Monthly Archives: February 2012

“Insurers Face Extinction” – Possible Future or Wishful Thinking?

Tuesday, February 28th, 2012

Brandon Edwards
President, Revive

There are many physicians and hospital executives who have secretly prayed for health insurers to face extinction over the last 10 or 20 years. Well, maybe not extinction, but the tension between payors and providers has always created trust issues and difficult business relationships.

Since the Great Recession started in 2008, we’ve seen a fundamental change in the contracting environment and the relationships between payors and providers. United, for example, has been acquiring physician practices and HIT companies in earnest, creating a separate brand for Optum as well as agressively pushing into the provider and care coordination space.

Blue Cross plans, on the other hand, including Anthem, HCSC and independent Blues, have been much more aggressive with tiered and restrictive networks. They have also pushed hard on provider rate increases, pushing historical rate increases down from mid- to high single digits into the mid-single digits or even zero. News accounts are rife with stories of Blue Cross physician rates in Texas below Medicare rates, after five consecutive years of cuts. Or Anthem in California pushing for 15% to 20% rate cuts from a stand alone community hospital. Or countless other examples of harsh rate cuts and contracts with zero increases as Blue Cross profitability and reserves continue to grow and grow.

The recent article in Health Data Management News outlines Aetna’s vision for the future, as articulated by Aetna’s new CEO Mark Bertolini. “So what will the health insurers look like in the future? Bertolini offered a strong endorsement of the accountable health organization model, positing health insurers as uniquely suited to usher in an era of coordinated care. ‘We need to move the system from underwriting risk to managing populations,’ he said. ‘We want to have a different relationship with the providers, physicians and the hospitals we do business with.’”

On the surface, it’s easy to see how the focus on “coordinated care” is similar to United’s strategy. Yet Aetna also plans to bring substantial new product offerings in technology, including mobile apps. Bertolini sees Aetna “providing providers with the technical wherewithal to better serve patients and drive costs out of the system, likening the relationship to Intel’s strategy to support computer manufacturers rather than targeting consumers directly.” I’m not sure that I can see many hospitals advertising “Aetna Inside” to their physicians and patients, but maybe I’m being overly literal.

It remains to be seen whether these are messages crafted for Wall Street analysts and the press, or whether Aetna and other payors are truly committed to a “different relationship with providers.” So far, we see ample evidence that payors are committed to lower provider payment rates and higher margins for their own businesses. We see the payors’ business success coming at the direct expense of hospitals and physicians.

Understanding the payors’ stated priorities is an important step in preparing for your next negotiations. Make sure your negotiating position takes into account their stated priorities, and push them to make these new arrangements and payment models a priority. If hospitals and physicians allow payors to dictate the agenda – cutting rates, creating new narrow networks that they control, and connecting with employers and consumers through the web and mobile technologies – caregivers run the risk of losing the little control and influence they have left.

You must carefully craft and share your own value proposition and priorities. Explain your technology priorities, not just in lifesaving technologies, but the platforms and apps that better connect physicians, patients, hospitals, and other care sites. Health systems and physician groups need a clear vision for the future, and to connect with those stakeholders that will make all the difference in the future – employers, patients, and the broader consumer audience.

Meaningful Use on the Red Carpet

Friday, February 24th, 2012

Mirena Bagur
National Practice Leader, Revive

This week at the Healthcare Information and Management Systems (HIMSS) conference, the CMS and ONC rolled out the red carpet for the Meaningful Use Stage 2 (“The Notice of Proposed Rulemaking for MU Stage 2”). Are you finding the timing of the Oscars and Stage 2 a coincidence? I certainly chuckled a bit.

Well, here we are, the Stage 2 was rolled out yesterday, albeit in Las Vegas instead of Hollywood, and everyone is waiting for the “envelope” — the large providers are scrambling, the small medical practices are ignoring it, and the technology vendors are smiling.

The Big Studios

As many studio executives know, investing in talent and content in advance of actually creating a blockbuster can pay off. Similarly, the large HIT providers, who usually have teaching hospitals on their rosters, have passed Stage 1 on their homegrown EHRs to the point that they think it will only require fine-tuning for compliance with Stage 2. But they are not quite ready. They are looking for a star with a white coat to help them create a successful blockbuster by 2014.

The Independent Film

Small budgets, indeed! But as in the case of successful ones — like “Sideways” or “Winter’s Bone” or other great indie films — when you have the right people, you can deliver great results. We are counting on numerous small practices to leverage their creativity and innovate on ways to implement technology. They will need a kind of EHR, but regardless, they will make sure it is giving them the best possible outcomes for their patients. After all, they really know their audience better than anyone.

The Special Effects

The stars, the money, and the special effects. Now we are talking about a winning combination. Just like blockbusters produced with cool effects, the health technology vendors are developing new ways to produce the ultimate entertainment, or rather, health outcomes. It takes the stars in the hospitals, in partnership with the creative development of technology elements, to create a blockbuster success.

After the Awards Show

So while many will debate whether the Proposed Rulings of Stage 2 make sense or not, the technology vendors are experiencing the kind of market boom not seen in the health care sector in the past.

And here is where the movie business parallel stops — because regardless of whether your organization fits the profile of a big studio or an independent filmmaker, the US is finally poised for all providers to leverage the benefits of technology in health care. In fact, we have done a lot recently.

