While the future seems uncertain to many in healthcare, there are tell-tale signs of how past opportunities and failures are becoming part of a cycle that will lead us to the future.
In the early 1970s, we saw a new type of healthcare organization emerge called the Health Maintenance Organization. These demonstration projects were encouraged by the government to provoke competition and improve use of resources. Embraced by many communities as a comprehensive solution to both price and quality, HMOs grew rapidly in many markets, attracting the ire of insurance companies who lost large groups of insured and drawing the anger of many physicians who saw charts move from their office to the aligned HMO physician offices. Consumers were drawn to the simplicity of few deductibles, guaranteed access, and comprehensive coverage. Employers were drawn by lower prices but also fewer calls from workers overpayment or access.
The focus of the early HMOs was to cover preventive care and emphasize early detection of disease. By removing the financial barrier to physical exams and follow-up outpatient visits, HMOs were able to save money for themselves and their patients who are now enrollees. The early adopters of these provider-sponsored plans were mostly physicians, but larger medical groups launched what were referred to as staff model type HMOs. Many, including Kaiser, Geisinger, and Group Health (Seattle, Minneapolis, and Madison, Wisconsin), were built upon this framework.
We are now seeing a repeat of the staff model structure (i.e., select providers linked to specific insurers). In many cases, these are exclusive relationships where a patient must be part of that insurance benefit plan in order to see these physicians or hospitals. In several markets, competition between health plans has forced provider consolidation and/or providers having their own health plan product.
An organized physician or hospital network can sell its services to an insurer, but consumers are not accustomed to buying such complicated services directly. Consumers see benefits as the product they want often, forcing providers to go through an insurance company; that is unless the provider becomes an insurance company.
The largest challenge today for most hospitals and physicians is how to deal with value-based care and its many reimbursement changes.
Reimbursement changes from variable cost to fixed cost in the form of global fees and/or capitation are part of an evolution from DRGs and RBRVS to multiple global payment system. Reimbursement under capitation is still alive and well in today’s value-based payment methodology. Although mechanisms within the capitation formula have changed to include risk adjustment and regional benchmarking, the fact is that performance of care outcome is still judged on Per Member Per Month.
While fixed cost reimbursement and shared risk have been shunned by many providers based upon a mistaken sense of capitation representing less revenue, the research points out that, if done properly, payment by means of global or capitation budgets can represent more revenue than fee-for-service. Reimbursement during the COVID pandemic has revealed that those providers, with a majority of their revenue coming from risk-based contracts, did well through the pandemic because payment was guaranteed whether clients were sick or healthy. It was the fee-for-service part of the payor mix that varied widely because patient visits and admissions were less than expected before the pandemic hit.
Health plans, especially provider-driven health plans, did very well as they had the advantage of setting their capitation fees and value-based payments according to a regional market, and converted many otherwise fee-for-service patients to fixed revenue guarantees. The chosen organizational structure helped make a difference. Open Panel Health Plans accessed large populations but did poorly in consistency of medical management and health status improvement. Network model health plans did better in overall care improvement but oftentimes had many cultural or systemic management problems between providers that reduced effectiveness.
Of all the models that have done well, the staff model health plan did the best because:
- They had a broad primary care base that assured ready patient access but also controlled unnecessary specialty care referrals and admissions.
- Specialists were on a fee schedule; some, as employed physicians, were on a salary which made payments predictable and tied bonuses to improved quality.
- The population they had enrolled were required to see aligned physicians and locked in to the medical management process that allowed them to harvest savings.
Medicare is offering numerous choices of shared risk payments for providers and health plans. This is all based upon providers uniting to manage better patient care through cost savings, health status improvement, and, in some cases, outcomes.
Healthcare just went through a 12-year period of massive consolidations of hospitals, physicians, and insurers. Many of these mergers started in 2018 and 2019 are now complete and we see fewer large systems merging. However, there are smaller, new joint venture partners entering the picture. These smaller groups are joint venturing with the big players who cannot master the skill set fast enough and would rather buy the experience than attempt to build it.
We have Walmart partnering with Oak Street, which has contracts with a select number of Medicare Advantage plans, and patients joining up to use these clinics exclusively. Provoked by the consolidation of Scott White/Baylor and Texas Health Resources opening their own health plans, Blue Cross Texas has opened 10 new clinics owned by the insurer that can exclusively be used by Blue Cross members. These newer partners forming staff model type HMOs that require patients to be locked in with a specific insurer are again affirming the fact that this type of linkage between health benefit plans and physicians in a staff model structure is desirable.
Large insurers have also been consolidating smaller insurers by shifting large patient populations from one benefit plan to another and requiring patients to only see those providers signed with that benefit plan. Many also seek non-health plan partners such as CVS/Aetna. Some plans see growth shoring up tools for benefit plan improvement. Optum, for example, affiliated with United Health Plans, was designed to absorb these companies to improve their products but also reach new patients using digital therapy and telemedicine. These conglomerates may need to make new plans for 2021.
The recent passage of the antitrust laws that heretofore made insurers exempt from the McCarran-Ferguson Act, will further force breakups of some of these large dominant carriers.
Our point here is this will offer the opportunity for physician-driven, community-based health plans to regain market share through ownership of their own health plans. They will have a vehicle to attract and maintain patient market share while having a means to harvest the savings created by their delivery system and not just be a subcontractor to a large conglomerate.
So, yes, the future of healthcare is starting to look familiar, especially when we look back at the staff model health plans of the 1970s which moved quickly to the forefront before consolidations and mergers muddied the waters. While uncertainties prevail in healthcare today, the cycle of the past is now repeating with new partners in the future and with the fundamentals of care management and physician-led improvements not changing.
William J. DeMarco is president and CEO of DeMarco & Associates in Rockford, Illinois.
Source: MedicalNewsToday.com
