 Increase connectivity
Accountable Era
2010s
LESSONS FROM THE FRONT LINES
Since the PPACA’s passing in 2010, Navigant has intentionally invested in assisting clients in Massachusetts, the nations’
laboratory of healthcare reform. Navigant has now completed over 250 post-reform engagements with a wide range of physicians,
payors, health systems, and suppliers. Based on our experience, we believe reform has been the catalyst for the following
market forces and trends which are reshaping the healthcare landscape.
#1. Under the Shadow of Reform,
Reconfiguration = Recapitalization
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Thinly capitalized and distressed hospitals
& physician groups increasingly will seek
partnerships, resulting in some
transactions that could not have been
predicted two years ago
#2. Reimbursement Cuts are
Requiring Improved Performance
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Large federal and state budget deficits have
exacerbated Medicare and Medicaid solvency
issues, pressuring provider payment
»
The cuts are large enough to require an
integrated performance improvement /
strategy/ financial approach
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#3. A New Reimbursement Paradigm is
Emerging
» Managed care contracts, offering incentives to
use accountable care tools such as more
generics, less high-end imaging and ED
avoidance are being embraced by primary
care physicians, triggering acceptance by
specialists and hospitals
THE “TWO CURVE” CHALLENGE
Curve #2: VALUE-BASED PAYMENT
Hospital and physician providers must address
how to optimize performance in the current
environment while also preparing to “jump” from
Curve #1 to Curve #2
 Achieving “Triple Aim” , as per IHI:
 Better Care Experience for Individual
 Better Health for Populations
Performance
 Lower Per Capita Costs
Natural
Trajectory
Curve #1: FEE-FOR-SERVICE
How do you prepare for a future world
that requires more clinical integration
while the health care system still rewards
a position of strength in the current FFS
“foot race?”
 All about volume
 Reinforces work in silos
 Little incentive for “real” integration
Time
Source: futurist Ian Morrison; Institute for Health Improvement
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EXCHANGE (HIX) REIMBURSEMENT
What is the anticipated reimbursement rate?
»
Price Signaling is Occurring Nationally
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Although the common initial ask is “Medicaid, Medicare or a steep discount”…..
Tenet strategy – participate in narrow/tiered network @<10% discounts off of commercial rates
Large Regional BCBS Plan – getting 5-10% discounts off commercial rates (up to 20%)
CHI – Very modest discounts off of commercial rates
Be mindful of out of network provisions (emergency, non-emergency, authorized vs. non-authorized,
PPO vs. HMO)
Many Hospital CFO’s are assuming HIX plans will reimburse hospitals at or slightly above Medicare
rates
Source: Wall Street Journal 3/1/13 “Another Big Step in Reshaping Healthcare”
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ACO/NETWORK IMPACT: WHAT IS LIKELY TO EVOLVE IN
THE EXCHANGE MARKETPLACE?
Implications for ACO/Provider Networks:
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Access and network design will include:
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Mental health and substance abuse
Avoiding providers who invite adverse selection (3 R’s minimize concern a little)
Impact of state QHP requirements on network design
Preference for narrow network
Payers will be interested in reducing medical claims costs through numerous network
strategies:
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Narrowing to lowest cost providers
Leveraging for more discounts
Creating tiered networks
Payors with limited experience with risk arrangements, may want to set up ACO and Bundled Payment
arrangements without sufficient experience in how to address risk adjustment and providing actionable
data to providers
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POTENTIAL PAYER MIX SHIFT (2012-2015) DUE TO THE
IMPLEMENTATION OF THE ACA AND EXCHANGES
2012
Payer Landscape
2012
Sample Payer Mix
Potential 2015
Sample Payer Mix
Anticipated 2015
Payer Landscape
45.0%
Medicare FFS
and/or HMO/ACO
Driven by aging pop.
Medicare FFS
42%
42%
3%
HMO / PPO
(predominantly BCBS)
42%
Medicaid FFS
11%
Self-Pay &
Other Unclassified
5%
6%
33.0%
5%
Commercial ACO /
“Narrow Network”
6%
1.5%
Total
HMO / PPO
(predominantly BCBS)
33%
6.0%
Medicaid FFS
6.5%
Medicaid HMO/ACO
7.5%
Exchange
(Gold, Silver, Bronze)
2.0%
Self-Pay &
Other Unclassified
100%
Total
100%
1.5%
2%
Net net, the positive financial gain from shifting
“uninsured/self-pay” volumes from “no pay” to
“some pay” is unlikely to offset the negative
impact of “Cadillac BCBS” insured patients
shifting to Exchange plans.
