8 Things CFOs Must Know About Health Reform

Whether a Chief Financial Officer is running the fiscal operations of a hospital system, an insurance company or a company that simply employs individuals with health coverage, the decision-making process for sustainability is changing at a rapid pace. However, after years of hearing about reformation in the health system, broad, sweeping and revolutionary changes are finally happening. Major shifts are also occurring in the population, as well as technological advances that will disrupt the entire premise of a four-walled institution for care and the very model we use for health delivery.

Health care in the US is a business – a multi-billion dollar business – and understanding the financial implications of health reform will make or break every CFO. Knowing that health access, demand, quality and payment changes are inevitable there is an immediate need for CFOs across the ecosystems to embrace and plan for transformation.

1. You have too many beds.
   While many hospital leaders won’t accept this at face value due to lengthy wait times, surgical demands and desire to shift beds, the truth is there are too many beds in a lot of hospitals. Between transferals to the outpatient setting and telemedicine, the need for expensive inpatient beds is declining. Additionally, hospital leadership are increasingly finding that they face problems with state authorities when they apply to move beds. Most recently at the University of Chicago, where 338 beds were being used for a 304-person utilization pattern, the state rejected a University application to move surgical beds.
2. Food, housing and transportation of patients is your problem.
   As Americans begin to define and attempt to tackle community and population-based care, the access individuals have to quality food, affordable housing and efficient transit matter.  No one living in a food desert will have the same health outcomes as someone living next door to a Whole Foods, just as an individual with a new car will always be more consistent in making appointments and picking up prescriptions than someone who has to access three public transit buses for the same activities. Real patient engagement and activation begins with understanding the environment of each patient.
3. Your patient demographics are shifting, and so too should your leaderships. As the US continues to brown, hospital leadership must be representative of the population to understand and meet need. At a recent Modern Healthcare Top 25 Minority Executives session, an awardee remarked that the United States is now a country of minorities, and “our leadership as minorities is our future for health outcomes.” With this in mind, it is inevitable and paramount to success that the leadership of any organization resembles and represents those it serves, so it makes the financial investments and decisions that influence the community.
4. More bodies in beds will never work again.
   Value-based purchasing means that a warm body in a bed not only drives costs higher for the payer, but that the longer a patient remains in the hospital – or the more often they return – the more penalties that accrue. Therefore, the goal should not be for more bodies, but for cost-effective bodies. Depending on the community serviced, this can mean desire for more Masters Athletes, specialized services or elective services. Additionally, as we shift to a world where technology enables more clinical procedures and recovery to be done in the outpatient setting, or at home, and expensive inpatient procedures decrease in volume and reimbursements, hoping to fill beds is futile.
5. Alignment with physicians is nonnegotiable.
   No leader can effectively attain a goal without buy in from those who carry out the work.  However, it is important to be aware that “physician alignment” is a term that causes almost all physicians to turn and walk the other direction out of fear that this indicates buying their autonomy and dictating their day-to-day, moment-to-moment ability to practice. According to Healthcare Financial News the implications of physician behavior are so important in 2014 that more revenue than ever will be spent recruiting physicians who see the world the same way you do, which is not very different from how corporation CFOs think about their employee hires.
6. As consumers take on more and more pay responsibility, unexpected payment shifts will keep occurring.
   Many experts estimate that defined contribution, health insurance exchanges and the growing individual health insurance market means that patients will become more informed about spending their health care dollars, and therefore, more unwilling to spend. The future of reimbursements and pricing strategies is presently a puzzle wrapped in an enigma because of extreme uncertainty. However, it is general knowledge that Medicare and Medicaid reimbursements are going to continue decreasing, with the American Hospital Association and Moody’s already estimating an, “unequivocally negative” outlook for hospitals on the reimbursement fronts.
7. Technology and data utilization can save you money.
   While the learning curve with new technology can be excruciating and the meaningful utilization of collected information seems daunting, everything from workflow to health activities and employee/patient engagement can be monitored – and altered in real time – using new technology. Moreover, the more information that is known today, the better predictive analytics and behavioral change that can be made tomorrow. However, as the amount of technology available to leadership continues to grow exponentially, the purchasing of new tech will be a balancing act between what is a passing fad versus what is sustainable and transferable.
8. Your EHR is going to cost you. Big time.
   Now this seems obvious to most hospital CFOs, as they have already seen the initial price tags that come with implementing a “holistic” electronic system. However, the most costly elements may not yet be realized. As mergers and acquisitions continue, technology advances and EHR capabilities increase, the need to refresh systems will continue.  At present there is not one system that meets end-to-end patient or provider needs, leaving the ecosystem open for further disruption, which inherently includes more interoperability, more upgrades, more plugins and more costs.

 

Health Insurance Benefits – Can You Have It Your Way?

As the percentage of large employers that consider a shift to defined contribution and/or private exchange increases, the number of options – and flexibility in those options – must also increase. Consideration for those options rose last year from 14% to 18% among large employers (500+ employees). Further, those who are considering the move to a private exchange want to because of their desire to offer more and better plan options, as well as realize cost-savings. Shifting to the defined contribution framework allows employers to moderate their subsidies to employees, and employees to make better trade-offs among plan options. Additionally, by increasing choices, defined contribution makes it easier for employers to integrate their health incentive and wellness programs by layering them “on top” of the defined contribution.

