Medecision offers predictions for 2013

I asked Medecision’s Chief Medical Officer, Katherine Schneider, MD, MPhil, FAAFP to comment on key health care issues for 2013 including ACO formation, payer and provider consolidation, emerging innovations, and cost containment.

Here’s what she had to say:

1.  What can we expect from ACOs in the public sector in 2013? Will the private sector follow the public sector’s lead? What will be the key differences between Medicare ACOs and those serving commercial patients?

There is going to be a big ramping up period in January as many new ACOs are established under guidelines set by the Medicare Shared Savings Program. As with any new organization, there is going to be a learning curve for most of them.

U.S. health care is in the midst of an enormous transformation. As these changes are being made, industry players are faced with the constant challenge of not letting their business model get too far ahead of their care model, and vice versa. This is definitely the case for ACOs in their startup phase. Most of these ACOs have not dramatically changed their care model (if at all), and have put the business model first. There is nothing terribly wrong with taking this approach. If they had gone the opposite direction and had fully implemented a care model without the right business model in place, they could risk significant losses. For example, if an ACO acquired extra resources on the frontend to reduce hospital admissions on the backend, they could easily take a double hit by paying for these resources, and then also losing the hospital volume. The challenge most ACOs will experience is not letting the business model get too far ahead of the care model. ACOs need to realize that they have to start taking care of people differently if they are going to achieve any savings.

As to whether the private sector will follow the public sector’s lead, I think it is going to be decided market by market. Things will look differently market-by-market because all health care is local. Different payers and different delivery systems are at different points in this curve. Some markets are relatively advanced, and the public sector ACO may be the last to join the party. In other markets, it is the first to arrive.

The biggest difference between Medicare ACOs and those serving commercial patients is the ability to customize benefit design to support patient engagement, adherence, etc.

2.  Do you expect payers and providers to continue consolidating in 2013? If so, why?

Yes, absolutely. I think you are going to see three kinds of consolidation: between payer and payer, between delivery system and delivery system, and between payer and delivery system. The first two scenarios are mostly driven by economies of scale and leverage. Payers and delivery systems are both looking at some of the infrastructure investments and the capital required to succeed in this market. If you are small, it is going to be nearly impossible to keep up with the general market, and the definition of small has grown substantially in recent years. In 2013, I think we are going to see several medium and large plans and delivery systems consolidating.

The third scenario is consolidation between payer and delivery system. We are going to see more of that as well. It is going to be very interesting to see how integrated systems evolve under this scenario. In other words, as payers acquire delivery systems and delivery systems acquire payers are they going to meet in the middle, or are they going to be two different flavors? Right now, it is too early to tell. However, it is clear that both larger payers and larger delivery systems are understanding that they are going to be held more accountable for better outcomes at a lower cost and the only way to do that is to start to adopt some of the others’ capabilities. If you are a payer, you are going to have to better influence the hands-on care of your members and not just add resources as a workaround. If you are a delivery system, you are going to be held accountable for population health outcomes and are going to have to build many of the capabilities that have been traditionally managed by health plan, like population health management, data systems, and care management tools.

As the payer and delivery systems start to merge and collaborate more, it is really important for us to go beyond just changing the sign on the door and transferring health plan functions into a delivery system. The real opportunity we have before us – and this is really the challenge for our industry – is how can we get more value out of these collaborations and not just create new layers and redundancies. The organizations that successfully navigate this transformation are going to emerge as the true market differentiators and winners.

3.  Despite the consolidation, is there room for start-up organizations, too, such as the COOP plans? 

As I mentioned above, it is very expensive to play in this market, and the cost of entry is only going up. There is definitely room for start-up organizations. However, if you are going to try to be a start-up organization in this space, it probably needs to be in some kind of a disruptive model in order to be successful. There is a lot of opportunity for startups that are willing to use their small size and agility to their advantage and adopt a different model from the start. It is much easier to innovate and go in a new direction when you are a small speedboat (as opposed to a large tanker).

4.  Are there specific innovations you think will have an impact in the near term?

I think we are going to start seeing much wider adoption of consumer engagement tools and technology. While some of them will fail, I believe that some will make a significant impact, particularly in niche areas. I strongly believe that benefit design offers much potential as well. Also, there are many things that can be done to move the needle around behaviors, such as preventive care, lifestyle change, etc.

I am also interested in big data innovations, and what we can glean from big data that is actionable and not just interesting. For example, something as simple as hypertension can be easily tracked using a few pieces of data – primarily blood pressure readings. There is a huge room for improvement in managing our population’s long-term health with this information. It is a huge cost driver.

5.  Where is cost containment going? Will we see anything new in 2013?

We are going to see some old practices reemerging in 2013. The drive to get to a zero premium plan on the health insurance exchanges is going to, for better or worse, go back to the blunt instrument of unit price and narrow networks that are selected based upon lowest unit price. From the government side – with the fiscal cliff, the debt ceiling and SGR all hitting at once – you are definitely going to see price pressure on government programs.

On the innovation side, I hope we see some innovation around system transformation that focuses more on total cost of care than just ratcheting down unit price. In other words, we need to focus on achieving better outcomes at a lower overall cost, not just driving unit costs down. Unfortunately, ratcheting down unit cost is much easier than trying to transform systems of care and systems of payment.


January 3, 2013

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