Healthcare, Insurance

5 Takeaways From Payer Q2 Earnings Reports

Originally published on Healthcare Dive.

Second-quarter numbers for payers showed a steady engine that has withstood the strain of the past two years, most notably (the failed) Republican efforts to tear up the Affordable Care Act and other big moves from the Trump administration.

Insurers appear to have found stability and responded by expanding offerings, pulling back on others, moving into new subsectors and partnering with or gobbling up other companies.

Payer underwriting margins were strong overall with no apparent ramp up in underlying medical consumption, David Windley, managing director for healthcare equity research at Jefferies in Nashville, told Healthcare Dive.

“2Q is a critical quarter for (managed care organizations) because it is the point at which management has seen enough actual data on claims payments to assess product pricing and any unusual trends,” he said.

Here are five trends and highlights from payers’ earnings reports in the past few weeks.

1. Payers love Medicare Advantage

Payers remain bullish on Medicare Advantage. Not only are traditionally strong MA payers growing their offerings, but more minor players are also expanding in the market.

UnitedHealth Group and Humana continue to have the two largest MA member populations. UnitedHealth’s MA population increased 10.4% year-over-year after picking up 450,000 new members. UnitedHealth views MA as a significant growth area and company officials said its long-term group rate is about 8%.

Meanwhile, MA drove Humana’s second-quarter earnings, which included a 5% increase in quarterly consolidated revenues. In a move to boost its MA plans, Humana recently purchased a 40% share of Kindred at Home with the right to buy the remaining interest over time. The payer expects that adding Kindred will help with end-of-life costs.

Another insurer growing its MA footprint is WellCare Health Plans. Medicare premium revenue grew more than 17% for WellCare, which offers managed Medicaid, Medicare and Medicare pharmacy drug plans.

The company said the increase was related to buying Universal Americanand organic growth. The Tampa-based payer ended the quarter at about 510,000 Medicare members, which was a 5% increase year-over-year.

WellCare’s pending acquisition of Meridian Health Plan for $2.5 billion is also expected to grow membership in Illinois and Michigan, as well as pick up MeridianRX, its pharmacy benefit manager business. “It will position us for future growth opportunities in government-sponsored programs, and we expect the transaction to be accretive,” Kenneth Burdick, WellCare’s CEO, said during the company’s Q2 call.

Anthem also spoke positively about its MA business, reporting a 14% operating revenue increase in its government business for the quarter. That was thanks to purchasing Health Sun and America’s 1st Choice as well as growing its Medicare membership organically.

Medicare enrollment grew by 254,000 year-over-year and membership in Medicare Advantage Part D plans skyrocketed by 37%. Anthem finished the quarter with 933,000 Medicare Advantage Part D members.

Anthem CEO Gail Boudreaux said the company plans to build its membership further by increasing its county footprint while finding organic growth where it already operates. She added that the Blues payer has found that members in their commercial plans want to transition to its MA plans once they reach retirement age.

“We have a strong pipeline of commercial customers who want to stay Blue,” Boudreaux said.

2. The individual market isn’t so bad after all

The days of widespread double-digit premium increases and payers fleeing the ACA exchanges appear to be over — or at least on hold.

During second-quarter earnings calls, multiple payers spoke of the ACA exchanges positively. Centene, which expanded its ACA footprint to 16 states this year, pointed to the exchanges as a major reason for its quarterly revenue growth. The payer, which has a large managed Medicaid population, has found success in ACA plans.

Centene is also looking to add new states next and grow further in the states where it’s already located.

Another payer that focuses on at-risk populations traditionally, Molina Healthcare, said it has seen better-than-expected ACA plan membership and risk-adjusted revenue.

Molina CEO Joseph Zubretsky said the risk profile of its reduced membership is also better. Last year, Molina pulled out of Wisconsin and Utah. Now, the payer is contemplating a return to those states and expanding to North Carolina.

“The issues we had in Utah and Wisconsin were mostly related to a network that was too wide and too highly priced. And the team is working at developing a network that will support the prices that we file … We’re going to watch every bit of data emerge on 2018 to make sure we have this right and then we’ll make the call at that point,” Zubretsky said during the call.

Even Anthem, which pulled back on the ACA exchanges along with other big-name payers last year, is looking at potential minor county expansions for 2019. Boudreaux said the insurer isn’t considering significant expansion, but it may move to abutting counties while focusing on areas with current Anthem individual plans.

“I think you’ll see some county expansions, but I think more focused on the areas that we’ve been this year, so not a major rescaling, but we are pleased with the performance. And again, it is all about stability and more certainty around that marketplace. But again, this year was solid,” she said.

Despite the better-than-anticipated ACA numbers, not all payers are interested in returning to the exchanges. UnitedHealth Group ended the quarter with 60,000 fewer individual plan members than a year ago.

UnitedHealth Group CEO David Wichmann said the nation’s largest private payer, which has 480,000 individual plan members, will continue a “modest presence” in that market. “Nothing has fundamentally changed since we made our decision,” he said about the exchanges. “It was the right decision for us.”

3. Commercial market results fell for some big players

Multiple payers have seen a drop in their commercial membership over the past year. UnitedHealth Group, Anthem, Humana and Aetna all reported decreases.

UnitedHealth Group said more commercial plans are moving to risk-based contracting.

The payer’s risk-based offerings increased by 50,000 members, while fee-based products decreased by 60,000. That’s part of a trend that Wichmann predicted during the first-quarter call in April. Wichmann said half of Americans will get care from a physician with a value-based contract within a decade.

Meanwhile, two payers, Humana and Aetna, reported that what companies want from payers is changing, especially small businesses. They’re seeing small group companies moving to contracts to perform administrative duties only.

Humana’s administrative services only plans increased by 3% to 458,800 members. The payer said small group membership made up just 7% of group ASO membership a year ago and 12% at the end of 2017. It was 18% at the end of the second quarter.

Humana’s commercial membership dropped 5% to slightly more than 1 million members as it lost large group accounts in self-funded accounts, but more ASO plans partially offset the loss.

Not all payers are seeing commercial plan decreases. Cigna picked up 329,000 customers year-over-year and ended the quarter with 16.2 million enrollees. “All the indicators we’re seeing … continue to reinforce [that] we see a very attractive growth outlook in the commercial space in 2019,” Cigna CEO David Cordani said.

Cigna has focused more on commercial plans after CMS temporarily suspended the payer from offering MA plans. Cigna got the OK to sell those plans again last summer.

4. Payers are looking at public plan opportunities

While payers are seeing sagging commercial plan membership, they’re finding growth potential in managed Medicaid.

Centene recently purchased Fidelis Care for $3.75 billion, which gives the payer the fastest growing Medicaid managed care company in New York and second fastest in MA. Fidelis’ 1.6 million members are spread across the ACA, MA and Medicaid markets. Centene expects to see more than $11 billion in revenue from Fidelis.

WellCare’s purchase of Meridian will make it the largest Medicaid payer in membership in Michigan and Illinois, where it has 508,000 and 565,000 members, respectively. WellCare said the deal will put it in the leading market position for six states.

WellCare will also grow Medicaid membership after being the sole winner for Florida’s Children’s Medical Services contract. The company expects the contract will increase its Florida Medicaid annual revenue stream by $1.5 billion.

Molina picked up nearly 70,000 members in the second quarter after a recent statewide Illinois contract.

There are other Medicaid opportunities for payers too, as more states show an interest in expanding Medicaid. Boudreaux said Virginia’s upcoming Medicaid expansion brings 400,000 possible members. Maine voters also approved Medicaid expansion last year and a growing number of states are putting expansion on the ballot this fall.

However, it is not all positive news for Medicaid payers. Humana’s state-based contracts membership, which includes dual-eligibles, decreased by 13% year-over-year. The decrease came after the payer didn’t participate in Illinois’ Integrated Care program and a Medicaid membership drop in Florida. That said, Humana expects improved Medicaid membership next year after a new Florida contract.

5. Industry is in good financial shape

The second-quarter reports show that payers (and most healthcare companies, actually) are doing well financially. Axios reported that publicly-traded healthcare companies enjoyed billions of dollars of profits in the second quarter. In fact, they’re making more than in Q1, especially pharmaceutical companies. Those numbers don’t include nonprofit hospitals, which face their own challenges.

Two financial numbers that stand out are the revenue results for Aetna and Molina. Aetna stayed stagnant, but it’s also in the middle of the CVS Health merger. Plus, it enjoyed a nearly 8% profit margin in the quarter.

Molina, meanwhile, went through upheaval over the past year when it ousted CEO Mario Molina and CFO John Molina, the sons of the company’s founder. The payer also pulled back on the exchanges. Hence, the revenue drop.

Looking ahead to Q3, Windley expects more of the same for payers. He said insurance companies will begin to publicly discuss their 2019 plans during the third-quarter calls, including potential MA growth.

Here’s a breakdown of important metrics to show how payers did in the second quarter:

Aetna

Revenues: $15.6 billion

Compared to 2Q 2017: No change

Profit: $1.2 billion

Net profit margin: 7.8%

Membership: 22 million

 

Anthem

Revenues: $22.7 billion

Compared to 2Q 2017: Up 2.3%

Profit: $2.4 billion

Net profit margin: 5.2%

Membership: 39.5 million

 

Centene

Revenues: $14.2 billion

Compared to 2Q 2017: Up 19%

Profit: $300 million

Net profit margin: 2.1%

Membership: 12.8 million

 

Cigna

Revenues: $11.5 billion

Compared to 2Q 2017: Up 10%

Profit: $193 million

Net profit margin: 1.4%

Membership: 16.2 million

 

Humana

Revenues: $14.3 billion

Compared to 2Q 2017: Up 5%

Profit: $193 million

Net profit margin: 1.4%

Membership: 16.6 million

 

Molina Healthcare

Revenues: $4.9 billion

Compared to 2Q 2017: Down 2.3%

Profit: $202 million

Net profit margin: 4.1%

Membership: 4.1 million

 

UnitedHealth Group

Revenues: $56.1 billion

Compared to 2Q 2017: Up 12.1%

Profit: $2.9 billion

Net profit margin: 5.2%

Membership: 48.8 million

 

WellCare

Revenues: $4.61 billion

Compared to 2Q 2017: Up 7.4%

Profit: $172 million

Net profit margin: 3.9%

Membership: 4.4 million

 

Healthcare

Return of the House Call

Originally published in Healthcare Dive. 

