Sunday, May 5, 2013
Tampa Bay Touts Itself As Incubator For Healthcare Innovation
Tampa Bay Touts Itself As Incubator For Healthcare Innovation
The Tampa Bay Partnership has decided to target market four industry sectors identified in the Regional Business Plan as industries that provide high-wage, sustainable job growth opportunities, thus shedding light on the Tampa Bay region as an incubator for healthcare innovation.
The goal is to ensure that Tampa Bay, which accounted for 41 percent of the state’s job growth in 2012, is recognized as one of the nation’s hubs for medical innovation. The industry of applied medicine and human performance leads the region’s target sectors, adding more than 7,000 jobs since 2009.
The applied medicine and human performance industry incorporates core clusters of medical technology and research, including senior health and wellness, personalized medicine, clinical trials, medical instruments and devices, health information technology and bioinformatics.
“Our target sectors have performed better than jobs in Tampa Bay, better than jobs in Florida, and better than jobs in the nation as a whole. The wages in these jobs are higher, and these jobs create more spin-off jobs,” says Dave Sobush, VP of regional business planning and development at the Tampa Bay Partnership.
Tampa Bay not only has the foundation of medical research and the presence of such large medical firms as H. Lee Moffitt Cancer Center and revolutionaries such as M2Gen to create a supply chain for programs, but the region also has great technical training for people to work in laboratory settings.
“Pinellas County is among a handful of communities in the nation with a strong cluster of medical devices,” says Sobush.
Several companies have selected Tampa as a base from which they can conduct ground-breaking medical research.
“We realize that we have something and we want to have one broad message to share with the world. We’re a hotbed for medicine,” says Katie Franco, sr. VP of regional development at the Tampa Bay Partnership.
Tampa Bay is strategically positioning itself as one of the nation’s regions to follow.
“We chose target sectors that are regional in nature, and we present the region purposefully to showcase the strength of the region. There’s no place stronger than the State of Florida,” says Sobush.
For more information on Tampa Bay’s Regional Business Plan, visit Tampa Bay Partnership’s website.
Writer: Kaye Brown
Sources: Dave Sobush and Katie Franco, Tampa Bay Partnership
Seven Choices Medicare Plans Will Need To Make In Order To Survive
Seven Choices Medicare Plans Will Need To Make In Order To Survive
May 1st, 2013
Although the April 1 Call Letter from the Centers for Medicare and Medicaid Services (CMS) seemed to reverse proposed rate cuts to Medicare Advantage (MA) plans, the outlook for insurers still isn’t rosy. The “all-in” impact of the per capita rate increases will be offset by new risk coding intensity adjustments, shifts to fee-for-service parity, and the Health Insurance Tax, actually resulting in an expected 2-3 percent cut for MA plans for 2014.
The Call Letter also limits beneficiary cost sharing, a lever that plans have typically used to offset reductions. Such measures come on top of the potential risk of reductions from sequestration, which may lower fee-for-service (FFS) and health plan capitations by a further 2 percent per year.
The expected impact is lower than the original CMS proposal of 8 – 9 percent for 2014, but the announcement still serves as an urgent reminder of the endgame for Medicare— the rate cuts outlined in the Affordable Care Act (ACA) that will result in approximately 14 percent reductions in MA reimbursements, relative to pre-ACA reimbursements, by 2017. Traditionally MA has enjoyed a rate premium compared with FFS, often justified by the enhanced benefits available to members. These cuts, however, will put the plans roughly at parity. (See Exhibit 1, click to enlarge.)
Clearly, Medicare will not be for the fainthearted. In the short term, MA plans will need to take action in order to survive the initial impact, such as optimizing 2014 plan benefits, reprioritizing star focus areas, and even exiting selected geographies.
In the long term, however, more will be needed as Medicare becomes increasingly consumer-centric. In this market, MA plans must develop a fundamentally different business model that allows them to preserve margins in a future environment of rate parity with Medicare FFS costs while still offering equal or better aggregate benefits.
The winners will be those that make deliberate choices regarding seven key dimensions that build on their strengths and align with the needs of beneficiaries.
