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.

Even outside of the pivotal Supreme Court hearing on the health care overhaul this Spring, state governments are intervening in areas many health care executives had not anticipated. Rather than an organization’s board, senior management, or shareholders making the decisions, government forces are increasingly weighing in and often making decisions that have major operational consequences. For two cases-in-point, consider Kentucky and Pennsylvania.

In Kentucky, Gov. Steve Beshear just rejected a proposed merger involving three major hospitals. The merger would have created the largest hospital system in the state, as University of Louisville Hospital would have joined Jewish Hospital & St. Mary’s HealthCare and St. Joseph Health System. Governor Beshear noted that the transaction was “not in the best interest” of Kentucky, and “the risks to the public outweigh the potential benefits.” Kentucky’s attorney general stated the merger would bring about ”a material change in the level of service at the historically public” University Hospital, and raise questions surrounding the “excessive entanglement between state and religion.”

The result for now is that the two systems will merge sans University Hospital. University was left out in the cold with no access to the sorely needed funding the new entity would give it access to, raising questions about the hospital’s future.

With the extensive due diligence involved in this type of merger, one has to wonder how hospitals failed to add the Governor and Attorney General of the Commonwealth to their list of key external stakeholders. In this case, government intervention prevented market forces from moving forward as planned.

Likewise, in Pennsylvania, a contracting dispute between the University of Pittsburgh Medical Center and Highmark, the Blue Cross Blue Shield affiliate in western Pennsylvania, has garnered national attention and produced a bevy of legislative proposals designed to bring an end to the stand off. Proposed legislative measures ranged from binding arbitration to an unprecedented expansion of powers that would give the state’s Insurance Commissioner significant authority over private-sector contracting disputes. Among other things, one measure would grant the Commissioner the authority to require private parties to stay in a contract (for years), if it was deemed to be in the consumers’ best interests. As the public and political din escalated, Gov. Tom Corbett, a Republican, announced that he was “deeply” concerned and became involved.

Republicans control both the House and Senate in Pennsylvania, but if any of these measures becomes law, they would affect far more than just the parties involved. This type of aggressive legislative intervention would have a profound effect on all of Pennsylvania’s health care contract negotiations.

You can debate the wisdom of government intervention on an ideological basis, but you can’t deny that increasing regulatory and government actions can profoundly affect your organization’s best-laid strategic plans. If government communications are not part of your strategic plan, or fully integrated with your senior management team, now is the time. It could be the only thing that separates the winners from the losers.

The not-so Super Committee pretty much lived up to expectations (zero progress), and conventional wisdom says the provider community really dodged a bullet…for now.  It’s true that a 2% Medicare cut in 2013 (and beyond) could significantly erode operating margins, but providers need to understand that this was only the starting point for the committee.  The committee, with Republican and Democrat member buy-in, was then going to go industry-by-industry to find the real savings that would begin to approach this summer’s “grand bargain” territory that was rumored to be in the ballpark of $4 trillion over 10 years.  That’s quite a leap from just 2% a year.

2012 is expected to be a year of gridlock, with both parties putting forth competing campaign themes leading up to the November election.  Save a robust economic recovery, which virtually no one is forecasting, many providers will enjoy a good year with decent margins that will then be used as the justification for even larger proposed cuts in 2013.  No long-term sustainability plan will leave funding for Medicare or Medicaid unaddressed.  And on the state side, there is no more help coming in 2012 from the federal government, and state lawmakers of all stripes know this to be the case.

In this environment it will be imperative for providers to know and practice the three P’s when attempting to influence government – policy, positioning, and pursuit.  Never has this been more true than in the current health care environment.  To develop the thought further, the 3 P’s all lead to one overarching goal: differentiation.

If your health care organization has not fully developed or is not currently implementing your 3 P’s, think of the committee failure as a gift, the gift of time. In many ways, 2012 will be the year of waiting.  Waiting for budget and tax certainty.  Waiting for the Supreme Court to rule on the health reform overhaul.  Waiting for debate followed by the rejection of competing proposals for the $1.2 trillion in cuts set to begin in 2012.  Waiting for order to emerge from the confusion and uncertainty.

With the failure of the Super Committee, the likelihood of any significant agreement next year given the backdrop of a Presidential election is essentially nonexistent.  So, now is a good time to evaluate where you are today and to plan how your organization will differentiate itself from the other competing budget interests going forward.

Not sure exactly where you stand on your organization’s or industry’s three P’s?  Might further guidance and advice be warranted?  Stay tuned.

Everyone says payment change is coming, but how soon and what will it look like?  Is the death of the fee-for-service system really upon us?

