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January 2012

TIERS OF CONFUSION…LIMITED UNDERSTANDABILITY…NETWORK PLANS

As part of the health industry’s movement toward greater cost-consciousness, tiered and limited network health plans are on the rise and confusing patients and physicians alike.

These plans known as tiered or limited network plans, require a deductible if a member wishes to be treated at these designated high cost facilities. The purpose of the plans is to drive members to the lower cost facilities; however, members can choose the higher cost facilities if they agree to pay the associated deductible amount for these providers.

Typically, the deductibles for these plans can range from $500 to $2,000 per visit. These plans are different from the high deductible plans that have been available for a number of years. The high deductible plans affect all covered members and impose an upfront deductible amount before co-payment amounts kick-on. Such plans have lower premium amounts as compared to typical lower co-pay plans; however, they do not provide the consumer with a choice of reducing their out-of-pocket cost by choosing a lower cost provider.

With the implementation of National Healthcare Reform, there is increased pressure on the insurance companies to help reduce the costs. These tiered and limited network plans are designed to put the employers and employees in the game with the insurance companies – to help lower costs. We will most likely see an increased participation in these types of plans in the coming years as a means to help control costs. (Source)

In Massachusetts, tiered and limited network plans now make up 15 percent of the health insurance market, a figure industry leaders expect to grow during the next two years, The Boston Globe reported.  As part of a recent amendment to the state’s 2006 health reform law, insurers are required to offer the plans—which either restrict a patient’s network of doctors or assign providers varying copayments based on cost and quality rankings—with premiums that are 12 percent below their standard plans. (Source)

Although this option offers patients substantial premium savings upfront, Massachusetts physician Sarah Bechta told National Public Radio’s WBUR that even she can’t determine whether a tiered plan would cost her family more in copayments and deductibles in the long run. For example, most insurers rate Boston’s Children’s Hospital as a tier 3, or high-cost hospital, to which one visit would wipe out Bechta’s $1,400 in premium savings.

“That was the thing that was really hard to predict. I could not figure it out,” Bechta said, even though, as a doctor, Bechta believes that she’s “as capable, or more capable, than everybody else who’s looking at this information.”

Even more frustrating, she said, is that every insurer uses different cost and quality measures to rank physicians, making it commonplace for physicians (herself included) to find themselves in different tiers for different health plans. Furthermore, Bechta said patients don’t understand whether they pay higher copayments for some doctors because they are better physicians or less cost-efficient.

Confusion Continues…

Massachusetts’ top three insurers say they are concerned about confusion as members get used to their new type of insurance.

“One of the things we’ve been trying to do is to make sure members know that doctors and hospitals are tiered based on quality and the efficiency of their care,” said Jonathan Chines, the director of commercial provider engagement at Tufts Health Plan.

“All of the health plans need to create easier-to-understand products with easier-to-use support tools, so that a consumer can find the knowledge we want to make available to them and use that knowledge to make health care decisions,” said Richard Weisblatt, senior vice president for provider network and product development at Harvard Pilgrim Health Care.

“Will members prefer tiered plans where there is some work on their part to figure out what their cost share is going to be for certain providers or would they rather something very simple but more limited, where the network doesn’t include every provider in the state?” asked Dana Safran, senior vice president for performance measurement and improvement at Blue Cross Blue Shield of Massachusetts.

Insurers say a growing number of employers are offering tiered insurance plans because they are the best way to lower premiums while still giving consumers some choice in where they go for care. Limited network plans that restrict where patients go for care in exchange for lower premiums are the other option many employers are considering as they try to hold down rising health care costs. Insurers are watching the consumer response to these plans with great interest.

If the physicians and the insurance companies agree that the plans are extremely difficult to understand…just what response do they believe they are going to get from patients?
(Source)

Accountable Care Organizations - Expensive Experiments?

For all the analysis and opinion on ACOs, the fact remains that provider organizations looking to start or join this type of organization are looking at significant expenses. Management consultants, counsel, and of course the IT systems that are required to collect, report and analyze the required savings and outcomes data.  The burning question is,“Will all the expense bring savings and increased quality of care”?  Recent information and expert analysis seem to suggest perhaps these organizations are not the meaningful model of cost savings and outcomes many had hoped for.

The Wall Street Journal asked the following experts to comment on the topic: Donald Berwick, former head of CMS (resigned 12/2/11), Jeff Goldsmith, president of Health Futures, Inc., and Tom Scully, former head of CMS (2001-2004) and former chief executive of the Federation of American Hospitals.

Berwick contends that the formula for ACO success is simple: “keep quality high, save money by improving - not restricting care”. Goldsmith sees the model differently. “The ACO is more like asking the hungry horse to guard the granary. The major savings for Medicare are to be found by keeping people out of the hospital, and reducing the incomes of the specialists who dominate hospital politics”.

Goldsmith also shares my opinion that the ACO has a sure fire potential for costing millions in start-up costs and reducing the income of the particating providers. As Goldsmith called it, “Tom Sawyer’s fence painting project”. In addition, for all the talk of patient-centric care, providers are making the choice to be in an ACO, not the patients.

Berwick contends that patients can certainly choose any care provider; however, if patients are changing doctors and seeing some outside the ACO on a regular basis, it seems to me this actually defeats the purpose of better coordinated and monitored care.