With this economic opportunity in the market, it is imperative that health plans and enrollment become more tailored to individual and company needs, in addition to the one-size-fits-all solutions of the past and present.

Private health exchanges, according to bswift, like their new Springboard Marketplace, could be the platform to give consumers that greater choice and increase individual decision-making. Given that most large employers who are considering a defined contribution will remain self-insured, bswift is taking a calculated gamble that employers will continue to invest in cost management solutions such as incentives, wellness programs, consumerism as opposed to simply shifting costs to employees under the “fix it and forget it” cost sharing approach suggested by some competitors.

Customize Your Cart

The Springboard Marketplace that bswift has created has the online functionality healthcare.gov could only have dreamed of, and the choice construction of a grocery store.  In fact, the terminology the company uses alludes to “Stocking the Shelves” with your benefit choices and “Shopping” for your ideal group of benefits. This is all done through the interactive benefits advisor, Emma, who walks employees through an online step-by-step process to fill their cart with health care options.

For those aware of bswift’s background as a tech company it may not be a surprise that the software and services offered are aimed at streamlining a very sophisticated system, and making the user experience easy. And for those that know the company’s Executive Director of Exchange Solutions Brad Wolfsen, the shopping experience and ease of transition into a new set of consumer options will easily resonate. Mr. Wolfsen, before joining the team, built and led Safeway’s wellness and retail strategy programs, and was the President of Safeway Health.

According to Mr. Wolfsen, the real benefit he sees to bswift’s products are that they, “allow employers to focus on equity for employees and shift to a retail view on providing health benefits.”  Or, as the Society for Human Resource Management labels it, From Parenting To Partnering.

New Plans Equal New Decisions

With a growing demand for health benefit options that resemble a choose your own adventure book, but with a set amount of money to spend, the development of software must also be functional for employers and employees. The Springboard Marketplace has been constructed so that functionality can simply be turned on and off, so that choices are simplified. Additionally, since there is not a standard approach to benefit choices and many legacy systems that have to be revamped due to mergers, acquisitions and partnerships, greater automation for employers means less paperwork for HR departments. By making workflow, reporting and administrative work more efficient through automation, cost-savings increase even further.

“The best and brightest clients are currently driving what is in the bswift system now,” says Mr. Wolfsen. “As we move towards expanding the suite of benefit options and meeting compliance standards, we are also investing in the shoppers experience.”

He, along with his colleagues at bswift, believe that their tech company is nimble in ways that others are not, and that with the help of their platform and Emma, more and more employers will begin the migration to defined contribution and private exchanges. If true, that growing shift could redefine how health benefit decision-making is done by employees in the future.

 

Sometimes, Even If You Like Your Insurance, You Can’t Keep It

Perhaps one of the most frustrating parts of being President is that your every waking moment is documented. Consequently, when you say something, and it subsequently turns out not to be quite true, you can expect that your opposition will take advantage of the opportunity to make you look like the American people can’t trust you. That’s precisely what has happened in the last week or two as some 3.5 million individuals report receiving cancellation notices from their insurance company, despite President Obama’s assurance early in the health reform debate that if you like your coverage, you can keep it.

There’s no disputing that the President overstated things and that his words are being used against him, but the issue is a bit more complex than that, and that’s what I’m going to address here. In particular, I want to move past the idea of broken Presidential promises and focus instead on the details of why insurance companies have been cancelling policies and what it means for the individuals affected.

The simple explanation is that the plans that were cancelled did not meet federal requirements under the ACA. This could happen for a number of reasons, but the primary one is that the plans did not meet the minimum actuarial value of 60% and/or did not cover all of the essential health benefits outlined in the law. That means, to put it even more simply, that individuals covered by these plans would be underinsured. But to people who were fortunate enough not to have to test the limits of their coverage, the inadequacy of their benefits isn’t apparent. In fact, one might argue that the coverage was perfectly adequate in practice, if not in theory.

So what’s happening now? The ACA is making these less than adequate plans illegal, and requiring individuals to obtain more robust coverage. Of course, the big concern among consumers is that this may be more expensive. Whether or not that’s the case will depend on numerous factors like where the individuals live, how much money they earn, and whether affordable coverage is available to them through an employer. Depending on the answers to those questions, individuals may find that they are eligible for Medicaid at no cost to them, eligible to purchase heavily subsidized private coverage through the health insurance exchange, or able to obtain affordable coverage through their employer. For many individuals, the price they’ll pay for insurance will go down. Of course, for others it will increase. But in all cases, the individuals will have substantially better coverage that will be there for them in the event that they ever need it, and that’s the true purpose of having insurance.

For those who want a more detailed understanding of the issue, I highly recommend two pieces by Jonathan Cohn. The first will provide you an overview. The second will give you some anecdotal insight into the complexities of the issue.

