There’s no doubt: drug costs are skyrocketing-and those rising prices are affecting providers, payers, and patients in a variety of different ways.

, Medicare Part D enrollees without low income subsidies are looking at having to pay thousands of dollars out of pocket for single specialty drug this year. Such costs, especially with 

baby boomers retiring at an average of 10,000 people per day

, are unsustainable-and President Donald Trump and others in government have been clamoring for ways to reduce list prices.

But as all eyes are on drug manufacturers to see how they respond to increased political and consumer pressure, Nitin Naik, Vice President of Global Life Sciences and Transformational Health at Frost & Sullivan, says there are many factors that are contributing to rising drug prices. He says current research and development efforts are, in fact, one of the main drivers behind the increasing price tags seen on drugs.

“There are several factors at play but mostly it’s the introduction of innovative molecules and specialty drugs used to treat complex disease pathways like oncology, rare disorders, and infections diseases like Hepatitis C,” he explains. “These all contributed to the overall increase in drug expenditures.”

Perry Cohen, PharmD, chief executive officer of the Pharmacy Group and the TPG family of companies, which provide services to associations, healthcare, and information technology organizations, payers, and pharmaceutical companies, says that the price increases of existing specialty drugs, sales, and marketing activities tailored to providers and patients to drive demand for specialty drugs, the lag in biosimilar adoption, and ineffective programs by health plans and pharmacy benefit managers (PBMs) have also played a role.

“There are many factors driving these costs,” he says. “And each patient population, from commercial to Medicare and Medicaid, will feel these rising drug costs differently.”

 Managed Care Pharmacy Survey, specialty pharmacy stakeholders, including providers, consultants, health plans, and pharmacy benefit managers (PBMs), were asked to offer their predictions about what will transpire at the drug manufacturer level as it relates to drug pricing over the next three years.

More than one-third of respondents (37.58%) said they believed they would see a short period of decrease in annual inflation rates, followed by a return to higher rates. That response was followed by the belief that inflation rates on existing products will continue to grow as they have for the past five to ten years (29.7%) and that we will see a prolonged decrease in annual inflation rates due to the increased scrutiny (18.79 %). Only 13.94% thought that a substantially greater number of drug manufacturers will decrease their current list prices.

Click here to read the full survey results

Naik says that the increased focus on drug pricing is valuable as it helps to bring more pricing transparency to patients-giving them the opportunity to make informed decisions on optimal treatment strategies with their physicians. He says that he believes manufacturers will have to invest in integrated media outreach platforms to help guide patients and physicians to help do that.

But as for significant changes in pricing in the near future? Naik is more circumspect. He says Frost & Sullivan expects modest rate increases due to collaborative efforts between government and manufacturers over the next three to five years. In addition, he doubts that the industry will see reductions in price across the board.

“Commercial drug plan spending has increased by 1.5% in 2018 compared to 3.8% in 2017,” he says. “In 2019, Frost & Sullivan expects lower pricing on drug categories related to pain, high cholesterol, and neurology due to the availability of generics in those segments. Categories related to diabetes, oncology, and HIV, however, will experience inflation due to the launch of new specialty products.”

Despite those projections, Naik says it is important to understand that the current debate about drug pricing is not as simple as just decreasing list prices. He argues it’s really about putting out holistic information about the benefits of the drug treatment and pricing in relation to insurance coverage.

“We have a need to generate simple yet meaningful data,” he says. “Healthcare executives should look at adopting new artificial intelligence or machine learning technologies that can assist standardizing and comparing treatment options with the help of calculator tools to estimate the total out-of-pocket costs for each patient by applying plan specific information.”

Kayt Sukel is a science and health writer based outside Houston.

Articles

With a country-wide focus on reducing the cost of prescription drugs, managed healthcare executives make their forecasts concerning the future of list prices.

Contemplating the Future of List Prices

It’s a usual regulation in a healthcare industry known for plenty of unusual rules: In 36 states and the District of Columbia, a healthcare provider hoping to open or expand her patient offerings must first prove to regulators that her community needs the service.

Providers can spend years and burn through tens or even 

 of thousands of dollars to prove this need and thus obtain what is called a “certificate of need” (or CON). The CON process can be required for both small and large investments: from hospital beds and gamma knives to new hospitals and neo-natal intensive care units.

Originally intended to discourage the use of expensive technologies and procedures, in many states a CON is now required for relatively lower-cost modes of care such as ambulatory surgery centers and for services unlikely to be over-prescribed such as drug-rehabilitation services and hospice care.

The federal government once required states to have CON rules in order to obtain certain federal funds. But since the repeal of that mandate in the late 1980s, a substantial minority have done away with their CON programs. Of those that have retained the regulation, many have scaled it back. In June, Florida 

 to eliminate its CON requirements for new hospitals, specialty hospitals converting to general hospitals, and for a raft of other service providers such as children’s care and substance abuse hospitals.

About four in 10 Americans now live in a state without a CON requirement. These include urban, rural, low-income, and high-income populations alike. What are the experiences of patients and providers in these communities? What has happened to access, quality, and costs of care?

