Present

Recent Trends and Key Issues
in Connection
with Managed Care
McGuireWoods
HealthCare Litigation Conference
April 8, 2014
17%
Managed Care Shifting to a
Broader definition under ACA
Past
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Traditional Health Plan as
insurance
HMO as prepaid Plan
PPO as a “whose its”
Clinical integration missed
Accountable Care
Bundled Payment
Community Based Health plans
Present
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Replaced by insurance
exchanges
Prepaid plans now have
deductibles and copays
PPO, PHO, IPA are at take risk
or die
ACO and MA plans are a
transition to full risk
Bundled care as another form of
capitation, only it’s global
Self Funded Employers
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No clear understanding of how all of this works
Employers have tried increasing deductibles, copays and
eliminating benefits—and still no relief
Forcing employers and self funded groups to act more like
managed care than managed care does
Finally seeing some great moves to wellness and health
promotion
New laws permit health status to be factored in when hiring
The Shifting Paradigm For Employer Active
and Retiree Medical
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What types of changes
are we seeing?
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Consumer-Directed and
Retiree Specific Health Plans
A reduction in the
prevalence of employer
sponsored retiree health
care but still many
retirees covered by
Defined
employer group
Benefit
coverage
Changes in the amount
Prior Environment:
and the structure of
Plan Sponsor
employer financial
Engagement
support
Changes in the structure
of the plans offered
Emerging
Environment:
Retiree
Engagement
Defined
Contribution
Traditional Medical
Programs
Source: Trend data DeMarco &Associates.
Health Plans
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New strategies are redefining the Health Plan
New legislation eliminates underwriting and pre-existing
condition exclusions
85% of premium must go to “health care”
No major medical maximum
While we will see an explosion in insurance costs during the
latter part of this year and next as insurers fill their reserves with
revenue to cover these limitations, improvements in coverage will
be sparse
Making money in the “premium business” will be more difficult
Texas HMO Growth
New Agenda for Health Plans
Reduce Admin Costs
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Improve technology
Claims precision
Reinsurance
Staffing
Data profiling
Population health profiling
Operational contracting
Patient profiling
Reduce Provider Cost
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Redefine credentialing
Lay off more risk for more
procedures
Narrow networks
Shared savings
Link providers via technology
Purchase provider organizations
Health Plans as Technology Partners
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UPMC investment in clinical and health plan technology is now
EVOLENT
Johns Hopkins now updating AVGs
United has been building its technology strategy with OPTUM
Cigna Buys Health Spring
Aetna buys Medicity
Technology companies merging underneath the radar hoping to
have an end to end solution
Lifestyle Based Analytics
Health Plan as Provider
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Regions Hospital and Health System purchased by Health
Partners - 1998
United buys Monarch, a very large IPA in California - 2012
Blue Cross Pennsylvania buys Allegheny Health System, really
upsets UPMC who sees Blues as a provider and competitor 2013
Illinois Health Plans
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Health plan profitability was very strong in 2011, driven by HMO Illinois and HMO
Medicare plans. HMOs based in Illinois reported net income of $370.9 million in 2011, or
7.3% of revenues of $5.06 billion. However, HMO Illinois accounted for $300 million of
that amount. An analysis of financial statements shows that Medicare plans were also
strongly profitable.
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• HMO enrollment fell below 1.4 million, although Medicaid and Medicare plans are
enjoying strong growth. Enrollment in Medicaid HMO plans could grow sharply, as
eligibility is expanded under the federal health reform and as the state moves to managed
care arrangements for persons dually eligible for Medicaid and Medicare. However, some
of the early initiatives are not using HMOs to manage care but are contracting with provider
systems for medical home and care management arrangements.
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Illinois Health Plans
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Enrollment in small group and individual plans offered by HMOs
and other insurers is likely to grow because of the subsidized
coverage that will become available in 2014 under the Affordable
Care Act. Illinois plans to partner with the federal government
and jointly create and operate a health insurance exchange.
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Excerpts from the report, including the popular "Illinois HMOs at a Glance" exhibit can
be viewed in the State Reports section of http://www.allanbaumgarten.com. .