 

 

Health IT Thrives With New Startup Companies

As the health insurance exchanges opened for enrollment just days ago, the federal government, including the President and the Department of Health and Human Services (HHS), had to acknowledge that it was not technologically ready. The IT infrastructures by which individuals tried to sign up for health insurance crashed and were unavailable throughout the first day and the weeks after. Those same sights were supposed to track enrollment, but proved to not be as well tested and far more expensive than originally anticipated. However, despite the shortages and disappointments with government IT readiness for exchange websites, there was a surge in US-based startup companies that demonstrated just how innovative and forward thinking technology can be in the health care arena. Nine new companies, all curated through BluePrint Health were introduced at that same time three weeks ago on “Demo Day,” and were ready to show the new frontier of health care, and how to transform care delivery through technology.

Health IT Incubators Driving Innovation

Blueprint Health is an accelerator program geared towards health care companies that want an intensive three-month mentorship to help find customers and capital, and learn from leading industry experts. The companies that are selected for the program range from individuals with a clever value proposition to well-established organization leaders that have existing customers, investors and are generating significant revenue, but with new ideas. According to Doug Hayes, a Principal at BluePrint Health, “We are seeing an acute need for innovation at the seed stage of the health care ecosystem. With top-down changes in regulations and quickly shifting incentive structures, the most successful companies will be those who can nimbly adapt.”

He asserts that what makes BluePrint successful is that it is, “uniquely positioned to attract, identify, and support the entrepreneurs that fill the gaps of service left in the wake of massive industry changes.” The accelerator program promotes the mindset that new businesses should not have to focus exclusively on fundraising. Hayes says, “Building a company is extremely difficult, and a founders’ time is best spent on customer and product development, not fundraising.” With that mentality, BluePrint does not use many pre-established filters when evaluating the near 1,000 applications it receives each year, but instead concentrates on business models.

The nine particular startup companies that were cultivated during the summer of 2013 range from Healthify, which focuses on creating platforms that connect and standardize medical homes to treat social needs to Board Vitals, an organization that improves the testing system of our nation’s providers. Each of these new businesses gives hope to innovators and entrepreneurs.

The Companies

Artemis

Artemis is a health care analytics firm specializing in benefit claims. With employers spending billions of dollars on health care, benefits managers need more information than the historical, once a year paper reports of the past. With the Artemis platform, benefit managers have graphical, real-time updates for claims and assessments. The creators claim that that deploying its tactics not only saves money for organizations, but also heads off future costs through prevention and determination of key cost drivers.

Board Vitals

Board Vitals brings together publishers, universities, and top physicians into a single digital platform for medical specialty education, with pass rates that are 10% higher than the national average. According to co-founder, Dan Lambert, “Content is continually voted up and down, meaning that the very best material comes to the top and outdated or incorrect content is voted out.” His partner, Andrea Paul added that their aggressive, but attainable, goal is to have materials for 20 of the 35 specialties in 2014.

CredSimple

The founders of CredSimple created a system to make the mandatory credentialing of physicians cheaper and more efficient. According to co-founder Garry Choy, at present, credentialing takes two to three months per physician and hospitals spend millions a year on the routine, but inefficient process. CredSimple uses an impressive 214 data sources to verify credentials, saving all provider parties time and resources, with downstream positive implications for entire hospital systems.

Genterpret

Pharmaceutical companies strive to gain pricing power and market share using genetic information about how patients respond to drugs. Genterpret, started by two system biology PhDs, links genetics to drug responses in one-third of the time (six months) of previous genetic testers. The faster turn-around time and vast outreach program created by the founders suggests that the Genterpret technology can soon be applied to thousands of diseases, improving health outcomes and saving money.

Healthify

After years of working in Baltimore health clinics, the creators of Healthify joined forces to start a company that addresses social needs such as food insecurities to improve health in communities. Medicaid spending on medical homes averages about $15 billion, much of which is spent on social needs. The data collected by Healthify will become vital as medical homes and accountable care organizations begin to address social needs as integral to overall health and well being.

ReferBright

ReferBright helps health practitioners with digital marketing in a world full of medical advertisements. The goal, according to the founders, is to improve outreach and referral rates for various kinds of professionals. Additionally, the automated system makes updating personal information easy for practitioners and makes vetting of practitioners easy for hospitals, knowing the information on ReferBright has been inspected and verified.

SpotMe Fit

According to co-founder, Jarrod Wolf, SpotMe, “allows employers to reward their employees for attending any fitness facility, running in races, or for using fitness apps and devices. When the barrier to incentives are removed–like eliminating paperwork and providing immediate rewards–and employees are given the flexibility to choose how they engage in fitness, then program participation rates skyrocket.” This focus on wellness and fitness programs is to improve health outcomes and lower health costs through incentives, monetary and physical.

Staff Insight

The premise of Staff Insight is to increase workforce productivity, specifically through hospital leadership being able to understand and staff facilities to the optimal levels. The company aims to use real-time dashboard to identify staffing levels in units, test baseline productivity, set new benchmarks for productivity and ultimately save revenue for facilities by optimizing productivity. The founders claim that early adopters have already seen a two to four percent increase in productivity.

WellTrackOne

WellTrackOne conducts a Medicare-approved personal assessment that hospitals can use to track patient data and identify potential risk factors. To lessen the administrative burden and disruption to the workflow, WellTrackOne claims that it can integrate all electronic health records, from multiple systems to improve data and health outcomes.