Using decades’ worth of state data, researchers can compare outcomes in CON and non-CON states. These statistical analyses include control variables that account for possibly confounding factors such as local economic and demographic patterns.

Their findings are consistent with economic theory: CON laws seem to limit access to healthcare, fail to increase the quality of care, and contribute to higher costs. I take each of these in turn.

The strongest evidence on the effects of CON relates to access to care. Economic theory predicts that a CON law will restrict the supply of healthcare services, and that once repealed, patients will tend to access greater levels of care.

Indeed, researchers have found that states that have removed these rules have 

 and more ambulatory surgery centers per capita. They also have more 

. Patients in non-CON states are more likely to utilize 

 and less likely to leave their communities in search of care. Though CON advocates sometimes claim that the rules protect rural facilities, states without CON laws have more 

 and more rural ambulatory surgery centers than states with CON laws.

Advocates also sometimes claim that CON rules encourage hospitals to provide low-cost or uncompensated care to low-income individuals. The idea here is to create a sort of quid-pro-quo: CON will protect hospitals from competition, and in return, hospitals will provide charity care. In some states, this quid-pro-quo is explicitly built into the CON approval process. In others, it is assumed. The evidence, however, suggests that 

 of charity care in states with CON laws. There is, however, greater 

 in the provision of care in CON states relative to non-CON states.

Though the CON approval process is not meant to directly assess a provider’s qualifications, safety record, or treatment success rate, it is sometimes said that CON programs might indirectly improve quality. The idea is that CON might cause more procedures to be channeled through fewer providers, allowing those providers to improve their proficiency. While not unreasonable, the idea must be weighed against another, well-supported proposition: that competition tends to elevate quality.

What do the data say? Early studies tended to focus on individual procedures such as coronary bypass surgery and had a difficult time distinguishing causation from correlation. The results were 

, with some early studies associating CON with higher-quality outcomes, others with lower-quality outcomes, and still others with mixed or inclusive results. One recent study is worth discussing in detail because it touched on multiple aspects of the patient experience and because its careful research design makes it possible to draw causal inferences.

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Two of my colleagues, George Mason University Professor Thomas Stratmann and PhD graduate student David Wille, set out to assess the effects of CON on hospital quality using 

, a database maintained by CMS. This database assesses quality through multiple dimensions-everything from patient satisfaction surveys to heart attack readmission rates to pneumonia mortality rates. 

, Stratmann and Wille estimate the effects of CON by looking at healthcare markets spanning CON and non-CON states. This allows them to control for other, unobservable, factors that might affect health outcomes such as culture and environment. Like other CON researchers, they also control for several observable demographic and hospital characteristics that might confound their estimates.

Stratmann and Wille find that hospitals in non-CON states have statistically significantly lower mortality rates for pneumonia, heart failure, and heart attack. They also find lower mortality rates among surgical inpatients with serious treatable complications. Compared with hospitals in states that require CONs for four or more services, hospitals in non-CON states have lower readmission rates for heart failure and heart attack. Patients in these states are more likely to rate their hospital experience highly.

An initial goal of CON was to limit the utilization of costly and unnecessary care. The federal legislation that encouraged states to adopt CON rules lamented a “massive infusion of Federal funds into the existing healthcare system [that] has contributed to inflationary increases in the cost of healthcare.”

CON might seem an unusual instrument to achieve this end. After all, it is a supply restriction-and supply restrictions tend to increase the costs of goods and services, not decrease them. Moreover, by throttling competition, supply restrictions are likely to permit providers greater latitude to raise prices.

Still, by limiting access to healthcare services, CON might reduce the total amount spent per patient or per citizen, even if it raises the cost per service. What do the data show here?

 two decades’ worth of peer-reviewed studies-every academic assessment of CON and spending that I could find. Four studies estimate the effects of CON on cost per service. None find that CON reduces per-unit costs. Three of the four find that it is associated with higher per-unit costs. The most recent, for example, finds that five years after repeal of CON, charges are about 5.5% lower than they would otherwise be. The fourth study-which only focuses on per-diem Medicaid charges for nursing home and long-term care-found no statistically significant effect.

Twelve studies estimate the effects of CON on spending per patient or per citizen. Of these, seven find that CON is associated with higher spending, two find no statistically-significant effect, and two find that it is associated with higher spending in some areas and lower spending in others.

Only one study finds a connection between CON and lower spending, and it was tenuous at best: The author finds that CON is associated with fewer hospital beds, which are, in turn, associated with slightly slower growth in healthcare expenditures per capita. Importantly, however, the author finds no direct relationship between CON and such expenditures.

Taken as a whole, the literature suggests that CON is associated with both higher per-unit costs and greater total expenditures.

The six in 10 Americans who live in states with CON laws need not speculate about what would happen should these regulations be removed. Both economic theory and data accumulated over the last four decades strongly suggest that CON removal will result in greater access to higher-quality, lower-cost care. 

 is a senior research fellow and director of the Equity Initiative at the Mercatus Center at George Mason University. He’s overseen and authored numerous 

 on the effects of state certificate-of-need laws.

