-: [AI-Generated Voice] This meeting is being recorded.
Sherry: Hello everyone. I'm Sherry Roling,
your host of the ACAP Value-Based Payment Showcase.
ACAP presents periodic vendor showcases
on a variety of topics so that our member health plans
can hear directly from vendors on key services.
Our next showcase will be in September, 2023,
where vendors will be discussing social determinants
of health offerings.
Today I'd like to walk you into our session presented
by Optum and our presenter today is Erik Johnson.
He will be presenting "Operating Imperatives
for Value-Based Care."
But before I turn it over, I have a few housekeeping items.
This session along with all ACAP calls
and webinars will be held in accordance
with the ACAP antitrust guidelines.
These guidelines can be viewed on our website.
We will record today's call
and will post it in the slide deck
on the value-based purchasing showcase website available
to all of our member health plans.
Always remember if your plan is seeking services,
be sure to check out the list
of preferred vendors on our website.
Just look at the top of our homepage
and click on the preferred vendor's link.
When you're seeking services,
you can also post a query or even an RFP
on the Preferred Vendor Connection portal.
During today's session,
you can ask a question at any time
by clicking the Q&A icon in your Zoom window
and typing in your question.
All questions will be answered during our session.
Now I'll pass it over to Erik to kick it off.
Erik: Thanks, Sherry. Thanks very much
and welcome to the the webinar today.
I'm Erik Johnson.
I'm Senior Vice President at Optum Advisory Services.
I run the value-based care practice here at Optum
and it's a pleasure to be speaking with you all today.
For the next 45 minutes or so,
we're gonna try to leave some time for Q&A at the end,
we're gonna try to address some of the operational
and functional demands that value-based care
is putting on both payers and providers
in the marketplace today.
We're gonna talk a little bit about that in context
about why value-based care, why now,
what are the market imperatives
in addition to the operating imperatives
that payers and providers are facing
in this ever-evolving market.
So we'll talk a little bit about the models of VBC
that are out there, the payment models that are out there,
the partnership models that are out there,
and really some of the strategic questions
that folks are asking us as their consultants,
but also asking of each other
as different stakeholders in the marketplace today.
As we go through this presentation,
there's some questions I want folks to keep in mind
that maybe will trigger some questions at the end.
And feel free to ask these questions back
to me as we get to the Q&A session later this morning
if I haven't addressed some of these in full.
But we really wanted to bucket
about four big sort of macro-categories of questions.
And the first is, in these payer provider arrangements,
how close to first dollar premium risk
do providers really want to be?
Because there's no single right answer
for any particular stakeholder.
Some folks will want to go
to a full delegated capitation model
in various product lines, whether that's Medicare,
Medicaid or commercial.
Some will only want to participate
in upside downside ACO type models
where there's a fairly narrow risk corridor,
but they're still being rewarded
for participating in a value based care arrangement
with particular emphasis on the quadruple aim.
The next set of questions that folks I think need to answer
or at least think about as they go down this route is,
which populations should we be taking risk on?
Because they all represent very different risk profiles.
If you think about Medicare ACO populations
versus Medicare advantage populations
versus managed Medicaid populations
versus commercial populations,
they all have very specific needs
and you as a health system,
you as a payer may be particularly well positioned
to take on one or two of those product lines,
but maybe not all.
So I think it's important to be intentional
about the populations that we're targeting
these value-based contracts on.
As we think about value-based models
and having providers take on greater responsibility,
there does become an imperative
for the providers to think about,
do we have the necessary assets
that we need in order to manage these populations?
Do we have the right sites of care, the right care models,
and the right primary care footprint
in order to take on risk at scale
with the populations that we choose
to engage in value-based contracting?
And then finally,
and this is maybe just giving away a little bit
of our mindset at Optum,
we do think that these are largely partner-based models.
We are generally not big fans doing it all by yourself,
whether that's owning all of the delivery assets
that you need or whether it's starting
your own provider sponsored health plan.
In some cases, again,
those may be the right answers,
but in most cases what we have found is that
that is a big ask from a capital standpoint,
from an organizational change standpoint,
and from a clinical standpoint.
