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GE Healthcare Camden Group Insights Blog

Improving Payer, Provider Dynamics: 4 Critical Components

Posted by Matthew Smith on Jun 24, 2016 9:24:08 AM

By Matthew Briskin, MPH, Senior Consultant, GE Healthcare Camden Group

shutterstock_162843836.pngThe core principles of the healthcare business model are changing in the Affordable Care Act world we live in. Less commonly will the “cat and mouse” game between payers and providers persist—the time has come for both parties to collaborate and seek to achieve optimal outcomes in terms of cost, quality, and accessibility.

There are four key components at the root of the changing dynamic between payers and providers: 

  1. Trust
  2. Cost and charge transparency
  3. Incentive structures
  4. Care management

As that dynamic continues to shift, and both parties work with one another, as opposed to against one another, we will continue to see improvements in the cost, quality, and accessibility of healthcare services.

Here’s more on the four key components, and what payers and providers should do about each of them.

1. Trust between payers and providers must improve

Historically, lack of trust between healthcare providers and health plans is rooted in the way that business has been conducted for decades. At the core of standard fee-for-service agreements, incentives are misaligned between the two entities, and providers are (by law) shielded from understanding the competitive landscape, in terms of reimbursement rates other competitor hospitals are receiving from health plans.

On the contrary, health plans typically have more available resources to understand whether their contracts (specifically, fee-for-service reimbursement rates) are in-line with the market.

According to a recent HealthLeaders survey, 39% of provider respondents noted that trust with commercial payers needs improvement, which is imperative as contracts move from a standard fee-for-service structure to risk-based, or outcome-based arrangements.

Providers should look for signs of trust from payers during value-based contract negotiation, such as a payer’s willingness to provide utilization or spend data broken out by in-network and out-of-network.

Providers will need to learn to reciprocate this good faith by no longer making unjustified, blanket demands for rate increases, and instead come to the negotiation table ready with cost and quality data that clearly illustrates a system’s value proposition to the payer and the members it serves.

2. Providers must be able to justify charges and costs

The hospital chargemaster has been a highly debated topic in recent years, specifically due to the notion that chargemasters are priced arbitrarily—which in many cases holds true.

Healthcare is the only industry where there is a defined price list of goods and services, and when those goods and services are delivered to the consumer, the total price is rarely ever paid (by any party).

Chargemasters, which were historically priced relative to Medicare rates (to avoid getting paid less than Medicare), in many instances, have not been well-maintained as reimbursement rates and methodologies have changed over the years. 

As a result, many hospitals struggle to justify how their cost structure correlates to what they charge for services rendered, and the result has yielded very high charge variation, even among hospitals belonging to the same health system.

As providers engage in value-based conversations with payers regarding what the payer should be paying the provider versus what it actually costs the provider to treat the patient, providers need to be able to support their chargemaster and have confidence in their cost accounting systems.

Hospital finance, revenue cycle, and managed care departments should work collaboratively in performing a thorough chargemaster pricing analysis, and ultimately, assess both price and cost to confidently justify to payers (and consumers).

3. Payers and providers must explore new incentive structures

As new forms of collaboration between payers and providers take shape, so do the types of incentives. Historically, providers have been incentivized to drive volume in a fee-for-service model, but in a value-based environment, there is typically greater emphasis on capturing covered lives, and managing that population effectively (i.e. capitation).

These types of arrangements offer varying degrees of risk, which depend on a number of factors, including demographics, regulatory environment, and market dynamics. Moving forward it will be important for payers and providers to work together in managing these factors through various techniques, such as risk-adjustment.

Before entering into any value-based contract negotiation, a provider should be able to determine their organization’s “tipping point,” which is the point in a mix between fee-for-service and capitation, that it no longer financially benefits the provider to focus on volume as the primary revenue driver. Not only should providers be able to calculate their tipping point, they should also be able to clearly articulate this to a payer in order to drive desired contracting outcomes.

Understanding the underlying economics and incentive structures from both a payer and provider’s perspective is an essential building block of payer-provider partnerships in value-based arrangements.