The days of the kindly, silver-haired doctor with a small medical bag going house-to-house appeared dead and buried, but a new movement is taking shape to return the practice.

The resurgence has a key twist, however, with a heavy dose of 21-century technology.

Healthcare startups have cropped up to provide in-home medical services, including mobile urgent care and doctor appointments. But they’re not the only ones trying house calls. Established providers such as Johns Hopkins are getting into the act and Medicare is testing a home-based primary care model for high-cost chronically ill beneficiaries.

“We see (our house calls) as old-fashioned care with state-of-the-art technology,” Nick Desai, co-founder and CEO at Los Angeles-based Heal, a company that offers the service, told Healthcare Dive.

Mobile urgent care startups now dot the healthcare landscape and big-name private payers like UnitedHealthcare and Anthem, as well as Medicare and Medicaid, are contracting with mobile care companies.

Investors see potential and have put millions into mobile urgent care startup companies. Heal, which offers services in California, Washington, D.C. and northern Virginia, recently announced $20 million in additional funding to raise its total capital collected to more than $69 million.

Mobile care advocates like Desai say providing care in a person’s home is a better alternative than telemedicine or urgent care centers. Both of these avenues are an attempt to offer lower cost settings, but Desai said they are getting in the way of the direct primary care physician-patient connection.

Desai said the healthcare system isn’t going to be helped by “cramming more people into waiting rooms or further distancing doctors from patients.”

Healthcare companies that offer mobile care differ by where they see themselves in the system and who’s making the house calls.

Denver-based mobile urgent care provider DispatchHealth sees itself as supplementing care and as a partner for primary and specialty care. Meanwhile, Heal provides regular care, including primary care, prevention and pediatrics, as well as urgent care.

Johns Hopkins’ Hospital at Home treats patients with pneumonia, heart failure, chronic obstructive pulmonary disease and other conditions.

Home-based models “can be a versatile platform for creating an alternative to skilled-nursing-facility care after hospital discharge, a complement to early-discharge programs, and an option for post-surgical care. And technological advances, such as biometrically enhanced telehealth modalities, will make [them] more viable,”  Bruce Leff, professor of medicine at Johns Hopkins University School of Medicine, wrote in the New England Journal of Medicine.

Leff predicted that the move to value-based care will be a catalyst to “challenge the traditional, facility-based model.”

Longer, but fewer, patient visits

What house calls offer is convenience for the patient, and a potentially longer time with the doctor.   Heal said its average visit is 28 minutes, compared to the national average of 13 minutes.

However, the drawback for a mobile urgent care company is that a clinician sees fewer patients than in an office setting. That means fewer reimbursements. Lower overhead costs is one way to offset that.

Mapping out myriad appointments would be difficult for a human, but mobile care companies have technology that does the work for them. DispatchHealth screens patient appointment requests by using a risk stratification tool that analyzes a person’s age and chief complaint. The proprietary technology maps out the stops based on distance, traffic and a patient’s sickness.

CEO Mark Prather told Healthcare Dive its first market, Denver, has eight vehicles on the road and they can get to most calls within 20 to 25 minutes. “The computer does all that and optimizes all visits to get more visits out of calls per day,” he said.

Heal said it has also removed office-related healthcare costs from the equation. Desai said Heal’s technology platform automates the booking and billing process, which lowers healthcare operating costs and bureaucracy by 65%.

Dispatch expects to care for 55,000 patients this year, which it said would save about $80.8 million in medical costs, such as avoidable 911 transports, emergency room visits and hospitalizations. Heal has delivered more than 60,000 house calls since it launched in March 2015.

Mobile care models vary

Prather said DispatchHealth is designed as a “mobile ER to intervene on acute illnesses” that communicates with the patient’s regular care team. Founded in 2013, DispatchHealth operates in markets in Colorado, Virginia, Arizona, Nevada, Oklahoma and Texas and plans to expand to 10 markets by the end of the year.

A two-person medical team, which includes a medical technician and an ER-trained and board-certified nurse practitioner or physician assistant, go to homes and businesses. They usually arrive within an hour in a vehicle equipped with a certified lab, advanced formulary of medications, IVs and fluids.

Meanwhile, Heal sends a doctor and medical assistant to calls.

Desai said 80% of Heal’s calls are to patient homes. The company also provides employee healthcare. That’s about 15% of its business. The remaining visits are done in senior facilities.

Mobile urgent care is how Heal often acquires patients. Desai said 80% of its users first enter the system through mobile urgent care and then transition to Heal’s primary care, chronic disease management, wellness and pediatrics services.

Social determinants of health

Another potential benefit of mobile urgent care companies: helping providers find potential social determinants of health issues. Payers and providers increasingly see a link between SDOH and overall health outcomes. If a person doesn’t have a car, stable housing or regular nutrition, there’s a good chance they will wind up with health problems.

DispatchHealth includes a SDOH section of its patient report that reviews concerns with primary physicians.

By being in patient homes, mobile urgent care clinicians can spot potential issues, such as smoking, unsafe living conditions and medication issues. For instance, Desai said two-thirds of senior falls are related to medication-related dehydration. Being in the home allows the clinician to review all the medications and make sure they don’t conflict. Conflicting medication can lead to dizziness, falls and hospitalization.

Growth opportunities in senior population

The aging population may be one factor driving the trend.

A majority (60%) of DispatchHealth’s business is in the senior population, which may be redefining on-demand care. “We have a tremendous opportunity to address the healthcare needs in the aging population in a much smarter way,” Prather said.

The U.S. Census Bureau estimates that the country’s senior population will grow to 83.7 million by 2050, nearly doubling. An older population means more chronic illnesses and healthcare needs, leading to more hospitalizations and ER visits.

CMS also sees opportunities with house calls. It is testing primary care services at home through its Independence at Home demonstration. The second year of the program saved Medicare more than $10 million, an average of $1,010 per beneficiary.

Though mobile urgent care is becoming more common, Prather said hospitals shouldn’t worry that it will replace them. Mobile care will be supplemental. There will always be a place for hospitals, but they will increasingly focus on caring for the very ill. Healthcare will need to provide other types of care in lower cost settings, such as the home, he said.

“If you’re a hospital system, you’ve got to look at the landscape and see where it’s headed. It’s not more bricks and mortar,” Prather said.

Healthcare

Value-based Pay a Factor Pushing Docs to Hospital Work

Originally published on Healthcare Dive.

More physicians, especially young doctors, are turning to hospitals for employment rather than running their own practice, spurred by the rise of value-based payments and population health.

The trend can have the effect of raising costs, however, and there are signs it may be slowing.

A recent report from Avalere conducted for the Physician Advocacy Institute found a 100% increase in hospital-owned physician practices, as well as a 63% increase in the total number of physicians employed by hospitals between July 2012 and July 2016. There were 72,000 physician practices employed by hospitals in July 2016.

PAI CEO Robert Seligson said payment policies favor large systems and the current payer environment “stacks the deck against independent physicians” through “administrative and regulatory burdens.”

Patrick Padgett, executive vice president of the Kentucky Medical Association (KMA), has seen the trend in his state over the past decade. Most employment is through hospitals and hospital systems in Kentucky, especially in rural areas. He’s seen a similar trend of more physician-led practices employing doctors, such as multi-specialty practices, Padgett told Healthcare Dive.

Times have changed so much in Kentucky that the KMA stopped providing an annual seminar to new doctors on starting your own practice. Now, because nearly every new doctor is employed, the seminar focuses on employment contracting and personal finance education.

What’s causing more hospital-employed physicians?

Multiple factors are driving the trend. Payment policies are a major factor.

Population health and value-based care models are driving “more coordinated, integrated and consumer-centric healthcare delivery systems,” Katie Gilfillan, director of Healthcare Financial Management Association’s finance policy, physician and clinical practice, told Healthcare Dive.

As payers move to risk-based payments, reimbursements that reward value, quality and lowering costs are replacing fee-for-service payments.

However, hospitals have limited influence on costs and patient outcomes once the person leaves the facility. So, instead, hospitals are looking to scoop up physician practices as a way to stay connected to those patients when they’re not in the hospital.

Caroline Pearson, senior vice president at Avalere, told Healthcare Dive that this gives hospitals a better chance to manage care and reduce costs.

Another factor is connected to market share and payer negotiation leverage.

Physician groups are feeling the economic pressures of rising costs to deliver care, Gilfillan said. Smaller practices are increasingly looking to hospitals and larger physician-led practices, which they feel can influence care and share the burden of risk more than going it alone. Being part of a larger system can make former small practices more competitive with the ability to negotiate better rates.

Being part of an integrated system also reduces risk. Plus, it can lessen regulatory burdens put on medical practices, such as prior authorizations.

A recent American Medical Association survey found that medical practices average 29.1 prior authorization requests per week. Processing takes an average of 14.6 hours per week. About 34% of physicians said they rely on staff to work solely on data entry and other manual tasks connected to prior authorization. Instead, being part of a larger system brings with it a bigger staff to take over or at least spread around those types of tasks.