Most experts agree the FFS system has some life in its old bones yet.  Whether FFS will completely disappear or just shrink as a percentage of the health care system payment methodology is something only time will reveal.  The next three to five years will bring many payment changes, and certain solutions may get better traction than others, either nationally or even different solutions in different markets.  Until there is a clear national timeline and clarity for a total FFS replacement, we will all watch the horizon for the coming changes.

Of course, Massachusetts is one place to watch.  Ever since the state’s health reform effort was implemented to increase coverage and access, people have been watching to see what solutions would be implemented to address rising costs.  The New York Times reported on October 17, 2011 that a “solution” may be close at hand.

“After three years of study, the state’s legislative leaders appear close to producing bills that would make Massachusetts the first state — again — to radically revamp the way doctors, hospitals and other health providers are paid.

Although important details remain to be negotiated, the legislative leaders and Gov. Deval Patrick, all Democrats, are working toward a plan that would encourage flat “global payments” to networks of providers for keeping patients well, replacing the fee-for-service system that creates incentives for excessive care by paying for each visit and procedure.”

Imposing a global payment system, first on state employees and those covered by Medicaid and state subsidized coverage, will create predictability in costs for the state.  If applied to those with private insurance later, it will give private employers and individual policyholders greater predictability as well.  The real question is, what will be done to reduce the actual costs of care in the system itself?  Will this really be good for the system?

A sick population still needs care, and sometimes a great deal of care for serious illnesses or injuries.  Consumers who eat poorly, smoke, drink too much, fail to exercise, and consistently march down the road to poor health will continue to tax the system and drive up the total health care costs that burden the entire system.  What will be done to affect those issues?

Paying less is always a solution that government and payors default to when they want to lower “health care costs.”  But in our health care system, total cost is driven by price, utilization, and population size.  As the population of sick and unhealthy people grows, the utilization goes up.  As the utilization rises, so do the costs of providing that care.  Pieces can be compressed, controlled, limited, or dictated by the state – but over time that’s just going to cause serious financial distress for hospitals and physicians.

The ultimate solution must address the health and wellness of the population.  Increasing access will always increase costs, and global payments will only serve to create financial pressure on providers.  The real solution is going to be tougher to create than that.

The 2011 Revive Health Care Leaders Summit brought about an amazingly rich discussion on the future of the health care system and the hospital’s role in the future. There were a number of common themes, and a great deal of discussion about the pathway to the future. The event featured speakers who are senior executive leaders from top, respected organizations – HCA, Norton Healthcare, Piedmont Healthcare, FTI Healthcare, Healthways, and others. There were also special appearances by HealthSpring, United, and Humana in a payor-only section of the agenda.

One trend was clear from the discussions: The health care system of the future must shift from “sick care” to “well care,” no matter what we call it. Population health management seems to be the most common term, although I respectfully submit that’s not the right term if we want people to embrace the idea. One key question is, who will lead the effort to design and implement population health management solutions? The role of the hospital is obvious, but whether it will be the leadership role or not remains to be seen.

Everyone involved in the Summit agreed that population health and “well care” will be an increasingly important part of any health care provider organization’s success. Whether it’s building these capabilities to enable more risk-based contracting, or constructing ACOs and other care-delivery models, or launching a wellness and disease management program to connect with self-insured employers, hospitals know they need this capability in the future. When they will need it, how they will use it, and how it supports the business model of the future remain critical issues to address.

Smart, forward-looking health systems see these decisions as a series of switches – first you have to build them, then you have to determine the best time to flip those switches to maximize the value of the opportunity.

Flip the switch too soon, and your hospital leaves profitable FFS revenue on the table. Flip the switch too late, and you risk losing market share to other providers or losing money on risk-based contracts. It’s a complex equation and contingency planning process you must consider to be successful.

The other population health issue that caused substantial discussion was the availability of proven strategies, solutions, tools, technology, and talent. The consensus is 1) the problem is coming into focus, 2) available solutions and tools have shown anecdotal success, and 3) most solutions and tools seem to be payor- and employer-centric, rather than attacking the issues from a provider perspective.

Even the payor speakers acknowledged that Kaiser and Geisinger were the two parties who can demonstrate the most mature capabilities in this area, yet the combination of assets these organizations offer would be very difficult to duplicate. In fact, payors say they have no interest in owning hospitals, and hospital executives say they have no interest in owning a health plan. There will be partnerships, JVs, and many other arrangements made to accomplish these goals, but it will require new and unproven approaches.

This is a fast moving environment everyone is navigating. A system in flux will create winners and losers, and it’s clear that the losers won’t just do one or two things right. The winners will build the right switches, flip them at the right time, and build a sustainable competitive advantage in their communities. The winners will keep making money from treating and healing the sick, while also making money from keeping people well.