4. Providers must prioritize care management  

When one takes a step away from the business side of healthcare, providers are there to care for patients, and payers are there to cover the cost of care. As healthcare fundamentally shifts from “treating the sick” to “keeping people healthy,” the role that care managers (from both payers and providers) have is going to be increasingly important.

As contracts move to value-based, and payers and providers are financially incentivized to care for patients effectively and efficiently, care managers will play a crucial role in managing populations, both in care delivery and preventive care.

Furthermore, care management, which has typically been handled by payers, will take place closer to the point of care (providers).

As providers begin value-based discussions with payers, they should look to set up a care management structure to enable discussion and resolution of issues such as the delegation of care management services, and how varying levels of delegation may change current or planned care management infrastructure, and any future payments allotted for care management activities.

Success in a value-based environment will be challenging if care is delivered in silos, so an effective, longitudinal care management program can be the key to delivering affordable comprehensive care across the continuum.


This article was originally published by Managed Healthcare Executive on June 17, 2016.


BriskinM.jpgMr. Briskin is a senior consultant with GE Healthcare Camden Group specializing in finance. He has extensive experience working with both payers and providers. Mr. Briskin specializes in revenue enhancement initiatives related to chargemaster pricing optimization and managed care strategy. He may be reached at matthew.briskin@ge.com.

 

 

 

Topics: Payment-for-Value, Payer Strategy, Matt Briskin, Payer Provider Relationship

7 Managed Care Trends to Watch in 2016

Posted by Matthew Smith on Feb 5, 2016 11:13:56 AM

By Adam Medlin, Senior Manager, and Matthew Briskin, Senior Consultant, GE Healthcare Camden Group

managed care trendsOne month into 2016, it’s clear that this will be a year of massive change for the managed care industry. Here are seven predictions for some of the key issues that will emerge, intensify, or be resolved by the end of this year.

1. The impact of recent health plan mergers will come into focus

It is likely that the major payer consolidations will get sorted out this year. The big mergers are already starting to impact contract negotiations between the health plans and providers. As the larger health plan organizations continue to cut operating costs and slow the growth in reimbursement rates, providers will respond by consolidating to form larger and more integrated health systems. Expect the Federal Trade Commission to expand its examination of provider consolidations. Organizations that are consolidating must demonstrate both pre- and post-merger consumer benefit as a result of these affiliations or acquisitions. 

2. Value-based arrangements will gain more momentum

The industry is still waiting to see if the federal government will make a move on the “Cadillac” Tax, which Congress delayed for two years at the end of 2015. The question is, will Congress eliminate it all together? If they do not eliminate it, we can expect to see further benefit reductions and higher deductibles and coinsurances as employers focus on meeting the cost limits prescribed. The government and employers will continue to develop and implement new ways to bend the cost-curve. Health plans will double their efforts to create “value” or “high performing” networks that will offer narrower networks in exchange for lower premium and out-of-pocket costs to consumers. This will accelerate provider consolidation, either through mergers, affiliations, or clinically integrated networks as they attempt to offer a broader, yet differentiated, “high performing” network to the market. Once formed, these newly established networks will have to demonstrate value to attract employers and effectively move market share. Positioning your organization as the lowest cost leader in your market will not be enough; quality and patient experience and satisfaction must be met simultaneously.

3. Provider-owned health plans will gain more interest from health systems

Health systems that are continuing their transformation to clinically integrated networks will face more pressure to have more control of their reimbursement streams and incentive systems. As such, expect more providers to become interested in owning a health plan or collaborating with other providers who already own a health plan. In addition, there will likely be a shift in strategy from competing directly with large health plans to a “plan-to-plan” strategy, which will allow the integrated delivery networks (IDNs), clinically integrated networks, and health plans to collaborate more easily. Finally, some recently established provider-owned health plans have struggled, so new entrants will be more selective and cautious as they refine their market and product approach to this strategy. 