And so we very much think about this in terms
of do you have the right partnerships
in place in order to be successful in this endeavor?
So that's kind of how we think about it.
What I wanna get into now is sort of
what are the fundamentals of value-based care?
And I think a lot of us,
at least I have been working in the world of VBC
for about 15 years now, and the definitions have evolved,
the marketplace has evolved.
And I think if you ask, you know,
10 consultants what a good definition
of value-based care is, you might get 11 different answers.
So we think of it very much along the,
what we were gonna cover in the next two slides.
First of all, this is a contracting model.
Value-based care ultimately
is about value-based contracting.
And that contract should include incentives
that will enable a community partnership
to make progress against the quadruple aim
of lower costs, improved patient experience,
improved provider experience, and higher quality.
Now, there's some disagreement about this.
Some folks have anchored very much on the triple aim,
ignoring the provider satisfaction element of this.
And some folks have extended this to the quintuple aim
and included health equity in the equation.
I think health equity is a good set of capabilities
that may be appropriate for certain types
of value-based care arrangements
for certain types of populations.
But in and of itself, health equity is almost too big
of a lift to later laden onto a value-based care contracting
if it doesn't require those sets of capabilities.
So we're very intentional
about these four elements being represented
in a value-based contract.
And having those four elements
in a VBC arrangement has some very specific implications.
And we lay out four of those right here.
The first is the implication for payment.
Moving away from that fee for service chassis
to something that is risk based.
Again, it doesn't necessarily have
to be a capitated payment.
It could be a risk based fee for service model,
like what we're seeing in in the MSSP program
across the country and what a lot of MA plans have adapted
into their own arrangements with their provider networks.
But we are looking to move towards risk
and we will talk about the elements of risk in a minute.
The second key implication is the implication
for where that care is being delivered.
And this is moving away from facility based care
as the primary delivery model
and moving that care as close to home as possible.
That is not to say we are arguing
for a hospital at home model in every, you know,
in every community or a snip
at home model in every community,
but we are looking to move it into the community
and out of the facilities to the degree that we can.
The third implication is for risk management
and who's gonna end up managing that risk?
And in a value-based model, at least at a minimum,
the risk management responsibility
is shared between payer and providers.
And in the most aggressive models,
the risk management is delegated entirely
to the provider network.
And then finally, the implications
for care design and delivery.
And that is moving the payment model
and the clinical model away
from visit based and episodic based care models
to longitudinal care models
where instead of treating the episode,
now you're treating the life
or treating the patient or at least a year
in the life of that patient
for whom you have risk during that benefit period.
And some of this may sound somewhat reductive
to many of you, but I think it is important
to keep in mind that all of these have
to move in parallel as we look
to find a sustainable value-based care contracting
and delivery model for the partnerships involved.
We talk a lot about risk in value-based contracting
and there are four elements of risk in a VBC arrangement.
And I think a lot of the attention is focused
on that first one, that insurance risk.
Ultimately a value-based contract
that includes insurance risk is an actuarial challenge.
Making sure that we have priced that risk correctly,
that we've addressed the total cost of care,
even if we're still only operating upside downside models
where you're not on the hook
for the entire total cost of care.
That insurance risk has to be calculated.
That insurance risk has to be shared.
We have to come to some agreement
that the provider network that is taking on some of
that risk has an accurate understanding
and complete visibility into
how that insurance risk is calculated.
And I think in a lot of cases,
insurance risk is where a lot of the risk discussion stops,
but there are other elements
of risk in value-based contracting
and I think they're largely accretive.
I don't think you need to tread one off versus the other.
In some cases you're gonna need all four.
The second is quality risk
and we're very familiar with that in the healthcare economy.
CMS has been doing various elements of quality measurement
and quality rewards and penalties for almost 20 years now
through the inpatient hospital reporting mechanisms.
And I think that is a good backstop
to make sure that we are hitting our insurance risk goals
without sacrificing our quality goals.
The quality world is evolving fairly rapidly
and expanding fairly rapidly
to move beyond sort of the task list based quality metrics
that were the sort of first generation of quality measures,
moving into then outcomes based measures.
Things like readmission penalties for hospital readmissions.
And now we've extended beyond that
into consumer and patient satisfaction.