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ACO IMPACT
Cynthia Peters Arnold, Director, Navigant Healthcare
ACO / NETWORK / HEALTH PLAN IMPLICATIONS
Implications of Expanded Benefits and Coverage:
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More coverage for mental health and chemical dependency services
It is assumed there will be a decrease in uncompensated care which will lead to more scrutiny of tax
exempt status of provider organizations
Implications for Care Management:
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Continuity of care issues/challenges
› Pent up demand for care
› Chronic illness management
› Mental health and substance abuse demands for service and volume of those needing it will increase
Implications for Provider Reimbursement:
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Plans will use “evergreen” contract clauses to continue current reimbursement without adjusting to
accommodate potential increase in acuity at the provider level for “Exchange” population
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Plans in Medicaid may try to apply the Medicaid fee schedules to move into individual and small group
markets
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Increase of risk transfer arrangement to providers, possibly without adequate data and risk adjustment
because the population will be “new”
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ACO / NETWORK / HEALTH PLAN IMPLICATIONS
Implications for Payor Operations that may impact ACO Networks/Providers:
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Appeals and complaints requirements and processes - Collections might become an issue for
hospitals/providers because of confusion over coverage and effective dates
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Premium billing and collections challenges
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Payers could narrow networks even further than tiering:
› There are basic network adequacy requirements but still less pressure to provider broad geographic
access to PCPs because its an individual and small group market
› States must meet minimum federal network access requirements but can make QHP requirements
more stringent than federal requirements
Impact on uncompensated care for providers (payer contracts, tax exempt status, financial planning)
Expect accelerated tiered network products with any related provider costs and quality information
reported on the exchange website:
› Provider cost and quality variation will be shown on the web sites by a significant number of states and
payers are likely to condition payment on this data/performance
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INCREASING ALIGNMENT OF MARKETS, DELIVERY AND
PAYMENT
Aligning Markets With Provider Networks: Requires Alignment of Delivery Systems
and Payment Mechanisms
Journey Toward Value-based Payment System
Current System
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"Pay me more" versus "pay you
less" rhetoric
Major cross subsidies and cross
shifts
Payment success equal
contractual loopholes plus
negotiation power
Limited if any relationship between
price, cost, quality, value
Cost–Based, Market–Based System
Milestones
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Awareness of cross subsidies,
irrational unit reimbursement,
over/miss/underuse of services
Establishment of a method that
basis prices on incremental costs
and market competitors, and
qualitative indicators of value
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Value-Based Payment System
Milestones
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Customer First
Payer and providers agree to a
"pay me right" method
Managers spend "unit
reimbursement, utilization, and
mix) strategically
New payment mechanisms such
as hospital/physician bundling, 30
day episodic payments,
guarantees, and peak pricing that
clarify who is accountable to
maximize patient value for the
incremental dollar
INCREASING ALIGNMENT OF MARKETS, DELIVERY AND
PAYMENT
Aligning Markets With Provider Networks: Requires Alignment of Delivery Systems
and Payment Mechanisms
Provider Cross Subsidy Matrix
Results
Hospital Cross Subsidy in Action
Physician Cross Subsidy in Action
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Margin Makers
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Radiology
Laboratory
Supplies
Drugs
High-end Cardiac Procedures
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Lab
Injections
Radiology
Crowns
Other Ancillaries
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Margin Losers
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Emergency Care
General Medicine
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Evaluation And Management
Codes
Procedures
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Unintended Consequences
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Over investment In High-end,
Acute, Specialty Services
Under investment In Access To
Primary Care, Prevention, etc.
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•
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Over invest in the Proliferation of
Commodity Services
Under invest in Access to Primary
Care, Prevention, etc.
CONSUMER OPERATED AND
ORIENTED PLANS (CO-OPS)
Cristine Vogel, Associate Director, Navigant Healthcare
CO-OPS: NEW & DIFFERENT COMPETITION IN 24 STATES
What are Consumer Operated and Oriented Plans – CO-OPs?
