Important initiatives for CIOs in 2015

The focus of healthcare accountability, quality outcomes and cost of care is driving a major shift in the healthcare industry. Whilst CIOs have always had their plate full, this year specifically will be a busier one. Each of the agenda items this year ties back to the transition from "Fee for Volume" to "Fee for Value" model. Strategically this means paying attention to how care is financed, delivered and managed. Here is my list of items that I consider to be important in 2015.

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Healthcare Cost Transparency is inevitable

Historically the healthcare model in the United States has been such that the total cost of care is generally not known until after the medical services have been rendered. Aside from having no knowledge of the cost, the insurance plans are looked upon as a primary source responsible for paying the healthcare bills. Although this model has been the status quo, the new healthcare trends are about to change everything.

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Implement Direct Enrollment or Lead Generation at the Health Exchange?

Henry Chao, the deputy CIO at CMS was probably not kidding when he said "Let's just make sure the Federal Health Exchange don't turn into a third world experience". We saw a slight glimpse of Chao's fears during the QHP submission period when the issuers kept experiencing the timeout issues.

During the planning phase the Govt. underestimated the website traffic by a major margin which is why when they went live, they suffered from a phenomenon similar to that of a traditional hacking attack known as DOS attack (Denial of Service). DOS attack happens when too many people visit one's website at the same time clogging its resources and rendering it unusable for everybody.

HHS recently announced that they will be adding some more servers to their HIOS fleet to facilitate seamless experience. Eventually their changes will allow issuers to get their QHP applications in, but this mess begs attention to a bigger event being the open enrollment!

The Federal Facilitated Marketplace

Starting October 1st the population interested in tax subsidies and Qualified Health Plans will visit Federal Facilitated Marketplace. This number of visitors will be way bigger than what HHS saw during its QHP submission time. I can only hope that the Feds have kept this larger traffic in mind when designing their hardware needs.

Direct Enrollment or Lead Generation

Direct Enrollment and the Lead Generation are one of the options through which the issuers can sell their products on the exchange. They are very important because they allow issuers to let consumers shop their plans without competing with anyone else.

The only single and the most important difference between these two options is that under Direct Enrollment, it is the issuer who carries most of the Burdon while under the Lead Generation, the exchange does all the processing. This brings us to the crux of this post which is the question that if one of these two algorithms is better than the other?

While I understand that due to IT staff size or budget shortages, having HHS do all the work would be the way to go for many plans; I lean towards the Direct Enrollment method. It is the safer bet of the two because it does not fully rely on the Federal servers.

Delivering on time is not enough

There was an article published this AM in USAToday that mentioned Whitehouse touting the success of ACA on the fact that it was hitting milestones on time. The problem is not delivering the milestones on time but delivering the products that will work. The USAToday failed to mention anything about the mess that happened at the Government severs which resulted in deadline extension. Only time will tell how the whole thing turns out but let's just hope it is not a nightmarish whack job scenario.

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Affordable Care Act is Anything but Affordable

Healthcare reform and the ACA mandate have been preached as a savior from the rising healthcare costs but the reality cannot be any farther from the truth. Simply put, the ACA is a program which focuses on paying the premiums rather than looking at how to bring down the healthcare costs.

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Health Insurance industry in post reform B2C world

The federally facilitated exchanges and the defined contribution models will shift the business-to-business (b2b) focus towards business-to-consumer (b2c). In the consumer market the brands and the perception they create are the primary influencers in purchase decisions.

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Rise of the Healthcare Pricing Tools

The notion "you get what you pay for" almost always holds true for general merchandise like clothing and related accessories. The high-end brands are usually expensive because their quality is directly proportional to the price of the product. Comparatively in case of healthcare, the price variances can be a little tricky and are tied to more than just the quality of the procedures.

Healthcare cost differentials

The cost of different kinds of treatments in a given area, city or state can vary substantially because they are dependent on fee schedules, demographics, and physician overhead.

A procedure like Lasik surgery can cost up to $4500 in New York while the exact same procedure runs for about $2800 in Ohio. Both of these treatments are about the same if judged on the scale of quality, procedure implementation, physician experience and time and yet there is a huge difference in cost.

Why the rise of the pricing tools?

Come 2014 the Affordable Care Act (ACA) will require everyone to get insured or face a penalty. This combined with the elimination of the pre-existing condition clause and the defined contribution model will put financial pressure on the whole industry and will create a consumer driven healthcare.

To stay afloat, the insurance companies will underwrite all subscribers as being under the same umbrella which will tie all participants together with an invisible financial thread. This thread will cause all participants to suffer equally for someone else not being able to pay their bills.

To ensure no one defaults on their payments and can afford the care, both the insurance companies and the consumers will demand to know the estimated cost of the treatments before they begin. This demand will give rise to the pricing tools.

Aspects that will matter

Pricing tools will be more than just a mere quoting system. Other facets like hospital versus private facilities, satisfaction ratings, availability and physician experience will equally count.