Costs associated with EHRs also play a role. “Many small practices simply could not afford installing and then maintaining such systems,” Padgett said.

And then there’s just personal preference. Going the employee route reduces operational and financial risks, which can be appealing to physicians, especially those new to the profession. Employment can also bring with it a more predictable schedule. The downsides, though, can be a lower salary and less control over practice designs and office management.

Many younger physicians are interested in practicing medicine and don’t want the hassle of running a practice or a small business.

In its Physician Practice Benchmark Survey in 2016, the AMA found that two-thirds of physicians under 40 were employees in 2016. That’s compared to about half in 2012. The share of employees among physicians 40 and older also increased in that time, but the increase was more modest.

What does the hospital-employed physician trend mean for costs?

A potential downside to the trend: rising costs.

Pearson said that’s because physicians employed by hospitals are more likely to perform procedures within the hospital setting, which are more expensive than at a lower-cost setting. “This can drive up costs,” she said.

An Avalere study in 2017 showed hospital-employed physicians increased Medicare costs for four services by $3.1 billion between 2012 and 2015. That study, also for the PAI, revealed that Medicare paid $2.7 billion more for four specific cardiology, orthopedic and gastroenterology services in hospital outpatient settings rather than in an independent physician’s office. Medicare beneficiaries spent $411 million more in out-of-pocket costs for those services compared to what they would have spent in an independent physician’s office, according to the report.

Given the trend toward hospital-employed physicians, Pearson expects payers will make changes. One way they may address these issues is through care payment site neutralization. For instance, insurers may pay more for complicated procedures and less for less complicated procedures rather than pay by care setting.

Is the hospital-employed physician trend slowing?

Though Avalere shows a doubling of hospital-employed physicians, the AMA said its numbers show that the trend is actually slowing. Physicians working for a hospital or in a practice with some ownership remained steady in 2014 and 2016 at 32.8%, according to the AMA.

Nevertheless, the group’s Physician Practice Benchmark Survey in 2016 marked the first time physician practice owners were not a majority portion of physicians since the organization began documenting practice arrangements. It found that more than half of physicians continue providing care in smaller practices (10 or fewer physicians). However, there is a gradual shifting toward larger practices.

Though the AMA said there is movement away from physician-led practices, Pearson wonders whether that will change. Physicians have increasingly led accountable care organizations and multi-specialty practices are willing to accept risk.

Physicians not affiliated with hospitals may see long-term savings if they assume risk and manage population health in the same way as a hospital in an ACO, she said.

“I think the pendulum may swing back to physician-led models,” Pearson said.

Gilfillan said there’s also a growing need for physicians in leadership positions, especially those who can “connect the clinical goals to the financial goals of the health system,” as well as running a “financially sustainable healthcare system.”

Future of hospital-employed physicians

More physicians are employed by hospitals than a decade ago, but is this a short-term trend or now a healthcare industry norm?

“I think it will continue to increase because there are a lot of drivers supporting that trend,” Pearson said.

That said, Pearson expects payers will change policies, such as payment incentives, which now push doctors into hospital-employed situations. Those changes will slow the trend curve. Also, eventually hospitals will run out of physicians interested in a hospital-employed situation, though new doctors prefer employment arrangements.

Something else to watch are proposed megamergers, which Padgett said seem to go against the hospital-employed physician trend.

“Recently proposed mergers, such as Humana/Walmart and CVS/Aetna, seem to be counting on more people getting their healthcare at store-based clinics. But the trend toward integrated care through a health system/clinic, along with technology changes, seem to be working against that trend. Unless they align with organizations that can provide different kinds of care through different specialists, I’m not sure how that will work out for them,” he said.

Healthcare

Providers Go Deeper with Population Health, Weighing Social Factors

Originally published on Healthcare Dive.

The industry transition to value-based payments is leading to more population health management programs, but providers are finding it’s difficult when patients lack secure housing, access to food or a way to get to appointments.

So many are now going beyond one buzz word, population health, and taking into account the role that another, social determinants of health, play in a person’s health.

“Population health management efforts are most successful when they are tied to efforts to address social determinants of health issues, since the challenges that patients face around housing, food and transportation, for example, are completely tied to their ability to engage in the healthcare system, manage their chronic conditions and stay well,” said Dr. Amy Flaster, an assistant medical director for the Center for Population Health at Partners HealthCare in Boston, told HealthCare Dive.

Flaster, also a physician at Brigham & Women’s Hospital and vice president for health management and care management at Health Catalyst, said a population health management infrastructure, such as working with community-based nurses and organizations that help at-risk people, allows health systems to address medical issues before patients wind up in the emergency room.   

“The key to population health is truly about taking care of patients across the care continuum.”

Dr. Sarika Aggarwal, chief medical officer, Beth Israel Deaconess Care Organization

Leveraging an entire team within and beyond her office’s four walls, she gets help from social workers, community resource specialists, community health workers, pharmacists and nurses.

Across town at Beth Israel Deaconess Care Organization, Chief Medical Officer Dr. Sarika Aggarwal has seen PHM both from the provider and payer side. She’s led initiatives at both BIDCO and Fallon Community Health Plan.

“The key to population health is truly about taking care of patients across the care continuum,” she said. “I have not found a (population health management) program that hasn’t helped the patient.”

For these programs to work, they need invested partners on all sides —payers, providers and communities.

Still, ROI is difficult to prove. Potential cuts to Medicaid and an apparent lack of interest in population health at the federal government level could also stand in the way of organizations looking to go down that road.

Social determinants of health

Providers can’t ignore tackling social determinants of health in many communities.

Boston Medical Center, for example, treats a large at-risk patient population.

“They’re trying to look at patients more holistically,” said Rosemarie Day, who runs consulting firm Day Health Strategies, noting examples like physicians writing prescriptions for food and then sending the patient to the hospital’s own food pantry.

Another factor: Patients with mental health challenges may have a harder time caring for themselves, especially when they have co-morbidities, Day noted.

Some state Medicaid programs, health plans and providers are starting value-based payments for behavioral health services. Arizona, Maine, New York, Pennsylvania and Tennessee have all created Medicaid managed care organizations with value-based payments that target behavioral health.

“If you can manage mental health issues, you actually have a big opportunity to reduce medical cost spend,” said Day, who served as chief operating officer for Massachusetts’ Medicaid program and deputy director and chief operating officer at the state’s Health Connector.

Three legs of a stool

Population health programs can be considered as a three-legged stool, made up of a provider side, the payer side and community programs. Providers serve on the front line with patients, Payers use analytics to coordinate care and provide value-based payments and community programs help patients outside the physician’s office.

Payer involvement is crucial, offering claims data to match patients with the most appropriate interventions and providing contract incentives to providers.

Of course, physicians are tasked with treating patients the same regardless of the payment model, but alternative payment models can provide the extra funding to help compensate for that care coordination.

“The creation of ACOs and other alternative payment models are directly changing how health systems think about delivery care for their patients,” Flaster said.

Community programs provide services that patients can’t get during a physician visit. Community organizations help people find food and housing and resolve transportation issues for appointments.

Are they worth it?

So providers say the programs can help improve patient health and tackle social determinants.

But the big questions are: Can they save money in the long run? Are they worth it?

Aetna Chairman and CEO Mark Bertolini has touted the goals of the company’s foundation, which invests in population health projects that aim to reduce chronic diseases, provide walkable neighborhoods and improve quality of life.

An Aetna Foundation-financed study found that investments in certain areas did result in better health outcomes. For example, getting residents active is connected to decreased diabetes and cardiovascular disease; and cutting smoking rates reduced asthma and improved mental health. The study additionally found areas with the highest unemployment rates are also the unhealthiest, which goes back to social determinants of health.

With this in mind, Aetna’s Healthiest Cities and Counties Challenge provides $10,000 grants to 50 communities or organizations. Programs promote healthy foods, increase mental wellness and seek ways to decrease prison reentry. The programs that show an improvement are eligible for more funding — as much as $500,000.

A Health Affairs report recently highlighted a Colorado program called Bridges to Care, involving an emergency department and the community to promote primary care. The Center for Medicare and Medicaid Innovations funded the program through a grant.

The program offers medical, behavioral health and social care coordination services, such care coordinators, health coaches, behavioral health specialists and community health workers.

Six months after Bridges to Care intervention, there was a 28% reduction in ED visits and 114% more visits to primary care physicians compared to patients in the control group.

Digging further, the researchers found that patients with mental health co-morbidities had 30% fewer ED visits and 30% fewer hospitalizations — and 123% more primary care visits compared to the control group.

However, PHM programs aren’t always cost-effective, despite their success with patients. Aggarwal gave the example of a program that offered home visits to the more costly patients with comorbidities. She said the program was successful with patients and staff, but ultimately it was too expensive.

So instead, Beth Israel spun off the cost-effective parts of the program into one for pharmacists and disease management. Improving a patient’s medication management can result in improved outcomes quickly.

In that case, BIDCO initially connected patients with out-of-control diabetes to pharmacists, who provided recommendations to providers. Aggarwal said 40% of patients involved saw a significant decrease in their A1C levels.

Beth Israel then expanded the effort to health coaches and added similar chronic obstructive pulmonary disease and depression programs, with hopes to move into other chronic illnesses.

Potential barriers

Despite signs of success, the hurdles are many: Potential pushback from leadership, funding crunches and the difficulty in measuring what’s working are among the big ones.  