4. It will be an important year for health insurance exchange products

With the Affordable Care Act (ACA) insurance exchange products continuing to grow as we move into 2016, eclipsing the 8.8 million subscriber mark, a critical success factor of this ACA provision relies on insurers continuing to offer these products, despite incurring losses in the initial years. For instance, UnitedHealthcare Group’s 2015 annual earnings report showed that the insurer lost $720 million from exchange products, but will continue to offer and closely monitor the performance of those products throughout 2016. As a result, health systems should expect a continued increases in high-deductible plans (more bad debt on exchange accounts and a need for ever increasing focus on revenue management), and increased pressure on reimbursement rates as health plans continue to adjust these products to the newly insured’s needs and their own need for profits.

5. Consumer Operated and Oriented Plans (“CO-OPs”) will continue to lose momentum

An alarming 12 of the 23 health insurance CO-OPs have failed in roughly three years of existence, and the trend is expected to continue into 2016, as the 11 CO-OPs that remain operational—are all operating in financial stress. The ACA-led program, which was funded with $2.5 billion of taxpayer dollars, has shown an inability to compete on the exchanges with the large commercial health plans. The original intent of these plans was to increase competition on the exchanges, and lower premiums for consumers purchasing individual exchange products, but without sufficient capital in reserves, state insurance commissions have forced many to shut due to lack of solvency. In all, closures of CO-OPs have resulted in over 700,000 Americans losing coverage, and over $1 billion of taxpayer dollars lost to-date. With the CO-OP program deemed largely as a failure, the result is fewer options for health insurance coverage to individuals and businesses. Expect to see further CO-OPs failures in 2016, and ultimately, movement toward exiting the market.

6. Compliance will become an important issue in the coming years

Federal and State actions and fines will highlight the new oversight and conduct expected of health plans and providers. Physicians and networks who are working to take on greater risk and seek rewards by lowering or limiting the number of providers in networks will come under greater examination by the regulators and by health plans. Building compliance in early to every policy and action, and then monitoring any delegated service providers, and any activities with potential member harm, requires focus and action at every level of management and governance. Do not be surprised if compliance actions become ever more common.

7. Is capitation making a comeback?

Expect to hear more about capitation this year, thanks to the implementation of the Centers for Medicare & Medicaid Services’ (CMS) Next Generation ACO (NGA) program. Most of the provider participants in this program are organized, sophisticated and have significant experience in managing financial risk. In addition, many of the participants are already at risk for managing Medicare Advantage populations through capitation or other fixed payment methodologies. Although performance year 1 (calendar year 2016) in NGA is still a fee-for-service platform, some participants may be willing to learn from their experiences and take the plunge in later years and go at-risk through capitation. Expect CMS to highlight and regularly announce the efforts for these participants. NGA could be the program that begins to further shape the health plans thinking and approach to providers taking more financial risk.

In coming months, the greatest challenge for most healthcare organizations will be finding the right pace for adapting to or embracing new payment models. Most organizations are now seeing the direction, but will have to find the right pace and organizational commitment to continue through this industry-wide transformation.

Originally published by Managed Healthcare Executive, 1/31/2016. This article is reproduced in its entirety. 


Adam_Medlin_headshot.png

Mr. Medlin is a senior manager with GE Healthcare Camden Group specializing in finance, managed care, and value-based payment models. He has extensive experience with hospitals, physician groups, managed care organizations, and health plans. His areas of expertise include valuations, financial assessment and modeling in support of value-based payments, managed care contracting and reporting. He may be reached at adammedlin@ge.com or 714-263-8200.

 

 

Briskin_headshot.pngMr. Briskin is a senior consultant with GE Healthcare Camden Group specializing in finance. He has extensive experience working with both payers and providers. Mr. Briskin specializes in revenue enhancement initiatives related to chargemaster pricing optimization and managed care strategy. He may be reached at matthew.briskin@ge.com or 714-263-8206.

 

 

Topics: Managed Care, Trends, Matt Briskin, Adam Medlin

The Push for Hospital Pricing Transparency: How is Your Organization Responding?