The consumer driven healthcare model will depend on:

• How is the reputation of the hospital or a physician's office?
• What kinds of deals are available inside or outside the plan network?
• Is the physician willing to offer discount rates to individual customers?
• What kind of satisfaction ratings did the physician receive?
• What percentages of outcomes were successful?
• Is there a price difference between a doctor's facility and a hospital?
• Are there any payment plans available?

Different types of pricing tools

There are three primary ways of implementing the quoting system: the bluebook approach, the insurance average and the true cost quoting. All of these systems will have an Expedia-like feel with some even offering online shopping through a cart system.

Bluebook approach

Bluebook models already exist in the market but they tend to have a higher chance of deviation from the true estimates. They gather the pricing information from data bank companies like Vitals and then calculate the estimate by taking the averages.

The reason the bluebook approach is not realistic is because it does not take different, more-detailed possibilities into account, remove outliers or have access to different fee schedules. For example: A dental implant surgery can have the possibility of including a bone graft if the jawbone is too small. This is something that bluebook pricing would have trouble representing properly.

Insurance average

In this approach the pricing statistics are created by mining the claims data from different insurance companies. During the calculations the resultant information is further refined for accuracy by removing the outliers from the source costs.

Systems that offer cost information by mining claims data are usually more accurate than their counterparts. The weakness of this system comes from the absence of individual data like copays and deductibles.

True cost quoting

True cost systems are designed to offer more realistic estimates and are geared towards churning out individual estimates. The costs for different treatments are calculated using the same methodology as the insurance average models and then individual deductibles, copays and out-of-pockets are applied. The end result varies from user to user depending on their standing in their plan.

Opportunities and Challenges

The employer contribution model, ACA and consumer driven healthcare will force employers, hospitals, insurance companies and physicians to change their business models. Information and data availability will be at the center of this change.

Hospitals will have to rethink the patient exit surveys, feedback management and the way they charge their patients. Hospitals and doctor offices will be in a state of covert competition which will bring down prices for certain types of treatments.

Price comparison tools are already available in the market but they are not effective enough if they cannot utilize one's copay or deductible in the equation. Insurance companies will have to connect and offer data to their pricing tool vendors so that real-time quote calculations can be made.

Web presence for doctors will not just be "good to have" anymore - consumers will expect doctors to maintain a website. There is a vast opportunity present for software development houses to offer some kind of IT services to doctors because due to the ever increasing costs and overheads as it will be hard for physicians to hire IT staff directly.

Other reasons to maintain a solid web base are so that the physician can contact his/her patients electronically and get their feedback personally. We should not forget that the majority of the consumers leaving feedback on the public pricing tools will be the unhappy campers. Physician websites will allow physicians to showcase their good cases tilting the negative bias towards a positive one from the public areas.

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No real Medicare solution in 2013 Fiscal Cliff deal

I was hoping, or to put it more accurately, dreaming, that the senate and the house will give sequestration and SGR a reasonable thought during the fiscal cliff discussions. Looking at the outcome I fear a gradual drop in the number of physicians dealing with the Medicare.

The fiscal cliff bill (HR 8) passed by the Senate delayed the Medicare payment cuts by one year. Current rates will continue until December 31, 2013, and at that time this patch will require more action.

Hospitals will pay for the delay

Besides not enacting a permanent fix, the other disturbing part is the cost of delaying is offset by requiring hospitals to fill the bill. Republicans did propose to pay for the bill through cuts to ACA and its beneficiaries, which the Obama administration overwhelmingly rejected.

Medicare cuts has no positive outcome

Hospitals will suffer because they will see reduced payments due to Medicare payment cuts and Disproportionate Share Hospitals plan. Physicians will suffer because they will either have to eat their losses or mitigate them by limiting their involvement in the Medicare program. Insurance companies will suffer because a reduction in Medicare physicians will affect their Advantage Plan’s provider network.

Doctors will leave Medicare

Many patients are questioning the old belief that doctors were supposed to join medical field to help people. Money should not be the primary factor. Some have gone so far as to say that professional honor is replaced by the goal of running a profitable venture, and I could not disagree more with this theory.

Doctors still join the medical field to help people, because many of these talented men and women could have gone onto other professions with more money, less hours and less hassle. But considering the large sum of medical school debt they accrue and the overhead of running their facility, the actual salary they are paid is like a rain drop in a desert.

Bottom line

Sequestration is a very serious problem which is not created by doctors in general. Instead of enforcing the existing laws, rules and regulations, the Government is further punishing care givers by adding more rules while leaving them hanging and guessing for the final outcome for another year. This will bring no positive change but force doctors to opt out of these programs.

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Notable Highlights of Federal Health Exchanges

Healthcare exchanges will bring in both opportunities and challenges for Health Insurance companies. Plan building, pricing, customer education and brand recognition will play a top role in the coming years. Here are some of the notable highlights in regards to the Health Exchanges.