1. Select a “Way to Play”
First, Medicare health plans must define a clear value proposition, or “way to play.” The market trends are clear—looming reimbursement cuts and increasing linkages between quality and reimbursements (through the star quality program) will require plans to rethink their value proposition. Taking these trends into account, we believe the market will shift from traditional low-cost models toward one of two options: either a high-quality plan model or a care delivery innovator model that helps manage costs more directly. (See Exhibit 2, click to enlarge.)
Although the two options have some common themes, noteworthy nuances separate them. For example, high-quality health plans have an intense focus on star quality ratings and can develop provider arrangements that closely align incentives to the efficient and timely delivery of care. In addition, these plans possess the analytical tools to continually monitor and refocus quality efforts as needed to maintain high ratings.
Care delivery innovators also aspire to high-quality care, but they focus on managing costs through clinical integration and advanced care management. These plans are known to experiment with care delivery (e.g., through Accountable Care Organizations) and tend to build best-practice capabilities to manage chronic diseases, co-morbidities, and long-term care.
High star ratings can provide a 4 to 5 percent differential in premiums. However, the overall revenue cuts expected by 2017 are on the order of 14 percent, which means that quality performance alone will not be enough. We believe the care delivery innovators that focus on reducing total costs will be the winners in the end.
Plans need to choose their way to play carefully, basing their choice on their own strengths in enabling care delivery, quality management, and care management, and their specific competitive environment.
2. Determine the Right Mix of Products, Segments, and Geographies
With a clear way to play established, plans must determine the best combination of products, segments, and geographies that will enable profitable long-term growth for their particular value proposition. For example, in the choice of segments, individuals with chronic diseases might provide high revenues on a risk-adjusted basis, but costs for these patients may spiral out of control if the right care-management capabilities are not in place.
Similarly, the cost to acquire and serve members can vary considerably across geographies, due to varying demographics and economic fundamentals. As a result, the impact of the expected rate cuts is unequal across counties. With this in mind, plans can choose to exit unprofitable counties by assessing the existing and projected demographic factors, current and pending legislation, and their particular strengths within each market.
3. Optimize Revenue
Once plans have identified the optimal portfolio of products, segments, and geographies for their chosen way to play, the critical next step is revenue optimization. For example, although member cost sharing through co-pays and coinsurance continues to be a means of offsetting the impact of rate cuts, the recent CMS 2014 Call Letter, as noted above, proposes decreasing the amount that members’ costs can change. As a result, plans must look for additional ways to improve revenue.
Plans that misalign benefits with the needs of their customer segments leave money on the table. High-performing plans, by contrast, choose the correct set of benefits by first developing a thorough understanding of their customer segments. This includes determining the unmet needs of specific micro-segments and creating the incentives that can effectively encourage healthy behaviors. For example, plans have historically not designed benefits around value to the customer. As a result, many ancillary benefits that CMS does not require get lumped in, despite providing little to no value for members. Plans can instead offer these ancillary benefits as an upgrade option. A detailed understanding of customers also enables plans to improve their customer-retention strategy.
4. Engage Customers More Effectively
Customers respond differently to different engagement strategies. Over time, plans can improve the experience of their members by stratifying and personalizing their approach, ultimately leading to better health outcomes.
Sales channels are a good example of this. Given the recent proliferation of channels, it is critical that MA plans optimize their mix by focusing on the needs of their customers, instead of looking at what has helped sell various Medicare products in the past. Traditional channel options include direct sales, brokers, groups, and the web; emerging channels include retail stores, payor partnerships, and private exchanges. Each avenue provides a unique experience for the customer, and the right match can determine the eventual buying decision. The range of channels increases complexity, but it also allows leading plans to tailor their engagement strategy by segmenting the customers and personalizing interactions on the basis of segment needs for sales and enrollment, as well as ongoing interactions with the member to improve experience and manage health outcomes.
5. Manage Star Quality Assessments
Star quality bonus payments are a critical revenue stream for Medicare health plans. Such payments provide up to 5 percent in additional reimbursement, or enough to partially offset the expected 14 percent reductions in Medicare Advantage payments set to take effect over the next four years.