The Future Of Health Technology

Despite the federal governments success in getting support from professional athletic organizations and celebrities like Jennifer Hudson, the technological infrastructure just wasn’t ready for consumer usage. In contrast, Doug Hayes says that a key reason BluePrint startups were ready on Demo Day is due to the mentor community and outreach.

He claims that a by-product of their focus on business models and portfolio is that it, “includes many enterprise solutions. The long sales cycle and disparate channels within health care makes enterprise sales an especially tough nut to crack. However, our experience within enterprise and our mentor community, 150 strong, makes us especially well positioned to help founders sell into large payers, provider networks, pharma, and other enterprise customers.

 

What Will You Pay for Insurance Under ObamaCare?

Since it was first debated, one of the major criticisms of ObamaCare was that it was going to make the cost of health insurance skyrocket. And, in turn, many critics of the law who happen to own their own businesses, expressed concern that they would be forced to pass on these higher costs to their consumers. We were told that Papa John’s large pizzas would cost an additional 14 cents because of higher insurance premiums. Consequently, Papa John’s and Applebees—whose CEO is also an outspoken critic of ObamaCare—have seen the public’s opinion of them drop dramatically. Of course, the White House released numbers to dispute the notion that employers would be hiring fewer full-time employees to avoid paying for their health insurance. But the best news of all is that we can stop speculating about what will happen to insurance premiums under ObamaCare, and start looking at actual data.

This is precisely what the non-partisan Kaiser Family Foundation did in a recently released report on 2014 health insurance premiums in 17 states and the District of Columbia. What they found is that health insurance premiums aren’t that high. In fact, they are lower than the Congressional Budget Office projected that they would be. Of course, that doesn’t mean that rates won’t have increased from the year before, as Avik Roy points out in arguing things from the consumer perspective. But Roy also oversimplifies things, because he fails to take into account the net cost to the consumer in light of the fact that many–if not most–Americans, will receive federal subsidies to help them purchase coverage. On this point, Wonkblog’s Sarah Kliff does a terrific job of walking through different scenarios, based on an individual’s age, income level, and choice of insurance plan, to calculate actual monthly premiums in 2014 after the subsidies are taken into account. The news is generally quite good: A 40-year old woman in Seattle earning $28,725 a year will receive a $90 monthly subsidy, which means she can get a silver plan for $193 a month or a bronze plan for $123 a month. As insurance goes, that’s awfully inexpensive. And, Kliff points out, if the same individual was 60-years old, she’d effectively get an even bigger subsidy, worth $408 a month, so that she can get a silver plan for the same $193 a month, but would be able to get a bronze plan for just $44 per month. Folks, that’s $528 a year for health insurance with a 60% actuarial value.

These rates are low, and by October 1, we should have actual premium pricing for all 50 states, so more analyses like these can be done, and we can start outreach and enrollment efforts to educate people about their options and what various insurance products available in their state will cost them. What we won’t exactly know–a point Kliff makes in her own piece–is what people are willing to pay or what they consider “affordable” as the Affordable Care Act has implied care will be. This is more subjective, because it depends on how people prioritize their health, and thus their demand for health insurance, and how they budget the rest of their income. Overall, though, the early news seems positive, and suggests that for many people, affordable health insurance–and the health care it buys–is just a few months away.

 

Say Hi To Oscar: The New Company that May Change Health Insurance

In five weeks from now, the Patient Protection and Affordable Care Act (ACA) mandates the opening of health insurance exchanges around the country. At that time New Yorkers will be introduced to an innovative way of thinking about health care: Oscar. Three friends, and technology entrepreneurs, teamed up to do something that has been inconceivable to date—create a start-up health insurance company to take on conventional health insurers on the NY exchange. Oscar co-founders, Josh Kushner, Kevin Nazemi and Mario Schlosser, plan to change the health insurance industry through technological interfaces, telemedicine and real transparency. Their goal is to redesign insurance to be geared toward the user experience, to make patients seek out their insurer before their doctor.

Americans do not usually think of health insurance as an intimate part of the care process. When sick, individuals do not call their insurance company for care or support. The health insurance industry is considered confusing, at best. The ACA however, presents an opportunity for the reformation of health insurance as we know it, not because of its disappearance, but by making it an integral part of receiving quality care. According to one co-founder, “We want consumers to feel like they have a doctor in the family.” That family doctor he speaks of is Oscar.

Oscar will have one plan in each of the ACAs metal-tiered categories, and additional plan options for the Bronze and Silver tiers. Although Oscar will have some of the familiar pillars of the health care industry like co-pays and deductibles for in-person visits, it introduces new elements like free telemedicine, free generic drugs and online price comparisons. Oscar health insurance will pioneer “a consumer experience, not a processor of claims,” explained Nazemi, with the goal of simply guiding individuals through the complex health system in an integrative and safe way.

Customer Service: What Oscar Can Do For You

Through user experience, customer service and innovative care options, Oscar will attempt to expand the role of the health insurance company to a health services provider. Oscar is being developed not just to cover medical costs, but to be the primary place to get the medical assistance a patient needs at any time.