The first piece of PHM is creating a cross-disciplinary team. Each stakeholder needs to set aside territorial hangups. Respect is needed for each stakeholder no matter their background or whether they have a medical degree. “Getting a team to truly come together and flourish to reach that ideal of a patient-centered medical center is not easy to do,” Day said.

Leaders of these efforts must become “a champion of change,” she said.

“Generally, you can throw a lot of money (at population health), but if they’re not led well and they’re poorly executed, you don’t get the results you want,” she said.

They require planning, outreach to other stakeholders and physician buy-in. Health system leaders need to communicate with providers and fully explain the programs.

“You need to engage them and put in the right incentives. A lot of my work is spent with providers in our system. That is important to the core of the population health,” Aggarwal said.

Flaster said one way to get physician buy-in is through data. Physicians will buy into the program if they can see it will lead to better care.

Aggarwal said modifying patient behavior and achieving a positive ROI isn’t always easy. Programs may take 18 to 24 months to show a significant impact. And one can never be sure which part of the intervention was successful.

Plus, the care teams need to coordinate to eliminate duplications in post-acute care. Aggarwal gave the example of a discharged patient who may receive calls from multiple stakeholders. The patient becomes frustrated by the multiple calls and stops answering the phone. That doesn’t help the quality of care and is a waste of resources.

Instead, population health requires continual dialogue among the stakeholders to limit duplications.

Future of population health

Population health programs are expected to expand as payment incentives become more aligned with value rather than volume. Aggarwal said infrastructure, data, financial incentives and administrative pieces will all become better aligned, as well as the model to identify patients who would most likely benefit from the programs.

Day believes that states and the private sector will continue to innovate. Oregon and New York both have Medicaid ACOs and Massachusetts’ Medicaid program called MassHealth will soon start its own managed care ACO. Massachusetts was the first state in the nation in October 2016 to create a payment model that added SDH variables to medical diagnoses, age and sex.

Seventeen healthcare organizations are taking part in the Massachusetts ACOs, including Partners HealthCare, BIDCO and Lahey Health on the provider side and Tufts Health Public Plans, Fallon Community Health Plan and Neighborhood Health Plan on the payer side.

Starting March 1, the ACOs will be financially accountable for cost, quality and member experience for more than 850,000 MassHealth members. The program includes investments in primary care and community support services.

The federal government is providing $1.8 billion to restructure MassHealth via a five-year 1115 Medicaid waiver. ACOs will receive more than $100 million in new investments this year to support the change to value-based care.

Day said having states try these kinds of initiatives in Medicaid is a positive — as long as the federal government doesn’t cut Medicaid funding. Day doesn’t think the current administration will undermine population health, but also doesn’t think it will be a priority either.

“I don’t feel too optimistic at the moment about the national level,” she said.

Healthcare, Insurance

5 Payer Trends to Watch in 2018

Originally published on Healthcare Dive.

The past year has been an eventful one for payers, from the tumultuous Affordable Care Act (ACA) exchange markets to potential mega-mergers. Insurers continue, however, to keep their efforts focused on lowering healthcare costs where possible, with the intention that quality of care is not sacrificed.

Those payer efforts are working. Healthcare spending growth dropped to the lowest level in nearly two years, and hospital spending growth lags behind all other healthcare sectors. Hospital spending increased by only 0.8% year-over-year in June, which was the slowest growth rate since January 1989.

Payers have ratcheted down hospital payments by creating policies with an eye toward providing care at less-costly locations, designing health plans that put more healthcare utilization costs on members and by replacing fee-for-service payments with value-based contracts. Providers have also teamed up with insurers in partnerships that look to offer better outcomes.

Looking ahead to next year, you can expect payers to implement more cost-saving measures and push for value-based contracting. Here’s a look at five payer trends to watch for in 2018, and some tips for preparing to deal with them.

1. Payers will continue to ramp up ways to cut costs

Insurance companies have created policies, designed plans and narrowed provider networks to bring down healthcare costs. They’ve shown success. Expect payers to accelerate those programs and policies and search for more cost-saving levers in 2018.

The most public example of health insurers cutting costs over the past year was Anthem’s policies to not pay for unnecessary emergency department visits or imaging services at hospitals. Anthem’s policies looked to nudge patients to less costly outpatient facilities, including urgent care centers and freestanding imaging centers.

Michael Abrams, co-founder and managing partner at Numerof & Associates, told Healthcare Dive that Anthem’s decision to not reimburse hospital outpatient MRI and CT scans without precertification is “an important message to the provider community.” Anthem’s policy is in response to “ballooning growth in outpatient imaging — both in volume and in unit cost.”

For hospitals searching for ways to improve their bottom lines, many health systems viewed imaging as a way to make up for lost reimbursements and less utilization elsewhere. However, Abrams said the payer’s message was that medical necessity is the stronger consideration and that unit pricing needs to reflect broader market pricing.

“Many provider institutions had turned this under-regulated service line into a profit center,” Abrams said. “Anthem’s action made it clear that such actions would not be acceptable.”

Aneesh Krishna, partner in McKinsey & Company’s Silicon Valley office, told Healthcare Dive payers will likely roll out similar policies for imaging, lab, diagnostic testing and low-risk surgeries. “We see a trend toward rationalizing the levels of payments across various sites of service,” he said. “Imaging-related initiatives are the first steps in that direction.”

In addition to pushing for more services outside of hospitals, Fred Bentley, vice president at Avalere, told Healthcare Dive that he expects payers to focus on readmissions. Providers will need to manage patients post-discharge and keep them healthy in their homes rather than in hospitals.

Though not as high profile as Anthem’s policies, payers have been narrowing provider networks to bring down costs. This has been especially true in ACA exchange plans and Medicare Advantage (MA). In fact, a recent Kaiser Family Foundation study found that 35% of MA enrollees were in narrow-network plans in 2015, while only 22% were in broad-network plans.

Bentley said narrow provider networks haven’t had a huge impact yet. However, the “significant value” associated with narrow and tiered provider networks will ultimately cause more payers to expand narrow provider networks in the employer-based market.

2. Greater emphasis on value-based care and contracting

Payers and the CMS have pushed for more value-based care and payments, but it’s been slow going.

“Payers see potential to contain costs and improve quality in such contracts. However, the pace of adoption is tempered by provider resistance to taking on risk and by payer reluctance to push providers to do so before they are operationally prepared to be successful,” Abrams said, referencing findings in Numerof & Associates’ 2017 State of Population Health Survey.

Krishna believes payers may move more into bundled payments, bonus payments and capitation as it pushes providers to care for the whole patient rather than receiving payments for individual services.

Krishna said the shift toward cost-effective sites of service will require payers to align provider incentives to get the best outcomes. It also gives providers greater flexibility to choose the right care for their patients. This will additionally mean payers will need to share the right data with providers. “Increasing levels of data availability and easier integration between payer and provider systems will make the transition easier and scalable,” Krishna said.

Steve Wiggins, founder and chairman of Remedy Partners, told Healthcare Dive payers will continue to leverage payment models that encourage patients to find care in the most cost-effective locations and use those service efficiently. This will lead to more bundled payments that trigger at diagnosis rather than only at inpatient admission, which is already happening in Medicare, he said.

“Orthopedics, all post-acute services, oncology care, most elective surgeries, all episodes that patients control and a wide range of chronic conditions lend themselves to bundled payments that start at diagnosis,” Wiggins said.

3. More outpatient and virtual care utilization

Payers have been pushing more patients to outpatient facilities as a way to cut costs.

“Care delivery is moving out of the acute care setting and into the community. Such a trend is responsive to consumer demands for fast, convenient access, and it offers the potential for higher volume and lower costs in specialized clinic settings. An increasing portion of hospital system revenues comes from outpatient services, and that ratio will continue to define the progress of systems in a market-driven, value-based healthcare environment,” Abrams said.

Wiggins said innovations will also play a larger role in keeping down costs. He said shifting away from traditional delivery models and fee for service to bundled payment models will lead to more remote monitoring and telemedicine.

“Bundled payments hold great potential to become the driver of innovations that leverage the explosion of wearables, remote monitoring and greater patient engagement,” Wiggins said.

A recent KLAS Research and the College of Healthcare Information Management Executives survey found that reimbursement remains the main barrier to telehealth expansion, but Krishna said virtual care will play a bigger role in the coming year, including for initial consultations and follow-up visits that don’t require an onsite doctor visit.

“Overall, these trends will likely shift significant patient volume from higher-intensity settings to lower-intensity settings while maintaining — or in some cases even improving — quality of care or patient experience,” Krishna said.

Abrams said the cost consequences of virtual care are not fully known, but consumers want that access to providers. More virtual care could include nurses offering guidance on day-to-day health issues and physicians monitoring and visiting virtually with chronically ill patients at home.

“As larger and better capitalized healthcare systems move toward risk-based contracting, we expect to see growth in the use of such services,” Abrams said.

4. Consumers want cost, quality transparency

Consumers are demanding more healthcare cost data on procedures. A recent HealthFirst Financial Patient Survey found that 77% of healthcare consumers say it’s important or very important to know costs before treatment.

Higher out-of-pocket costs and high-deductible health plans are the biggest reasons for this greater interest in transparency. A recent Kaiser Family Foundation study found that out-of-pocket spending is outpacing wage growth.

Deductibles went from accounting for less than 25% of cost-sharing payments in 2005 to almost half in 2015. The average payments toward deductibles rose 229% from $117 to $386, and the average payments toward coinsurance increased 89% from $134 to $253 in that period. Overall, patient-cost sharing increased by 66% from an average of $469 in 2005 to $778 in 2015.

With members taking on more healthcare utilization costs, payers and employers view cost and quality data as a key to reducing healthcare costs. However, the information is not always easy to find for consumers.

