The paced roll-out of the Patient Protection and Affordable Care Act is, for the most part, a fait accompli. But many businesses are still wrestling with myriad considerations in implementing programs for the greatest benefit to their company and their employees. And what worked a year ago might not be the best option as their situation changes and as new options become available. Leaders in the healthcare industry share their insights and experience as well as some best practices with In Business Magazine. There are legal concerns as well, and, although the so-called “Cadillac Tax” on high-value health insurance is not yet in force, the other requirements and potential penalties are covered in our Legal feature “The Employer Shared Responsibility of the Affordable Care Act” on page 20.
Engaging the Consumer
The most significant shift has been from the fee-for-service model to outcome-based, value-based care that rewards providers for managing patients and getting the patient better, observes Dave Allazetta, president and CEO of UnitedHealthcare of Arizona.
A delivery system built around this model is the accountable care organization (ACO), through which care providers are eligible for incentives based on meaningful improvements in measures such as hospital readmission rates, disease management and prevention, patient safety and car delivery, as well as total cost savings and patient satisfaction.
UnitedHealthcare launched its first in Tucson in 2013; in the Phoenix area, in May 2014 in partnership with Arizona Care Network to improve transitions of care for patients and facilitate better communication with all who are involved in a patient’s treatment. UnitedHealthcare followed this ACO two months later with another in partnership with Banner Health Network, which was one of the first care provider networks in Arizona to adopt the principles of accountable care — and one of the original 32 organizations nationally selected by the Centers of Medicare & Medicaid Services to demonstrate the Medicare Pioneer Accountable Care Model.
Nationwide, more than $30 billion of UnitedHealthcare’s annual physician and hospital reimbursements are tied to accountable care programs, centers of excellence and performance-based programs. The company projects this will reach $65 billion by 2018.
“From my perspective, the big headline is engaging the consumers,” Allazetta says. The ultimate intent is helping providers engage their patients — UnitedHealthcare’s clients — but Allazetta sees it from the other direction as well: “We want the employer and employees to engage providers for preventive diagnostic care.” So there is no out-of-pocket cost for such things as mammograms and regular physical exams. And Allazetta observes many employers incentivize their employees to make sure they get the direct diagnostic care. It’s important, he points out, “to determine if they’re at risk for [health] conditions they will need to manage.”
One way to facilitate engagement is to provide a platform and tools that allow the user to see the various options available and the approximate cost. A scenario he describes is a patient in the doctor’s office, getting a referral to an MRI, who can pull up information right then and there. “He can show the doctor it’s cheaper somewhere other than where he’s making the referral, and can ask, ‘Does that work for you?’ Usually, it’s fine,” Allazetta says.
Allazetta sees as part of the challenge in healthcare the fact that patients have more choice than they realize. “Our concern is how best to provide a plan that makes sense for the employees and offers the security that it will be there the next year.” In working with employers, then, “We try to create a relationship that will go beyond the renewal to provide consistency and predictability for the employer as he provides his benefits.”
He feels some regulations try to relegate health insurance to more of a commodity, but UnitedHealthcare’s focus is on the customer experience. “We try to engage the consumer in a way that helps them get the best care at the best price with the best outcomes.”
Businesses are well served by working with a good consultant or broker, but he emphasizes the importance of an employer knowing his plan’s actuarial value — where the plan falls on the continuum in terms of cost of the premium and how much the patient will pay out of pocket. UnitedHealthcare, for instance, provides a decision-support tool that employers can offer their employees to help them understand their individual healthcare need by looking at such details as how many times per year they have been to a doctor. Noting that, usually, no one plan fits all the needs of all employees, Allazetta says, “The more they understand what’s expected for an employee out-of-pocket, the better they can design a program that’s appropriate for the employee and is cost effective.”
Additionally, “When they do select a plan, they need to have resources and tools for information regarding their own healthcare.” UnitedHealthcare designed an app to serve this function, also providing guidance to the individual as to how best to use his health plan. This includes incentives to stay healthy, and wellness plans and health risk assessments to help engage employees in their own health needs.
A 2014 report from UnitedHealth Center for Health Reform & Modernization found that adding primary care physicians leads to fewer hospitalization and emergency room visits. “Primary care is essential to building a higher-performing healthcare system that promotes personal well-being and saves consumers and taxpayers money,” said Richard Migliori, M.D., executive vice president of Medical Affairs and Chief Medical Officer of United Health Group when the report was released. “This research shows the value of improving primary care capacity, not only in terms of improving patients’ health but also in catching problems early and avoiding unnecessary and costly hospital services.”