They were formed to provide greater access to healthcare and lower costs, but they may be doing more harm than good.

 Do Certificate-of-Need Laws Still Make Sense in 2019?

As health disparities continue to impact access to care and health outcomes in the U.S., and patients are demanding quicker access to care, easier communication with their providers and higher quality outcomes, healthcare leaders are seeking innovative ways to narrow the gap.

“With the growth of consumerism in healthcare, consumers are demanding the same of their providers and plans that they do of any other brand they interact with,” says Tom Wicka, CEO and co-founder of 

, Minneapolis. “They want to be treated like an individual, they want a personalized experience, and they want to be acknowledged for doing the right thing for their health.”

Healthcare leaders need to recognize this, put consumers at the center of their business, and align internally around a comprehensive strategy to engage and serve them. And that’s often meant a change in thinking from leadership and the need for new skills that can help them and their healthcare facilities better succeed.

Craig Samitt, MD, CEO of Blue Cross and Blue Shield 

, says over the past decade, the most successful healthcare executives have been the ones who have fiercely protected the status quo-a healthcare model which is progressively outdated, antiquated, and broken.

“The future of healthcare will require us to develop, nurture, and promote those that are inventive, collaborative, forward-looking, customer-oriented, and more value-based,” he says. “If healthcare doesn’t bring in leadership that will reinvent our industry from the inside out, disruptive innovators from other industries will reinvent it from the outside-in.”

, a leading analytics company in Atlanta, that helps payers improve programs affecting financial performance, says several trends are coming together to create a perfect storm of change, including rapid technological advancements, an aging population, skyrocketing costs and a provider shortage, to name just a few.

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“Beyond a new level of technological savviness, today’s leaders need to be courageous, collaborative and committed-they must have the courage to take calculated risks, and they must collaborate with other departments in the organization and stakeholders across the healthcare continuum,” he says. “Commitment must be demonstrated beyond words and reflected in actions to employees, clients, patients and the entire organization.”

, a San Francisco-based healthcare communication company, notes a result in this shift is the emergence of new titles such as chief patient experience officers, chief data analytics officers, and chief population health officers-all looking to effectively guide patients along their healthcare journey with the goal of driving (and tracking) strong health outcomes.

“We’re also seeing more roles being filled by executives from outside of traditional healthcare, which is a positive step towards designing care that is nimble and responsive to new patient demand,” he says. “Hand-in-hand, patient experience roles are being elevated to new levels-all with the goal of meeting new patient and payer expectations.”

Mark Prather, MD, CEO and co-founder of 

, which provides mobile and in-home health services, says 30% of employees are now in a high deductible plan so as consumers pay for an increasing percentage of their healthcare costs, they will rightfully demand an improved care model that delivers more value for them.

“Leaders who are design thinkers are more capable of building care models that align with the needs of this new healthcare consumer,” he says. “The leaders that I admire, and that I think will be successful, are creatives and collaborators. They understand data and how to use it and possess the clinical acumen necessary to design systems that drive value for the consumer.”

The regulatory shifts brought on by the ACA and CMS’s focus on driving quality improvement via Star ratings have had a major impact on how the healthcare industry delivers care and is measured, and that has been a catalyst for some of the change happening in leadership. A more recent driver is the entry of Amazon and other retail giants that are redefining what care delivery looks like, raising the stakes for consumer expectations.

Wicka notes there are several macro trends simultaneously impacting the healthcare industry today. The first is the ongoing shift from a fee-for-service system to value-based care. The second is the increasing importance of consumer satisfaction and retention, as plans and providers alike face tougher competition and more consolidation in the market.

“Finally, we’re seeing rapid growth of consumerism in healthcare, driven both at a macro level by the entry of large retailers like CVS and Walmart, and at an individual level as consumers demand more from their providers and plans,” he says. “These trends all underscore the importance of engaging consumers in a meaningful way.”

Today’s patient population is demanding more from healthcare and expects high-quality care delivered with convenience and ease of access.

“They want to be able to make appointments online, reschedule, ask questions, and communicate with the care team digitally,” Iqbal says. “They want to interact with the healthcare industry in the same way they interact with just about everything else-via a mobile device.”

Providers can no longer take for granted that patients will find or return to them. They have to be proactive about their outreach and make sure patients can reach them easily whether it’s via a text message, online platforms such as Google or Yelp, or a virtual visit.

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“With the growth of retail clinics offering a new level of convenience for patients, executives in more traditional settings have to be responsive to patient demand in order to retain and grow their market share,” Iqbal says.

Samitt believes that the healthcare industry is no longer working for the customers it serves and that’s a market change that is greatly impacting what we’re seeing.

“From a service perspective, we’re complex, fragmented, bureaucratic, and not very customer oriented. From an accessibility perspective, we’re increasingly unaffordable and inconsistent in assuring that everyone has access to good care,” he says. “Given the glacial pace of change, it’s no wonder that more and more Fortune 500 companies are getting into the healthcare business-and that the likes of Haven, Google, Apple, Walmart, Best Buy, and others are making a bigger play in our industry.”

