It's not easy being a managed care executive today. Successfully navigating the changing healthcare environment can seem like an uphill battle. But despite the challenging nature of the industry, there are some bright spots on the horizon. Most of you agree, for example, that the movement to value, the rise of consumerism, and the use of new technologies could
transform the industry for the better—it's just a matter of turning that potential into reality.
Unfortunately, that's where many of you are struggling, according to the results of Managed Healthcare Executive's
2015 State of the Industry Survey. The survey findings, based on more than 600 responses from executives at health systems, health plans, pharmacy benefit organizations, and more, show the biggest challenges today and in the year ahead. Here's more on the survey results, and what industry experts say you can do to ensure your organization can meet these challenges head on in 2016.
Challenge #1: Transitioning to value-based payment
Moving to value-based reimbursement continues to be a top challenge, according to our survey. While most respondents said their organization has at least started shifting its operations toward value, nearly one out of every five said they have not yet started transitioning and are "waiting to see what works for other organizations."
national leader of the health plans practice at Deloitte Consulting,
LLP, cautions that this "wait-and-see" approach may be short sighted. "Every health plan and every large provider system has to recognize that demonstrated value will be a key element in payments not too many years down the road," he says. "Beginning to get more experience now seems to be critical so that two and three and four years from now, the learning curve is not too steep, the payment risk is not too high."
Of the 81% of survey respondents who said they have
started shifting operations toward value:
35% said they have started a few initiatives in this area;
23% said they have started many initiatives; and
23% said most of their business/operations is focused on value.
"The results, to me, demonstrate a fair degree of honesty, in that sometimes both plans and providers have a tendency to overstate how much value-based payment is occurring in their book of business," says Scott. "I think that 35% saying they have a few initiatives started, whether that might be bundled payments, or Patient-Centered Medical Homes, or quality-driven payments to supplement fee-for-service-based payments, that sounds about right. With a quarter saying the majority of their business is focused on value--that's quite conceivable. There are some plans, and some provider-based plans, and some integrated delivery systems that are working in a very heavily-capitated or prepaid environment or otherwise have significant value-based arrangements."
In 2016, there will be some incremental growth in the percentage of respondents who are fully focused on value in 2016, but there likely won't be a "massive tipping point," says Scott. "[Focusing primarily on value is] hard to do in many parts of this country, no matter if you're a plan or a provider."
Ceci Connolly, managing director of PwC’s
Health Research Institute, agrees that it may take some time before the number of organizations fully focused on value significantly increases. In fact, she says, even some of the most advanced organizations with great desire to move to value currently only have about 5% of their revenue at risk.
So what's holding managed care organizations back from fully shifting to value? Connolly says, for many, it may be a scaling problem. "... By that I don't necessarily mean scale of a company or of an organization, but scale of the effort to move away from fee for service," she says, citing findings from a recent PwC report. "What we found was the organizations that were doing some bundled payments and engaged in Medicare advantage, and were maybe a part of an ACO, all of those efforts combined got them to a critical mass, and you really need to head in that sort of a direction of a tipping point to walk away from the very solid revenue stream that fee for service provides."
There are also operational challenges associated with the shift that may be holding some organizations back, says Scott. On the provider side, many lack the data-driven care management capabilities to be successful, and/or they lack incentive systems that change provider behavior to focus more on cost and quality, he says. On the plan side, many are struggling to collaborate more closely with providers who don't always have the right capabilities for a value-based model, and who might be concerned about how value will change their business model. "It's not just [about] throwing the dollars over the transom, but really working with providers in much more of a partnership model," says Scott.
For providers gearing up to participate in a value-based reimbursement initiative, Connolly advises focuses closely on efficiency. "... For some period of time, the alternative payments may in fact generate less revenue, so you've got to be prepared as an organization for that initial financial squeeze," she says. It's also critical to remember that physicians who are accustomed to operating in a fee-for-service world are going to have to do their jobs very differently and rely much more on a coordinated approach to care that includes nurse practitioners, pharmacists, data experts, and so on, says Connolly.
Next: Challenge #2 - Turning data into action
Challenge #2: Turning data into action
While the shift to value-based payment is challenging, utilizing technology can help ensure success in this type of reimbursement model. For example, payers might be able to use data analytics technology to identify at-risk members so that providers can intervene before serious problems occur. Or, seamless data exchange between electronic health records (EHRs) might help primary-care providers stay up-to-date on patient health issues, such as recent emergency room visits.
Many organizations, however, are struggling to realize technology's full potential, according to the survey. When asked, "What is your most pressing information technology problem" the answer that received the highest percentage of responses was, "turning data into action."
This does not surprise Anita Nair-Hartman, vice president of strategy and business operations for payer business at Truven Health Analytics. "Lots of organizations or companies can take information and put it in sort of a data repository, but asking the right questions of that data and pulling out the right information so that you can use it to help determine your business decisions--that is really where it becomes difficult," she says.
