D CEO has turned to some of Dallas-Fort Worth’s most respected thought leaders within the healthcare industry to get their assessment regarding the current state of healthcare in North Texas. We asked them where the industry is headed, about the largest challenges that organizations face, and how businesses are being impacted. Here, they offer a glimpse into their perspectives on everything from the impactful trends to how innovation and technology will affect patients, businesses, and providers.
What are some of the most impactful trends occurring in the healthcare marketplace?
Flannery: One of the most important emerging trends is uniting healthcare and coverage through providers, health plans, and pharmacies. Healthcare organizations across these industries are collaborating in more meaningful ways in the pursuit of the triple aim: better care, better health, and lower costs. Through the growing adoption of value-based care models that promote value over volume, we are developing a healthcare system that is more personalized, simplified, and convenient. That’s because value-based models focus on quality and use incentives to reward better health and lower costs, driving important improvements in how health plans and care providers work together to support people’s care.
Crow: There is a fast-growing recognition that investing upstream with good primary care yields both positive financial returns and increased quality and longevity of life. Second, and as important, is the care coordination needed and desired by patients in their healthcare experience. Finally, the willingness of more and more employers to be bold and innovate given the cost pressures and lack of performance of traditional solutions that have been offered for years.
Goldfarb: In the small group market, we are seeing more and more level funded health plan options from most of the major insurance carriers. Level funded health plans are a hybrid between fully insured plans and partially self-funded plans; they combine the cost savings and customization of self-funding with the financial safety and predictability of fully funded plans. More employers with 50 or more employees are beginning to seriously evaluate transitioning from traditional fully insured health plans to partially self-funded health plans. If properly designed, these employers benefit from potential cost savings, the opportunity for plan customization, and reduced regulations. To provide employers of all sizes with lower-cost plan options, insurance carriers are continuing to provide narrow network and even narrower network plan options–networks with a limited provider choice for employees.
What can business owners do to mitigate the rising costs of healthcare?
Signor: The high cost of insurance premiums is largely generated by two to three percent of employees who spend 100, or more, times the average annual expenditure. Most of this spending occurs after deductibles have been met and the incremental cost is not directly borne by the employee. Employers can work to educate employees on how their choices affect everyone’s overall cost. Although physicians ultimately must sign off on the treatment plans, patients can select how they want to be treated. Choosing certain drugs or latest type of surgery can increase the cost of treatment by more than tenfold.
“There is a fast-growing recognition that investing upstream with good primary care yields both positive financial returns and increased quality and longevity of life.”Christopher Crow, M.D.
Crow: Since they are paying the majority of the healthcare costs in most cases, they should strongly consider moving (if they haven’t already) to a self-funded plan structure rather than fully insured. This provides flexibility to design more effective solutions that reduce costs and increase value to patients by reducing fragmentation and low-value services that rest between the beneficiary and the provider of care.
• Structurally encourage your employees to have a relationship with a primary care physician. In fact, look to provide them benefits that remove all barriers and costs in seeing your PCP including removing deductibles for primary care
• Make sure the physicians or a proxy have integrated care coordination services to support your patients and that there is contractual alignment on quality and cost.
• Eliminate out-of-network benefits, especially in a market like North Texas where there is more than adequate coverage of high-quality providers of all types.
• Be transparent about what you are doing for your employees and how it is a benefit to them and their families.
Flannery: Employers can help curb healthcare costs by using technology to reshape how benefits are offered to employees. Enabling access to information simplifies the process, creating an affordable and interactive experience. By utilizing online resources, employers can analyze data to create employee-engagement programs; enable employees to comparison shop for healthcare based on quality and cost; and help people better understand their health plan and more easily navigate the health system. These online resources encourage engagement and a savvier workforce, contributing to improved health outcomes and reduced expenses. In addition, employers can encourage employees to lead healthier lifestyles through well-being programs that yield potential cost-savings, including initiatives that offer financial incentives for achieving fitness goals and renewal discounts for employers based on aggregate team results.