Today’s executives have a particular challenge-they need to know how to position their clinics for success in the traditional, fee-for-service environment, while simultaneously preparing for value-based care.

“Providers have to optimize their capacity to meet a high level of patient demand, implement new services such as online scheduling, and elevate their online presence to attract and retain their patients,” Iqbal says. “But they also have to keep a watchful eye on quality and effectively guide patients along their healthcare journey.”

For example, are diabetic patients controlling their blood sugar levels appropriately? Are children getting their vaccines on time? Iqbal adds that today’s healthcare executives have to implement new technology solutions and processes to keep innovating toward the move to new payment models, all while meeting patients where they are today.

Wicka believes that today’s leaders must possess clear communication skills to be successful.

“From payers to providers, healthcare organizations need to talk to members and patients like people, not policy numbers,” he says. “And the communications need to be personalized. What specifically do you want that consumer to do? Does he prefer email or SMS communication? Is she on track with her care plan, or is some motivation required? The language of consumer engagement is one that every healthcare executive today needs to learn.”

Adapting to these changes also requires making bold moves. The key is having a plan that connects each team’s work to the goal, so everyone understands their own role in the process and can see the path to achievement.

Christopher Logan, a healthcare industry strategist, says changes to patient care models, increased financial pressures, and significant swings in the industry’s workforce, have sparked a need for a new era of leadership. Gone are the days of looking at how healthcare operates from a single pane of glass, with the complexities of both internal, as well as external pressures, leaders need to learn to adopt new leadership principles and traits.

“Leadership skills are rapidly evolving and some of the attributes that are going to facilitate success in this new era are having the ability to dissect and implement new vision/strategy, a heightened concern for and deeper awareness of integrity, developing open lines of communication with the ability to collaborate beyond the walls of your institution, and finally be agile in your decision making,” he says.

Technological advancement is one of the main drivers of the need for a leaderships’ changing skillset. Prather says it’s imperative for today’s executives to have at least a rudimentary understanding of data science and technology.

Artificial intelligence, machine learning and natural language processing (NLP) have all made their ways into the healthcare space sooner than anyone expected. Many organizations are now using machine learning across many disciplines throughout healthcare-such as combing through medical charts and extracting data using NLP-while payers are using AI to streamline claims intake and prevent fraudulent billing.

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“I think the most important skill is to be technology-aware,” Rizk says. “Leveraging interoperability within healthcare and new technologies such as machine learning, NLP, and AI in healthcare is critical at this junction of our evolution.”

Additionally, he says that to be a strong leader in today’s healthcare environment, one needs courage, collaboration on a broader scale, and commitment to employees and the organization like never before. An example of a leader with these traits is Bernard Tyson, CEO of Kaiser, who pledged to find housing for underserved people in his organization’s purview.

“He is taking on responsibility for things that health plans have never done before,” Rizk says. “He is re-examining his role, and that takes courage.”

He also sees some of the mergers occurring in healthcare right now as companies with leaders making courageous moves. For instance, UnitedHealth, led by CEO David Wichmann, decided to acquire DaVita Medical Group a couple years ago, expanding the health plan’s reach into the provider space. CVS President and CEO Larry Merlo has been a driving force in the company’s purchase of Aetna, which would give the combined entity unprecedented reach into the payer and pharmacy sphere.

“If leaders don’t keep up, or are afraid to make bold choices, they become irrelevant,” Rizk says. “Leaders need a lot of courage and they need to be comfortable taking a risk for something they believe in.”

Healthcare executives of the future should adopt some of the skill sets that leaders in other high-performing industries have long used to assure sustainable success, Samitt says.

That includes strategic nimbleness, with the realization that healthcare needs to be reinvented, and the bravery to avoid becoming the next Kodak, Blockbuster, or Borders; collaborative intent, with a goal to achieve partnerships between doctors, hospitals, payers, patients and vendors that have aligned incentives and interests all directed at delivering better care at a lower cost; and execution discipline, with a goal to move beyond incremental progress in improving service, quality and cost, with more relentless speed to improve the performance of our industry. 

Rizk notes the leaders of the future need to be adept at collaboration in ways new to healthcare. For example, in the past, collaboration tended to focus more within a department or defined area, but given everything is so interdependent right now, collaboration must become much wider.

“You must collaborate, not just between physicians or nurses, but with every department-and perhaps with other organizations in the larger healthcare ecosystem,” he says. “No leaders are worth their salt unless they demonstrate commitment to their team and people. You need actions to back up the words. People follow leaders who care for them and who show commitment to them. Leaders must break down organizational hierarchy and work on building connections with all of their employees.”

Healthcare systems are doing the right thing by implementing new leadership positions to elevate roles around digital health, data analytics, and patient experience. Making access and quality key organizational priorities should always be top-of-mind.

“Key Performance Indicators (KPIs) and executive compensation will also be aligned to capitalize on these trends,” Wicka says. “From executive bonuses to member and patient satisfaction, payer and provider KPIs will go beyond measuring services rendered to include broader goals such as medical cost reduction, quality improvement, and improved NPS scores.”