One reason it is so challenging is that it requires a specific skill set, says Nair-Hartman. "We have noticed that it is becoming more difficult for health plans to find the analytically oriented and
business oriented individuals who can bridge that gap to help answer these questions," she says. " ... A computer can't do that—there's no easy button, it truly does require some expertise in understanding not the business, not just the data, but also the analytics, and putting those three pieces together."
Scott says another major barrier to creating actionable data is lack of seamless information exchange between payers and providers and within health systems. While health plans have a large amount of administrative data at their disposal, such as members' basic demographic information, diagnosis codes, and procedure codes, they lack easy access to clinical data, he says. If they had it, and it could be easily combined with administrative data and shared with providers, providers would be able to better identify and address patients' health needs in real time, he says. "Certainly the data in a health plan data warehouse is not nearly as actionable as it would be if it were combined with more of the clinical data that you get from a provider electronic health record."
Larry Yuhasz, national practice leader, population health, at Truven Health Analytics, agrees that lack of information exchange within individual healthcare systems is a key aspect of the problem. "There's still a high number of siloed pieces of data across the enterprise, so if you look at a typical health system, you'll find that they have multiple [EHRs], they have different registries for different types of disease groups, they'll have cost and revenue cycle management systems in different silos ... " he says.
So what can health plans do to improve data exchange and application? Here are some recommendations:
Next: Challenge #3: Addressing rising pharmaceutical costs
Challenge #3: Addressing rising pharmaceutical costs
Move toward a single data repository. Most plans have many data repositories that are accessed in different ways by different departments, says Nair-Hartman. "I think that they are starting to, and they need to continue this investment of having a single source of health information to help drive their business," she says.
Improve plan-provider collaboration. "Only by working together can we consolidate and normalize and utilize the various sources and types of data that are required to really have actionable information," says Scott.
Make sure payment aligns. "The financial integration will support clinical integration," says Scott. "... If the money is suggesting that plans and various types of providers need to link arms in a more collaborative way to focus on the information required to make the new value-based payment system work for all the stakeholders—that's big."
Have the right governance. Managed care organizations must understand each data source they have, who's responsible for each data source, and what activities they are responsible for within each data source, says Yuhasz. "It's hard work to sit around and identify [governance] and to build it into the organization," he says. "But those organizations that treat it as best practices do very, very well analytically. It's kind of like the roll up your sleeves part of making sure that you get actionable data coming out of your systems."
For more tips, visit bit.ly/analytics-action.
It should come as no surprise that the rising cost of specialty pharmaceuticals is another top challenge for managed care executives. According to Connolly, these rising costs are, in many cases, the number one reason for rising premiums in 2016. And, she cautions, this is likely to remain a top problem in 2016 and beyond. "If you look at the FDA approval pipeline ... there are many more specialty drug approvals that are likely to be coming in the future months and years, so it is indeed a serious problem for everyone involved," she says.
Managed care executives are split, however, when it comes to the best way to address this problem. According to our survey:
24% of respondents said government interference is the best way to address these rising costs;
23% of respondents said integrated pharmacy and medical benefits;
19% said utilization management;
15% said cost-effective pharmacy plan design;
10% said prior authorizations; and
9% said pharmacy benefit managers and specialty pharmacies.
Scott says one response, which he believes might be the most effective solution, is missing from the choices. "... We almost need a new model because we are going to have exponential growth in the next decade of specialized and personalized therapeutic possibilities for really difficult disease states and conditions, and we're going to have to get better at this and public policy is certainly not keeping up with this," he says. "... Our current benefit designs, our current insurance products, our current government program payment mechanisms, they're not going to work and we need new business models to accommodate exponential therapeutic developments and innovations."
Scott says a public/private initiative or program that brings various stakeholders together to address this issue is critical. "I do think that in the short term, new financial arrangements between the key stakeholders—the manufacturers, the health insurance companies, the pharmacy benefit managers, the specialty pharmacies ... [and] new contractual arrangements are probably the best hope," he says. "But over the long term, I'd like to think that smart and well-intentioned people working together can come up with a combination of private sector and government policy moves that can spell the difference. This is a new world and today's PBM contracts, for example, aren't going to get it done."
Connolly says that in efforts to contain rising pharmaceutical costs, clinical outcomes goals for individual
patients should be a major focus. For instance, one patient might want to be able to walk his daughter down the aisle at her wedding; another might want to be able to get up and go to work every day, says Connolly. "We need to key in much more on what the patient outcomes are and see that real-world evidence, and then once we understand that, we have the ability to target right therapy to the right patients at the right times," she says. "That means that not everybody is going to get every new thing, but hopefully it's going to be based on who is really going to be able to benefit from something and who's not necessarily, or who should be considering alternatives."