When Oscar opens on the New York insurance exchange on October 1^st, there will be a focus on function, ease of use and design. When a patient logs into HiOscar.com, he or she will want to keep using it like a new iPhone or laptop, or so the creators hope.

For frequent conditions or issues, patients will be able to find treatments right on the website and have 24/7 access to a physician through their unique partnership with the telemedicine company, TeleDoc. Additionally, the creators claim there will be no need to discuss prescription refills in-person with an expensive physician when a user can have “one-click refills” through a health records feed that resembles a Twitter timeline.

Oscar will also offer services at many hospitals and retail locations such as New York CVS CareMark. The partnership that Oscar and CVS have is so strong that CVS is building sites for Oscar. These added locations will serve as one method of addressing the physician deserts that exist in the state. The company also contends that Value Options is a strategic partner with the goal of making mental and behavioral health care more accessible for the newly insured.

Not everything will be brand new though. Oscar will offer several types of plans like traditional insurance companies, but the approach is slightly different. As Schlosser explains, “packages will be bundled like AT&T, which consumers are now accustomed to.” The intention is to eliminate many of the arcane rules of the insurance industry, which often frustrate patients and erode the customer service experience.

Schlosser tells a story of him, his wife and baby going to CVS in the fall of 2012 to get flu shots in New York City. Schlosser gets his shot, but when his wife goes for hers, she is rejected. The pharmacist explains that Mario’s insurance only covered one shot per 24 hours. Schlosser, who at the time was already working with Kushner and Nazemi on Oscar, explained that Oscar is designed specifically not to have such “Byzantine rules.”

Telemedicine: The Doctor Will See You Now

When describing key functions of their new company, Nazemi and Schlosser emphasize that telemedicine will be the method by which many of their objectives are accomplished. Although telemedicine has been around for a while, it has not been wildly popular with patients to date. Oscar hopes to change that feeling with new incentives, 24-hour online services and a sleek design.

The founders of Oscar claim that consumers will have access to a doctor by phone within 20 minutes of a request, with no co-pay. Perhaps the concept is not revolutionary, but if it works, the behavioral changes associated with seeking care could be seismic. Currently, not many patients log onto insurance carrier webpages before seeing a doctor, unless they are seeing if the doctor is in-network. Oscar, however, wants patients to start their care with the insurer, not just use it for payment submission.

Oscar also plans to have incentive programs such as the “10 for 10,” where patients will receive $10 for answering 10 questions about their health and preferences. The answers from those questions will then be used to establish proactive health care, as well as help the Oscar team make continual upgrades based on user preferences. For example, answers to the “10 for 10” might help create an outreach program for Diabetes patients where a registered nurse would come to the home, or the answers might inform web developers on how utilization could change in the future.

For added flexibility, Oscar asserts it will employ registered nurses and nurse practitioners to provide in-home follow-up services for patients if needed. In the case of new mothers, weekly visits to the home can be arranged if that is preferred over online interaction. Schlosser described his vision of this component as “integrating backwards,” where patients and providers interact in the settings they choose at the times they agree upon.

According to the creators, in addition to the partnership with TeleDoc, Oscar has already amassed some form of relationship with more than 83 hospitals in New York, hoping to make the telehealth to in-person relationship seamless.

Just How Transparent?

Transparency, the newest buzzword associated with the ACA, plays a dual role in the Oscar story. The availability of data drove Oscar’s operation and consumer focus, and has been an integral part of their ability to test their interface with government feedback. Schlosser describes tracking and analyzing years of medical claim data for entire episodes of care to help assess how technology and telemedicine may better treat patients. His go-to example relates to how many people use expensive physician time and technology for simple ailments like headaches, where large percentages of costs go to small percentages of patients.

Data analysis like Schlosser describes are only the beginning. As more medical data becomes available under the ACA, more and more relevant analyses will be conducted. The Oscar team is counting on this improved data to help them meet patient needs on the platform as well as potentially predict future health demands. Like their past Instagram endeavor, the group hopes to make data the backbone of sharing information.

Oscar’s creators were quick to stress that design and functionality are also deeply rooted in transparency. Schlosser explains that the interface will allow consumers to see price differences based on location, facility and desired services.

On Oscar, a user will supposedly be able to look up prices for doctors across the street from one another or shop for MRI pricing by facility. Schlosser boasts that patients will be able to view “heat maps of services and providers.” The question, however, of whether patients will actually log on to compare prices remains unanswered. Human behavior indicates that unless cost savings are passed on to the consumer, there is very little incentive to look for or care about alternatives.

Media Experts As Marketers

Oscar’s founders plan to target all uninsured in their market area. Based on Oscar’s innovative approach to insurance, and the creator’s unique backgrounds in social media, the marketing endeavor will surely be novel. Nazemi says that the approach to courting the uninsured will “include traditional and nontraditional forms of media,” with the ultimate goal being, “to win over every consumer.” This winning of the consumer, or patient, will include all of the feedback mechanisms and personal interaction that allow for real time updates to the company.