Keith Loria is an award-winning journalist who has been writing for major newspapers and magazines for close to 20 years.

How healthcare leadership is changing due to market trends, and the new skills healthcare executives need to thrive.

The Future of Healthcare Leadership

The deluge of gene therapy drugs that have entered the market in 2019 foreshadows what industry experts believe will be a continuous push toward personalized medicine. With a variety of new, highly specialized drugs in the pipeline, insiders say the healthcare industry can expect to see shifting treatment models along with dynamic payer challenges for these high-dollar drugs.

“There’s going to be a new paradigm in medicine from a cost and patient perspective,” observes Tami John, MD, an instructor in the department of pediatrics section of hematology/oncology, Baylor College of Medicine in Houston. “From a physician standpoint, we’re advocating for negotiations from the federal, state, and hospital levels because these drugs are going to be life-changing.”

As it stands, managed care organizations are already feeling the fallout of containing the cost of gene therapies currently on the market, with some treatment costs exceeding $1 million. The most expensive drug ever approved, Novartis’ Zolgensma (onasemnogene abeparvovec-xioi), indicated for the rare spinal disorder spinal muscular atrophy, carries a staggering $2.1 million price tag. Although a one-time treatment, the advent of more gene therapies for rare conditions, blood disorders, and cancers brings the question of cost to the forefront.

In reaction to soaring costs, many payers and employers alike have begun implementing stop-loss provisions in their insurance policies to cap spending. Stop-loss policies fall into two general categories, individual and aggregate. Despite being a method to protect payers and corporations from shelling out hundreds of thousands of dollars for tailored treatment, individual policies leave patients on the hook for sizeable out-of-pocket contributions, with deductibles ranging from $40,000 on the low end to as much as $500,000, according to Dominic Galante, chief medical officer of 

 in Buffalo, New York. Meanwhile, aggregate coverage protects against higher than anticipated claim activity for the plan as a whole.

There are numerous gene therapies in the pipeline, and similarly, hundreds of clinical trials are underway. Some trials target rare conditions, including sex-linked conditions such as X-linked granulomatous disease and immunodeficiency disorders, according to clinicaltrials.gov; however, hematologic and oncologic therapies appear to dominate the list, as do therapies entering the pipeline over the next 12 to 18 months.

“I expect gene therapy-within the process of chimeric antigen receptor T-cell (

) therapy-to become an option for more cancers besides relapsed and refractory B-cell lymphoma along with more CAR T-cell treatments for Non-Hodgkin lymphoma and multiple myeloma,” says Vincent Vidaurri, PharmD, BCOP, a clinical oncology pharmacist at the University of Colorado Health in Fort Collins. “However, the greatest impact would be for the treatments of cancer with very poor prognoses such as pancreatic, triple negative breast, and glioblastomas.”

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According to new research from Prime Therapeutics, the pipeline includes specialty therapies, such as a calcitonin gene-related peptide (cGRP) drug, an alternative for migraine sufferers on Botox therapy, along with treatments for cystic fibrosis and autoimmune digestive disorders.

On the oncological front, Vidaurri anticipates that healthcare providers will bring the combining of gene therapies with immune checkpoint inhibitors seen in clinical trials to the clinic. He cites combining viral therapy such as talimogene laherparepvec (Imlygic), a genetically engineered product, with a checkpoint blocker such as nivolumab, ipilimumab, or pembrolizumab as examples.

Despite these exciting developments, John cautions that until the payment process is refined, providers should focus on finding local hubs with scientific institutions that have the resources to navigate through payment translation. She advises readers to consider institutions that have access as well as the ability to translate in large volumes to refine techniques as well as forge relationships with the payers.

Frieda Wiley, PharmD, RPh is a contract writer and consultant pharmacist.

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John Baackes had an unusual route to becoming a managed care executive. He started in the business in 1976 by designing a logo for Community Health Plan, a new health maintenance organization in Albany, New York, and 12 years later he was CEO.

“I was first approached as a graphic artist but I was hooked on this idea that managed care could really make a difference in peoples’ lives,” he says. “I began working as a sales rep and knew quickly this was something I wanted to do.”

He remembers when initially starting in the industry, he would go into the waiting area of the health center and see the people sitting there, and he knew the organization was doing something different.

“It struck me I could make a difference,” he says. “I was also attracted to the immediacy of it all; we weren’t just planning things but executing them, and because it was new, we could try things and if they didn’t work, try something new. Our ability to work with patients and providers to come up with better solutions was a big draw to me, and I’ve been happily pursuing it for 42 years.”

, the largest publicly-operated health plan in the U.S., serving more than two million members. In his position, he helps to provide access to quality and affordable healthcare for Los Angeles County residents through a variety of health coverage programs, including Medicaid, L.A. Care Covered (California Health Benefit Exchange), L.A. Care Cal MediConnect Plan, and PASC-SEIU Homecare Workers Health Care Plan.  