Goldfarb: For most employers, their benefit plan represents their second-highest expenditure behind payroll. Employers need to be more open-minded when it comes to the design of their benefit program. Traditional plan designs are inefficient and unsustainable. Fifteen to 25 percent of total healthcare spend is pharmacy. As a starting point, one strategy we recommend all employers to consider is carving out their PBM (pharmacy benefit manager) from their medical plan and working PBM that is transparent in their pricing and accountable for their services. A well designed PBM contract, with audit provisions, can easily yield 20 to 50 percent savings in pharmacy spend, equating to a five percent savings in overall healthcare spend.
Pinkstaff: A business owner could really change the cost equation by simply reducing benefits to employees or by creating some type of defined contribution plan. However, depending on the types of employees, this may yield a difficult scenario for recruiting and retaining a talented workforce. Therefore, it is more important than ever for companies to consider being innovative with their plan options. This could mean offering plans that provide more flexibility or more consumer engagement. Additionally, employers could encourage their employees to use lower cost providers, even those that are virtual.
What other tactics are employers using to reduce their healthcare expenses?
Pinkstaff: An interesting trend we see among some self-funded plans is the use of destination medical centers. Depending on the size and characteristics of an employer’s population, it may make sense to fly employees suffering from certain conditions to certain hospitals for treatment. This center of excellence type of approach has reduced cost and improved outcomes for some employers.
Goldfarb: Most health plans are inefficient. For employers that have a partially self-funded health plan, we highly recommend a thorough evaluation of all moving parts that make up the health plan. This includes the actual stop loss insurance, third-party administration, pharmacy benefit management, disease management, network access, and case management. For any parts that are not performing well, replace them to optimize the overall performance of the plan. Also, it is very important that all contracts be reviewed many times healthcare expenses can significantly be reduced by revising existing contracts. For employers that really want to move the needle, consider direct healthcare contracting. Instead of delegating this responsibility to the insurance carriers, employers can provide their employees with the highest quality local healthcare while controlling costs through direct arrangements with local providers and health systems.
Flannery: Value-based care programs that reward providers for health outcomes instead of the number of procedures they perform are an effective
“Value-based care programs that reward providers for health outcomes instead of the number of procedures they perform are an effective way to help improve the quality of care employees receive while managing costs.”Scott Flannery
way to help improve the quality of care employees receive while managing costs. An example is bundled payments that provide a single, set payment that is dispersed among all care providers involved in a defined episode of care. This is a shift away from the traditional fee-for-service structure in which a care provider is paid for each treatment, appointment, or test, generating multiple claims within a single, broader episode of care. Bundled payment methods reward care providers for value over volume, helping align incentives and linking reimbursement to the delivery of coordinated, efficient care.
Crow: Unfortunately, many are using PPOs and high deductible plans that only increase costs over time. Benefit design is the most powerful tool that the employers have. There is no silver bullet for all employers but some in this market are purchasing primary care directly from networks like Catalyst. This benefit removes any limitations to primary care and encourages a strong relationship with their PCP. The employer should also connect easily accessible primary care with care coordination services along with incentives to the PCP and his/her team to improve quality and lower costs. Employers providing this support are not only lowering costs but getting great feedback from their employees on the benefits provided to them.
Signor: Last year, our firm opted to go at-risk for our employees’ healthcare insurance. We saw a 78 percent increase in premiums from 2014 to 2018 and decided to perform an audit of our healthcare expenditures. We found that the insurance companies were getting a 20 to 25 percent margin to our costs without bearing any of the risk for the costs. They would increase our premiums to ensure their profitability and offload the extra risk with reinsurance. This year, we became our own insurer (with the help of some stop-loss coverage) and are passing the savings on to our employees
How are businesses impacted by healthcare consolidation and partnerships?
Flannery: Some people believe that consolidation alone results in more leverage and, in many cases, this is true. However, collaborations focused on delivering value and quality, while improving patient satisfaction, are the ones that prove most successful in improving health outcomes. The ACOs we’ve established with care providers in the Dallas-Fort Worth area are a great example of those partnerships. For example, our ACO with Catalyst Health Network lowered health care costs in North Texas by $28 million over the past two years.