Bentley said consumers are frustrated and confused by their bills. Health systems understand they need to provide pricing and outcomes information and payers like Anthem have created comparison shopping tools for consumers, he said.

That is just the start of a greater move toward consumerism as patients take on more out-of-pocket costs.

“In the new market-based healthcare landscape that is evolving, buyers will look for transparency, accountability for cost and quality across the continuum and consumer choice based on real competition,” Abrams said.

5. More payer/provider partnerships

Payers have pushed more cost controls that are affecting provider bottom lines, but there have been some moments this year when payers and providers have seen eye-to-eye. Providers and payers have increasingly worked collaboratively.

Payer-provider partnerships vary in type, size, location and model. There are 50/50 joint ventures with co-branding, and less intensive partnerships like pay for performance, accountable care organizations, patient-centered medical homes and bundled payments. Oliver Wyman found the partnerships can be broken down depending on providers’ appetite for risk.

They involve national payers like Aetna, Cigna and various Blues and new players in the payer space like Oscar Health and Bright Health.

Bentley said healthcare is becoming a “messy hybrid world” in which payers get more involved in the provider side and vice-versa. Increasingly, providers and payers are more concerned about managing patients’ health rather than viewing them as volume. Bentley said to expect more experiments and partnerships as the lines in healthcare continue to get blurred.

How hospitals and providers should prepare for these trends

Now, the important question for hospitals and providers is: What should we do to get ready?

Here are five suggestions from experts:

  • Strengthen your acute care core. Krishna suggested providers do this by addressing the acute care cost structure, improving care coordination/continuity and expanding efforts to deliver lower costs of care in post-acute care.
  • Think about a patient’s total episode of care, including what happens to patients long after discharge. Wiggins said providers should think like a product manager in industrial America who is responsible for the entire value chain. Stop organizing hospitals into specialty silos and organize around patient conditions, episodes and needs. Providers should also track behaviors and identify failures and inefficiencies in patient care. “With those insights, dive into value-based payment models, especially bundled payments that are most closely aligned with the role hospitals play,” said Wiggins.
  • Consider your approach to value-based care and long-term transition in the market. Krishna said systems need to find the right balance to move into value-based care. Moving too quickly from fee-for-service will reduce near-term earnings, but moving too slowly could leave you behind.
  • Bolster revenue cycle management capabilities to manage both patient responsibility and payer denials, said Krishna. The revenue cycle is a key aspect for hospitals, and that’s morphing as patients take on more responsibility. Tracking down patient payments is quite different from working with payers, but hospitals and health systems will need to make sure they are prepared to handle both.
  • Focus on efficiencies on operating costs. Hospitals and health systems have turned to M&A as a way to improve profit margins. Some systems like Community Health Systems, which is divesting at least 30 hospitals this year, are shedding unprofitable facilities. Health systems will need to continue that process to sell off facilities that don’t make sense financially or don’t fit a health system. “I do think it is time for them to review their portfolio of assets on inpatient and outpatient to figure out is this something we need to own,” Bentley said.
Healthcare

Why Payers are Flocking to the Medicare Advantage Market

Originally published on Healthcare Dive.

Medicare Advantage (MA) and the Affordable Care Act (ACA) exchanges are both federal programs, but they couldn’t be more different in payers’ eyes. Insurance companies are entering or expanding their footprints in the MA market, while simultaneously pulling back or out of the ACA exchanges. They’ve found success in MA. Not so much in the ACA exchanges.

Payers see MA as a stable market. That’s evident in the fact that MA premiums are expected to decrease by 6% next year. Insurance companies like stability. Insurers increase premiums by double digits when there isn’t stability, which is the case with the ACA exchanges.

A large part of the ACA exchanges’ problems is linked to actions and inaction in Washington, D.C. President Donald Trump’s administration stopped paying cost-sharing reduction payments to insurers, cut the exchanges’ open enrollment in half, reduced the exchanges’ advertising budget by 90%, offered proposed rules and executive orders that hurt the ACA and threatened not to enforce the individual mandate that requires almost all Americans to have health insurance.

Congress, meanwhile, has tried and failed to repeal the ACA this year. All of this created an unstable exchanges market, which resulted in payers leaving the exchanges or jacking up premiums by 20% or more for 2018.

Meanwhile, the MA market is a picture of stability and payer success.

  • There is a steady stream of new people eligible for Medicare daily, and many choose MA.
  • People usually don’t switch back from MA plans after leaving traditional Medicare.
  • Payers can easily convert members from traditional Medicare to MA via marketing campaigns.
  • The MA demographics are usually people who once had an employer-based plan, so they know insurance and how healthcare works. That also means they usually don’t have pent-up healthcare needs.
  • The CMS pays MA plans upfront for covering people with high healthcare costs and payers have enjoyed stable MA payments from the CMS.

So, MA members are easier to get and keep, they usually have fewer health needs and payers like the MA payment structure better than the exchanges, which get compensated at the end of the year. All of that equals a stable market for payers.

One-third of Medicare beneficiaries are enrolled in an MA plan this year compared to 25% just six years ago. Enrollment grew by 8% between 2016 and 2017 and the CMS recently announced that MA membership will grow by 9% to 20.4 million members in 2018.

Gretchen Jacobson, associate director with the Kaiser Family Foundation’s (KFF) Program on Medicare Policy, told Healthcare Dive that more than half of those in Medicare will have MA plans in many counties next year.

That growth isn’t expected to slow — especially with Republicans controlling both houses of Congress and the White House, according to Steve Wiggins, founder and chairman of Remedy Partners.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth,” Wiggins told Healthcare Dive.

What more MA members and payers means for hospitals and providers

With more MA members expected next year, the continual shift to MA will have mixed benefits for providers. Jacobson said it’s not entirely clear how more MA members will affect hospitals and providers. “One of our studies recently showed that the provider networks for Medicare Advantage plans greatly varies and these networks will become even more important as enrollment in Medicare Advantage plans grows,” she said.

Fred Bentley, vice president at Avalere Health, told Healthcare Dive that MA’s growth will present a whole new set of challenges for hospitals and health systems.

Bentley listed two issues:

  • Narrow networks
  • Tighter utilization management compared to Medicare’s fee-for-service model

recent KFF report found that 35% of MA enrollees were in narrow-network plans in 2015. Payers have increasingly turned to narrow networks to control costs and improve quality of care. To take part in the narrower networks, physicians usually have to agree to payer demands concerning cost and quality.

“Differences across plans, including provider networks, pose challenges for Medicare beneficiaries in choosing among plans and in seeking care, and raise questions for policymakers about the potential for wide variations in the healthcare experience of Medicare Advantage enrollees across the country,” KFF said.

Another issue for hospitals and providers is that more payers involved in capitated plans like MA will result in more pressure on providers and hospitals to focus on the cost of care, Michael Abrams, partner at Numerof & Associates, told Healthcare Dive.

There’s also the issue of having too few MA payers in some regions. Aneesh Krishna, partner in McKinsey & Company’s Silicon Valley office, told Healthcare Dive the concentration of MA plans in certain markets is a worry for providers. “This concern would be magnified in markets where there is a similarly high concentration in commercial segments from the same payers, and where overall MA penetration is high,” he said.

There’s also a potential payment issue. MA generally reimburses at a slightly higher level than traditional Medicare, but utilization is managed more tightly. Krishna said providers willing and capable of sharing medical cost savings are “likely to see more benefit from the shift to Medicare Advantage plans.” However, MA networks are often narrow, which means providers will need to weigh the relative price/volume trade-offs of accepting MA.

More MA growth in the coming years

MA will have more payers and members than ever next year and the two largest payers, UnitedHealth and Humana, are expected to increase their footprint. Despite new payers showing interest in the market, Jacobson expects the market break down will look similar in 2018. She said small payers entering the market will offset the plans exiting MA next year.

The Congressional Budget Office (CBO) and HHS both project MA enrollment will continue to grow over the next decade. The CBO estimated that about 41% of Medicare beneficiaries will have an MA plan in 2027. UnitedHealth even predicted half of Medicare beneficiaries will eventually have an MA plan.

MA’s popularity with payers is easy to understand — 10,000 people turn 65 every day. The CBO expects 80 million Americans will be eligible for Medicare by 2035.

There’s also an opportunity in the MA market to sign up members quickly. Rachel Sokol, practice manager of research at Advisory Board, told Healthcare Dive that utilizing a strong marketing engine allows payers to grow MA membership. This is quite different from the employer-based market, which relies on payers working with companies.

Potential MA barriers

The MA market is largely positive for payers, but it does face challenges, including:

  • A small number of payers dominate the market
  • The CMS expects improved efficiency and savings
  • There is increased federal oversight, especially concerning possible overpayments to MA insurers

CMS is all in supporting MA plans and its market space. The agency last week proposed a rule with an aim toward improving quality and affordability in contract year 2019. According to the agency, the number of plans available to individuals will increase from about 2,700 to more than 3,100.

The agency is proposing to expand the definition of quality improvement activity to include fraud reduction activities, changing the medical loss ratio (MLR) requirements for Medicare Advantage plans. This change should excite payers because they can add the administrative service to the MLR ratio they are required to spend on healthcare, which is at least 85%. CMS states it believes the service will help combat fraud.

For now, the MA market is consolidated around only a handful of payers. UnitedHealth and Humana have more than 40% of the market. UnitedHealth has one-quarter on its own. KFF said UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers constitute three-quarters of the market.

Also, CMS is imposing improved efficiency in the traditional Medicare program. This could ultimately affect MA. Accountable care organizations (ACO) and bundled payments will “put downward pressure on the benchmarks used to set payment rates for Medicare Advantage plans,” Wiggins said.

