The healthcare industry continues to evolve at an unprecedented pace due to explosions in technology and consumer demand. ACA development introduced a new consumer to the industry, one who is unfamiliar with the healthcare experience. A new way of thinking is required from both health plans and providers. Over the next five years, the most significant changes will include a continued increase in consumerism, a growing role of technology in providing healthcare, the commoditization of health plans, and payment reform. The amount of information available to health plans, providers, and consumers continues to grow exponentially and effective use of this information is critical to success.
About the Research
For over a decade, Stonegate Advisors has conducted multiple research studies to solicit expert industry opinions on the state of healthcare in both the near and long term. This research, from both healthcare subject matter experts and opinion leaders, allows us to formulate perspectives on industry evolution over the next 3-5 years. Twenty-three (23) industry experts across the healthcare spectrum were interviewed, including senior leadership from health plans, brokers and third-party administrator (TPA) professionals. Discussions were framed around several key dimensions, including macro-priorities, exchanges, reporting & analytics, and payment reform.
2. Executive Summary
Macro-Priorities: At a high level, priorities for both payers and providers focus on managing membership size and improving the consumer experience. This mostly involves building the necessary tools and educating consumers on how to best use them as a means to optimize their healthcare experience.
Role of Exchanges: Payers are mixed on their acceptance of public exchanges due to increased risk levels. Some payers have taken the stance that they will not participate on exchanges until the market settles down, while others are participating fully, understanding that there will be some growing pains that need to be worked out. Participation in private exchanges is even lower. While the process of working with exchanges is still in need of significant refinement, consumer education will also play a role. Exchanges provide a vast amount of information to consumers and figuring out the best way to educate consumers will play a key role in success.
Reporting & Analytics: Consumers are not the only ones learning how to contend with a vast amount of information. The introduction of new delivery methods, such as telemedicine or mobile health, provides a wealth of new information to payers and providers as well. There is a desire to move away from data aggregation toward data integration. Data systems within organizations are old and may not be able to handle the new information needs. In addition, employees may need to develop new skill sets to understand the new information. As a result, some payers may be looking to outside vendors to help them develop processes and programs to manage data.
Payment Reform: The next 3-5 years will see a significant shift away from traditional fee for service payment programs toward value-based reimbursement programs. Many payers have some programs in place, such as a quality measurement program or shared savings program, but more complex payment reform will take some time. Development of more complex programs will require payers to improve their internal systems as well as invest significant resources to educate payers on program benefits.
As health insurance payers and providers are consistently being asked to do more with less, priorities continue to be focused on the consumer and bottom line improvement.Important areas include growing the membership base, focusing on quality metrics, increasing access to care, improving the customer experience, and increasing access to information.
Growing and maintaining the membership base: Health insurance plans are under constant pressure to increase their membership base while lowering administrative costs. For Medicaid payers, the expansion is easing membership growth difficulties in some states, but challenges still exist as some states are either reconsidering expansion or are determining current reimbursement rates are too high. Mergers and acquisitions also play a key role in membership growth, with goals to achieve economies of scale to reduce administrative costs.
Focusing on quality metrics: Quality metrics are becoming a crucial measure of healthcare performance from both a governmental and consumer perspective. Regulators are increasing the number of required metrics and performance targets every year. As consumers become more aware of these measures, reliance on these metrics to find top providers increases.
Increasing access to care: Health plans and providers are exploring alternative methods to reach consumers. Telemedicine and online health are priorities for many health insurers because the market is expected to grow to $1.9 billion by 2018. It is also becoming a more common benefit offered to members as part of their health plans. Payers are anticipating significant cost savings as telemedicine gains traction in the market.
In addition to telemedicine, retail clinics and urgent care centers will continue to see growth. As the number of insured increases, these clinics and centers will allow providers to extend hours and increase volume while directing non-urgent cases away from expensive and over-crowded hospital resources.
The proliferation of smartphones provides another opportunity for reaching the consumer. Industry research conducted by the U.S. Department of Health and Human Services shows that utilizing texting can aid in smoking cessation or short-term diabetes management. Texting has also shown to improve compliance. The use of text messaging in mobile health is still in the developmental stages, with some concerns about patient privacy limiting potential success.
Improving the Customer Experience: Health plans are recognizing the importance of the total patient experience and the impact this has on customer satisfaction and outcome. The ultimate goal is to make a seamless experience by focusing on personalization, responsiveness, and patient knowledge. Health insurance payers are looking at organizations such as Disney or Amazon, who are hyper-focused on the consumer, for direction on how to improve the healthcare experience.
Increasing access to information: Consumers are increasingly required to pay a larger share of their health insurance costs and transparency tools can help them manage this responsibility. However, significant barriers to acceptance still need to be overcome, including awareness, accuracy, and understanding.
Awareness of tools is low: While health insurers are spending a significant amount of time making sure the tools are understandable and easy to use, some consumers aren’t aware that the tools are available.
The information provided is perceived as having low value and accuracy: Often, the information that is provided represents a range of costs that a consumer might find, depending on the region of the country, the provider used, the health insurance carrier, and the specific plan. The challenge is that consumers don’t have an idea of what the pricing means for them or how to use the information.
Tools are confusing to use: Significant education is required to ensure consumers understand the information they are receiving. Additionally, effort should be made to encourage the use of these tools more frequently to increase familiarity and set reasonable expectations when using.