Health Plan Owned MSO
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Aveta Inc. is one of the largest health insurance organizations in the United States, which arranges for the care of, and/or owns or
manages medical practices with, approximately 227,000 Medicare beneficiaries and more than 342,000 commercial members. Aveta
specializes in building provider networks and Management Service Organizations (MSOs) that emphasize integration and
coordination of healthcare. This organization is known for its innovation, clinical excellence, fine service, financial strength and
advanced electronic infrastructure. Its headquarters are located in Fort Lee, New Jersey and currently has operating subsidiaries in
California, Illinois, and Puerto Rico.
http://www.aveta.com/
MMM Healthcare, Inc.
The Leading Medicare Advantage plan in Puerto Rico and the fastest growing in the United States. Founded in 2001, it was designed
to specifically benefit the advanced age and impaired populations, with a strong emphasis in Special Needs Plans (SNP). As a plan,
its focus is to promote the physical and emotional wellbeing of its members through the development of innovative programs. One of
its main goals is to educate the community in general in regards to the needs of this aging population. Aveta Inc. acquired MMM in
2004.
http://www.mmm-pr.com
PMC Medicare Choice, Inc.
A company dedicated to providing extended benefits to the Medicare population at a very accessible cost. It began its operations in
august 2004 in 31 municipalities. Thousands of Medicare beneficiaries have chosen PMC as their plan, a result of the dedication of
providers, physicians, shareholders, and employees that work to offer excellent alternatives in health coverage. PMC respects a
physician’s right to fair compensation and the patient’s right to freely choose the Medicare Advantage plan they want.
http://www.pmcpr.org
NAMM CA
North American Medical Management of California
It coordinates medical services for around 28,000 elderly people and 185,000 commercial members through its exclusive provider
network. It also offers an extensive array of services with the purpose of helping a physician in the management of their business. For
more than a decade, NAMM California has been a healthcare innovator, with an excellent track record in clinical excellence and
extraordinary service.
http://www.nammcal.com/
Why Buy Practices
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Practice has 150 Medicare Advantage patients at $750.00PMPM
equals $ 1, 350,000.
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A primary care practice sells for $150,000 to $200,000 to a hospital.
A health plan can buy it for $350,000 and still have a million extra
because the HMO is getting income directly from CMS.
As a Health Plan I have just changed my variable cost to a fixed cost
and with a core group like this have formed a staff model HMO
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Transaction
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10 PCP want to form a group without walls
They can ante up into a MSO centralizing their overhead
They can get an insurance company or HMO to also ante up as a
Minority Partner in the MSO and obtain favorable rates
What will the hospital do?
Payer Distribution Shifting
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For fiscal year 2011, hospital costs were distributed among payers this
way:
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Medicare: 39.3%
Private payer: 34.6%
Medicaid: 16.3%
Uncompensated care: 5.9%
Non-patient [cafeterias, parking lots, gift shops & other non-patient care
services]: 2.1%
Other government: 1.8%
The private payer share has declined from 41.8% in 1980.
Source: Chart 4.5: Distribution of hospital cost by payer type, 1980, 2000, and 2011.
In: Trendwatch Chartbook 2013. American Hospital Association, Feb. 26, 2013.
http://www.aha.org/research/reports/tw/chartbook/2013/chart4-5.pdf
Illinois Hospitals
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Profit margins for Chicago area hospitals averaged 7.4% in both
2011 and 2010. Based on an analysis of Medicare facility cost
reports for 2011, Chicago area hospitals had net income of $1.541
billion, or 7.4% of patient revenues of $20.8 billion. Most
profitable systems in the region were Northwestern Memorial,
University of Chicago and Advocate. However,
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• Inpatient hospital utilization rates have fallen every year since
2008. The number of inpatient days at Chicago area hospitals
dropped by 1.9% in 2011, the fourth consecutive year of decline.
That comes at a time when hospital systems have invested
heavily in new facilities.
Illinois Hospitals
• More hospitals are now members of systems, both in the Chicago
area and in downstate Illinois. The number of independent hospitals
in the Chicago area has dropped from 40 to 28 in just a few years.