Posted by Matthew Smith on Jun 2, 2015 11:15:00 AM

By Tawnya Bosko, MHA, MSHL, MS, Senior Manager, and Matthew Briskin, MPH, Senior Consultant, The Camden Group

Post-image-transparency.pngIt is evident that government officials, policymakers, and others believe in the power of access to clear pricing to help reduce healthcare costs in the United States.The Center for Medicare and Medicaid Services (“CMS”) took steps in the fiscal year (“FY”) 2015 Inpatient Prospective Payment System (“IPPS”) final rule to implement the Affordable Care Act’s (“ACA”) provision requiring hospitals to “establish and make public a list of its standard charges for items and services”[i]. In the final rule, CMS reminded hospitals of this requirement and reiterated that they encourage providers to move beyond just the required charge transparency and assist consumers in understanding their ultimate financial responsibility. Beyond the federal government requirements, many states have implemented rules around disclosure of charge and sometimes price information. Further, all payer claims databases (“APCD”) have been established and stakeholders continue to build apps and other databases to assist consumers in assessing hospital pricing information, and as more consumers enroll in high deductible health plans—in other words, the out-of-pocket costs for healthcare services are becoming more of a driver in consumer decision-making—those resources (APCDs, apps, and other databases) are becoming increasingly popular. The trend is clearly moving toward increased transparency of price and quality information, yet many hospitals lag behind and have yet to address the antiquated chargemaster (“CDM”) and incorporate pricing into their overall strategic plan.

Legislation Surrounding Price Transparency

Coupled with the ACA and FY 2015 IPPS final rule requirements for hospitals to disclose charge information to consumers, CMS also continues to publish individual hospital charge, utilization, and reimbursement information for the most common inpatient and outpatient services. Additionally, 28 states have legislation around price transparency with various requirements of hospitals and other providers[ii]. While most states do not have robust systems in place for transparency, the majority are beginning to pursue these initiatives, with Colorado, Maine, Massachusetts, Vermont, and Table1_DRG.pngVirginia making the strongest push[iii]. For example, Table 1 shows an excerpt from the Colorado Hospital Price Report, which reflects volume, average length-of-stay and the range of charges for DRG 470, major joint replacement or reattachment of lower extremity without major complications. The site also provides average reimbursement information by payer and diagnostic category, though it does not get to the level of individual hospital.

Pricing transparency initiatives are clearly not specific to federal regulations and Medicare information. In addition to the state regulations around transparency, many states are engaging in initiatives to bring APCDs to their state. Figure 1 (note: click here for interactive map) shows the status of APCDs by state as provided by the All Payer Claims Database Council.

Figure1_APCD.pngAs shown, 12 states have existing, required participation APCDs and another 6 are in the implementation phase of a required APCD, which typically are able to provide charge and reimbursement information, though reimbursement information at the individual hospital level by payer is not always disclosed.

Why Is This Important?

Transparency initiatives are being pushed from the federal government, state governments, employers, consumers, and other stakeholders. People want to understand the costs of care in order to make better purchasing decisions.

 

Key Considerations as Part of a Hospital Pricing Strategy Include:

Cost Structure

If the move to value-based reimbursement isn’t enough of a push to get a better understanding of your cost structure, add transparency to the list of reasons why hospitals must understand what it costs for them to provide a service. You can’t ‘right price’ your services if you don’t know what your costs are.

Quality Scores and Performance

In the new era of healthcare, quality is extremely important. Not only is it be linked to value-based reimbursement, but as in most markets, the supplier (hospital) should understand the quality of their product or service and integrate that information into their pricing strategy and payer negotiations.

The CDM

It is important to ‘right price’ your services. The old ways of setting charges to capture maximum reimbursement but not considering costs will soon be extinct. A revitalized strategy around the hospital CDM and coordination with costs, quality and reimbursement will become a necessity.

Payer Strategy and Reimbursement

Updating the CDM and becoming more transparent with prices cannot happen without consideration of the payer strategy and the impact of changes on reimbursement. Engaging payer partners in this process early is important to success.

The Market

Hospitals should be aware of how quickly their market is moving on transparency initiatives, both from state regulations and payer initiatives, as well as staying aware of how their pricing compares to their peers and competitors for key services.

Whether or not hospitals are ready to disclose this information, the push for transformation is steady and strong. Hospitals should be at the forefront of understanding their cost structure and how that relates to the often antiquated CDM and ultimately to reimbursement, quality, and patient financial responsibility. Making this connection and transition won’t be easy, but hospitals that are able to master their pricing strategy early on and convey this information to consumers will be competitively positioned for success in the post-reform era.