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“This is my fifth plan I’ve been involved with-third as the CEO,” he says. “When I was first asked to meet the board for a potential interview, I was quite taken by the mission of L.A. Care-it was here to serve a vulnerable population and to serve the network of safety net providers that took care of them.”

In his position, Baackes acts as the face of L.A. Care and communicating the mission and message to outside decision makers in the community, whether that be regulators, legislators, potential customers or customers at the provider level.

“I do spend a great deal of my time outside of the office working with people,” he says. “Another big component of my time is setting a strategy with the organization, getting people to follow it, and monitoring it to see that we are executing against it.”

With a 13-member board, and all board meetings open to the public, L.A. Care’s strategy is very transparent and Baackes also spends a lot of time on board-related activities.

Baackes’s resume also includes serving as president of Philadelphia-based AmeriHealth Caritas VIP Plans, where he oversaw the Medicare Advantage business unit; CEO of Senior Whole Health in Cambridge, Massachusetts, a voluntary healthcare plan for more than 10,000 low-income seniors in Massachusetts and New York; and president of Kaiser Permanente’s Northeast Division.

With a seat on the board of AHIP, Baackes has also helped guide policy around the Medi-Cal/Medicaid population and implemented pioneering safety net programs to save money and improve outcomes.

In 2019, L.A. Care has continued what it has been trying to do for the last four years-introduce a higher level of accountability, particularly among its provider partners.

“There is a strong move to value-based purchasing for both Medicare and Medicaid and when I looked at the quality of both we were producing when I got here, we were pretty mediocre,” Baackes says. “Because we are contracted through medical groups-and we have about 58 of them-the performance was too varied and we began doing a report card on the performance of these medical groups by domain areas that we thought were representational of what the values and value-based purchasing programs would be.”

Now with four years of data, L.A. Care can point out to the groups where there are gaps and help them improve their overall quality score.

“We also recognized that because we had gotten as large as we were, we needed more providers, so we began contracting directly with doctors who felt they lacked representation by a third party,” he says. “This is how most of the health plans I was involved with before I got here operated. L.A. Care being totally contracted through groups was a unique aspect.”

Because there is a lack of providers serving vulnerable populations-Medi-Cal, the uninsured, immigrant-and recognizing there was a documented shortage, Baackes asked the board to set aside 5%, which amounted to about $35 million, and use it in program called “Elevating the Safety Net,” which consists of three components.

“The clinics and practices that serve our members have a difficult time competing with places like Kaiser and academic medical centers, they are always on the short end of competition for compensation for the doctors they need,” he explains. “So, we are offering grants of $125,000 to clinics or practices that will bring a new primary care doctors to Los Angeles County. We want to increase the number.”

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Since last September, L.A. Care has awarded 48 grants and 29 new doctors have been recruited.

And since many of these new recruits will be recent graduates and have massive medical school debt, if the doctor agrees to stay for three years, L.A. Care will retire $180,000 of that physician’s medical school debt. The hope is they will get hooked on the importance and value of working in a safety-net practice.

The third part of the program involves building a pipeline, so it awarded eight medical school scholarships for the full four years with four students going to the Charles Drew Medical School in South Los Angeles, which caters to minority students, and the others going to UCLA’s Geffen School.

The plan is to continue this program for at least five years.

Since many of L.A. Care’s members have in-home support service workers-where if you are at a certain level of frailty because of complex care and you need help with activities and daily living, the state will provide someone to do that-and it has allowed family members who have these caregiver roles to be recognized and be paid for it.

Baackes recognized that these people could be a huge benefit in care management because they are with them almost every day and wanted to do more for them, so L.A. Care started a training program that would teach them more about what managed care is and helped them with skills to make them more effective with the patients when interacting.

L.A. Care partnered with SEIU on the IHSS+ Home Care Integration Program, a 10-week training program for the IHSS workforce where providers learn how to take on the enhanced roles of monitor, communicator, coach, navigator, and care aide. It’s offered in numerous languages (English, Spanish, Russian, and others) and people attend classes for two and a half hours each week.

Baackes has attended several of the graduations personally, but always makes sure someone from L.A. Care is present to celebrate with them.

“We funded this 10-week program, contracted for 3,000 to be trained and we are a little more than half way through,” he says. “The result has been much more impactful than I thought it would be. Many of these folks never graduated from high school, so this certificate is a big deal to them. They are critical and if they get burned out, it’s going to cost our healthcare system a lot more money to take care of those patients, so we need to take care of them.”

Although he spends a lot of time taking care of L.A. Care business, it’s not all work for Baackes, who likes to spend time with his four adult children and two grandchildren.

Plus, moving to Los Angeles from the East Coast for the first time in his life, he’s enjoying visiting the many interesting places the city has to offer.

“When I went to college, I wanted to be an architect, so I’m still an architecture buff,” he says. “I go visit significant architectural buildings to see them, enjoy them and learn something from them.”

But it’s being at the office, knowing he’s helping people, that he loves most. And one of his favorite parts of the job are the people he works with.