This pressure will result in MA payers needing to either cut costs or trim benefits. “The former is difficult, except through narrow networks, and the latter will diminish the attractiveness of Medicare Advantage plans,” he said.

Then there’s the 800-pound gorilla in the market — potential overpayments. The Department of Justice (DOJ) has joined whistleblower lawsuits against UnitedHealth Group concerning MA overpayments. The lawsuits allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer. A federal judge threw out one of the lawsuits in October.

The DOJ is investigating other MA payers for the same reason, and Congress is also interested. Sen. Charles Grassley (R-Iowa), chairman of the Senate Judiciary Committee, sent a letter to CMS Administrator Seema Verma in April questioning what CMS is doing to “implement safeguards to reduce score fraud, waste and abuse.” Grassley said there was about $70 billion in improper Medicare Advantage payments between 2008 and 2013 because of “risk score gaming.”

It’s understandable that investigators and Congress have grown interested in MA payers. The federal government paid $160 billion to MA payers in 2014. The CMS estimated about 9.5% of those payments were improper.

The combination of billions being paid to insurers, the potential for fraud and growing membership numbers make MA ripe for oversight. The stability of the market, particularly compared to other options for payers, however, will mean growth continues.

Healthcare

How Will Instability in the ACA Exchanges Affect Healthcare in 2018?

Originally published on Healthcare Dive. 

Threats, actions and inactions from Washington, D.C., have left the Affordable Care Act (ACA) exchanges teetering and insurance companies fleeing the individual market for 2018. This state of affairs can be harmful for payers, who are sometimes unable to share population risk with other insurers. It’s also an issue for providers, who will see fewer people with coverage and will lose leverage in payer negotiations on reimbursement and provider networks.

The effects of an uncertain individual market are already showing in premium rate hikes, but 2019 will likely be even more troublesome — unless there are policy changes.

Congress has failed to pass major healthcare legislation this year, and critics charge the executive branch has been undermining the exchanges, including:

  • President Donald Trump has ended cost-sharing reduction (CSR) payments to insurers. CSR payments help keep down out-of-pocket costs for lower-income Americans.
  • The Trump administration may not enforce the individual mandate. This would lead to fewer members and cause younger, healthier people to leave the exchanges. The result would be an imbalanced risk pool with not enough healthy people to offset the sickest members.
  • The administration cut the open enrollment period for ACA plans in half this year, slashed its advertising budget by 90% and moved healthcare.gov offline on Sundays, which is when many working people may try to sign up for an ACA plan. These moves could reduce ACA plan membership.

These actions and threats have resulted in some payers exiting the ACA exchanges or proposing more than 20% premium increases.

“Insurance markets work best when there’s stability and when everyone has a pretty good sense of how the market is going to operate. Sadly, we’re not there right now,” Ken Wood, senior vice president of health plan development at Evolent Health, told Healthcare Dive.

During her time at HHS, Chiquita Brooks-LaSure, a managing director at Manatt Health, saw firsthand how much insurers worry about uncertainty. As director of policy coverage at HHS during President Barack Obama’s administration, Brooks-LaSure was there at the start of the ACA exchanges. She recalled how insurers’ No. 1 concern was uncertainty.

Brooks-LaSure told Healthcare Dive insurers care less about specific rules and regulations than not knowing what to expect. They can price bad risk and design products when they know the market.

“Uncertainty has caused a lot of insurers to say (the exchanges are) too volatile,” said Brooks-LaSure.

Only one ACA payer in nearly half of counties in 2018

The ACA market uncertainty almost resulted in counties without any options in the exchanges. Major payers like UnitedHealth Group, Aetna, Humana and Anthem pulled back or completely out of the exchanges for 2018, which left state insurance commissioners scrambling to fill the gaps.

Nevada, Ohio, Missouri, Indiana, Virginia, Tennessee, Washington and Wisconsin all feared that they would have counties with no ACA payers in 2018. Ultimately, state officials and payers were able to get all counties covered. However, nearly half of counties will have only one ACA plan option in 2018, which is far from ideal for payers, providers and members.

Entire states like Kentucky, Oklahoma, Iowa, Nebraska, South Carolina, Mississippi and Wyoming will have only one payer for the entire state. Other states like North Carolina, Georgia, Tennessee, Alabama and Arizona will have most counties with only one payer.

Counties with only one payer option are mostly rural areas. Higher population areas mostly have multiple payers competing for business. For instance, Texas has four or more ACA payers in metro areas like Dallas-Fort Worth and Houston, while the more rural areas have only one or two ACA payers.

Having only one payer doesn’t provide members any choice, leads to higher health costs and gives insurers more leverage over physicians and hospitals. Chris Sloan, senior manager at Avalere, told Healthcare Dive that payers can pretty much say “we want to pay X or you’re not in the network.”

Brooks-LaSure said those insurers also can set prices, provider networks and cost-sharing structures without any competition.

“States don’t have a lot of leverage if there’s only one insurer,” she said. “(The payer) has no incentive to try to compete better because they’re not competing against anyone.”

What does having only one ACA payer mean for hospitals and providers?

Payer contracts are likely already signed for 2018, so reimbursements won’t be affected in the counties with only one ACA payer next year. That impact may come in 2019.

This lack of competition will mean higher premiums. Sloan said Avalere’s research found that premiums are higher with lower competition. Places with one insurer had about 10% lower premiums than those with two and 15% less than places with three or more carriers.

There are three major concerns for hospitals in areas with only one ACA payer:

  • Out-of-pocket costs could increase. Higher out-of-pocket costs, especially in high-deductible health plans, may result in more bad debt for providers.
  • Narrower networks may nudge members toward HMOs, which will affect doctors not in those networks.
  • Decreased ACA plan enrollment will result in people using the emergency room for non-urgent healthcare. If this happens, hospitals will see more bad debt and uncompensated care because of fewer insured Americans.

To prepare for 2018, Sloan suggested hospitals in lone ACA insurer areas review their patient population. Find out the percentage of patients in ACA plans. Think about what would happen if say 10% of those patients drop out of the plans in 2018. Then, determine whether you need to set aside more money for charity care next year.

Wood said providers can also help patients who lose their insurer and need to choose a new plan. “I think the most important thing that hospitals and physicians can do is get the word out for people to get coverage,” Wood said.

Sloan suggested another way to help is for providers to advertise open enrollment in their waiting rooms. Having those patients insured is not only important for their health, but providers’ bottom lines.

What will this mean for payers?

Being the only game in town isn’t exactly great news for insurers either. Sure, they get all the business, but that’s not a positive. There’s a reason the other payers pulled out of the counties.

“There is clearly a reason why plans didn’t want to stay in those counties. There are clearly risk issues,” Sloan said.

Without any competition, the insurance companies don’t have another payer in which to share the risk. This means the remaining insurer will need to find ways to balance the risk and figure out how to reach profitability.

Given the increasing costs and reduced outreach and open enrollment period, insurers will likely see fewer members enrolled in ACA plans next year. Sicker members will remain in the plans. This will lead to higher premiums and out-of-pocket costs, which in turn may make more people leave the ACA plans.

Payers in rural areas especially will need to work on getting enough healthier members to offset those who need the most care, Wood said. Those insurers may also need more innovation, such as using telehealth, to help keep down costs.

“If you’re in a rural area and you’re the only health plan, you’re just hoping for an adequate mix of enrollment,” Wood said.

Sloan will closely watch how the only insurers in counties perform in 2018. He’s especially interested to see if they can manage risk and price plans correctly for the patient population.

“It’s going to be interesting how these health plans do,” Sloan said.

How will payers perform in 2018?

Sloan said one reason some of the larger payers pulled out the ACA exchanges is they’re publicly traded, and need to explain to shareholders why they’re losing money in the exchanges. The Blues, on the other hand, are nonprofit and have a mission to serve the individual market. Sloan said Blues plans cover about 90% of counties with only one payer in 2017.

“The Blues are holding up the market,” he said.

The Blues were in the individual market well before the ACA. So, while insurers with limited individual experience have pulled out of the ACA exchanges, the Blues continue to largely stay in the exchanges except for Anthem, a Blues plan that pulled out of nine of 13 exchanges for 2018.

“The Blues have been in this market and, in general, have been interested in making it work,” Brooks-LaSure said.

Beyond the Blues, another insurer to watch is Centene, which is expanding its ACA plan footprint. The St. Louis-based payer is growing ACA plan coverage in six states and entering three new ones (Kansas, Nevada and Missouri).

Centene has experience in Medicaid managed care plans. Those plans are closer to the ACA plan population than employer-based plans, so that could be a reason company officials spoke positively about their experience in the ACA market. Centene, which has 1.2 million ACA plan members, announced earlier this year it saw 69% growth in the first quarter of the year.

What about 2019?

Will more insurance companies drop out of the ACA exchanges for 2019? A lot can change over a year — or even over a week given the current political climate. Predicting the future is difficult when everything keeps changing.

However, health insurance experts agree that unless Congress passes legislation to provide CSRs — and take the decision out of the hands of the president — more payers will leave in 2019 and members’ costs will continue to skyrocket.

This scenario would lead to counties with no ACA plan options in 2019, more counties with only one payer, difficult negotiations with payers, higher costs for members and likely more bad debt for providers.

One possible solution may come from the states. States are seeking their own reinsurance programs, which helps insurers manage risk. Brooks-LaSure said states could create reinsurance programs to help balance the market.

Ultimately, however, she would prefer a federal solution. “A national reinsurance program would be great. I’m not sure if it’s feasible now,” she said.

Healthcare, Insurance

How Will Expanding Catastrophic Health Plans Affect Providers?

Originally published on Healthcare Dive.