In his speech at the HIMSS conference, Farzad Mostashari, M.D., national coordinator of health information technology, said, “We’ve made more progress on EHR adoption in the past two years than we made as a nation in the previous 20 years.”

So Washington, please pass the envelope soon! The technology vendors and health care organizations alike are waiting for your direction on the path to stardom.

Cost Cutting: Tell Me Something I Didn’t Know

Thursday, February 23rd, 2012

Brandon Edwards
President, Revive

Every hospital and health system is looking at the next round of cost cutting to deal with declining inpatient volumes, lower Medicaid payments, and a more difficult pricing environment with private payors. There are more pressures on the horizon, and now smart provider organizations are moving beyond the supply chain and other recent cost-cutting initiatives.

Smart organizations have assessed the likely impact of health care reform through 2020, as well as the fundamental changes in supply, demand, and pricing in the health care economy. These smart organizations have identified the financial gap and other challenges created by these changes, and now they’re looking to tackle problems like never before. They have identified improvement opportunities and they’re going to open every can of worms this time around.

You may be thinking, “tell me something I didn’t know.” Cost cutting is like quitting smoking or eating healthier or getting more sleep – we all know we need to do it, but we don’t because it’s difficult and it requires a high degree of accountability and consistent follow-up. So here are two things you may not know. First, 70% of cost cutting and organizational change efforts fail. And second, according to Objective Health – McKinsey’s group focused on hospitals and health systems – failure is caused by employee resistance to change and the perception that management behavior does not support change.

In short, important and needed changes fail because of inadequate communication and organizational alignment. Your hospital’s financial performance – its ability to carry out its mission in the future, even its very solvency – may hinge on your ability to determine needed changes, communicate them within the organization, and maintain organizational alignment as the changes occur. This is mission critical, yet an oft-overlooked element of cost cutting and performance improvement initiatives.

Consider the January 2012 HealthLeaders report, “The Next Phase of Cost Control.” The report states, “Many of the CFO panelist discussed a ‘Medicare profitability project’ at their institution as a way to envision a tangible goal for their efforts. That means progress is measured by how close that organization is to making its needed margin based on Medicare reimbursement levels. It’s that main target that organizations are using to determine their progress in improving efficiency and cutting costs. Many suggest that their institutions have a cost-of-care reduction goal of as little as 5% but as much as 20% in the coming four or five years in order to reach Medicare profitability.”

This type of approach – branding a cost-cutting initiative as a “Medicare profitability project” – is a great way to create a shorthand within the organization for the rationale behind the cost cutting effort, and the ultimate goal that will be achieved. When finished, the cost cuts will allow the hospital to make money on Medicare, instead of the 7% loss the average hospital suffers on this book of business. Better yet, eliminate the word “profitability” altogether and focus on the real purpose for the organization, which is not just profitability (which no one cares about), but surviving and thriving.

Innovative Communications for CMS Innovation Funds

Tuesday, February 7th, 2012

Kriste Goad
Senior Vice President, Revive

With the pressures on pricing, reimbursement, volume, and politics weighing heavy on health care provider segments this year, at least two Wall Street analysts say their firms are keeping a close watch on what happens with companies vying for and receiving grants from the CMS Innovation Center.

Both Darren Lehrich (Deutsche Bank Securities) and Adam Feinstein (Barclays Capital) cited the Innovation Center funds during their recent appearance at the Nashville Health Care Council (NHCC)’s annual Wall Street event featuring predictions for Nashville’s publicly traded health care players in the hospital, health plan, post-acute care, home health, senior living, pharmacy, and medical device sectors.

“Most interesting to us,” said fellow NHCC panelist Whit Mayo, senior research analyst with Robert W. Baird & Company, “will be watching many key providers move closer towards their vision of what is an integrated care model. We think large, well-established systems that are the must-have in payer networks sit in an advantageous situation with regards to this developing ecosystem.”

Playing an especially interesting role in the developing ecosystem will be the 32 ACO Pioneers named by the Innovation Center last December. We’ll be keeping a close eye on how they are positioning themselves, and their brands, in the wake of their new designations. Maximizing brand preference will be absolutely key in the future.

As you know, patients do not enroll in an ACO – it is a product of their provider use. Employers and their employees who are using health care services will continue to select their private health plans. These people with private coverage will, in turn, continue to select their providers. This means creating strong consumer and employer preference and brand loyalty for a specific ACO’s hospital and physician groups is key to ACO profitability and success.

Even though the Innovation Center’s Pioneer ACO Model is designed for health care organizations and providers that are already experienced in coordinating care for patients across care settings, how these organizations communicate what’s happening will play a critical role in their success going forward.

It will be important, for example, to understand how being an ACO Pioneer affects overall organizational branding and marketing, if at all. From a public relations standpoint, the ACO Pioneers will likely lead the way for others, good or bad, when it comes to explaining:

– How the Pioneer ACO will work and what benefits will be created near-term and long-term; and
– What happens next, especially in the context of population health plans.

Time and again, organizations that communicate their vision and help their constituencies clearly understand what they’re doing – and why – tend to fare best and create the most value. Let’s hope the next generation of health care ideas being funded by the Innovation Center includes some innovative communications as well.