Next: Challenge #4 - Reacting to healthcare consumerism
Challenge #4: Reacting to healthcare consumerism
Consumers are playing a more active role in selecting their health plans because of the growing number of public and private health insurance exchanges. In addition, since many of these plans include higher cost sharing, consumers are more informed about their healthcare costs. All of that translates to more informed, savvy consumers when it comes to healthcare decisions, and that means managed care organizations need to step up their game.
"Increasingly what we are recognizing is that there has to be much more sophisticated customer segmentation in the healthcare industry," says Connolly. "It's not enough to simply break folks down by men, women, or a couple of different age groups, they really have to think in terms of different markets, they have to think about whether customers want to have in-person experiences versus digital experiences or a combination of the two. When you think about some industries such as retail, which know so much about their customers and how to interact with them and when to engage with them, healthcare really needs to go much more in that direction."
Here's what you are doing to attract new members and expand market share, according to our survey:
60% are expanding their customer experience improvement initiatives;
53% are increasing consumer outreach initiatives;
43% are expanding consumer relationship management capabilities;
34% are focusing on improving cost transparency; and
17% are providing more financial counseling.
Connolly says that while improving the customer experience is critical, she's surprised that more respondents are not focusing on affordability and cost transparency. "Overwhelmingly, consumers tell us that cost is the #1 issue for them right up there with quality of care," she says.
One way health plans need to adjust to the increasing role consumerism is playing in healthcare is by educating members about their benefit design and making sure information is easy to understand, says Connolly. "Beyond that, [the challenge is] trying to get consumers to appreciate the need and the value for things such as prevention, healthy living, good management of chronic conditions—a lot of those activities that are going to be beneficial to them down the road."
This of course, speaks to the ongoing challenge payers and providers face: Getting patients to engage in their own healthcare. To do this, Connolly says a combination of "carrots and sticks" might be effective. "If you think back to big public health campaigns in the past in our country—whether it's smoking, or wearing seatbelts, or drunk driving—all of those efforts involved some financial dimension like taxes or higher prices, they involved incentives, they involved the community and getting almost peer pressured if you will," she says. "I think we're going to need those sorts of comprehensive efforts, especially to get people with chronic conditions much more engaged in their health."
Next: Challenge #5 - Responding to industry consolidation
Challenge #5: Responding to industry consolidation
In 2015, the pace of consolidation within health plans and provider organizations picked up, leaving many of you wondering how this will affect you and what you should do about it. Overall, respondents to the survey were split regarding how consolidation will affect healthcare costs. A slight majority (54%) said it will lead to higher overall healthcare costs, 33% said it will lead to lower costs, and 13% said it will not impact costs.
The mixed response doesn't surprise Connolly, who says there's "intense debate" over this issue. Still, she says, "I don't think that anyone would suggest that any healthcare costs in our country are going down in the future, that's just not a trajectory that we have seen or that we expect to see, but it is possible that some companies might get efficiencies and some companies might be able to deliver that better value for the dollar ..."
Michael Nugent, managing director in the healthcare practice at Navigant Consulting, Inc., and leader of the firm's
managed care pricing team, agrees that consolidation could lead to improved efficiencies and streamlining across the industry. Therefore, he says, it could reduce healthcare costs. For instance, consolidation may make it easier for payers to work with providers and the federal government to standardize operations related to claims administration and claims payment. "Currently, there are so many different ways of being paid, there are so many different ways of administering claims, there are so many systems out there, that further consolidation could arguably result in a quicker path to standardization," says Nugent. "... If consolidation can be accompanied by standardization, then costs could very well decrease, administrative costs could decrease." In addition, if payers that consolidate pursue value-based reimbursement, that could make it more compelling and necessary for providers to pursue cost reduction efforts, standardize care, reduce avoidable utilization, and so on, says Nugent.
So what should managed care organizations do about increasing consolidation? For those participating in it, Nugent advises looking closely at how they propose to reduce waste and standardize operations. Connolly says it's also critical to focus on the "nuts and bolts" of running the business and combining departments such as administrative areas and IT. "Those may not be very sexy topics but they can really improve the success or slow it down," she says.
For those organizations who are not consolidating, Nugent advises conducting a "competitive gap assessment" to compare how they stack up against these newly combined organizations from a marketing perspective, a price-point perspective, a product offering, and a network offering perspective.
Keep in mind that regulation could affect the outcome of potential mega-mergers, says Connolly. "There's just so much of it across the entire healthcare sector that you're going to have intense scrutiny by regulators through all of 2016 and this administration, in terms of consolidation in other industries, has been somewhat skeptical," says Connolly. "The healthcare industry needs to be prepared for that and will need to have very strong cases to present to the regulators."
Aubrey Westgate is executive editor of
Managed Healthcare Executive.