President Donald Trump’s recent executive order to expand catastrophic health insurance plans would offer a low-cost alternative to people in the Affordable Care Act (ACA) exchanges. However, there are serious questions about what they would mean for consumers, providers and hospitals.

The expansion of catastrophic plans would likely result in less utilization of providers and could increase costs as patients put off care until their medical issues are more serious, and therefore more costly. But it could also push providers to improve their patient engagement and embrace the increasing level of consumerism in healthcare, experts say.

It’s a mixed bag for payers as well. These plans could upset the balance of risk pools, but insurers can benefit from offering more options to beneficiaries.

Bret Schroeder, healthcare expert at PA Consulting Group, told Healthcare Dive there is market demand for less-costly plans. Expanding catastrophic plans could help patients who can’t afford more comprehensive plans. The downside is consumers will pay more out-of-pocket costs if they need care.

“If you’re unemployed and seeing skyrocketing premiums, this is an attempt to get care at lower costs. On the other hand, there’s a slippery slope in terms of the financial impact, which can be significant,” Schroeder said.

What are catastrophic plans?

Catastrophic plans are meant as a low-cost safety net from financial ruin. Members in those plans pay little for premiums, but also have the highest deductibles allowed by the ACA. How high? This year, the deductible was $7,150 for an individual plan and next year that increases to $7,350 per person and $14,700 for a family policy.

These plans cover you if you have a serious health issue that surpasses your deductible, but you’re on the hook for out-of-pocket costs until you reach that deductible.

Unlike his executive order to stop cost-sharing reduction (CSR) payments to insurers, Trump’s order including catastrophic plans won’t cause any changes soon. Instead, his action directed the Departments of the Treasury, Labor and Health and Human Services to “consider expanding coverage through low-cost short-term limited duration insurance,” also known as catastrophic insurance. That executive order also trumpeted association health plans.

The departments would need to partake a process of proposing rules and getting public input, which could take years. So, it’s going to be a while before catastrophic health plan expansion happens. Catastrophic health insurance is already part of the ACA exchanges, but it’s not open to everyone. The only people eligible for the short-term plan are those under 30 or with a hardship exemption or affordability exemption. Trump’s order would open up the-short-term plans to more people, possibly everyone.

Currently, the short-term plans hold a small portion of the ACA exchanges market. Out of the 12.2 million people with exchange plans altogether at the beginning of the year, only about 110,000 people were enrolled in ACA catastrophic plans.

People currently enrolled in catastrophic plans are covered for the same essential health benefits as those in the other ACA plans. However, in Trump’s executive order, he suggested catastrophic plans could be exempt from ACA provisions, which could lower costs of the plans, but also offer fewer benefits.

Trump’s proposal also looks to increase the length of the short-term plans. Now, the plans are meant strictly as a stop-gap measure to provide a low-cost option before the person enrolls in a “metal” plan in the exchanges or an employer-based plan. The ACA only allows for three-month catastrophic plans. However, Trump is looking to making them a more permanent option, with people being able to stay on the plans for a year.

What could this mean for providers and hospitals?

Rita Numerof, co-founder and president of Numerof & Associates, told Healthcare Dive studies on high-deductible health plans (HDHP), such as catastrophic health plans, show they reduce healthcare costs, at least in the short-term, but that’s not always positive.

HDHP members often delay care because those plans require the consumer to shoulder more of the cost. Delaying care can lead to long-term health problems for the patients — and less utilization for providers.

“Based on this evidence, we should expect an increase in catastrophic health plan enrollment to result in decreased utilization and lower short-term healthcare costs,” Numerof said. She added that not getting appropriate health services and not adhering to medication can cost more in the long run and lead to more severe health issues over time.

Having more patients pay a larger percentage of their healthcare bills also likely means more uncompensated care and bad debt for providers and hospitals. Stenglein said health systems are already seeing patients paying more out-of-pocket. A recent Kaiser Family Foundation study found that the average deductible for people in employer-based health insurance increased from $303 in 2006 to $1,505 in 2017.

Having people pick up a larger portion of healthcare bills also complicates the billing cycle. Hospitals and providers need to track down payments from patients rather than dealing directly with payers. That’s harder on health systems and more time intensive.

Expanding catastrophic plans may cause issues for providers, but reimbursements to hospitals and providers likely won’t see a change. Numerof said healthcare companies have already seen downward pressure on reimbursements and she doesn’t see that ending, but catastrophic plans won’t quicken that.

What does this mean for payers?

Beyond helping people between jobs, Trump views catastrophic plans as a solution to those who live in counties with only one insurer offering ACA exchange plans, people with limited provider networks and those who missed open enrollment. Nearly half of counties will only have one ACA exchange payer in 2018.

Numerof said the executive order looks to promote competition within the health insurance market and offer more choices for consumers. Numerof said the order is a step in the right direction regarding healthcare consumerism.

There are questions as to whether catastrophic plans could help insure more Americans. Gallup reported recently that the percentage of uninsured Americans increased for the first time since 2014 and is now at 12.3%. Numerof said it’s difficult to know whether expanding short-term plans might improve those numbers. “Ultimately, if the goal is to ensure everyone has access to healthcare in this county, we must first focus on bringing down the overall cost of healthcare,” she said.

Chris Stenglein, CEO of Provider Web Capital, which works on both the practice and patient side of financing, told Healthcare Dive that catastrophic plans could help people who are currently uninsured. “If you don’t have insurance today and you have a high-deductible plan, it’s better than nothing,” he said.

For payers, there is a worry that expanding catastrophic plans may result in healthy people abandoning other types of plans. This could create an unbalanced risk pool in the other plans, which will lead to higher costs for the remaining members.

However, UnitedHealthcare, for one, is speaking positively about catastrophic health plans. During a recent third-quarter earnings call, UnitedHealth officials said they are interested in both types of plans in Trump’s executive order (short-term and association plans).

What can providers and hospitals do?

More HDHPs and catastrophic plans could spark further healthcare consumerism. Numerof said more patients will demand data from providers so they can make better healthcare choices. That information could include costs and quality data for facilities, physicians and treatment options.

Consumers already have difficulty finding information about cost, quality and outcomes. That needs to change, she said.

“Consumers that are responsible for a greater share of the healthcare dollar will also expect a more convenient healthcare experience — from scheduling initial appointments and the intake process to the discussion and scheduling of follow-up treatment,” she said. She added that patients will likely prefer getting care at lower-cost settings, such as ambulatory surgery centers, retail clinics and even within their own homes. That means fewer dollars for hospitals.

Healthcare consumerism is already forcing hospitals and health systems to rethink their business models to remain viable, Numerof said.

“(Healthcare delivery executives) need to place less emphasis on site-level reimbursement and more emphasis on finding new and innovative ways to increase market share. One way to do this is by shifting elements of care delivery away from high-end, expensive settings to more convenient and affordable options for consumers,” she said.

Stenglein said greater consumerism is an opportunity for providers to engage patients. One way to accomplish this is to offer multiple payment options, including extended billing options that give patients a longer time to pay for services, he said.

Stenglein suggests caregivers remain focused on providing healthcare and delegate financial tasks to administrators, front-end staff or outsource to another company. What’s important, he said, is for providers to innovate and practice medicine and let others handle the financial aspect.

Stenglein offered these solutions for providers:

  • Implement more affordable tech-based health solutions like text messaging services or appointment scheduling apps
  • Provide counseling with onsite billing staff to make bills easier to pay and understand
  • Supply patients with estimation tools from practice management & EHR systems
  • Consider practice financing options to bridge any revenue gaps from patients
  • Offer flexible patient financing options — including longer terms — to provide more manageable solutions for families by offsetting costs

Despite the potentially negative impacts to providers and hospitals, Numerof said catastrophic plans are an opportunity for hospitals and providers to compete for business and help patients make better healthcare decisions.

Numerof said providers that will benefit from more catastrophic plans include those that:

Offer patients alternative products and services

  • Demonstrate and communicate economic and clinical value through the use of costs and outcomes data
  • Manage variation in cost and quality across the continuum of care
  • Operate efficiently
  • Show transparency about cost and quality of services

“This is an opportunity for those organizations that want to move to total cost of care and are focused on caring for patients in a more comprehensive way to compete for patients,” said Numerof.

Healthcare

Trump Eyes Executive Order to Cripple Individual Mandate

Originally published on Healthcare Dive.

President Donald Trump’s administration has reportedly prepared an executive order to end the Affordable Care Act’s (ACA) individual mandate. Trump may direct his departments to not enforce the mandate and could allow for more hardship exemptions that let people avoid fines for not having coverage.

Trump is reportedly not following through until he sees whether an individual mandate repeal winds up in major tax legislation. Republicans are trying to pass a tax bill by the end of the year, but they need to find ways to fund the $1.4 trillion tax cut over 10 years. One way is by repealing the individual mandate, which could save $416 billion over a decade.

 

House Speaker Paul Ryan (R-Wis.) said the individual mandate repeal isn’t part of the current tax bill, but leaders could add it to the legislation.

The Congressional Budget Office predicted earlier this year that about 15 million Americans would lose coverage over 10 years and premiums would increase 20% for individual plans without the individual mandate.

Scrapping the individual mandate would result in fewer people seeking health insurance and fewer government subsidies to help people buy coverage.

Repealing or seriously weakening the mandate would also result in healthier people leaving the insurance markets. Healthier members help offset the sickest members. Without that offset, the health insurance markets will become unbalanced, which would likely result in higher premiums and out-of-pocket costs for those who maintain coverage. Ending the individual mandate would also cause more payers to flee the ACA exchanges.

