WHPRMS Webinar Series Presents: The Coming Retail Revolution: Insurance in transition, patient accountability, and the redefinition of American health care

Speaker: David Willis, VP, The Advisory Board Company, Health Care Advisory Board • willisd@advisory.com

Hospitals, health systems, and other providers can no longer rely on the same well-worn channels for growth that have sustained them in the past. New channels—for insurance coverage, for referrals, for patient access—are disrupting established patterns. We hosted a free webinar to members on June 4 with David Willis, VP of Health System Strategy and Executive Education at The Advisory Board Company. In this session, David took us through how disruption is an opportunity for us to deliver greater value and win market preference in new ways. Here are some takeaways:

• The tenuous hospital business model: Cross-subsidization
  • 149% hospital payment-to-cost ratio, private payer, 2012
  • 86% hospital payment-to-cost ratio, Medicare, 2012

• Important trends:
  • Most of us are becoming public hospitals; Medicare is out largest payer – continuous to grow over time.
  • Second: they are not going to pay us as much. Payment cuts will continue. 30.8B reduction in Medicare bad debt payments
  • Third: steady shift toward risk-based payment
    • 2 new bundled payment initiatives in SMS RFI
    • Bundled payment for outpatient specialty procedures
    • Bundled payment for complex, chronic disease management
    • Would incentivize specialist to manage a beneficiary care over a long-term period

• CMS lays down marker for value-based payment
  • The historic payment targets demonstrate commitment to FFS alternatives
  • Seems clear that they are trying to make PPS for hospitals – population health evolving.
  • Medicare advantage continues record growth

• Future of Medicaid expansion less clear
  • Benefit expansion clear for hospitals, but opposition remains
  • 7 M net income in Medicaid, CHIP enrollment, july-sept 2013 to feb 2015

• Traditional employer coverage eroding
  • 3 ways employer-sponsored coverage is evolving
    • Employers have the option to get out of the business of providing insurance all together;
    • Compelling option for insurers: defined contribution/private exchange; activist benefits purchaser (aggressive)
    • Consumers are still continuing to flock to public exchanges. The second round of enrollment hitting targets.

• When people buy on the exchange they become shoppers.
  • The buy silver or bronze. Usually buy the cheaper options. They end up buying a network that is narrow and also come with high out-of-pocket for the consumer. $3-5,000 out of pocket deductible.
  • That causes challenges: patients can’t pay for health bills.
  • Trading low premiums for high deductibles: Patient put this off even more because the out-of-pocket is so very high.
  • Interestingly enough: majority satisfied with coverage when switching to exchange. Just as happy as people who have health coverage through their employers.

• Private exchanges: no public exchange
  • Projected 40 million projected private exchange enrollment in 2018
  • Again they buy at lower premiums but have high out of pocket.
  • Burgeoning retail market: disrupting traditional channels of coverage
  • 87 million total retail market (buying insurance thru private exchange)

• Redefining value in health care: what does it really mean to the consumer.
  • Consumer now making choice in provider with a combination of 4 things:
    • Low cost unit price
    • Total cost control: develop population health model to control cost trend
    • Geographic reach and clinical scope
    • Clinical and service quality

• BIG TAKEAWAY: David asks us as PR, communications pros to ask ourselves: what is your value proposition to the consumer with these four attributes?
  • David says it needs to be clear and choose us based on that decision. We have to win our consumers and need to have a clear understanding of what our value proposition is.

• Substantial potential for price shopping:
  • People pay more out-of-pocket for hip replacements and renal failure admission, heart failure too.
  • We then have to prove why those services are best for those patients with those things in mind.
  • Example of price transparency
    • Castlight Health, California: Patients are willing to drive an hour for cheaper service.
    • Invest in tools that allow us to price discriminate: much like stubhub. Prices vary on time of day and even times of day.
    • CarePilot Scheduling Service: case in brief: Colorado-based company controls with 300 providers to offer available medical appointment for a variety of procedures.
    • Price wars: Surgery Center of Oklahoma puts its service online for knee replacements as example so they can actually compare to competitors.
    • Primary care: Wal-Mart charges only $4 visit fee for associates; $40 visit for customers. Wal-Mart care clinic model: the largest activated employer yet by far.
    • David says we cannot ignore this model.
    • “As the largest private employer in the us, we are committed to finding ways to drive down health care costs for our 1.3 million us associates and the 140 million customers who shop our stores each week – Labeed Diab, President of health and wellness

• How do people make decision on WHERE they get primary care?
  • 6 of top 10 attributes that drive the decision all related to access, convenience and service quality and cost.
  • People say they want to see a doctor for care but if it means a better visit or cost is lower – they don’t need to see a doctor.

• Health care 2020 
  • We need to sell why our service or specialty is better. How do we do that?
  • David says to ask ourselves: What is the true, unique advantage of a health system? Where are our biggest opportunities to use our scale and assets to deliver tangible value to purchasers?
  • How do we transition from a service-centric organization to a consumer-centric org? What opportunities do we have to productize system value and sell directly to the end consumers?

This post was written and researched by Trish Reed. If you have other news, resources or links to share, please comment below or email Trish Reed, blogger and research content specialist for WHPRMS, at trishskram@gmail.com.