“Everyone at L.A. Care gets the mission and that’s why it’s fun to come to work every day,” Baackes says. “As an entity, we need to add value to our members and the providers who participate, but we also need to add value to our employees in the workplace. I like to mingle with our staff and hear what’s going on, and I’m always impressed by how they want to continue contributing to the care of people in the community who are more vulnerable than they are.”

Although he dreamed of becoming an architect, John Baackes now has designs on creating a better future for managed care.

Featured Exec John Baackes, CEO of LA Care Health Plan

It’s a good time to apply for a job in healthcare.

Per the U.S. Department of Labor’s Bureau of Labor Statistics, 

-but there have been particularly notable gains in the healthcare industry. But despite-or perhaps because of-some of the lowest unemployment numbers in decades, many hospitals and health plans are struggling to attract and maintain quality employees.  As noted in a 2017 

survey, there is “unprecedented” employee turnover among hospitals and other healthcare organizations-for both clinical and non-clinical staff. Joseph Parente, a principal with KPMG’s Management Consulting Practice who works specifically with provider and payer organizations, says this not surprising.

“These results are a couple years old, but they are pretty representative of what we’re seeing in the industry even now,” says Parente. “The 

survey found that more than one-third of employees were planning to leave their hospital within two years. Nearly 70% said they’d be leaving in the next five years. And, although we talk a lot about physician and nursing shortages these days, it’s not just clinical staff who are looking to leave their positions. The survey also found that, when asked if they plan to leave their current job, it’s non-clinical administration staff that are most likely to say yes.”

The downstream effects of this kind of employee turnover results in the sort of vicious cycle that leads to even more employee dissatisfaction and turnover, says David Wilkins, chief strategy officer for HealthcareSource, a healthcare talent management firm, in Woburn, Massachusetts.

Health Execs Share Their Favorite Interview Questions

“With so many people leaving, healthcare organizations will have a hard time attracting new, qualified employees because of the existing gaps,” he says. “When people are working understaffed, and they don’t have the right team to help support their work, it leads to a more challenging workday, more responsibilities, longer hours, and increased stress. With so many other opportunities outside of healthcare, people have a choice-and they are choosing positions that will allow them a better work/life balance.”

So, given this kind of “seller’s market,” how can healthcare organizations better recruit and retain experienced staff? The key, experts say, is to focus on ways to improve employee satisfaction for employees at all levels.

Numerous studies now suggest that clinical staff, in particular, are experiencing a high rate of burnout-and many of them blame different information technology (IT) platforms, such as electronic health record (EHR) systems for those frustrated feelings. But Parente says it’s not just doctors and nurses who are aggravated by the various systems they need to interact with.

“They are being asked to use a lot of different technologies that are really cumbersome and out-of-date. It’s not just EHRs, though those are frustrating-some of the health plan systems are even more staid and difficult to use,” he says. “It’s a problem when an employee can go home, use a computer or smart phone to easily order food or clothing but have to go through dozens of onerous steps just to restock surgical supplies at work. They want to have more of the same kind of easy-to-use experience at work that they can get at home.”

Parente recommends that healthcare organizations look at their legacy systems and see where they can improve workflows to decrease the amount of time-and the amount of exasperation-employees face when using them.

Wilkins says another issue is management practices in healthcare.  In many cases, employees don’t feel like there is room to advance.

“In healthcare, too often, the person who gets promoted isn’t the person who is best for the job but the person who has ‘paid his dues,’ so to speak,” he says. “So instead of looking at whether you have the person with the right leadership qualities and skillset, you see the person who’s been there the longest moving up. That’s not the right thing for the organization.”

Yet even when the right person is promoted, there is still an issue of span of control.

“The average span of control, of number of people someone is supervising, is about 9.7 people per manager,” Wilkins says. “But the average span of control for a nurse manager is 49 to 1. You can see even larger ratios in other healthcare jobs. So, if you are a manager and are responsible for that many people, how can you see who is doing well? How can you evaluate an individual employee’s strengths and weaknesses? There’s just too much load on a manager to be able to keep up with. People will not get the recognition they deserve. They won’t get the training opportunities they need to advance. And they will end up leaving.”

By looking at your organization’s management structure and reducing the span of control ratios, while also putting in appropriate recognition and reward programs that incentivize employees to work toward your organization’s mission and values, you can help reduce turnover-and help promote more appropriate internal mobility, where individual employees are being groomed to advance and take on new roles that may be harder to fill in the marketplace.

ZoÃ« Harte, senior vice president of human resources and talent innovation at UpWork, a company located in Mountain View, California, that connects companies with freelance talent, says that contract employees can help fill in for one of healthcare’s greatest challenges, the industry’s aging workforce, particularly when it comes to IT needs.

“There is a need for new skills driven by telemedicine as well as the talent scarcity seen across care delivery organizations. Since healthcare is so highly regulated, there are a lot of very specialized certifications and needs when it comes to IT,” she says. “Freelancers can help organizations grow and operate as the market dictates-and healthcare organizations should shift their mindset so they don’t see hiring freelancers as a stop-gap measure, but rather a highly strategic way to get to where they want to go.”