What else did we learn at the Summit? Stay tuned.

There’s a lot of talk these days about coordinated care, but employers still need help understanding what it means for them and how it really works.

Employers want to know that their health care dollars are going toward better management of chronic conditions, fewer lost days of work, healthier employees, and lower health-care costs in the long-term.

That means speaking the language of the business owners who want to know that the people being paid to help keep their employees healthy are focused on the same issues they care about: “cost” and “value.”

Whether it’s narrow networks, direct contracting or on-site wellness, the changing health care landscape, with its evolving clinical models of care and payment, demands that hospitals and health systems build closer, more transparent, more mutually beneficial relationships with the employers in their communities.  That calls for something very basic to succeed: good communications and a well-conceived story.

From thousands of interviews with employers of all sizes across the country to find out what resonates, what moves the needle, and what annoys them when it comes to the health care information they receive, we’ve gleaned Seven Insights to guide more effective communications and an employer-friendly business strategy.  We’ve talked about quality and mumbo jumbo, but how should providers talk to employers about coordinated care?

- Focus on benefits, not just features and “health care speak.”

- Use this opportunity to educate.  Employers are unfamiliar with medical homes and ACOs but support the concepts.  Even if they are familiar, they think medical homes will improve care, but not costs, yet most believe ACOs will decrease costs.

- Give a real-life example of coordinated care.  There’s value in coordinated care and wellness beyond just cost, but until we can help employers understand that value, they will continue to fixate on cost above anything else.

- Demonstrate and articulate clinical and administrative efficiency.  Employers think it’s important and that it saves money.

More and more providers are engaging and communicating with employers directly as part of their business strategy.  As employer engagement efforts expand, and certain programs and services grow, the focus must remain not on healthcare speak, but on the real, tangible benefits to employers — healthier employees, better management of chronic conditions, fewer lost days of work, and lower health-care costs in the long-term.

Coordinated care sounds a whole lot better than the alternative, right?  But what are you actually doing to coordinate care, and what difference does it make to patient health and to the employers’ bottom line?  Identify those two things, start communicating them in simple English to the business community, and see how it makes a difference to your top and bottom lines.

Coming up: Employer Insight #4: Employers value wellness, and they want help from hospitals and physicians (not payors).

Despite all the readily available quality data and rankings, most people still choose providers on the basis of three criteria: 1) what their insurance covers, 2) what their doctor recommends, and 3) personal experience or on the recommendation of family or friends. Likewise, most employers form their opinions of health care cost and quality based on what they hear—from brokers, consultants, health plans and, yes, the media.

So what can providers do? Start talking and use simple English. Health care is complex, yet communicating your value doesn’t have to be. Engage your local employer and broker communities directly, educate them, and build relationships. Help them navigate the information that’s out there. Most importantly, drop the jargon and keep a smiling human face at the front of everything you do.

We’ve conducted interviews with thousands of employers of all sizes and geographies to find out what resonates, what moves the needle, and what annoys them when it comes to the health care information they receive. From those interviews, we’ve learned some pretty compelling insights, and today, we look more closely at what employers look for when it comes to Quality.

First, be cautious about too much focus on data and “populations;” the language itself dehumanizes care. These are important elements, and employers want to know about the broader efforts—but they think of their employees as people, not “populations.” Be sure you always offer specific examples relating to individual personal cases that represent a broader problem and solution.

Second, employers see limited value in the data without understanding how it will be used and what benefits it will create. Emphasize what you’re doing to treat people like individuals. People expect more than one-size-fits-all care. Emphasize what you’re doing to provide individualized attention, from personalized care plans, to nurse care coordinators, to individually tailored disease management programs. Get personal.

Third, value is only as good as the professionals delivering the care. Employers want to hear about your nurses and physicians, not just your facilities. They also want to know how your nurses and physicians treat people, and not just with medical care. That means putting physicians and nurses in the forefront of your communications efforts and making sure they’re effectively communicating with patients every step of the way. This must be an inside/outside effort, not just one or the other.

If you don’t have an internal communications plan for this, it’s important to develop one. Once you do, tell the outside world about it (with a particular mind toward the business community) in simple, relatable, personal terms. If you don’t, who will?

Next week, we’ll take a deeper dive into Employer Insight #3: Demonstrating Efficiency and Coordinated Care Will Score Big Points. In the meantime, call or email us (805.617.2832 or learnmore@revivepr.com to learn more about how we can help your organization connect with employers in your community and effectively communicate your value.