Signor: Consolidation allows health systems the ability to practice corporate medicine. Healthcare started with doctors and nuns. Now it is run by executives measured by the return on investment and improvement in bond ratings. As such, they might by motivated to push policy which increases the revenue despite alternatives that can be less expensive and just as effective. For example, we had a friend whose child recently was admitted into a notable children’s hospital for ingesting a metal object. The policy of the hospital was to surgically remove it. Fortunately, the mother was educated on the matter and convinced the hospital to go against protocol to perform a simple colonoscopy prior to the invasive surgery. As a result, the object was removed without endangering the child and incurring the excessive cost of a surgery.
“Whether intended or not, health systems have negotiated lower reimbursements for physicians visits versus higher payments for acute procedures like surgery. As physician reimbursements continue to decline, it forces doctors to sign on with a hospital in order to survive, furthering the effect.”Jason L. Signor
Crow: North Texas has become one of the most expensive metro areas in the country in the last 10 years. There are two primary drivers of the cost increase. First, consolidation of the major health systems has driven prices up due, in large part, to increased negotiating leverage in the market. The purported savings from anticipated economies of scale does not seem to translate to the buyers of healthcare. In fact, healthcare premiums in North Texas have more than doubled in the past decade. The second reason is a strong PPO market locally. This allows for out-of-network services to operate without true transparency. Forest Park Medical Center was a grand example of this, but it happens in all areas, including surgeries, emergency rooms, imaging, and laboratory testing. You can often see costs for a procedure that is out of network be five to 20 times more expensive than the same procedure in network.
What trends do you see or anticipate in physician reimbursement?
Signor: For the past eight to 10 years, significant consolidation of physician practices has occurred to increase the referral revenue generated from inside the health systems. This consolidation has increased the power of the oligopoly of the health systems within our market. Most of the Dallas-Fort Worth market reimbursements are dictated by how the four major health systems negotiate bundled payments with the insurance companies. Whether intended or not, health systems have negotiated lower reimbursements for physicians visits versus higher payments for acute procedures like surgery. As physician reimbursements continue to decline, it forces doctors to sign on with a hospital in order to survive, furthering the effect.
Flannery: As our value-based models continue to mature, one of our main areas of focus continues to be providing actionable, patient-specific information that will help care providers deliver quality care and that seamlessly integrates into their workflow. Providing that access to rich information and data is part of our commitment to providing the support and incentives necessary to serve physicians’ overall patient populations as part of value-based models. Equally important, we reward care providers for efficient, quality care, rather than reimbursing solely on the volume of services delivered.
Crow: Medicare, Medicaid, and commercial insurers are trying to move physicians to accept more downside risk for the services they provide. Very few physicians or even groups have the capability or willingness to get into the risk game. I think you will see independent physicians who are not part of a performing network see their reimbursement drop or stay flat at best. This will continue to drive more consolidation in the market. The government is actually leading the way here with innovative primary care prospective payment models, including for Medicare and Medicare Advantage.
What is an example of a lesson that healthcare can, and should, learn from other industries?
Hinton: The No. 1 lesson that healthcare can learn from other industries is to be more customer-centric. We have traditionally been a “do to” industry, where we do things to patients when they need us, but we must evolve to be more of a “do with” industry, where we see our customer as a partner and an active part of their own healthcare journey.
Is telemedicine changing the way healthcare organizations operate? How can the patient benefit from it, and is it here to stay?
“Preventive care is more than a buzzword; it can be a sound business practice.”Karen Pinkstaff
Goldfarb: Telemedicine is likely here to stay. It provides 24/7 access at a very low cost, therefore providing on-demand access to care and steering patients away from costly non-emergent emergency room care. It is especially relevant for the millennial workforce population representing the majority of employees. We are now seeing telemedicine enter the behavioral health space, which seems to be a natural evolution.
Signor: Telemedicine is here to stay, but it will not replace the majority of healthcare spending in the near future. Most of healthcare spending occurs in the operating room or in the treatment of chronic diseases, like cancer. Simply put, I would not trust my home’s internet connection during an open-heart surgery. Some things cannot be replaced by technology.
Flannery: When you need care any time–day or night–virtual visits can be a great option, and a patient can save up to $1,500 in comparison to what they might pay for that same care at an emergency room.
Hinton: What we used to call telemedicine; we today call virtual health. Virtual health, which includes asynchronous e-visits and real-time virtual visits, is making the care experience easier and more convenient, and it is helping us reach more people.