Although Oscar will be targeting the entire uninsured population in their New York market, it is likely that the young, healthy and social media savvy will be the easiest to penetrate with marketing materials. This population, however, has been of the greatest concern for the constructors of the ACA, and the reason the individual mandate exists. As time progresses we will see how Oscar uses its flexibility to attract and maintain a young and healthy population that is the least likely to pay for insurance.

Currently, the Oscar site is merely a welcome page and a list of open positions within the company. But, on October 1^st, the site will be fully functioning, possibly putting other sites and insurers to shame. It is certain, given its creative employee background, that the feel and design of Oscar will be more user friendly than the state-based or federal sites.

According to Schlosser, the idea for consumer usage is to have a site where, “like Google, you can come use Oscar. You can type in your issue and we will help you find the best solution.” He explained that the entire experience will be interactive.

When asked about their role or faith in the success of the ACA, the team commented that, “the ACA is a catalyst for what we’re doing.” And the creators hope that Oscar will become a catalyst for the rest of the health insurance industry to be more transparent. They claim Oscar will set the stage for new expectations and behaviors by consumers, and that people already know they deserve more from their health care system.

Whatever the success of Oscar in the early stages of the exchange market in New York, one thing is for certain; Oscar has the potential to cause much needed disruption to health insurance and health care.

You can say hello to Oscar at HiOscar.com

 

Primary Care Deserts Do Not Disappear With Nurse Practitioners

In coming years the US could see growing shortages in the availability of primary care physicians (PCPs). With the number of individuals seeking care increasing and the current medical system continuing to incentivize physicians to specialize, the number of available PCPs will decline proportional to the population. To fill that gap, Ezra Klein and others have asserted that expanded scope of practice will allow nurse practitioners (NPs) to serve as viable substitutes for primary care shortages.

While NPs serve a vital role in the system and meet need, the argument that they are a 1:1 substitute for PCPs (but for the greedy doctors and pesky regulations holding them back) is singular and shortsighted. The argument also fails to address broader policies that influence both NP and PCP behaviors. Policies that unjustifiably lead to the unequal distribution of caregivers, location or expertise, inherently parlay into unequal care for patients. Sadly, a broader scope than “freeing nurse practitioners” is necessary to meet primary care needs, as NPs are complements, not substitutes. Policy must address the need for more primary care and assist to realign the system to meet our country’s basic care and equality through redistribution.

Primary care is the foundation of the evolving health care system, with equal access the intended goal of the ACA. Along the way to meeting future demand for primary care, NPs can be increasingly utilized to meet the needs of Americans and improve the health of the nation. And let it be known I am a strong proponent and supporter of nurse practitioners and all non-physician providers and coordinators. However, the argument that most NPs practice in primary care and will fill the primary care gap, estimated at about 66 million Americans, is inaccurate. It isn’t a 1:1 substitute, especially given that models of the solo practitioner are vanishing in lieu of complementary and team-based care.

The US, unlike many western countries, does not actively regulate the number, type, or geographic distribution of its health workforce, deferring to market forces instead. Those market forces, however, are paired with a payment system whose incentives favor high volume, high return services rather than health or outcomes. These incentives are reflected in where hospitals steer funding for training, and in the outputs of that training.

Throughout the US there are geographic pockets that fail to attract medical professionals of all kinds, creating true primary care deserts. These deserts occur in part due to the unequal distribution of practitioners in the health care system, with our medical schools and salary opportunities producing low numbers of generalists across the board. We have even continued to see shortages in nurses throughout the US.

In fact, 2012 residency matching rates not only show continued unfilled positions in primary care, but that the rates of graduating minorities are highly skewed from programs. This contributes to even greater problems with finding primary care providers that reflect the populations they serve. Sadly, this is also true for nurse practitioners, where only 4.9% are African American, 3.7% are Asian or Pacific Islander and 2% are Hispanic. Further, the geographic distribution of NPs and physicians assistants alike is close to that of physicians. A June 2013 assessment found that the distribution for urban, rural and isolated rural frontier primary care providers is within a few percentage points for NPs and PCPs.

Ezra Klein was not wrong in his assessment that physicians are often influenced by income. However, it seems likely that financial incentives are drivers for many professionals in the health care sector, including nurse practitioners, registered nurses and physicians assistants (PAs). Dr. Andrew Bazemore, Director of the Robert Graham Center for Policy Studies in Primary Care in Washington, DC has done significant research in this area. His perspective is that, “The suggestion that runaway health system costs could be contained simply by replacing higher salaries of physicians for lower salaried substitutes with less training misses the point – that cost containment will most likely result from optimizing primary care functions such as prevention, population management, care coordination, and avoidance of unnecessary referrals, procedures, ER use and hospitalizations of primary care providers.” Dr. Bazemore asserts that, “Achieving that level of effectiveness likely involves teams that include primary care physicians, NPs, PAs, behavioral and community health workers, and other important components, operating in a transformed practice setting.”

It is also correct that regulation on NPs is onerous and sometimes oppressive. Across the nation, regulation on NPs is exceptionally disjointed and often results in unnecessary hurdles for all involved, called scope-of-practice laws. Although impediments are common in the health care system, it is extensively difficult for NPs and similar non-physicians to break into a system that is deeply rooted in tradition.