Tom Scully contends that docs are human and like all humans, they follow financial incentives. Scully states the system would be better under a capitated systems (see bundled payments concept) in which care-management groups pay docs a comprehensive fee depending on the level of care provided for each patient. “ACOs are baby steps in the right direction - but they come with a big danger”. In this model hospitals, not doctors are driving the bus - one level removed from the level of care that is actually treating and monitoring the patient.

Interesting that capitation is mentioned (hey I remember that model! Total, partial, carve-out cap rates). WSJ asks “Does capitation work”? Berwick doesn’t go so far to say that capitation is the only approach and ACOs are a move in the direction of more consolidated payment schemes. Scully sees ACOs as a move in the right direction - however, Medicare fees are fixed regardless of quality levels and “...price fixing has never worked in any society ever”.

My question - are providers really ready to accept the risk of care coordination and savings that are inherent with Medicare’s ACO model? Those of us that watched the Physician Hospital Organization (PHO) model of the 1990s fizzle out when PHOs ran out of cash reserves have to wonder if this time things really will be different.

Patient Engagement Starts with Making Appointments

ZocDoc is a free online service for patients to book doctor and dentist appointments instantly – and we wish more doc offices used it!

ZocDoc’s mission is to improve access to healthcare.  The service currently offers patients the ability to book appointments with clinicians in Atlanta, Baltimore, Boston, Chicago, Dallas-Fort Worth, Houston, Los Angeles, Miami, New York, Philadelphia, Phoenix, San Francisco and Washington DC.

Patients benefit because they can avoid the hassle of waiting on hold, or wondering whether a doctor takes a particular insurance.  Participating doctors and dentists benefit by attracting new patients, and alleviating the productivity lost from last minute cancellations by filling those available appointments with ZocDoc patients. (Source)

ZocDoc, a New York-based four-year-old start-up raised $50 million from DST Global last week. DST Global is the investment vehicle of Russian billionaire Yuri Milner, who had made early bets in Facebook, Zynga and Groupon. ZocDoc is its first health-related investment. Milner joins another billionaire investor who’s become a mini-expert, Peter Thiel.  His Founders Fund put up $15 million last summer.  Others include venture capitalist Vinod Khosla, Amazon’s Jeff Bezos, Salesforce.com’s Marc Benioff, and SV Angel’s Ron Conway.  This brings the amount of money ZocDoc has raised to $70 million, one of the largest in health IT.

ZocDoc’s business is refreshingly simple.  Patients can schedule doctor appointments online for free.  Doctors pay $250 a month for the service.  The key is creating more revenue for the physician; Massoumi says his automated scheduling software is more efficient than a receptionist and most of his clients add at least two new patients per month which makes up for the monthly fee. 

“We’re the fastest growing health technology company,” says Massoumi. He won’t disclose the number of doctors signing up, but 700,000 unique patients per month use ZocDoc in 10 cities so far. 

Massoumi, a 35-year-old former McKinsey & Co. consultant,  co-founded ZocDoc in 2007 with Oliver Kharraz, a neurologist who also worked at McKinsey.  Massoumi had flown from Seattle to New York with a bad sinus infection which punctured his ear drum upon landing.  It took him four days to find a Ear Nose & Throat doctor through his health insurance web site.  He found out that it typically takes 20.5 days to see a new doctor, and that physicians had a 10% to 20% cancellation rate. “I thought there had to be a better way,” he says.  If restaurants and airlines could automate booking, why couldn’t doctors?  (Source)

Bundled Payment Pilot Project Results, and New CMS Pilots

This article looks at the results of the PROMETHEUS Payment pilot project, which one of several bundled payment pilot projects.  The project is discussed in the November 2011 edition of Health Affairs.

But after three years of efforts, not a single bundled payment had been made, or a contract even entered into. All three projects lagged “months or years behind their planned milestones,” said the study published in the most recent edition of Health Affairs, notes the Wall Street Journal blog.

The primary culprits were determining payment rates—a process hobbled by issues analyzing claims databases—and getting those rates to interface with the insurers’ claims processing systems. According to recent study of the Prometheus system by Washington-based RAND Corp., the primary reason the organization was unable to achieve its goal of making bundled payments to providers despite three years of work was “the complexity of the model and the fact that it builds on existing complex health care systems.”

However, researchers have suggested that the efforts have helped better coordinate care at all three systems, and that advances in technology could make future bundling efforts progress more smoothly.

Interesting to note is the article by Uwe Reinhardt recommending an industry-wide switch to an “all-payer system”, similar to what Maryland does with hospital payments. Under such a scenario, the prices for health care services and products are subject to uniform price schedules that are either set by government or negotiated on a regional basis between associations of health insurers and associations of providers of health care. (Source) 

CMS’ Center for Innovation is currently accepting applications for the Bundled Payments for Care Improvement Models 2-4. For more information on the bundled payments pilot projects CMS is conducting, visit this page.

The Supreme Court Hears Health Reform Arguments March 26 – 28

And we are launching our “Verdict Pool” in February on our Facebook page! More information about the contest and cool prizes coming in early February!

The Supreme Court has finalized its schedule for oral arguments on the constitutionality of the Affordable Care Act, setting 5.5 hours of presentations during March 26-28.

CNN reports the court on March 26 will consider whether challenges to the law can be made before the individual mandate goes into effect in 2014. The individual mandate will be argued on March 27, with severability of the mandate from the rest of the law scheduled on March 28. The court on the 28th also will hear arguments on whether the government can force states to expand their share of Medicaid costs and lose federal funds if they don’t.

A ruling is expected in late June.