» ACA included a loan program to finance the creation of CO-OPs and provided for
federal start-up and solvency loans to qualified applicants
» Nonprofit, member-governed, consumer driven health plan choice
» Innovative care delivery and payment models to compete in the health insurance
market
» A clean slate - no constraining legacy business
» No existing license, networks, operational capabilities, market intelligence, reputation
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24 CO-OPS IN 24 STATES NOTE
CO-OPs located in:
• Arizona
• Colorado
• Connecticut
• Illinois
• Iowa
• Kentucky
• Louisiana
• Maine
• Massachusetts
• Maryland
• Michigan
• Montana
• Nebraska
• Nevada
• New Jersey
• New Mexico
• New York
• Ohio
• Oregon
• South Carolina
• Tennessee
• Utah
• Vermont
• Wisconsin
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CO-OPS AND MARKETPLACES
CO-OPs are required to sell two-thirds of their contracts in the newly created
Marketplaces
• Mostly targeting the individual and small group markets
• Large employers can participate but limited to about one-thirds of the contracts
Federally-Facilitated
Marketplace (FFM)
State Partnership Marketplace
(SPM)
State-Based Marketplace (SBM)
Arizona
Illinois
Colorado
New Mexico
Louisiana
Iowa
Connecticut
New York
New Jersey
Michigan
Kentucky
Oregon
Maryland
Utah
Vermont
South Carolina
Tennessee
Maine*
Massachusetts
Wisconsin
Montana*
Nevada
Nebraska*
Ohio*
*These states are not partners but willing to review QHP market rules
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CO-OPS: CHALLENGES
» Difficulties creating a start-up health plan in the expedited timeframe
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Hire management and staff
Obtain state licensure
Comply with the new ACA rules regarding benefit designs
Develop provider networks and provider directories
Contract for claims processing and payment systems
Contract for call center operations
Develop marketing strategies and create marketing materials
Interface systems with state and federal agencies
» No name recognition and limited resources for marketing
» No claims history data for product pricing
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CO-OP: OPPORTUNITIES
» Brand new market rules effective January 2014 levels the playing field
» New “kids on the block” may get additional attention
» Not all competitors will participate inside the Marketplace leading to greater market
share
» Providers may be more willing to participate in the network due to nonprofit
consumer governed organizational structure
» Price competitive because lack of “legacy infrastructure”
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QUALIFIED HEALTH PLANS
(QHPS)
Cristine Vogel, Associate Director, Navigant Healthcare
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ENVIRONMENTAL LANDSCAPE
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Insurers are cautious about the initial opportunity of the Marketplace
Participation in Marketplaces is likely to be less robust than originally envisioned
Insurers are assessing and evaluating on a state-by-state basis
Blues are likely to be the mainstays in the Marketplace
Narrow networks on the Marketplaces are expected
Provider rates are a big question mark – although starting to see some light on this
topic
» People will shift between the Marketplace and Medicaid – opportunity for Bridge
products or Medicaid expansion on the Marketplace
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THE NEW HEALTH INSURANCE MARKET
» In 2014, the ACA changes nearly all of the market rules
› Essential Health Benefits & Actuarial Value requirements for the entire individual and small
group markets
› Guaranteed availability
› Single risk pool for the individual and the small group markets for each issuer
› Limits on cost sharing
› Rating rules
» Individuals will be required to have health insurance
» Individuals with lower incomes will be eligible to receive federal premium tax credits
and reduced cost sharing
» Large employers (>50 FTEs) may pay a fee if the health coverage offered does not
meet federal requirements
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QUALIFIED HEALTH PLAN
Only health plans that become certified as Qualified Health Plans (QHPs) can be
offered in the Marketplace
Issuer Standards
Rating Standards
• State licensed and in
good standing
• Quality improvement
strategies
• Risk adjustment
standards
• Accreditation
• Justify and post rating
increases
• Set rates and benefits
for an entire plan year
Product Design &
Marketing
Requirements
Transparency
Requirements
• Standardized plain
language
• Ability to submit data
across a number of
federal and state
agencies
• Reporting and
auditing
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Network adequacy
Rating variations
Enrollment periods
Marketing approaches
and materials
STATES BY MARKETPLACE TYPE
The timing for QHP certification varies by state and by Marketplace type:
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QHPs in most SBMs will be certified by July 31st
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QHPs in FFMs will be certified in early September
QHPs in SPMs will have the State “recommend” to HHS those QHPs that should receive certification by July
31st, but HHS will officially certify QHPs in early September
Federally-Facilitated
Marketplace (FFM)
State Partnership
Marketplace (SPM)
State-Based Marketplace
(SBM)
19 States
7 States in a Partnership
agreement
17 States plus DC
7 States that agreed to review
QHPs for market rule compliance
Total = 19
Total = 14
Total = 18
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MARKETPLACE RATES?
Although no Marketplace has approved any QHP rates at this time, we are getting a glimpse
into the rate filings from some Marketplaces…
State
Number of Insurers that
Submitted
Early Indications to Premium Costs
California
33 insurers applied, 13 selected
Average individual monthly premium
approximately $300
Connecticut
5 insurers intend to file (2 have
submitted)
Average monthly premium for individual is
approximately $575; and for SHOP
approximately $425
Oregon
12 insurers
Individual monthly premium ranges from $169 to
$422
Vermont
2 insurers
Average individual monthly premium
approximately $350 and family coverage
approximately $980 monthly
Washington
9 insurers (57 plans)
Average individual monthly premium for 21 year
old $225; for a 40 year old $280; and for 60 year
old $600
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NEXT STEPS FOR QHPS?
» The insurers who submitted their QHP applications and rate filings to the
Marketplaces will begin to learn of their certification during July, August and
September
› Some SBMs will make the monthly premiums rates available to the public as soon as the
QHP rates have been approved
› The FFM and SPM will post the rates on October 1st when Open Enrollment begins
» QHPs are developing their marketing strategies to identify who are the “newly
eligible” and who will enroll
› What are the market segments and how can you to attract a mix of segments
› Profitable growth and satisfaction in a new market with much uncertainty
› Different social, economical and cultural population than traditional commercial business
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FREQUENTLY ASKED QUESTIONS
Q&A
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