Preventive care is another buzz term today. What role do business owners play in improving the health and productivity of their employees?
Flannery: Preventive care benefits save employers and employees money in the long run by warding off serious, long-term illnesses. Studies show that employer-sponsored well-being programs may help prevent or more effectively manage chronic conditions, create happier and healthier employees, and reduce overall costs. We’re seeing more employers leverage technology to make their well-being programs more engaging with adoption of things like digital resources and wearables.
Hinton: As a large employer, we know firsthand that businesses can incentivize employees toward healthy behaviors by requiring an annual physical or health screening to receive employer-based insurance premium discounts. They can also include, as part of their benefits package, a wellness component to drive behavioral change. Our Baylor Scott & White Quality Alliance, an accountable care organization, successfully partners with employers to deliver these types of programs, resulting in measurable improvements in the health of populations.
Goldfarb: Approximately 70 percent of chronic diseases and conditions are preventable, but unfortunately most of today’s workforce do not use preventive care services. Why? It typically boils down to inadequate communication. Consistent communication to employees, reminding them that preventive care services are not subject to deductible, copays, or co-insurance payments and will yield greater utilization, a healthier employee population, and a better bottom-line for the business. Simply put, the more employees take advantage of preventive care, the more cost-effective their care becomes.
Pinkstaff: Preventive care is more than a buzzword; it can be a sound business practice. Amenities such as healthy break room snacks, on-site gyms and fitness classes, company fun runs, mental health apps and counseling, can help you attract and retain talent, but they can also help you lower your healthcare costs.
How will transparency and the disclosure of costs and quality ratings affect the healthcare industry?
Crow: Unevenly at first. Right now, most consumers consider higher costs equivalent to better quality, while in many cases it is the exact opposite. It should help employers as they gain access to more and better data about the health and costs of their employees and dependents. However, there will be challenges due to current market forces that don’t incentivize real transparency. These same market forces are contributing to the rapid vertical integration by the large national health insurance companies.
Hinton: Consumer demand is evolving to include increased expectations of price transparency, and we are making significant progress for those we serve. Baylor Scott & White Health was the first health system in Texas to launch an online, self-service pricing tool. It produces an estimate in seconds using our pricing, contracted rates, and real-time patient eligibility and insurance benefit information.
Flannery: Fortunately, many online and mobile resources are available today to help people access healthcare quality and cost information, enabling them to comparison shop for healthcare just like they do for other consumer products and services. A UnitedHealthcare analysis showed that people who use online or mobile transparency resources are more likely to select healthcare providers rated on quality and cost-efficiency across all specialties and pay 36 percent less than non-users. This is an important effort that has the potential to help improve health outcomes and make care
“Consistent communication to employees, reminding them that preventive care services are not subject to deductible, copays, or co-insurance payments and will yield greater utilization, a healthier employee population, and a better bottom-line for the business.”David Goldfarb
Goldfarb: Conceptually, with greater cost transparency, we should experience greater competition, lower prices, and most importantly, better employee consumerism and lower healthcare spend. We have seen this work effectively for employers who properly structure and implement consumer-driven health plans, such as plans that provide employees with Health Savings Accounts. However, traditional health plans simply do not promote consumerism; prices are an afterthought if an employee is only responsible for a $25 copay. However, there has been some positive movement with transparency in the prescription drug space. Today, the 10 most commonly advertised drugs have list prices ranging from $488 to $16,938 per month for usual course of therapy. Patients taking these drugs will now know what a drug costs as they discuss their options with their doctor.
Pinkstaff: The players who can provide patients with a value option are well-positioned for success. Transparency is so much more than a machine-readable chargemaster file posted online. Transparency is relatively meaningless unless it enables patients to make decisions on the type of care they will receive based on factors such as quality and cost.
What can be done to ensure quality, transparency in pricing, and a reduction in the cost of healthcare to help consumers?
Crow: Since there is no American Association of Patients, I think the best chance comes from the local employers and large employers sitting down and talking with providers. They pay for the care and should demand it. You see alliances like this, such as the Amazon, Berkshire, JPMorgan announcement this year, and many others are organizing. While the Amazon alliance has one million lives nationwide, we have seven million citizens in North Texas, so healthcare is and will remain a local issue that must be solved in local markets.