Readiness dates are closer than they appear

Even though the regulations come in on January 2014, the enrollment will have to start in 2013. This means that the health plans will have to have their exchange participation ready by October 2013. The readiness for the exchange is a large topic in itself. Connecting with the exchanges will require the ability to accept and create 834 and 999 responses, factor subsidies when processing plans and premiums and the ability to process the financial data coming in from the exchange.

Risk adjustment and cost

The ruling requires insurers to accept everyone without discriminating against chronic illnesses or preexisting conditions. Due to this, the underwriters will underwrite everyone as a whole and hence distribute risk and cost.

Government as an employer

Traditionally if you have healthcare coverage through your employer, your employer pays part of your monthly premium and the rest comes out of your paycheck. Similar to the employer based health coverage, the health exchange pays part of your premium through subsidy and you pay the rest. So the subsidize care turns the government’s role into more like that of an employer.

Subsidy based coverage & the penalty

To ensure that both the sick and healthy people get on board, the penalty and the subsidy system came into being. Come 2014, everyone will be required to get health insurance and depending on where one stands on the poverty index scale, the IRS will either pay a credit towards the monthly premium or will charge a penalty if an individual fails to get insured. How much money the IRS pays to the health plan for an individual depends on how large of a subsidy that person is eligible for.

Subsidies and the silver plans

Even though the subsidies are based on the poverty level, the second lowest cost of the silver plan in your region plays a major role. For example: your subsidy in Ohio will be different than the one you will get in Pennsylvania under the same exact income and poverty level if the silver plan rates are different in the two states.

A point to note is that even though your subsidy is based on the silver plans, you are not obligated to buy a silver plan. You can always use that subsidy against other plans such as a bronze one.

Small employers

Small employers with 50 or less employees will not be required to provide health insurance to their employees, but will be eligible to get tax credits should they do so through federal exchange. The subsidy itself will not be significant enough to make any dent in their insurance costs which is why we will see the small business workers applying for tax credits and enrolling as individual subscribers.

Technology will not eliminate the human intervention

Whether health plans participate in ACA through federal, state or private exchanges, the technology will not eliminate the need of customer service to assist people with their enrollments. There will be lots of enrollees who never had insurance before or never had to deal with having to make a decision to choose between what benefit is right for them or having a full understanding of what is the difference between gold, silver, bronze or a platinum plan.

All health plans should be ready to offer some kind of education to its enrollees about the choices and their impacts.

Subsidies, taxes and income raises

Getting educated on how the personal taxes will be impacted by the subsidies and income changes will be another critical task for the enrollees. For example: An individual making a $20k annually getting a subsidy of $200 per month will actually end up owing the IRS money if that individual received a pay raise within that year and failed to report it right away.

The moment there is a change in the pay level, the IRS will need to be notified so that the subsidies can be recalculated.

Bottom Line

There will be a large influx of customers that will be making purchase decisions based on brand recognition, brand alliances, provider network, hospital network, premium pricing, subsidy levels and the quality of the benefits being offered.

 

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Broken system of Medicare, SGR and the Sequestration

Would it make sense if you’re told that not only you are not getting a raise this year but your pay will be cut by n% because the US economy didn’t do well this year? In a nutshell this is actually how Medicare cuts (known as SGR) works.

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Obama, Romney and the Medicare cuts

Recently Obama accused Romney of “ending Medicare as we know it”. The Romney camp fired back saying “it is Obama who is endangering Medicare by already cutting billions from it” and that it is the Republicans who are trying to save it. So who is right?

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Middle Class & The ObamaCare Taxes

The Obamacare mandate brings more than one kind of tax with it and it may actually affect the middle class. Before you read further, I would like to make it clear that my intention is not to take sides or bash Democrats or Republicans. I have done my earnest effort to have an independent take on what kind of taxes will come with Obamacare and how they will affect us.

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Must have features in Private Health Exchanges

Regardless of the healthcare reform’s long term future, the private exchanges are here to stay. The idea of private health exchanges came at a time when employers were eager to explore new options due to the rising medical costs and the exchanges gave them that new option.

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Health reform and the ACA approved. Now what?

SCOTUS ruled the healthcare reform as being constitutional if seen through the tax law. Even though it is a win for Democrats, to me it looked like the Republicans followed the "lose the war but win the battle" strategy. The way Justice Robert ruled, the tax (penalty) part of the ACA became the center stage attraction.

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Ohio Medicaid Contract Drama

If it walks like a duck and quacks like a duck, chances are….

The recent flub by the state of Ohio on the new Medicaid contracts makes one think if this is how the state is performing with its own cost saving initiatives, what will it do with the healthcare reform and exchange implementation?

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The Healthcare reform after the Supreme Court’s ruling

There are only three possible outcomes from the SC’s ruling. The ACA will be thrown out altogether, the individual mandate will be thrown out but ACA will stay or the ACA will stay in its entirety. Whatever the outcome maybe, the genie is out of the bottle and there is no going back.

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