Entries in health plans (42)

Friday
May062016

Hot Healthcare M&A Market Starting to Cool

By Clive Riddle, May 6, 2016

Irving Levin Associates reports that healthcare merger & acquisition activity, which has been relatively overheated, is starting to cool a little. Lisa E. Phillips, editor of Irving Levin’s Health Care M&A News tells us “the slowdown in deal volume in the first quarter of 2016 might simply be fatigue setting in after a record-setting year in 2015. Also, some buyers are still figuring out where the best opportunities are, as the shift to value-based reimbursements gains momentum.”

Health Care M&A News states that “health care merger and acquisition activity began to slow down in the first quarter of 2016. Compared with the fourth quarter of 2015, deal volume decreased 7%, to 351 transactions. Deal volume was also down 7% compared with the same quarter the year before. Combined spending in the first quarter reached $79.5 billion, an increase of 87% compared with the $42.5 billion spent in the previous quarter.”

Here’s a snapshot the publication provided of the quarter’s activity:

How big was 2015?  Bigger than 2014, which was also a huge year.  Irving Levin’s Lisa Phillips says “health care mergers and acquisitions posted record-breaking totals in 2015. The services side contributed 62% of 2015’s combined total of 1,503 deals, which is even higher than 2014, when services deals accounted for 58% of the deal total.” A separate Irving Levin publication, the Health Care Services Acquisition Report, cites that “deal volume for the health care services sectors rose 22%, to 936 transactions versus 765 in 2014. The dollar value of those deals grew 183%, to $175 billion, compared with $62 billion in 2014. Merger and acquisition activity in the following services sectors—Behavioral Health Care, Hospitals, Laboratories, MRI & Dialysis, Managed Care, Physician Medical Groups, Rehabilitation and Other Services—posted gains over their 2014 totals. The exception was the Home Health & Hospice sector, which declined 33% in year-over-year deal volume.”

In the hospital sector, for 2015, they report that “activity remained strong in 2015, up 3% to 102 transactions, compared with 99 transactions in 2014. An average of 2.6 hospitals were involved in each transaction, compared with an average of 1.8 in 2014 and 3.3 in 2013.” Philips noted that “several deals resulted from the mega-mergers of 2013,” and that “we’re seeing more sales resulting from bankruptcies, especially in states that have not expanded Medicaid coverage.”

Thursday
Feb252016

Et Tu, Oscar?

By Kim Bellard, February 25, 2016

Things seem to be going well for Oscar Health, the health insurance start-up that has been wowing investors and the media since it was founded in 2012.  Forbes reports that Oscar just raised $400 million in an investment round led by Fidelity, which effectively values Oscar at about $2.7b.  So why do I fear that perhaps they are taking the wrong path?

I've previously expressed my concern that Oscar and some of its fellow health insurance start-ups might be more about repackaging than reinventing.  I'm more concerned than ever after Bloomberg reported that Oscar is adopting a new network strategy: moving to "tight, exclusive networks with hospitals."  

There's no secret why Oscar is taking this approach.  It's about cost, with the expectations that narrower networks yield cost savings Closer relationships with providers and the ability to offer lower premiums without hurting quality.  If that's what Oscar is after with its new network strategy, what's not to like?

Well, plenty.  For one, with this strategy Oscar isn't innovating; it is buying into the strategy that most other health plans are trying to adopt.  That doesn't make it a bad strategy, but playing follow-the-leaders certainly doesn't fit the cool yet disruptive image that Oscar has so carefully cultivated. 

More importantly, it is the wrong strategy.  For Oscar.  For any health plan.  It is a strategy rooted in the 1990's, if not earlier.  The argument for networks, especially narrow networks, is that health plans can drive better bargains by promising more volume to specific providers.  I don't have a problem with health plans driving hard bargains with providers, especially if those bargains are performance-based.  What I do have a problem with is forcing consumers to use those, and only those. 

I think it is great when a health plan tries to find the highest quality providers, and to get a good deal with them.  What I wish they would do, though, is say, "here's the data that demonstrates their quality, and here's how much we're willing to pay them to take care of you.  If you can find providers that are better, that's great; go to them, and we'll still pay the same as we'd pay the providers we recommend.  No hard feelings." 

In other words, let the health plan act as the concierge, not the gatekeeper.

If a consumer goes to providers who charge more than the health plan would pay their designated providers, well, there's a price for choice; consumers might have to pay extra.  On the flip side, maybe the consumer should pocket some of the savings if they manage to find less expensive providers.