Evidence from UnitedHealthcare’s medical home programs in four states showed average third-year net savings of 6.2 percent of medical costs, resulting in a return on investment of six to one, largely due to a payment model that rewards value.
The report included a warning that primary care was limited in areas with lower incomes and higher rates of uninsured, and although that is not of great concern for the Valley, it’s still important to note the need to encourage primary care visits.
Gaining more attention now is the concept of total cost of care. Rather than looking at just how much one visit or treatment will cost, this involves measuring guidelines of treatment to understand the total cost. A knee replacement, for instance, involves an MRI, surgery and rehabilitation. UnitedHealthcare considers quality an important factor; noting, “The [cost of the] one treatment may seem higher than elsewhere in the marketplace, but this provider has a high level of success,” Allazetta explains there is less in the way of complications due to care being more efficient with a higher-tier provider. Another factor is location of the procedure; is in-patient the most appropriate, or does a stand-alone surgery center fit the bill? Says Allazetta, “The total cost of care must include the right provider at the right location at the most appropriate cost.”
Focusing on Businesses and Individuals
“There is significant attention being paid to challenges in the individual market, but it’s important to note that the majority of people are enrolled through group plans,” says Jeff Stelnik, senior vice president of strategy, sales and marketing with Blue Cross Blue Shield of Arizona. Noting, “We consistently hear that employees are looking for choice, tools and ownership,” he says BCBSAZ developed its Benefits Starter program to support its employer partners.
The program was designed to help employers streamline their benefits choices, Stelnik says, explaining, “Administrative complexity was the biggest challenge to giving employees choice.” Benefits Starter gives different plan choices to individuals, helping them “manage their money and their health-spend as effectively as possible.” Describing it as “like a private exchange,” Stelnik says it gives employees more choices on the medical plan and specialty product like vision, dental, disability, life and accident, while enabling either a defined contribution or defined benefit model. “Employees are empowered to choose plans that make the most sense for them,” including leveraging smart technology that helps them choose the products that meet their needs. “Rather than having one choice, this enables the employer to give a wide variety of medical plans and specialty products that empower employees to use their dollars in the most beneficial way,” Stelnik says, noting this is a growing trend.
There’s also a set of tools that give employees access to information on how they are using their healthcare dollars, such as what costs are involved — at the time of service. “Using a transparency too, they can get multiple pieces of information, in one place, personalized to their plan, such as whether a doctor is in their network, the cost to go to that doctor for a specific diagnosis based on their plan, and where they are in their deductible level,” Stelnik explains.
The focus is on empowering individuals to keep themselves healthy and moving through the entire spectrum of health — which also, Stelnik points out, helps control cost. The concept of “moving health forward” encompasses helping healthy individuals understand their level of health and how to stay there — “If they’re on the healthy end of the spectrum, they can get forgotten,” Stelnik observes — as well as working with the one in six people who have a chronic condition, to help them manage that condition and move on the spectrum to being healthier. The three key components are insights, relationships, and proven results.
“Insights” involves anticipating the health needs of individuals, such as managing pre-diabetes before it becomes a high-cost and health risk issue. “When we get high-risk individuals into an office, visit, it improves their health and reduces cost,” Stelnik says, citing annual care management cost per member of $670.
Discussing “relationships,” Stelnik notes, “As a local carrier, we’ve been able to foster collaboration with hospital systems that lead to unique programs.” One such is the “Transition of Care” program, which involves working closely with the hospital in its discharge process, following up with patients after they leave the hospital to make sure they get to their doctor within seven days and fill their script right away. “Those two components reduce readmission by 38 percent.”
There is also the focus on the proven results of addressing the six most common chronic conditions that can be influenced by behavior: asthma, congestive heart failure, chronic obstructive pulmonary disease, coronary artery disease, diabetes and hypertension. Again seeing the discarding of the fee-for-service model, BCBSAZ pays based on the patient’s improvement in the status of the chronic condition rather than on whether the doctor sees the individual. “These are chronic conditions that can be significantly influenced by strong employee engagement and a strong partnership on the primary-care side,” Stelnik explains.
“Most insurance products are focused on the adult,” notes Chad Johnson, senior vice president and executive director of Phoenix Children’s Care Network, observing that families find out only “after the fact” when their child gets sick that they can’t see the doctor they want nor get care at Phoenix Children’s Hospital. “We feel it is detrimental to create an insurance product that’s narrow in scope.”
