How narrow is a narrow network?

Is narrow good or bad?

Is narrow good or bad?

Health Insurance Exchanges are one of the most interesting and potentially impactful features of the Affordable Care Act. The exchanges allow eligible individuals to compare health plans on an apples-to-apples basis and choose the one that’s most appropriate for their individual circumstances.

Health plans are interested in participating in these exchanges because they offer one of the few sources of member growth. Federal subsidies make exchange plans affordable for middle income buyers who make too much to qualify for Medicaid.

Not surprisingly, exchange customers are price conscious shoppers. That means plans have to work hard to offer low enough premiums to be competitive. The Affordable Care Act outlaws some of the ways health plans used to stay competitive, such as charging different prices based on health status, refusing to cover certain patients, making exclusions for pre-existing conditions, and offering skinny benefits packages.

One of the few things plans can do is to offer different networks of physicians, hospitals and other providers. Exchange plans have embraced the concept of “narrow networks,” which offer a smaller than usual collection of providers as a way to hold down costs. I have heard and seen a lot of anecdotes about what this means in practice, but now there is some real data.

Avalere has conducted an analysis of health plans in the top five exchange states to compare the size of exchange plan networks with the size of commercial networks in the same geographies. Sure enough, the plans included an average of 34 percent fewer providers on average, and 42 percent fewer oncologists and cardiologists.

image001

Although anyone’s initial reaction is that a bigger network is better, that is not automatically the case. If the narrower networks exclude the wasteful, low quality providers the result could be increased quality and cost effectiveness.  If network inclusion is based just on unit costs, then who knows the outcome on quality. And if fewer providers means it’s harder to get an appointment, that could be problematic. Patients might even end up spending out-of-pocket for out-of-network coverage.

I asked Avalere vice president Elizabeth Carpenter to answer a few questions that immediately came to mind: You report the average, but how much variability is there? How have network sizes changed since last year? How often do exchange members go out-of-network?

Elizabeth answered the first question as follows, “Overall, we did see noticeable variation among the five states we examined. However, interestingly, it was not consistent across provider type. For example, exchange plans in one state may cover a higher percentage of primary care physicians than another state’s exchange plans but may cover a lower percentage of hospitals.”

As I expected, Avalere hasn’t yet done the work to answer the other questions. Clearly there are lots of interesting studies to be done on the impact of exchange plans on costs, quality, and the overall insurance market. I eagerly await them.

Image courtesy of marcolm at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

Checking the symptom checkers

I have a small problem

I have a small problem

Online “symptom checkers have deficits in both diagnosis and triage, and their triage advice is generally risk averse,” according to a new study in BMJ by Harvard researchers. Some of the press coverage of the study has been pretty critical of the symptom checkers, but the study itself is quite balanced.

Symptom checkers are a lot better than “Google Diagnosing” (typing a list of symptoms into Google and seeing what comes up). They’re very similar to nurse triage lines used by health plans, which is no great surprise considering that many of the triage lines use the same logic that drives the symptom checkers. They’re inferior to a primary care physician, but of course physicians aren’t infallible either.

People use symptom checkers to self-diagnose and to figure out if they need to go the emergency department, doctor’s office or can treat at home. Not surprisingly, the symptom checkers err on the side of suggesting patients seek care. No producer of these tools wants to get sued for recommending self-care to someone who should have called an ambulance. But in this regard symptom checkers are similar to nurse triage lines and also –at least in my experience– to physicians who are covering call. Too often they suggest a trip to the ED.

There’s an opportunity to reframe the next generation of symptom checkers as tools for navigating the medical system. That means not just suggesting a diagnosis and level of care, but pointing to an appropriate specialty, facility, or individual clinician to follow up with. This could be especially useful for patients in areas with fewer specialists and sub-specialists, and those with rare or hard to diagnose conditions. Primary care physicians could use such a tool as well to help direct referrals.

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

The specialty drug pricing conundrum: Caps may raise costs, not lower them

Money, money, money

Money, money, money

It used to require hundreds of thousands of patients taking a drug to make it blockbuster. But over the last decade drug companies have figured out that they can get to $1 billion in product sales with much smaller populations. The key: sky-high prices.

The math is simple. A drug that goes for $1000 per year needs 1 million patients to get to the billion dollar mark, but if the price is $100,000 it takes just 10,000 patients. At $200,000 it’s 5000. Anyway, you get the idea.