Parente says that healthcare can also look toward other industries to develop the right strategies to recruit and retain the right employees.

“Outside healthcare, companies have developed deliberate employer of choice initiatives that are intended to enhance the employee experience by improving work/life balance, quality of work, and supporting an employee’s individual needs,” he says. “So, having more flexible schedules for employees, not doing things the way they’ve always been done before, can go a long way.”

Certainly, not every organization can address employee turnover in the same way. Your mileage will vary.  Yet, 

 Editorial Advisor Don Hall, a principal with Delta Sigma, a healthcare consulting firm in Littleton, Colorado, says there are some basics that should be considered. He recommends that all healthcare managers, regardless of organization type, read 

, a groundbreaking 1999 management book by Marcus Buckingham and Curt Coffman.

“The things that this book highlights, the things that are most important to making an employee want to stay with you, haven’t really changed,” he says. “It’s about employees understanding what is expected of them, having the right equipment and materials to do their work, and being recognized for doing good work. And that’s what healthcare should be looking at. This isn’t a problem that is going to be solved with higher salaries or a ping pong table in the break room. It’s about, whether you are talking about claims management, care management, or IT, looking at these really integral elements of employee satisfaction and making sure you are doing everything you can to make sure they are addressed in a way that helps both your employees and your organization as a whole.”

With a rapidly-growing employment environment, how can healthcare orgs best recruit and retain the right employees?

Finding-and Keeping-Good Employees

Although the number of new drug shortages in the United States has declined to 186 in 2018 since a high of 267 in 2011, there have been 80 for the first half of 2019, according to the 

University of Utah Drug Information service

“Shortages continue to be on the rise and in talking with our customers, we’ve discovered the problem continues to get worse. More medications are going on allocation or unavailable and what used to be short, periodic shortages have become long and drawn out, making it a continuous challenge for clinical leaders,” says Patrick Yoder, PharmD, CEO, 

, a Minneapolis-based clinical process improvement and control software provider.

“Some medication shortages have been going on for years with no real sign of recovery,” he says.

“While the number of drug shortages has declined substantially in recent years, any drug shortage places substantial burdens on healthcare, providers who may have to ration medicines or identify alternative treatments,” says Andrew Powaleny, director, public affairs for Pharmaceutical Research and Manufacturers of America (PhRMA).

Four Ways Hospitals Can Deal with Rising Drug Costs

“The issue of drug shortages demands attention and collaboration from all stakeholders involved in providing life-saving medicines to patients. This includes the biopharmaceutical companies producing brand-name medications, as well as generic drug and biosimilar manufacturers, wholesalers, distributors, pharmacies, and healthcare providers,” he says.

 conducted between March 6 and April 4, 2019 of 365 acute and non-acute care facilities across the country-members of Vizient, a healthcare performance improvement company headquartered in Irving, Texas-confirms the ever-present problem of drug shortages and their ramifications.

Nearly two-thirds of respondents report they managed at least 20 shortages from July through December 2018; 64%, more than 21; 33%, six to 20; and 3%, up to five. Thirty- eight percent report one or more medication errors directly related to a drug shortage in that same time period.

The most commonly reported items facing shortages, according to the survey, are controlled substances, local anesthetics, antibiotics, electrolytes, and emergency injectables such as “crash cart” drugs, many of which are low-cost generics.

Injectables comprise 39% of drug shortages in 2019, according to the University of Utah Drug Information Service.

The FDA primarily attributes shortages to quality/manufacturing issues but also points to production delays, some caused by not receiving raw materials and components from suppliers, and drug discontinuations. An estimated 70% of shortages are caused by manufacturing and quality problems, according to the Healthcare Supply Chain Association.

“The FDA can't require a firm to keep making a drug it wants to discontinue. Sometimes these older drugs are discontinued by companies in favor of newer, more profitable drugs,” says Charlie Kohler, spokesperson for the FDA. “With fewer firms making older, sterile injectable drugs, there is a limited number of production lines that can make these drugs. Raw material suppliers also are limited in the amount they can make due to capacity issues at their facilities.”

Kohler says that these limitations, along with long lead times and the complexity of the manufacturing process for injectable drugs, result in shortage vulnerabilities. “When one company has a problem or discontinues, it is difficult for remaining manufacturers to increase production quickly, and a shortage occurs,” he says.

Drug shortages might be decreasing, but their continued existence is urging the pharmacy industry to maintain its vigilance.

Vol 29 No 9

Contemplating the Future of List Prices

Do Certificate-of-Need Laws Still Make Sense in 2019?

The Future of Healthcare Leadership

Life-Altering Gene Therapy Pipeline Poses Challenges

Featured Exec John Baackes, CEO of LA Care Health Plan

Finding-and Keeping-Good Employees

Drug Shortages Continue to Burden Healthcare

Making the Most of Predictive Analytics

Top Women’s and Men’s Cancer Treatment Developments

How to Prepare for Leadership Changes

6 Strategies for Your Hospital Readmissions Reduction Program

Top 6 Things Health Execs Need to Know About LinkedIn