Phoenix Children’s Care Network created a pediatric product that can plug into any other product available. It is an integrated model, with the patient at the center, that gets rid of silos and segmentation of care. “We can follow the patient throughout the care continuum — primary care, hospital and specialists,” Johnson says. With more than 850 doctors in its network — spanning more than 60 percent of primary care and 80 percent of specialists, along with the nationally recognized Phoenix Children’s Hospital — “We can handle any type of pediatric need.”
Johnson characterizes PCCN as an enterprise model of pediatric care. “We work with individuals, employers and insurance companies.” Acknowledging there may be some “bits and pieces” of overlap with other policies, he notes, “This is a whole system.” Explaining that PCCN co-builds and manages the care and the product, and “the insurance company delegates the pediatric responsibility to us to manage,” Johnson notes PCCN assumes some of the risk by taking the burden from the insurance company and the employer with a joint partnership. “We manage [the care] in a cost-effective manner and have excellent outcomes, and can show the employer group where they have an opportunity for cost-effective and improved care for their employees.”
According to Mercer, a global leader in the health and benefits marketplace, provider groups like Phoenix Children’s Care Network are emerging as attractive partners in the delivery of high-quality, coordinated, multispecialty care to large employers with self-funded health plans.
Especially in regard to children who have a greater need, Johnson says, “We reduce the anxiety and stress of care and navigating the healthcare system.” And access to this level of high-quality, cost-effective, comprehensive care, Mercer contends, improves employee attendance, productivity and morale while enabling employers to save costs associated with its healthcare spend. Johnson, noting PCCN benchmarks itself against national figures, says, “With our model, we are 16 percent lower than the national average in how we deliver pediatric cost.” Furthermore, he says, “I believe we can lower it further with our robust integration between the primary care community, the specialist community and the hospital.”
And then there’s Arrowhead Health Centers, which this year began providing free healthcare to its employees and their families. “This evolved over a decade — the realization that we had developed a healthcare model to offer superior care at a lower cost,” says Ken Levin, CEO of Arrowhead Health Centers. The key was, “we could keep people healthy, and the healthier people are, the lower the cost of care is.”
The decision to become self-insured as an employer was in 2008, Levin relates. “With premium prices going up 20 to 30 percent a year, it takes a toll on a small business’s ability to invest in its future and grow. [Then-CEO David] Berg looked into self-insurance, and developed a plan model for employees that consistently brought down cost per insured.” According to Levin, the annual price per insured that leading national healthcare company Kaiser quotes is $6,500; Arrowhead’s annual price per insured is $2,500.
Over and above what Levin calls the “tried and true practice of taking care of our employees,” Arrowhead’s leadership “came to realization that we could reframe healthcare as being an expense of being in business to become an asset to recruit and attract the best employees in the marketplace.” Free healthcare, then, is a tool for recruitment — and, perhaps not surprisingly, applications in February 2016 were triple the number in February 2015.
Levin emphasizes that healthcare is not free to Arrowhead. “We do spend a substantial amount of operating income on making healthcare free to employees,” he says, adding, “We believe other employers can create a similar model for their business.” Arrowhead currently employs about 195 people, and Levin shares the cost of their healthcare is 2.5 to 3 percent of revenue — which he estimates is about one-third what it would cost to buy insurance on the open market.
What’s at the core of the employee program is the healthcare delivery system, the same that Arrowhead provides all of its patients. “We don’t let the patient’s or employee’s conditions exacerbate to where it becomes an expensive endeavor,” Levin says. And there is neither co-pay nor deductible. “Out-of-pocket expenses are a barrier to early entry to care,” he notes. In the same vein, Arrowhead treats chronic disease in proactive manner, for instance with nutrition counselling or behavioral therapists. Patient compliance is improved with same-day or next-day guarantee for appointment enabling patients to see a doctor when they first suffer symptoms, and having, for the most part, all services under each respective clinic roof. “Having no barrier to following the health plan is how people get better faster,” Levin says.
Since the free healthcare is new this year, Arrowhead is currently building the metrics to measure the return on investment. But Levin notes the value of being able to attract employees who are fully engaged and who take as their personal mission every day to ensure the patient’s experience is positive: “The more we can do to attract and retain the best employees, the better we’re going to perform and the greater our growth is and the greater our success is going to be.” He has already seen a higher level of productivity, which increases efficiency and revenue and reduces turnover. “I expect this will pay for itself,” Levin says.