However, by honing in on one piece of the puzzle, Mr. Klein missed the bigger picture. The principals of substitution do indicate that on the supply side, NPs stepping into roles for PCPs would better meet demand. But that is not the real world outcome. The broader landscape shows us that instead of a 1:1 substitution, nurse practitioners are compliments in the overall care system, important roles that fulfill many primary care needs.

Therefore, policy changes are still needed to improve patient health outcomes and forge a team-based relationship between care providers. Incentives to enter primary care and needed across the disciplines, as are models of team-based training that build on the strengths of each in managing whole persons and populations. Ezra Klein fails to note that most primary care shortage estimates implicitly include NPs and PAs already working in primary care while not accounting for the fact that NPs and PAs are choosing specialization over primary care for the same reasons as physicians.

Instead of an environment where NPs and PCPs are positioned to compete with one another, federal and state legislators should spend more time crafting policy that equalizes the distribution of care providers across the system. That redistribution means incentivizing, monetarily or otherwise, primary care clinicians to stay in general medicine and work in tandem with other providers. Whether it be the reformation of medical school, constructing a more honest approach to population health or restructuring pay scales and incentives, team-based medicine with improved access and outcomes should be the real discussion.

 

What Obama’s Done For You Lately: Lower Insurance Premiums

The number of people who love health care reform plus the number of people who hate health care reform is considerably larger than the number of people who actually understand health care reform. John and Jane Q. Public were outraged that Congress voted on a bill that “they hadn’t even read” although Mr. and Mrs. Public didn’t read it, either. It’s unfortunate, because the Affordable Care Act, despite some of its shortcomings, actually does a lot of wonderful things. One of those things is put some regulations in place on the health insurance industry.

In particular, the ACA requires insurers to be more transparent about how they’re spending your premium dollars and places caps on the rate at which insurers can increase your premiums. This might not seem like a huge deal to you at first, because most of us get our insurance through our employers, and our employers pick up the majority of the tab, but according to the Department of Health and Human Services, these regulatory provisions are adding up. According to a recent report, the ACA has saved consumers $2.1 billion over the last year.

The savings come from two different provisions of the law. First, insurers are prevented from raising their premium rates by more than 10% without submitting public justification for the rate hike and receiving approval from state insurance departments. This, according to HHS, has slowed premium growth and saved $1 billion since September 2011. Second, the ACA requires insurers to devote at least 80 cents of every premium dollar to providing health care. This also provides an incentive for insurers to hold rates down, but more importantly, it puts money back into consumers’ pockets. If an insurance company doesn’t meet the 80% threshold, they have to refund the difference to their beneficiaries. This, according to HHS, adds up to another $1.1 billion since September 2011.

Of course, most of us probably won’t be getting a refund check in the mail, but those who do can expect it to average around $151. So, what has Obama done for you lately? Well, for many of you, go look in your mailbox, because his administration may just have arranged for you to get a refund check from your insurance company. If there’s anyone out there who doesn’t like that, might I suggest that you cash your check, send me the proceeds, and vote for Mitt Romney?

 

An Early Victory for Health Reform

When the Affordable Care Act was enacted, there was immediate and enormous uncertainty about how the law would be implemented, whether or not it would be successful, and how its success or failure would be recognized. Proponents pointed to economic theory and Romneycare in Massachusetts, suggesting that we’d see a decrease in the number of uninsured initially, followed–hopefully–by a reduction in the rate of health care spending growth. Opponents, meanwhile, shook their collective heads and began filing lawsuits over the constitutionality of the individual mandate, and those cases are still winding their way through the courts.

While the ACA is still in its infancy, with numerous provisions of the law yet to be implemented, there is now evidence that health reform is doing its job. To be sure, a tremendous amount of uncertainty remains, but the latest data from the U.S. Census Bureau shows that the number of uninsured Americans remains unchanged between 2009 and 2010. Though health reform critics might like to jump on that statistic and proclaim that the ACA has failed to cover more Americans, history proves otherwise.

The U.S. economy–while supposedly no longer in a recession–is far from robust. Historically, economic downturns coincide with increases in the number of uninsured, as people lose their jobs and, thanks to the design of our health care system, their insurance coverage. So, the unchanged number of uninsured masks what actually happened: Roughly 810,000 middle-aged adults, those ages 45 to 64, were likely let go from their jobs, didn’t yet qualify for Medicare, and ended up uninsured. Meanwhile, some 494,000 young adults, those ages 18 to 25, gained coverage, which seems to point to the ACA provision allowing children to stay on their parents’ plans until age 26 that went into effect in the fall of 2010. Of course, there may be other explanations, but the simplest explanation is likely the right one.

Assuming that the ACA continues to reduce the number of uninsured, the bigger question is what happens to costs after it is fully implemented. A large part of this will hinge on consumer behavior, and the news here is mixed. There is emerging evidence that uninsured patients don’t dramatically alter their care-seeking after gaining coverage. In some cases, this is a good thing. For example, in Massachusetts, the uninsured being served by community health centers continued to seek care there even after they were insured. That’s good news for the health centers, which would otherwise be left with an even heavier burden of uncompensated care than they currently face, and it’s good news for the health care system, because health centers are widely recognized as high quality, cost effective primary care providers. Expanding that model could help to bend the cost curve.