Thus far, plans have struggled; 2013 star quality ratings reveal that only 23 percent of plans reached the necessary four-star threshold required to receive bonuses. Improving this performance will entail overcoming several serious challenges, including the disparate data sources used to calculate ratings, the cross-functional nature of measures, and a continually changing methodology.
As result, plans need to focus their efforts on the quality measures with the highest expected impact. Such impact can be measured in many ways, but plans should strive for an unbiased and data-driven approach. For instance, we believe that the expected impact for a specific quality initiative can be objectively measured with a formula that takes several factors into account:
• The relative performance of other plans for each metric
• The relative positions of the star thresholds across plans
• The measure weight
• The current measure distance from the overall summary rating (this takes into account the bonus that CMS provides for low variance)
This calculation allows plans to prioritize their quality initiatives appropriately. Also, statistical methods assigning risk values or likelihood of achieving a particular outcome by metric (based on standard deviations of plan performance data) and using Monte Carlo methods to look for priorities that will maximize overall performance can be very powerful. However, that is only part of the solution. Plans will also need to implement the right governance structure, especially given that many initiatives span functional boundaries. For instance, launching a member engagement campaign requires close collaboration between care management, marketing, and even providers. A governance structure that ensures coordination and establishes accountability is essential if plans are to reach their goals in the established target measures.
6. Manage Medical Costs
Given the long-term pressure on rates, MA plans must learn to operate on a significantly lower total cost structure. The magnitude of change in medical costs requires more than merely tweaking existing network management and care management programs. Plans must fundamentally rethink how they manage members.
To start, such an approach involves eliminating expensive avoidable hospital admissions and readmissions, emergency room visits, unnecessary or duplicative testing, and so on. Related to this, MA plans need to take active steps to keep members healthy. Stratifying their customer segments is one component. By better understanding the needs of members, they can better engage with them on a proactive basis. For example, a benefit question regarding diabetes treatment may trigger outreach to enroll the member in a diabetic care counseling program.
Plans will also need to choose provider partners wisely—based not on unit costs alone but also on the provider’s ability to build close relationships with members (particularly high-risk members), their understanding of the strongest drivers of members’ health, and their ability to manage the patient population. Not all providers are ready to take on such a role. For some MA plans that have operated with broad networks in the past, having closer, more integrated partnerships with a smaller number of providers will be culturally challenging and may require stakeholder management.
In the choice of provider partners, the role of the primary care physician (PCP) and care coordinator will become even more critical as they increasingly become the “quarterback” for the care of Medicare patients. Similarly, the role of home-based and community-based care providers will also increase as MA plans and PCPs strive to keep members healthy and in their homes and communities, instead of in hospitals and long-term care facilities. Finally, the healthcare system will need to tackle the larger—and more sensitive—topic of end-of-life care.
7. Invest in Capabilities
Plans must determine the capabilities needed to support their way to play. For example, plans opting for the emerging two plays, high-quality health plan and care delivery innovator, will need strong capabilities in three key areas. First, plans should build a deep understanding of their interactions with seniors and the resulting customer experience. In addition, the ability to design products to incentivize healthy behaviors by leveraging provider arrangements will be critical to improving quality scores. Last, plans must build the care and network management capabilities needed to design and support new provider partnership models and align incentives to quality indicators.
In addition to these differentiating capabilities, plans must develop and tailor a large set of “table stakes” capabilities (i.e., pre-requisites for all plans) that span the Medicare value chain — activities in the front, middle, and back offices, as well as corporate/shared-services functions (e.g., enrollment processes that are compliant with CMS guidelines).
Next Steps
MA plans are at a crossroads and must conduct an honest assessment of their likely viability in a future environment of rate parity with FFS. If they aim to compete—and succeed—it’s critical that they articulate their chosen way to play. And to support that strategy, they must implement the necessary dimensions discussed here: the right mix of products, segments, and geographies; an improved approach to engaging members; optimized revenue; better management of star quality ratings; stronger cost management; and the right capabilities. The future holds greater challenges for the industry as a whole, but successful MA plans will benefit from inevitable growth in the Medicare market if they take decisive action now in these areas.
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