So much happened in the past 90 days in the health and human market space. But what really matters? What are the “stop the presses” developments that executive teams need to incorporate in their strategic thinking? Our team had some debates about what were the developments that have the potential unravel the best laid plans of many organizations—and came up with the “big five” for the quarter. The themes were two-fold: One, the push for “whole person” approaches to care and, two, the integration/consolidation of organizations, functions, and financing.
Among the many developments that we think will reshape strategy are payers increasing focus on social determinants. In the past quarter, the Centers for Medicare & Medicaid Services (CMS) announced that Medicare Advantage plans in 2020 will be able to offer supplemental social service benefits if they diagnose, compensate for physical impairments, diminish the impact of injuries or health conditions, and/or reduce avoidable emergency room utilization (see Medicare Advantage To Offer Supplemental Benefits For Social Determinants In 2020). The second was UnitedHealthcare’s announcement that it expects its provider organizations to use the International Classification of Disease, Tenth Revision, Clinical Modification (ICD-10-CM) Z-codes, in categories Z55 to Z65, to capture information about the consumer’s reasons for a health care visit that further explain the need for the social support services. The idea is to expand efforts to identify consumers with social service needs (see UnitedHealthcare Expands Initiative To Use Diagnostic Codes To Capture Social Determinants Of Health).
The implications? There will be a new market for “packaged” social services. But these won’t be the social service of the past – they will be “prescribed” packages of support services for specific consumers with a carefully calculated return on investment (ROI). The availability of these new payment streams means that new competitors will enter the market space, forcing traditional social service provider organizations to ramp up their measurement of cost and outcomes.
My long-term questions: Will public social service budgets shrink as these services become “medicalized”? And, will the types of social services available to an individual vary by their health plan members (and whether they are insured)? These are big issues to watch.
In addition, the push for whole person approaches in the last quarter included the CMS proposal to launch health homes for children with complex conditions. The Medicaid Services Investment and Accountability Act of 2019 (MSIA) directed CMS to create Medicaid health homes for children with chronic or complex conditions such as cerebral palsy, cystic fibrosis, sickle cell disease, muscular dystrophy, severe autism spectrum disorder, and serious emotional disturbance. The health homes will provide five general services. More detailed information is expected in October 2020 and planning grants for the health homes will be available in 2022 (see CMS To Launch Health Homes For Children With Medically Complex Conditions).
I’ll be the first to admit that I didn’t expect the original health home program for adults to be anything more than a fad. But while health homes have grown in fits and starts, there are now 23 states and the District of Columbia with health homes and more states are developing models (see Medicaid Health Homes: SPA Overview). And almost more importantly, the health home construct is now common in the commercial health insurance market and with accountable care organizations.
The implications? Executives of child-serving organizations will face a “fork in the road” in terms of their market positioning. They will need to decide if they want to be the “coordinator” of all services – or a specialty service provider working in conjunction with one of those coordinators. For the organizations that want to operate a children’s health home, they will need the same clinical, financial, and technological infrastructure as the many organizations that are already serving as adult health homes or specialty medical homes. And this will bring new and different competition to the children’s services market space.
At the same time, retail pharmacy, and soon-to-be-insurer, CVS announced their own approach to whole person care in the form of one-stop-shopping HealthHubs. In 1,500 of its current retail locations, CVS plans to dedicate 20% of retail space to health care services like urgent care, telehealth, chronic disease management, and wellness. The HealthHUBs will offer a care concierge professional, seminars, kiosks, and iPads for wellness apps (see CVS To Expand HealthHUB® Format To 1,500 Stores Nationwide By 2021).
The implications? New competition for a number of provider organizations. Obviously, traditional primary care practices face a competitor with a consumer-centric approach and wide range of services. But specialty provider organizations face new competition as well. The model will include chronic care management and Minute Clinics already have telehealth services for specialty consultation. The HealthHub concept—if successful—is perfectly positioned to compete for care coordination, medical home, and health home contracts.
At the same time, the push to value-based forms of reimbursement entered Medicare primary care – with CMS unveiling five new models for value-based primary care reimbursement. CMS primary care payments will likely fall in one of two models.
The first model is called Primary Care First and will utilize a risk adjusted professional population-based payment with a flat primary care reimbursement fee. The second model is a direct contracting model that will pay a capitated, risk adjusted payment for enhanced primary care services. Overall, CMS estimates that 25% or 11 million Medicare FFS enrollees will be served under the new model (see CMS Announces ‘Primary Cares Initiative’ With Five New Value-Based Models).
The implications? This is reflective of the overall movement of Medicare away from fee-for-service reimbursement. There will be opportunities for specialty provider organizations to collaborate with primary care practices that, under this model, will be more likely to refer high-needs and complex consumers for specialty care – depending on the performance incentives. But certainly, this change in financing is going to drive the purchase of a host of digital health options by primary care practices who will be substituting tech-enabled interventions for staff time.
Finally, we have two notable mergers among health plans. Wellcare is being acquired by Centene and Anthem is acquiring Beacon Health Options (see Centene To Buy WellCare For $17.3 Billion and Anthem To Acquire Beacon Health Options). These mergers represent the continuation of two trends we have noted before—the consolidation of membership among a small number of health insuring organizations and the dwindling of the use of the horizontal carve-out for care financing and service delivery.
The implications? Centene will continue to be the largest insurer of Medicaid beneficiaries by far (see The 2019 OPEN MINDS Medicaid Managed Care Market Share Report) and Magellan and New Directions remain the only major national behavioral health carve-out companies (and New Directions is affiliated with the Blues system). I think the bigger picture is that the standardization of health service delivery will happen within national health insuring systems and not necessarily within geographic regions. While the health insuring organizations do have local plans with local control and local provider networks, we are seeing the advent of national contracts for a wide range range of specialty services (see Developing A Value-Based Partnership: The Optum Case Study; Humana, SurgCenter Development Announce National Agreement Expanding Availability of Outpatient Joint Replacement at Surgery Centers; and Walmart Adds 12th Center Of Excellence To Knee, Hip Surgery Network). This trends poses a market share threat to local provider organizations delivering those specialty services.
As I was thinking about the future impact of these recent developments, I immediately thought about the need for scenario-based planning models and a nimble executive team. Strategy is more important than ever – but that strategy needs to be constantly adjusted with the changing market. What to do? I was reminded of the William Arthur Ward quote, ” The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” It’s all about adjusting the strategy sails, so to speak.
Look for our next update the ‘Big Five” strategic developments at the end of the third quarter. And, for our Elite members, to hear our full discussion, check out The OPEN MINDS Big 5 – An Exclusive Web Briefing & Podcast For OPEN MINDS Circle Elite Members featuring myself, Sarah Threnhauser, Executive Vice President, and Athena Mandros, Market Intelligence Director at OPEN MINDS.