The latest media coverage of health insurance is more of the same – premiums going up double digits every year, including the most recent period as reported by the Kaiser Family Foundation.  This is just more of the same, right?  More health care services, provided to more and more people, with hospitals and doctors and drug companies charging ever-higher prices for their services – right?  The insurance companies are just passing those costs along, right?

Um, wrong.

The New York Times coverage says, “Major health insurance companies have been charging sharply higher premiums this year.  Aetna and United Health/Oxford said their requested rate increases… largely reflected actual hospital, physician, and pharmacy costs… ‘Our rate requests are simply keeping pace,’ said a payor spokeswoman.  The increases requested by Aetna range from 8.8% to 53.6%, while those from United range from 13% to 34%, according to the New York State Insurance Department.”

Pointing the figure at “actual” costs may make for convenient media coverage, deflecting blame from the payors to the provider community.  The problem is, it’s just not true.  In fact, the payors’ own statements to Wall Street run counter to their own statements in the media.

Recent coverage by Carl McDonald at Citi reveals the truth about medical costs.  “The Blues enjoyed a 300 basis point positive spread between pricing and cost trend in the first half, as medical costs rose just 1.0% on a PMPM basis, contributing to an 81% commercial group loss ratio in the first half of the year, 240 basis points better than last year.”  That means premium pricing rose a full 3% faster than underlying medical costs, and that doesn’t even count increases in copays, deductibles, and patient financial responsibility.

Carl goes on to say, “Before factoring in cost sharing, like copays and deductibles, we estimate that industry pricing is up 7.0-7.5% this year, while cost trends have been about 6.0% in the first half, or maybe even a touch lower.”  These are Blue Cross premium price increases – the national for-profit payors are projecting even higher increases.

United Health Group’s information is even more striking.  “Utilization trends continue to be extremely favorable, and United’s quarter suggested the cost environment is improving…Since it appears utilization, particularly at inpatient facilities, continues to deteriorate, we think United’s assumption of more normal cost trends in the second half of the year is wrong, which will result in meaningful EPS upside.”  In short, higher premiums, lower cost trend, and lower utilization.

Carl McDonald goes on to say, “What United reported jives with the data we’ve seen. CIRA’s hospital analyst, Gary Taylor, conducts a monthly survey of hospital admissions, and the results suggest that inpatient admissions seem to be deteriorating as the year progresses.  In June, the survey results indicated that admissions fell 150 basis points relative to the prior year…United noted that its inpatient bed days were flat to slightly down in the second quarter.”

So let’s recap the facts: Hospital CPI for the last year was 5.9%, medical CPI even lower, and utilization for people with commercial insurance is down in every category of care.  If price increases are down and utilization is down, it would seem that the premium increases are doing a little more than “keeping pace.”  In fact, these premium increases are driving the most significant margin expansion and resulting profitability that the payor industry has ever experienced.

The New York Times says, “The increase in premiums was striking because in a poor economy, many people put off going to doctors, to avoid co-payments and higher deductibles.  Despite a decrease in the use of medical services, companies have defended higher premiums – and their high profits – reasoning that their costs would rebound once the economy recovered.”  So these payors are raising premiums because costs will rebound some day?  Some day, when the economy recovers?  Shouldn’t they raise prices then instead of now?

Ask yourself: Do employers know this?  Or, do they assume your hospital deserves the blame for the pain they’re feeling?  Don’t let your organization assume the blame for higher insurance premiums.  Engage your local employer and broker community, educate them, and build relationships.  Help them navigate the information that’s out there.

For more ways to engage with this audience, take a look at our latest thoughts, Seven Insights to Help Connect with Employers.  You can also call or email us (805.617.2832 or learnmore@revivepr.com) to learn more about how we can help your organization connect with employers and brokers in your community.

Interested in Insights from the Upcoming Health Care Leaders Summit?

Hear what the most respected thought leaders in health care are saying about the future of care delivery, their near- and long-term strategies for accountable care, strategies for taking risk or bundled payments, the latest approaches for payor contracting, and all the implications of health reform.  Attendance is strictly limited, so email us if you’re interested in learning more.

Can’t make it to New Orleans?  Don’t worry!  You can still take advantage of the many benefits and key insights from the Summit through our real-time updates via Twitter and e-blasts highlighting the events most talked about topics.  You’ll definitely want to stay tuned to these big topics from the Big Easy.

We promised we’d unpack the Seven Insights behind a successful employer engagement effort, and today we take on Insight #1: Lose the “Mumbo Jumbo.”

Business is booming for firms that can help companies navigate the Patient Protection and Affordable Care Act, according to a recent article in the Des Moines Register, because “less than 10 percent of employers totally understand the law.”