[i] The Center for Medicare and Medicaid Services, 2014
[ii] The National Conference of State Legislatures, 2015
[iii] Healthcare Incentives Improvement Institute, 2014

bosko_headshot.pngMs. Bosko is a senior manager with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization  and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

Briskin_headshot.pngMr. Briskin is a senior consultant with The Camden Group specializing in finance. He has extensive experience working with both payers and providers. Mr. Briskin specializes in revenue enhancement initiatives related to chargemaster pricing optimization and managed care strategy. He may be reached at mbriskin@thecamdengroup.com or 714-263-8206.

Topics: Tawnya Bosko, Chargemaster, Matt Briskin, Charge Information, APCD, Hospital Pricing Transparency, Pricing

Mergers & Acquisitions: An Opportunity to Align Charges Across a System

Posted by Matthew Smith on May 20, 2015 2:30:00 PM

By Matt Briskin, MPH, Senior Consultant, and Tawnya Bosko, MHA, MS, MSHL, Senior  Manager The Camden Group

health-dollar-335x251.jpgWith merger and acquisition (“M&A”) activity remaining steady, hospital systems have the opportunity to strategically align charge description master (“CDM” or “chargemaster”) prices to fit with their system-level corporate strategy, specifically targeting defensible pricing, revenue growth, or the managed care strategy.

Hospital M&A Activity on the Rise

Recent projections suggest that M&A in the healthcare industry will continue to rise in the next year. Given this trend, hospitals should seize the opportunity to align their chargemasters during the phase of integration, but also need to be aware of the risks associated with alignment.

M&A: A Great Opportunity to Align CDMs

Given a system with multiple hospitals in the same market with homogenous patient-payer mixes and service offerings, prices likely need to be aligned such that services provided at hospitals located close to one another are charging patients the same price for the identical good or service. Having prices that are aligned across hospitals in the same market where the hospitals are within reasonable cost-to-charge ratios refers to the practice of ‘defensible pricing’ and is very important as an increasing amount of states regulate that hospital chargemasters be available to the public. Furthermore, from a revenue perspective, as hospital systems grow larger, they may desire to renegotiate their payer contracts to support the changes in the organization. As a result, systems may be in a position to negotiate different reimbursement methodologies. Having all hospital systems on similar pricing schedules will support the overall managed care strategy for the newly developed system and may save the system from answering payer questions such as “Why does Hospital A charge so much more than Hospital B for the same service?” Furthermore, aligning the CDM across the system could lead to operational efficiencies from integration of functionality to support the CDM.

When Not to Merge CDMs

On the opposite end of the spectrum, healthcare systems with hospitals serving diverse patient populations or different markets may want to price goods and services differently across the system. Similarly, a hospital system with a specialty facility may benefit from having a separate CDM due to the nature of highly-skilled or unique services provided at that hospital. 

Systems with recently acquired hospitals need to closely evaluate whether aligning prices across a ‘system CDM’ is the best strategy.  Successful system-wide CDM strategies should be approached with clearly defined goals and revenue projections from day one. Without clearly defined goals and up-front due-diligence, hospital systems run the risk of lost revenue from reimbursement or patient leakage (ultimately, lost revenue) if prices are too high and patients seek services at a lower-priced competitor. As hospitals plan their post M&A integration strategies, the CDM should make the list of items under consideration.


Briskin_headshot.pngMr. Briskin is a senior consultant with The Camden Group specializing in finance. He has extensive experience working with both payers and providers. Mr. Briskin specializes in revenue enhancement initiatives related to chargemaster pricing optimization and managed care strategy. He may be reached at mbriskin@thecamdengroup.com or 714-263-8206.

 

 

bosko_headshot.png

Ms. Bosko is a senior manager with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization  and MSO development, managed care strategy, and physician alignment. She may be reached at tbosko@thecamdengroup.com or 310-320-3990.

 

 

 

Topics: Tawnya Bosko, Mergers, Acquisitions, Mergers & Acquisitions, Chargemaster, CDM, Matt Briskin

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