Flannery: Our traditional fee-for-service health care system is giving way to a model that promotes better health, better care, and lower costs. We’re collaborating with healthcare providers by offering them technology, data, and financial rewards for delivering quality patient results at lower costs. Value-based care can transform how healthcare is paid for and delivered, resulting in employers moving away from a singular focus on network discounts negotiated by each health plan, and instead putting more emphasis on the total cost of care for their employee population and the idea of paying for value, not volume. By the end of 2020, we expect to have $75 billion in care provider reimbursements tied to value-based arrangements annually.
Signor: We recently provided a new benefit to our employees which helps provide information when selecting a location for a certain service. The company is called Medibookr and provides transparency on the costs for treatments within the marketplace. Our employees can now decide when and where to go in order to save substantial sums. Simply asking the right questions before blindly going to the referred location can save lots of money.
How does a business owner balance the benefits of self-insured options with the more standard plans?
Pinkstaff: Your healthcare plan, whatever it is, should be consistent with your talent strategy. You can’t ignore cost, but you must think of your healthcare offering as a key component to how you attract and retain talent. The labor market is tight, and health care is a critical consideration for many current and prospective employees.
“Healthcare is in the midst of a transformation – one that will empower consumers and put greater focus to keeping people healthy as opposed to just treating them when they’re sick.”Jim Hinton
Crow: You have to do your homework. There is a reason why mid- to large-size companies are self-insured. The standard fully insured plans have been incredibly costly to small businesses the last 20 years with three-fold premium increases, and the company doesn’t have the ability to meaningfully impact their own experience and costs, due to the community rating of fully insured plans. One of the ways employers can begin to navigate this choice is to work with a consultant who is experienced in self-insured plans and prices their services transparently to customers.
Goldfarb: Insurance is a balance between costs and risks. A fully insured (standard) plan removes most risk from the employer and employees, but the guaranteed cost of the plan is higher. Business owners should spend time understanding their healthcare choices and mapping out a long-term benefits strategy. Moving to a self-insured plan should be a well thought out, long-term decision. If properly designed, self-insured plans can provide savings from the individualized plan management, increased flexibility and control of the plan, improved cash flow, and cost savings from reduced premiums (exempt from state premium taxes, a two to three percent premium savings).
How can hospitals and physicians respond to changes in the way reimbursements occur?
Crow: Without question, both are needed in the healthcare model, and it will be incumbent on hospitals and physicians to show their value just like any service provider should. As costs become more transparent and more services are bundled, it will become even more important for facilities and providers to demonstrate their real value beyond marketing campaigns and historic brand identity. Ultimately, hospitals and physicians will have to be more efficient financially while maintaining or improving their outcomes and providing a superior patient experience. This will require better, more coordinated patient communication across all domains and services.
Pinkstaff: Our clients are focusing on how to implement methodologies around value-based reimbursement. This includes better tools to determine the true cost of the services being delivered as well as improved workflows using artificial intelligence to enable the provider to determine the best care options of the patient.
Looking forward, what do you think the healthcare landscape will look like, say, five years from now?
Hinton: I think healthcare will continue to drive big decisions, both nationally and locally. I also think employers will take a bigger role in the health of their employees. And I think we will continue to see healthcare evolving to meet consumer expectations.
Crow: We will most likely have more consolidation, higher costs, and more outrage by the government, employers, and consumers. However, we will also see the evolution and scaling of solutions from smaller pockets today to regions of better performance. These have characteristics of alignment and investment in good primary care and care coordination. This can provide a roadmap for the rest of the country. This pace of change would quicken with an any meaningful, large-scale economic recession.
Goldfarb: We will continue to see growth in the direct contracting movement. It can benefit both employers and the healthcare system. For employers, it can provide a predictable window into spend, many times negotiating rate corridors that represent a discount over historical prices paid, all while eliminating administrative overhead that comes from working with third-party payers. For the healthcare system, this arrangement represents market share and an expanded community footprint, without the complexities of an intermediary standing between the patient and provider regarding care decisions and payment.