In recent years, local systems have expanded and outside hospital
managers have entered the Chicago market with a series of
acquisitions.
Vertical Integration Strategies for
Physicians & Health Systems
450,000 Covered
Lives
System in Brief
ELEMENTS OF A BALANCED
SYSTEM
• 350 days/1000 commercial enrollees
•2430 days/1000 Medicare enrollees
•Average length of stay 4.3 days
•Physician mix
–52% primary care
–48% specialty care
•25 primary care outpatient sites 1
275 Primary Care
Physicians
•2.5 primary care visits per commercial
enrollee
•5.5 primary care visits per Medicare
enrollee
225 Specialty
Physicians
1Primary
care includes Family and General
Practitioners, OB GYNs, Internists, Pediatricians
Hospitals
300 Beds
300 Beds
300 Beds
Sources: “The Marketplace in Healthcare Reform: The
Demographic Limitations of Managed Competition”; The
New England Journal of Medicine, Jan. 14, 1993
Doc groups earned $16.7 million in
demo, CMS says
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Ten physician groups earned $16.7 million in incentive payments for
improving the quality of care delivered to patients with heart conditions and
diabetes during the second year of a CMS demonstration project, the agency
announced.
All participants in the Physician Group Practice Demonstration achieved
performance goals on at least 25 out of 27 quality markers for patients with
diabetes, coronary artery disease and congestive heart failure. The
demonstration project rewards healthcare providers for improving outcomes
and coordinating the overall healthcare needs of Medicare patients assigned to
the groups.
The groups include: Billings (Mont.) Clinic; Dartmouth-Hitchcock Clinic,
Bedford, N.H.; the Everett (Wash.) Clinic; Forsyth Medical Group, WinstonSalem, N.C.; Geisinger Clinic, Danville, Pa.; Marshfield (Wis.) Clinic;
Middlesex Health System, Middletown, Conn.; Park Nicollet Health Services,
St. Louis Park, Minn.; St. John’s Health System, Springfield, Mo.; and the
University of Michigan Faculty Group Practice, Ann Arbor.
Five of the physician groups—Forsyth Medical Group, Geisinger Clinic,
Marshfield Clinic, St. John’s Health System and the University of Michigan
Faculty Group Practice—reached performance goals on all 27 quality
measures.
ACO agreements
Accountable Care Organizations
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Over 400 ACOs operating
Many privately sponsored by large insurers as a means to form
new risk taking groups
MSSP has half of that number but it now represents about 15% of
all Medicare eligible. Add this to Medicare Advantage and 40%
of Medicare eligible now participate in Medicare through a
contractor and not directly with traditional Medicare.
Accountable Care Organizations
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Most of the MMSP ACOs saved Medicare money
59 ACOs actually received partial or full bonus for completing
both costs and quality reporting
The remainder either:
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Did not meet the 2% minimum savings percentage threshold
Overspent on IT
Overspent on staffing
Did not invest enough to get the savings
The ACO does not know
Summary
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As networks get tighter and tighter physicians and hospitals will be
fighting to get into the right panels and out of the non producing panels.
As Health plans tighten their quality reporting more narrow networks
will be created building a two and three tier reimbursement status.
As Health plans purchase Medicare Advantage plans or ACOs the
compliance rules are tightening as well, so expect more mergers and
consolidations which will present a potential reopener for physicians
signed with a new health plan.
Expect the year 4 problem for ACOs to be solved by forming
community based Medicare Advantage health plans who will now have
a product for ACO patients, Medicare Advantage patients, and
Commercial patients and, in some states, Medicaid managed care.
We have known what to do for quite a while,
now is the time to actually carry out this
strategy
“It is time for medicine to
reinvent itself—for researchers
and clinicians to form a strategic
partnership and to embrace the
goal of exponentially increasing
medicine’s value. Physicians
need to become part of the
solution in the US health care
system. The system’s problems
should not be addressed by
politicians, who are virtually
powerless to effect meaningful
change in health care until
physicians fix the way care is
delivered.” JAMA; 20 April
2011:1589