This approach might sound like reference pricing, because reference pricing is a start to where I think we need to go.  I'd rather we put more effort into that than in narrowing consumer's choices.  
Noah Lang, CEO of Stride Health, told Fast Company, "Oscar is primarily a consumer experience company."  I don't think restricting choice of providers is a very good consumer experience for any health plan, and especially not for one like Oscar who prides itself on its member experience.

Oscar thinks this new approach is their future.  If so, their future may be as just another health plan.  And that'd be too bad.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

Friday
Jan222016

Revisiting the Health Cooperatives Morass

By Clive Riddle, January 22, 2016

A new Wall Street Journal article, Obama Administration Works to Fix Health Insurance Co-Ops, covered Andy Slavitt’s - acting CMS administrator – testimony to the Senate Finance Committee regarding how to recoup federal loans from failing co-ops, how so many co-ops failed, and what future fixes are planned for the cooperatives, including reducing funding restrictions. A graphic accompanying the article re-hashes the $1.5 billion lent to co-ops that have failed, which range from $265 million in New York to $60.6 million in Oregon. Yesterday’s edition of Inside Health Policy  reported that Slavitt has indicated risk adjustment changes proposed for 2017 may come sooner. The natural fallout from the failed and failing cooperatives continue to surface in the news. For example, this week it was announced the failed Kentucky Health Cooperative was placed in liquidation.

What CMS can do to mitigate the tenuous position the remaining cooperatives are in is news. But the bulk of current media discussion of cooperatives continues to beat the dead horse of the number of failed cooperatives, their cumulative losses and unpaid federal loans, all which was significantly covered in the fall. There was plenty of blame to go around: co-ops underpricing themselves in the market, CMS policy restricting their abilities to capitalize, CMS risk adjustment policy and congressional reduction in funding for said policy. The dead horse will continue to be beaten in the news – after all it is an election year.

But perhaps a more fundamental issue that wasn’t talked about enough was simply that start-up health plans are going to initially lose significant amounts of money in new markets even under the best of circumstances, and the start-up losses weren’t adequately budgeted, capitalized or communicated in setting stakeholder expectations.

If you’re keep tabs of the continuing status and travails of the cooperatives, two sites are worth bookmarking: U.S. Health Policy Gateway's Co-op Performance by State and the National Conference of State Legislature’s Health Insurance Purchasing Cooperatives and Alliances: State and Federal Roles.

Thursday
Nov122015

Someone Must Be On Drugs

By Kim Bellard, November 11, 2015

As is probably true for many of you, I'm busy looking at health plan open enrollment options for 2016. The past few years I've been guilty of just sticking with the same plan, so it has been too long since I've had to shop. Plus, I'm helping my mother pick her Medicare options for next year. All in all, I'm awash with health plan options.

I've got different levels of HMO, POS, and PPO options, from multiple carriers. My mother has many choices of Medicare Supplements, with Part D options, as well as Medicare Advantage options (both HMO and PPO), each from multiple health insurers.

It's not that there aren't plenty of options. It's just that, well, the options are so damn confusing.

Austin Frakt recently wrote in The New York Times about this problem. He cited a few studies specifically on point about health insurance, such as:
 

  • One study found that 71% of consumers couldn't identify basic cost-sharing features;
  • Less than a third of consumers in another study could correctly answer questions about their current coverage;
  • Researchers found that consumers tended to choose plans labeled "gold" -- even when the researchers switched the "gold" and "bronze" designations, keeping all other plan details the same.

Many consumers tend to stick with their existing choice even when better options are available, simply because switching or even shopping is perceived as too complicated.

I'm most frustrated with prescription drug coverage. Not that long ago, the only variables were the copays for generic versus brand drugs. Now there are often five or six different tiers of coverage -- such as preferred generic, other generic, preferred brand, other brand, and "specialty" -- with different copays or coinsurance at each tier, each of which can also vary by retail versus mail order, and for "preferred pharmacies." 

Moreover, the health plan's formulary, which determines what tier a drug is in, can change at any time. Plus, as has been illustrated recently, the prices of any specific drug can change without notice, sometimes dramatically. If either of those happens to one of your drugs, say goodbye to your budget.

It's all enough to make your head spin.

The health plans would no doubt argue that their various approaches to prescription drug coverage are necessary in their efforts to control ever-rising costs for prescription drug costs. Well, they aren't working.