Being generous, that’s probably about equal to the percentage of Congress that understood the law before they passed it.  Even the most astute members had to work from a plain-English summary of what was supposedly in the bill because the actual language of the bill was so “confusing,” “arcane,” “incomprehensible,” and “hard stuff to understand” (actual words used by legislators to describe the bill).

Prior to its passing, Sen. Thomas Carper, D-Del., was quoted as saying, “I don’t expect to actually read the legislative language because reading the legislative language is among the more confusing things I’ve ever read in my life.”

So what did Sen. Carper and hundreds more do before deciding on the bill?  They read the translated version, and they listened to those they trusted to give them the information they needed to take action.

That’s exactly what most employers do when making decisions about their health care spending, and too often providers just sit back and let the payors do most of the talking.

If you’re a provider and you think it’s important to develop a strategy to survive and thrive in the wake of health reform, then you should also think about how you’re communicating your strategy to the community: namely, the business community.

After all, if you’re not talking to employers, you can bet your revenue stream that someone else is, and they’re most likely talking about you in less-than-flattering ways.

Too much is as stake to let others define you.  Make the connection with employers and the business community to tell your story.  And when you do, lose the “mumbo jumbo.” Shoot straight.  That’s what we heard from interviews with thousands of employers across the country.

The vernacular is extremely important.

People glaze over when they hear terms like “accountable care organization,” “population health,” and “patient-centered medical home.”  They’re unfamiliar terms, and there aren’t really any examples to provide a point of reference.  Without definition, most employers believe these new models of care are government programs.

Once you explain the terms, however, employers are in favor, and medical homes test better than ACOs.  Many believe new models have the potential to lower costs and increase coordination of care.  The key is communicating about these things in relatable terms.

Answer the question, “What does this mean for me?” Rebrand or package these models, or whatever efforts you’re pursuing, in a way that will be memorable, meaningful, and understandable to the community.  Employers want to see a focus on efficiency, reducing duplication of care, and greater coordination that will result in better quality and lower costs over time.

When you open up a dialogue and communicate clearly and honestly with employers and brokers, they will give you the benefit of the doubt.  They might even take your advice, influencing their benefit plan choices and coverage decisions.

If you want to take steps to open up that dialogue with your employer community and communicate in plain English, we can help.  Just call or email us (805.617.2832 or learnmore@RevivePR.com).

NEXT UP: A closer look at Employer Insight #2: Quality is about people, and being treated like a person.

There’s no doubt about it. The changing health care landscape, with its evolving models of care and payment, demands that hospitals and health systems build closer, more transparent, and more mutually beneficial relationships with the employers in their communities. For the first time in years, employers and providers are removing the middle man (the payor) and forming direct relationships in an effort to drive value.

It sounds simple enough. The leadership of hospitals and health systems most likely know many of the leaders of their local business community. Chances are they’re neighbors, friends, or even relatives. But when it comes to actually reaching out to the business community and engaging them in delivering value for their health care spend, there’s a disconnect. What health systems are beginning to realize, though, is that engaging employers is a vital part of the coordinated care equation.

Like any other piece of the coordinated care equation, building closer, more transparent, more mutually beneficial relationships with employers requires a plan. Once there’s a plan, it helps to know what to say and how to say it so employers know very clearly what it all means for them. It’s very much like delivering the right care in the right place at the right time.

Inevitably, though, when health care professionals talk, they use language and terminology that cause people’s eyes to glaze over. Seriously. Try it. Throw out phrases like “accountable care organization” or “patient-centered medical home” to someone in real estate or manufacturing and watch what happens. At the very least, they’ll probably think you’re talking about some sort of government program.

Yet employers outside of health care are being inundated with indecipherable information about health care from every source imaginable. We’ve talked to thousands of employers across the country about what’s going on in health care to find out what resonates, what moves the needle, and what annoys them. Here are the seven insights we’ve gleaned:

1. Lose the “mumbo jumbo.”

2. Quality is about people, and being treated like a person.

3. Demonstrate efficiency and coordinated care, and score big points.

4. Employers value wellness, and they want help from hospitals and physicians (not payors).

5. Transparency equals value, or at least the perception of it.

6. Tiered networks are just fine, thank you.

7. Choice and competition in health care are harder to understand than you think.

In the coming weeks, we will unpack each of these insights and outline the elements of a successful employer engagement effort. Like so many things in health care, building relationships and effectively communicating with employers is easier said than done. Call or email us (805.617.2832 or learnmore@revivepr.com) to learn more about our research findings and how we can help you make the connection with employers. And be sure to stay tuned…