You don’t see these dynamics in other fields, but healthcare is different. The two big drivers: third-party payment that shelters patients from the real costs of treatments and an aversion to talking about anything that could be construed as “rationing.”

In fact, as Kaiser Health News reports (States Limiting Patient Costs For High-Priced Drugs) public policy is moving even further away from using cost-sharing to constrain demand by limiting out-of-pocket payment amounts to as low as $100 per month. These policies will backfire as cost containment mechanisms because they will just end up boosting premiums.

Some other states are considering bills to require manufacturers to report their costs for high-priced drugs. That strikes me as pretty useless as well. If it’s a first step toward capping prices, that may discourage companies from moving forward with risky development programs for orphan diseases.

So what can be done, if anything? Well, a few things:

  • Use step therapy and similar programs to try less expensive treatments before defaulting toward the priciest. These programs are used today, but too often patients jump right to the high-priced specialty drug without seeing if something else would work
  • Shift the site of service for infused drugs away from hospital outpatient settings toward the home or physician’s office, which is much less costly
  • Encourage comparative effectiveness research and the adoption of quantitative measures such as Quality Adjusted Life Years (QALYs) to compare the efficacy of different treatments
  • Demand real-world, patient outcomes data from marketed products
  • Once a specialty (biologic) product has been on the market for several years and its patents have expired, regulate its price. This is a safer, more cost effective approach than encouraging so-called biosimilars

Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

Partners HealthCare goes global: Is it a good idea?

There's gold in them thar hospitals

There’s gold in them thar hospitals

In shift, Partners HealthCare seeking growth globally in today’s Boston Globe describes how Partners is turning its focus from dominating the Massachusetts healthcare delivery system to looking for revenue growth overseas.

This wasn’t hard to predict, and it makes a good deal of sense. Last year the Globe asked me to speculate on whether Partners’ hiring of a new CEO would change the company’s strategic course. I said it was surprising that Partners had continued its relentless expansion in Massachusetts. While it made sense to affiliate with community hospitals and physician practices to generate complex referrals for “tertiary” care, it was puzzling why Partners wanted to be in the business of offering the most cost-effective colonoscopies and other routine services throughout the state, generating friction with the state government, health plans, employers and consumers as a byproduct.

I suggested that Partners might choose to return to its roots as a world-renowned academic medical center with its Massachusetts General and Brigham and Women’s hospitals. Interestingly, from today’s article it appears that MGH and the Brigham –not Partners itself– are the entities that are driving forward. MGH plans to manage a hospital in China near Macau while the Brigham has recruited a chief business development officer from Johns Hopkins to set up business in the usual hotspots for high-dollar international medical ventures, i.e., China and the Persian Gulf, with a nod toward emerging South American economies.

Using the MGH and Brigham brands is wise, and helps remind us of just what Partners is. Remember, Partners was established to prevent health plans and the state from playing MGH and the Brigham off of one another in contract negotiations. The two hospitals continue to exist –it is not a merger in the traditional sense.

But these entities will have to be careful when they go abroad prospecting for gold. A few things to watch out for:

  • Politics: Picking one foreign partner in a region can mean foregoing the opportunity to work with that entity’s rivals. And if an emir is ousted his successor may shoot down the pet projects of the previous emir and his family. (It has happened!)
  • Brand risk:  When I traveled to Asia a decade ago to research medical tourism, the Harvard name and crest were splashed up all over the place by operators who had little or nothing to do with Harvard. That had something to do with an earlier venture by Partners hospitals to use the Harvard name to drum up business overseas. It worked a little too well.
  • Overconfidence:  Sure we have great hospitals here in Boston. But not everyone running a hospital overseas is an idiot; many understand their own health system and patient populations pretty well. When I visited Singapore hospitals I was struck by the openness of executives in speaking with me, and impressed with their approach to cost-effective, high quality care. The one exception was when I visited a Hopkins outpost there, where the staff were highly bureaucratic and unapproachable.  MGH and the Brigham will need to make sure what they take on is aligned with their true areas of differentiation and not just their self-perceptions.
  • Ethical risk: Let’s be honest. American values differ from those of the Persian Gulf and China. As just one example, anyone in Boston can show up at the emergency department of MGH or the Brigham and be treated, regardless of nationality, race, religion or ability to pay. Will that be the case in hospitals MGH and the Brigham work with overseas? If not, is that ok? What else needs to be considered?