At the same, however, there is evidence from the University of Pennsylvania’s Dan Polsky and colleagues that the uninsured who become Medicare eligible don’t change their behavior either. In particular, they continue to have lower rates of physician office-visits and higher rates of emergency room and hospital outpatient department use. That’s bad news, because those sources of care are notoriously more expensive and present an obstacle to continuity of care.

Consequently, the future is uncertain. The promise of the ACA to reduce the number of uninsured remains intact, but what happens to health care costs will be determined largely by the actions of tens of millions of newly insured persons. If ever there was a time to help patients make informed decisions regarding their use of the health care system, that time is now.

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The Nonsensical Private Insurance Model

Today, I’m going to try to convince you that private insurance companies should not exist. Okay, maybe that’s a bit hyperbolic, but let me explain. The basic premise of insurance is that, by pooling people together, risk can be made more manageable. Say, for instance, that historical data indicate that 1 in 10,000 people will develop a rare illness that is very expensive to treat. In fact, let’s say that the cost of treating that illness is a cool $1 million. Because most people aren’t millionaires–our group of 10,000 people might contain none at all–being the individual with the illness goes from being a health concern to being a financial concern as well. Bankruptcy is almost assuredly the outcome.

But there’s some uncertainty in the risk. None of the 10,000 people knows if they will be the one to contract the million dollar illness. At this point, they have two options: They can take their chances–after all, there’s only a 0.01% chance that they’ll get the illness–and figure out how to come up with the $1 million if they become ill, or they can pool their risk with the other 9,999 people and buy a product called health insurance. In our simple little single illness world, where probabilities always work out nicely, we might imagine a scenario where the total health care expense would be $1 million (the cost of treating the illness for the one person who contracts it). The fair thing to do, then, would be to charge everyone a premium of $100. That’s the break even point, anyway. And it’s obvious why the one person who falls ill would want to have this insurance–$100 is a lot cheaper than $1 million. In fact, because people are typically risk averse, they’d rather go ahead and pay the $100 with certainty, rather than letting a million dollar bet ride on an open ended “what if?”. Risk pooling works in theory.

Of course, the world is not so simple as our little experiment happens to be. Instead, the total health care expenditures would be far more than $1 million for the group, because people would contract other illnesses, develop other diseases, and even spend money for routine check-ups. But we have data on that amount of utilization, too, and the setup is the same. Figure out how much our population of 10,000 people is expected to cost, divide that total by 10,000 and charge everyone that same amount. Welcome to community rating.

But people don’t like that approach. After all, some people in our group of 10,000 smoke and some do not. Those who don’t smoke aren’t often excited about paying a higher premium to cover the cost of lung cancer treatment that has its origins in the bad decisions made by smokers. It’s kind of like going out to dinner with a big group that eats and drinks its fill while you have a salad and a glass of water. At the end of the night, they want to split the check evenly, and you don’t want to subsidize their wine habit. Surely there must be some system that figures out your own personal risk category and charges you accordingly. Welcome to experience rating. Obviously, this leads to stratification that is antithetical to the solidarity inherent in the concept of risk pooling, but that’s a subject for another post.

Figuring out everyone’s risk, and the costs involved requires actuaries. Sending out the bills for the premiums requires administrative staff. In other words, running the risk pool takes work and is associated with additional costs. These, too, must be added to the total health care expenses in determining the break even point for premiums. And, if the government ran health insurance, it could stop there. The calculation would simply be:

Per enrollee premium = (total health care costs + total administrative costs) / number of enrollees

When private companies get involved in the insurance business, things get more complicated, because one of the goals–even if the company is technically a non-profit–is to make money. There’s only one way for that to happen, which can be explained by the following formula:

Per enrollee premium > (total health care costs + total administrative costs) / number of enrollees

It looks almost identical to the government equation, with one difference: the equal sign has been replaced with a greater than sign. There are two primary ways that this can happen. The insurance company can charge a higher premium, or it can deny claims–essentially asserting that “total health care costs” are lower than the enrollees would claim. If they do both–increase premiums and deny claims–they stand to make even more money. Now, conventional wisdom would suggest that if the insurance companies did this, people would leave in droves. Unfortunately, imperfections in the market make this easier said than done. For starters, as I discussed last week, most people have no idea how much their health insurance premiums actually cost.

The bottom line is this: Insurance companies profit the most when you pay them and they don’t pay your claims. They have a financial interest in denying you your benefits. That makes about as much sense as McDonald’s earning 10 cents on each hamburger it sells, and 20 cents on each hamburger it doesn’t sell. There’s an inherent conflict of interest in the private insurance business. The government, by contrast, isn’t in the business of making money. I think even my conservative friends who want to slash domestic spending and lower taxes would agree that. As a result, they are perfectly content to break even, and the only claims that they would have an interest in denying would be fraudulent ones. As I see it, this moves us away from the inefficient world of private insurance towards the purest risk pooling function that only government can provide. People freak out about this (a technical term), because they distrust government and can’t envision any scenario where the profit motive doesn’t generate the ideal results. Apparently, these people prefer the idea of paying more and getting less to the idea of getting what they pay for.

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