Role of Exchanges
Some health insurance providers are finding that a significant number of the newly insured enrolled through exchanges are sicker and suffer from more chronic diseases when compared to the commercial population. These enrollees utilize prescriptions for treating pain, seizures, and depression in greater proportion compared to members in employer-sponsored plans.
In addition to being sicker, many in the exchange population are gaining coverage for the first time and may not know how to use it properly. This lack of understanding could lead to inappropriate use of services such as emergency rooms or unexpected bills for members who access care outside of their plan’s network. To avoid these issues, hospitals, health plans, and advocacy groups will need to organize education efforts to help enrollees understand how to optimally use their health plan.
As a result of this increased risk, payers and providers are mixed on the role that health insurance exchanges play in their organizations. Payers, like United Healthcare, remain uncertain on their commitment to exchanges. When exchanges were first introduced in 2014, they did not participate. They then entered several markets in 2015 and 2016, but decided to only participate in a handful of markets in 2017 after losing an estimated $1 billion dollars for the 2015-16 plan years. Other payers recognize the challenges that exist with exchanges, but remain bullish on them, believing that the issues will be worked out eventually.
The shift to private exchanges is expected to lag even further behind the shift to consumer exchanges. Employers who have tried developing a private exchange found the product less flexible than desired, resulting in what was perceived as an expensive enrollment tool.
Full acceptance of exchanges is unlikely until these issues are resolved. Health insurers must focus on exchange-specific consumer education while exchange developers need to find ways to eliminate the ability to “game the system” by signing up, receiving expensive care, and then canceling the policy.
Analytics & Reporting
The efficient use of data and analytics represents a significant challenge for most health plans.A large amount of data is collected on a regular basis and the amounts, types, and available sources of data collected changes frequently. In many cases, data is often siloed across an organization and housed using different systems, making management and use of the data across the organization very difficult.
Users of data are looking to move beyond data aggregation and toward data integration.As a result, health insurance companies find themselves needing to find employees with a very different skill-set than in the past.For example, current employees not only need to know how to work with traditional claims data, but also with information that comes through new channels such as social media or telemedicine.
Finding employees with the right skill-set may be difficult in the short-term, which may lead to more reliance on outside resources and consultants to get systems up and running.Long-term goals may focus on keeping data management in-house once employees with the right skill-set are found.
Estimates by Catalysts For Payment Reform indicate that as of March 2013, only 11% of healthcare payments involved some sort of payment reform. These payment reforms involve both incentives for higher quality or sharing risk for not meeting certain thresholds. The U.S. Department of Health and Human Services has set aggressive goals to deliver better care at lower cost. A large part of this effort relates to changing how providers are compensated for delivering care and ensuring the care is of high quality. Initially, the focus is on providing quality Medicare services, with the goal of applying successful programs to the commercial and individual space at a later date. Medicare targets for 2016 include:
Tying 30 percent of traditional/fee-for-service Medicare payments to quality or value through alternative payment models such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016; tying 50 percent of payments to these models by the end of 2018.
Tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.
These programs have been successful, resulting in $12 billion in Medicare cost savings from 2012-2013, but there are significant barriers to overcome before similar programs can be expanded within and beyond Medicare.
Awareness of Payment Reform: When asked about payment reform, many health insurers immediately think about quality metrics and pay-for-performance. However, payment reform has many more components that need to be considered, including bundled payments, global payments, risk sharing, and shared savings.
Continued reliance on traditional fee-for-service: Many payers still rely on traditional fee-for-service methods. Familiarity and benefits of payment reform and its related impact will need to be clearly identified for health insurance companies and providers. For a successful transition, outlining clear case studies showing the benefits of payment reform and how non-traditional payment methods can be easily implemented will be required.
Comprehension of new payment methods: Many providers understand that payment reform involves some sort of quality measurement or risk-sharing agreement, but do not fully understand the bottom line impact. Payers will need to be shown that switching to a non-traditional payment method may actually benefit them and improve their bottom line. In many cases, health insurance companies find that once a provider is shown how they are “leaving money on the table” by not switching payment methods, receptiveness to payment reform increases significantly. Convincing providers to switch methods will need to be a slow process, likely done in stages rather than all at once.
Internal system readiness: Many health insurers are currently addressing their IT systems status to prepare for value-based reimbursement programs. Some payers indicate that the systems that are currently in place can only handle fee-for-service methods. In some cases, making a bundled payment currently involves manual adjustments to claims. Many health insurance companies are in the process of updating their systems to prepare for payment reform, but it is a very long and complicated process.
To manage these barriers, some health insurance companies are looking to outside consultants and vendors in the short-term to help install systems and get processes in place, but the long-term goal is to manage this information using internal resources.
The post-reform environment continues to evolve and health plans, providers, and consumers will need to adapt quickly and efficiently. As industry leaders navigate a constantly changing landscape, health plans and providers should keep several things in mind as they make short and long term plans 1) develop products and services that are consumer-centered and allow for flexibility and scalability; 2) focus on a better end-to-end digital experience, including exploration of best practices from other industries; 3) invest in technologies that will allow for data integration and access to high quality information for decision making; and, 4) prepare for reimbursement reform by updating data systems and educating providers on the benefits of value-based reimbursement to make the transition easier. Ultimately, the flexibility of health plans and providers will determine the level of success in the changing environment.