I wish the MGH and Brigham well in their overseas forays, and do think it’s a more fruitful approach than further expansion in Massachusetts. The Globe should have plenty more to write about as the strategies unfold.

Image courtesy of pakorn at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

 

Partners closes Lynn’s hospital. I’m quoted

Partners is following through on a plan to consolidate its North Shore operations into Salem Medical Center, a move that will result in the closure of Union Hospital in Lynn, 6 miles away. I’m quoted in the Boston Globe (Partners to close Union Hospital in Lynn).

Here’s what I had to say:

David E. Williams, president of Health Business Group in Boston, said Union’s closing is hardly surprising, since many community hospitals –particularly those that treat high numbers of low-income patients and rely on government reimbursements– are struggling financially.

He said Partners, the state’s largest health system, is closing the hospital more gently than other health care companies without as much money; keeping an emergency room open for three years is a big concession to community concerns.

“I do largely buy their logic,” Williams said about Partners. “On the one hand, nobody likes it when their local hospital closes. On the other hand, considering how high health care costs are, it can’t say the way it is.”

By healthcare business consultant David E. Williams, president of Health Business Group.

King v. Burwell: A frivolous lawsuit

What do you think will happen to Obamacare if I press this button?

What do you think will happen to Obamacare if I press this button?

Some are surprised that Chief Justice John Roberts came out so strongly for the government in King v. Burwell, the lawsuit that aimed to bar insurance subsidies from Obamacare exchanges run by the federal government.

I’m not a lawyer or Supreme Court scholar but to me Roberts’ stance isn’t surprising at all. King v. Burwell was a joke –an exemplar of the type of “frivolous lawsuit” some on the right are so fond of citing. Roberts wants the Court to be taken seriously both now and in retrospect, so this was an easy decision.

Let’s face it:

  • Congress’s intent was clear –to provide subsidies regardless of the mechanism a state chose to implement its exchange
  • There was no discussion by anyone at the time of drafting about any difference in subsidization on state v. federal exchanges
  • Every state –including those led by Obamacare foes, interpreted the law the way Congress intended
  • The legal argument was the result of opponents sifting through the minutiae of the law to find any argument that might be used against it
  • The plaintiffs –if they even understand the argument– have not been harmed by the law

Frankly, it’s hard to take the consenting Justices seriously.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

Long term care insights from a long term friend or Yes Virginia, there is a role for LTCi

I wrote my blog post about long term care insurance in reaction to what I thought was a foolish, ivory tower-induced article in the Wall Street Journal, which blamed the unpopularity of long term care insurance on “narrow framing.” Narrow framing is certainly an issue in consumer financial decisions, but with long term care insurance the problem is the products themselves aren’t very attractive.

In particular I’m looking for a plan to cover catastrophic expenses in case I end up in a nursing home for a decade or more. I can pay the first few years myself and want coverage that kicks in later and takes over. Instead the plans that are out there start paying within a few months and end after just a few years of coverage.

Whenever I encounter an insurance oriented issue, I know to turn to InsureBlog’s Henry Stern for his perspective. I always learn something when I do.

Hank has a different spin on long term care insurance than what I’ve heard. Here’s what he writes in his critique of my post:

More disturbing, though, is [David’s] contention that “the benefit structure [of LTCi} doesn’t protect against catastrophic expenses.” This is a common misconception of how LTCI works and what it’s really designed to do, and for that I blame not David, but my industry. The story we’ve been told to tell is that you buy LTCi to pay for care. This is correct, but misleading: there is no realistic way to buy a plan that will completely cover the costs of a major claim (or series of claims). Anyone that could afford to buy such a plan would be much better off self-insuring.

No, the role of LTCi is to supplement one’s assets (and a Partnership-compliant plan is a terrific ally in that quest), and to buy “choice.”

What does that mean, Henry, “choice?”

It means that having the ability to pay for care oneself opens up a lot more doors (as regards facility and resource availability) than folks dependent on Medicaid will see. Is that fair? Doesn’t matter. Is that real? Yes.

Ok, that’s interesting. In other words long term care insurance doesn’t do what I want it to do, but it still does something useful for some people.

So I revise my view: long term care insurance has a role to play. But it still doesn’t deliver what I’m looking for.


By healthcare business consultant David E. Williams, president of Health Business Group.