Increasingly frustrated by the Republican-led Congress not passing ACA repeal legislation this year, the president has taken other ways to chip away at the ACA law. One of his first executive orders in January requested the HHS “exercise all authority and discretion” to delay ACA provisions that impact members and states financially.

That order led to the CMS’ recent proposed rule that would allow states to bypass the ACA’s essential health benefits (EHBs) and let them decide on their own EHBs. It would also remove regulations that require payers in the ACA exchanges to pay a certain amount of premium dollars on claims. Right now, the ACA requires payers in the exchanges to uphold at least an 80% medical loss ratio. In the proposed rule, states would also have more influence over deciding what’s considered a qualifying health plan.

Trump additionally signed an executive order to allow small businesses and groups of people to come together to buy insurance as an association health plan. That order also expands short-term catastrophic plans, which offer barebones insurance coverage with high deductibles. Currently, only young people and those who meet hardship requirements can buy catastrophic plans in the exchanges. Trump’s order could open catastrophic plans for everyone.

In addition to the executive orders, the Trump administration has slashed the ACA advertising budget by 90% and cut the open enrollment period in half this year.

ACA opponent on Capitol Hill haven’t been as successful as the president in weakening the law. The House could add an individual mandate repeal to its tax bill, but the legislation may face impenetrable obstacles in the Senate. The Senate has already failed to pass ACA repeal legislation multiple times this year. Trying to wipe out a key plank to the ACA in the Senate likely won’t happen.

If Congress fails to repeal the individual mandate, the president may once again take aim at the ACA. The president’s previous executive orders and policies have wounded the ACA, but harming the individual mandate could be the final trump card that topples the ACA exchanges.

 

Healthcare

What Will be the Fallout from Anthem’s New Imaging Policy?

Originally published on Healthcare Dive.

A movement health systems have been dreading is gaining speed, as commercial and government payers are implementing more and more policies that restrict reimbursements for services that can be performed outside a hospital. Anthem’s recent announcement that it will no longer pay for MRIs and CT scans performed at a hospital in an outpatient basis could be a harbinger for what’s to come.

Several hospitals and health systems have already taken steps to recapture revenue lost to these demands for pushing patients outside their walls whenever possible. But with the industry already suffering from reduced patient volumes and lower reimbursements in general, policies restricting the services hospitals count on for steady cash flow could be a major disruption.

Anthem’s new rule

Anthem plans to implement the policy in 13 of its 14 states by March 2018, with only New Hampshire exempt from the new policy. The payer has already implemented it in nine states.

Hospital officials are predictably concerned about what this could mean to their margins. Higher in-hospital reimbursement for MRIs and CT scans made them profitable, even though they’re not a major service for hospitals. One estimate said some health systems collect more than half of their profit from imaging services.

Anthem’s new policy is part of a payer movement to reduce healthcare costs by pushing patients to get care at locations less expensive than hospitals. That’s also true for another controversial Anthem policy to stop paying for Emergency Department (ED) care it deems unnecessary.

Trying to cut healthcare costs is nothing new for insurance companies, or the industry in general. For many years, payers and employers have created health plans that reward members for getting care at less expensive locations. That benefit design has resulted in patients paying more to go to specialists rather than primary care physicians and going to EDs rather than places like urgent care centers. Payers have also nudged members to get more services as an outpatient and avoid being admitted to a hospital.

Those cost-cutting efforts seem to be working. Altarum’s Center for Sustainable Health Spending’s recent Health Sector Economic Indicators reported overall national health spending growth decreased in the second quarter. A major reason for the slower spending growth was connected to hospital spending growth, which was only 1.3% rather than the expected 4% growth rate. Hospital spending growth was the slowest major healthcare category over the past year. Hospital spending increased in June by 0.8%, which was the slowest growth rate year-over-year since January 1989.

While payers have looked for passive ways to re-direct patient care in the past, Anthem’s two new policies extend beyond benefit design and go to the heart of hospital funding. In recent years, hospitals overcame lower Medicare reimbursements by making more on imaging and ED services, which have been steady profit centers. Now, hospitals in 13 states will see that funding dry up.

Anthem said its new Imaging Clinical Site of Care program dovetails with the Institute for Healthcare Improvement Triple Aim Initiative, which seeks to improve the patient experience, improve population health and reduce per capita cost of healthcare.

Anthem subsidiary AIM Specialty Health is administering the program to identify when hospital outpatient services for services like MRIs and CT scans are medically necessary. Lori McLaughlin, Anthem communications director, told Healthcare Dive getting services in a “clinically appropriate setting” like a freestanding outpatient clinic or imaging center is less expensive and clinical research shows those locations are safe.

Anthem said the policy will result in lower healthcare costs for members and the healthcare industry overall. Imaging services in a hospital can cost $1,000 more than a freestanding clinic, and that cost could fall to the patient if they haven’t met their plan’s deductible.

Anthem said AIM Speciality Health will only review the level of care if there are at least two alternate freestanding imaging centers nearby. So, imaging would be approved in rural areas that might not have more than one option for an MRI or CT scan, according to the payer.

McLaughlin said Anthem doesn’t know how much it has saved or how many hospital scans it has reduced because the plan is still so new. With the imaging policy set, McLaughlin said Anthem will continue to look for more ways to save healthcare costs.

“Anthem’s primary concern is to provide access to quality, safe and affordable healthcare for our affiliated health plan members. We’re always looking at new approaches to ensure clinical quality and improve affordability and we are committed to reducing overall medical cost where possible when the safety of the member is not put at risk,” she said.

Will other payers follow suit?

Anthem is a major insurer in more than a dozen states, so any decision will have a ripple effect in those areas and beyond.

Lea Halim, senior research consultant at Advisory Board, told Healthcare Dive other payers will likely watch how Anthem’s policy plays out.

“Will Anthem get a lot of pushback from patients and employers? Will hospital lobbies succeed in getting state governments to force Anthem to roll back the policy? If Anthem does not face, or successfully overcomes these types of challenges, other payers may very well follow suit,” Halim said.

Payers are working to bring down costs in other ways, too. One example is insurance companies buying surgical centers, said Gregory Hagood, senior managing director at SOLIC Capital Advisors, which works with hospitals on mergers and acquisitions. Another example is payers creating networks that encourage members to use alternative (i.e., less expensive) services.

Hagood expects payers will continue to look for more ways to cut costs, including reviewing elective services performed in hospitals. “We’re seeing all insurance companies trying to create an alternative network where, theoretically, the quality of these centers are what you get in the hospital, but at a lower rate because you don’t have all the overhead of hospitals,” he told Healthcare Dive.

Private companies like Anthem aren’t the only payers creating policies that cut costs and affect hospital finances. The CMS also recently announced a proposal to make costs more site neutral. With this change, CMS would pay services at off-campus hospital outpatient departments by 25% of regular outpatient rates (while increasing outpatient payments overall by 1.75%). The CMS expects the proposal would save about $500 million this year. The American Hospital Association has spoken out vociferously against the proposal.

Medicare is also proposing hip surgeries in surgery centers in addition to just hospitals. Knee and hip surgeries have the highest margins for hospitals, but Medicare is pushing more volume to outpatient services.

“Those are huge dollars you’re talking about there,” Hagood said. “It’s another where a hospital’s lucrative services like joint replacement and imaging are starting to get squeezed from both sides — from CMS and private payers.”

Impact to hospitals

Anthem’s size and importance in the 13 states where it is active means its imaging policy will affect hospital finances. However, Paul Keckley, healthcare researcher and managing editor of The Keckley Report, told Healthcare Dive many hospitals are already competing with freestanding and physician-owned facilities. So, though Anthem’s policy will affect hospitals, Keckley said those facilities are already “accustomed to the downward pressure on their margins.”

Hagood estimates that MRIs and CT scans make up only 5%-10% of a hospital’s business, but those services are profitable and have huge profit margins for hospitals.

Hagood said an MRI for a knee or shoulder would cost about $500 on average in a physician’s office, but that would swell to somewhere between $1,000 and $2,000 at hospitals in many markets. This means hospitals are making an average of $1,000 more on each procedure, he said.

Spread over a year, that’s about $800,000 more profit for hospitals, which these facilities stand to lose with Anthem’s new imaging policy.

Halim said hospitals stand to lose the reimbursements from Anthem, but those with their own freestanding imaging facilities that bill at a lower rate already should be able to capture a portion of the lost revenue.

Beyond hospital finances, the policy change would impact patients both positively and negatively. Anthem patients in a high-deductible plan will pay less out-of-pocket for an MRI or CT scan at freestanding facilities. However, patients not in a high-deductible plan and who may not pay much out-of-pocket anyway, may feel inconvenienced if they’re told they can’t get the services at their local hospital. Plus, if the ordering physician doesn’t direct the patient to a freestanding facility and the person gets the services at a hospital, Anthem could deny the claim and the patient will get stuck with the bill, said Halim.

What will hospitals do?

Hagood doesn’t think hospitals will make up the lost funding in other areas. Instead, he expects staffing cuts and hospitals squeezing vendor contracts for supplies and maintenance.

One way hospitals could respond is by working with the payer to get a little more money for imaging than a freestanding imaging center, but much less than what Anthem has been paying hospitals. Hagood said hospitals may get a “modest premium,” such as maybe get another $100 or $200 for a scan instead of the extra $1,000 Anthem has been paying them.

Halim said hospitals may accept the outpatient payment rate for hospital-based facilities in exchange for a policy waiver. Plus, they may invest more in their own freestanding imaging centers.

“If Anthem represents a significant portion of their revenue — and if the new policy sticks — that may lead some hospitals to consider investing in freestanding facilities so that they can still capture Anthem’s outpatient imaging business,” Halim said.