Save Money, Add Value
Another route for business is to offer employer-sponsored, voluntary non-insurance benefits. It can add value to employee benefit programs with little cost to the employer. While the employee pays for the instances of care, the employer’s contribution is leveraging volume of individuals so as to provide access to either programs or special rates not available in the individual marketplace.
This is the realm that John Richards, CEO of chiropractic clinic The Joint, sees opportunity to serve, with a form of direct primary care. Chiropractic is increasingly considered part of the healthcare continuum, especially for back pain — chiropractic represents about 25 percent of the more than $50 billion spent annually on back pain, according to Richards, who says the general consensus among the medical community is that back pain is best treated by the chiropractor’s repeat, non-invasive approach. But “restrictive codes on insurance lead to co-pays that are more expensive, and insurance allows only so many visits,” Richards says, explaining the advantage of non-insurance package plans as a supplement benefit to healthcare insurance.
“The No. 1 barrier to care is financial,” states David Berg, D.C., chairman of Redirect Health. While a few years ago, such a statement might have been taken to refer to cost of health insurance, Berg is talking about co-pays and deductibles. But there is opportunity now to shine a light on cost, and get away from an employee-benefit-covered individual taking the attitude, “I don’t know the cost, and the employer is paying anyway.” Dr. Berg’s focus now is on ways to avoid overpaying for care.
“I’ve been a diligent student of healthcare since 2007, and I’ve seen a lot of waste and overpricing,” he says. In fact, he adds, “We can free up so much money, we can provide free healthcare to more people.”
Contributing to the problem is the fact that cost is not transparent because it also involves proprietary information. Dr. Berg supports his statement about overpricing with an example of price disparity in one familiar drug: amoxicillin. He has seen a certain generic form of amoxicillin sell for $11 and $36 — and the brand name, in the same store, for $960. What many consumers may not realize, he points out, is that pharmacies are allowed to replace a doctor’s prescription with an equal drug, so if they don’t have the generic form, they can upgrade to the expensive brand name. And while some pharmacies do this very seldom, he says some do it regularly. Which is why Redirect Health includes on every prescription the notice, “no substitutions.”
Hospital charges is another area rife with overpricing, according to Dr. Berg. For hospitals, an issue may be infrastructure cost of equipment. Additionally, Dr. Berg acknowledges that emergencies can cost a lot. But, he says, “Make sure the pricing is appropriate.” A blood test would cost $20 in an office setting and more than $1,000 in a hospital setting — “Therefore, the hospital is the wrong place for that service.”
Yet hospitals may be funneling services to themselves where other options have been available. According to Dr. Berg, a hospital loses about $150,000 per year when it hires a doctor; up to $300,000 a year per specialist. “So why do they do it?” he asks. “They do it to funnel elective services to themselves.”
Self-insurance is one way to manage healthcare cost, and Redirect Health helps businesses leverage this model. “Whether it’s the business owner buying a plan or the individual getting care, it’s important they understand the care they need, their care plan, and how to navigate the system,” Dr. Berg says.
Smaller companies may be priced out of traditional insurance, yet they may need it in spite of the allowance PPACA makes exempting companies with fewer than 50 employees from the requirement to provide health insurance. In today’s business world, companies are in a war for employees, so even those exempted small companies need to offer healthcare coverage in order to compete.
While not an insurance company, Redirect Health’s healthcare plans fall under a portion of the law that enables employers to self-insure, and they do provide companies with an avenue to meet Minimum Essential Coverage (MEC) and Minimal Value Plan (MVP) requirements stipulated by PPACA.
The plans start with the philosophy of first tending to the routine 90 percent of care that most people need most of the time. Another part of Redirect Health’s program — which Dr. Berg says some companies opt to use by itself — is a care logistics team that helps members navigate the system and identify the most efficient and affordable route for treatment — without sacrificing the quality of care and, in many cases, even improving it.
Redirect Health also offers Premium Plans that use health insurance companies to supplement risks specific to a company’s workforces, such as coverage for specialists, hospital stays and drug benefits. Employers can also add voluntary coverage such as vision, dental, disability, critical illness and accident.
So, how can employers derive the best benefit for their company and their employees? As changes continue to take place in how healthcare is consumed, how it’s delivered and how it’s paid for, the industry continues to expand its efforts to provide employers with options that strengthen healthcare as an investment that helps them grow their business. In this shifting landscape, businesses are wise to evaluate the tried and true alongside what’s innovative and new.