Prescription drug prices continue to soar, even for generic drugs. They have become a political issue, with the Senate now launching a bipartisan investigation into prescription drug pricing and the Presidential hopefuls from both parties being forced to take positions on how they would control them. For once, politicians are in sync with their constituents; the latest Kaiser Health Tracking Poll found that affordability of prescription drugs tops their priority list for Congress and the President.

I've long thought that the pharmaceutical industry was ahead of the rest of the health care industry. They were doing electronic submission of claims over forty years ago. They pushed for direct-to-consumer advertising in the late 1980's, and quickly jumped on that bandwagon. While providers only grudgingly adopted EHRs, they quickly moved to e-prescribing.  Other health providers had to move away from discounted charges twenty years ago, whereas drug companies still mostly use that approach and are only starting to tip-toe into more "value-based" approaches, as with the recent Harvard Pilgrim-Amgen deal.

And the backroom rebate deals between drug manufacturers and payors put a lie to any claim that at least drug pricing is transparent.

It's not only prescription drug coverage that is increasingly complicated, what with narrow networks, gatekeepers, different copays for different types of medical services, bundled pricing, or numerous other gimmicks used in health plan designs.  The collateral damage in the ongoing payor-provider arms race is consumer understanding. 

Making things more complicated for consumers is not the answer.

In typical fashion, the health care industry has tried to address the confusion by creating a new industry that doesn't actually solve the problem but does manage to introduce new costs. Many enrollment sites --the Medicare plan finder, public exchanges, private exchanges, broker sites like ehealth, or health insurer sites -- offer tools that purport to estimate your costs under your various health plan options. Yet consumers still don't understand their options.

We keep treating health care as a multi-party arrangement between providers/health plans/employers/government/consumers, which is why everything ends up so complicated. Drug company rebates or medical device manufacturers' payments to providers are prime examples of the kind of insider trading that goes on. It's usually the consumers that come last. And that's the problem.

I think back to 1990's cell phone plans. Consumers never knew what their next bill would bring, between peak/non-peak minutes and the infamous roaming charges. No one liked it, no one understood it, and for several years no one did anything about it. Then AT&T came out with a flat rate plan that essentially said, "we'll worry about all those for you," and soon all carriers had to adopt a version of it.

I keep hoping for that kind of breakthrough with health insurance.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

Wednesday
Nov042015

Juggling Risk

By Cathy Eddy, Health Plan Alliance, November 4, 2015

The insurance industry is based on managing risk. Health insurance has managed medical costs for years. With the Affordable Care Act, the federal government has set a minimum target for the medical loss ratio at 80-85%.

But managing risk has become so much more challenging for the health care industry than just managing medical claims. We are now juggling lots of types of risk at the same time. We are hoping not to drop the ball on any of these or it could mean losing millions of dollars or even going out of business. The number of Co-ops that have closed this year is a clear indication of just how hard it is to do business in the public exchanges.

Here are the types of risk that health plans are now simultaneously juggling:

  • Risk adjustment
  • ORSA
  • Risk Corridors
  • Value-based reimbursement
  • Bundled payments
  • Upside risk and maybe downside risk
  • Cyber Risk
  • Business interruption and disaster recovery
  • Key employee risk

And the Alliance health plans are right in the middle of these challenges. As we are planning our programming for 2016, we are looking at ways to share how plans are trying to align with providers to be successful.

During 2016, the Alliance will expand its membership to include health systems that our members identify. We will discuss their strategic priorities, build informational profiles on these systems and develop our meeting agendas to focus on the areas where our health plans intersect with the providers. We hope that health systems will take advantage of the content at these meetings:

  • April 13-14  Clinical Integration and Payer/Provider Partnerships
  • June 7:  Board and Governance Strategic Issues and Performance
  • June 8-9: Health System/Health Plan Strategic Alignment
  • Sept 28-30 Care Management/Care Coordination
  • Oct 19-20: Managing Risk Reimbursement Arrangements
  • Dec 6-8 Managing Populations with Data

We will also be collaborating with other organizations that are working with providers to serve as a resource for content. Many providers have indicated an interest in taking on more risk and either starting up a health plan or working with partners to offer a private label plan in their market. We would like to leverage the Alliance’s 20 years of experience in the provider-sponsored health plan space to help those providers that are entering or reentering the health plan business.

As the rest of the insurance industry consolidates into a few very large players, we’d like to see integrated delivery system with health plans and those independent health plans working closely with providers be able to offer a viable option to the other types of health insurers.

And to be successful, our plans and health systems will need to juggle all types of risk collaboratively.