We've seen that in the MA program
as the star rating regime starts to move away
from what we would consider more
of a HEDIS based environment
and more towards caps
and really getting at consumer satisfaction
with their benefits and with their access points.
That's quality risk.
The third element could be operating risk.
Making sure that we're efficiently
managing the anticipated demand
by taking advantage of all of the sites
of service available to the network
and optimizing at the lowest cost,
highest quality site of care and rewarding networks
for managing those referral patterns intelligently.
And then the last element of risk
is what we call episodic risk.
And that is managing episodes
and procedures as efficiently as possible.
This is an area where providers
have had a lot of experience,
roughly 40 years of experience to be precise
since Medicare first introduced diagnosis related groups
back in the early eighties.
Those diagnosis related groups
or DRGs are really small bundled payments
that really are meant
to cover just the inpatient hospital stay.
We have seen a lot of experimentation
over the last 10 years with bundled payments.
Certainly CMS invested quite a bit of of time and energy
in rolling out various models
of bundle payments over the last decade or so
with varying degrees of success.
And I think there's a moment now
where we're taking a little bit of a pause
to see whether those types
of episodic risk arrangements are sustainable
in the long run.
But certainly when you get into a full delegated model,
there are certain types of providers you don't want
to hold insurance risk, but you still want them accountable.
We're talking about proceduralists and surgeons
and subspecialties where they might not own a life
during an entire 12 month benefit period,
but they're gonna have a disproportionate impact
on the amount of resources devoted
to that life in a very discreet type of episode.
And I think that's an important model
to keep in mind as we go forward.
So these are the various elements of risk
that we include in risk-based contracting.
These are the various elements
that are largely present in accountable care models
that CMS and CMI have put forward
through the MSSP program and now the ACO reach program.
And I think all four of them are things
that we need to think about and negotiate
with our provider networks as we go forward.
Now, as I mentioned at the beginning of the call,
I've been working in value-based care
for better part of a decade and a half
and it's always been the next big thing.
And the question I think a lot of folks ask me now
and that you may be getting asked as well is why now.
And I think there are a couple reasons for that.
The first is there are some significant
macro headwinds facing the provider market today,
which is making their business models
that are based on fee for service increasingly difficult
to maintain given the contracts
that they have previously put in place.
There are extraordinary inflation pressures
across the healthcare economy.
They're easing a bit over the last six months,
but certainly the workforce shortages
and supply chain disruptions that we've seen
over the last 24 months
have increased the operating cost basis
for a lot of our healthcare providers
in the last couple of years.
We've also seen some pressures,
some legislative and regulatory pressures on reimbursement
and most recently on MA rates coming out from CMS.
We've seen some market downturns
in the stock market eroding some of the value
of the endowments and cash reserves
and liquid reserves that health systems have had
in the past, which is further tightening their ability
to operate with with some latitude.
And finally we see the expiration
of the public health emergency a couple weeks ago,
which is contributing to some dramatic swings
in coverage through the Medicaid redeterminations
that are ongoing and will be through the rest of the year,
as well as some of the clawbacks
from some of the waivers that providers
have enjoyed since March of 2020.
All of this is projected
to put some significant downward pressure
on provider operating income over the next few years.
And I think that's an important consideration
to have as provider systems and provider networks look
to what is the next opportunity
for margin in the market today.
So those are sort of the macro economic dynamics
that are forcing providers
to think about value-based contracting
as an alternative path to margin.
But there are also sort of
what we would call endemic market disruptions
that are happening to the provider market.
And that's been going on for quite a bit of time as well.
We lay out a couple of those dynamics
on this on slide eight.
The first dynamic that we call out
for the purposes of today's discussion are
what we would call the physician aggregators.
These are the vendors that are going out,
Aledade and the Agilon and the Privia
of the world who are going out
and creating what are essentially synthetic IPAs
with the idea of moving those into synthetic ACOs.
And they are largely focused on the ambulatory market
and on the independent practice groups
that are still out there today giving them sort
of purchasing power with payers
in order to take on some of that risk
and take on some of that delegator responsibility
for populations primarily in Medicare advantage today,
but I think increasingly moving
into the commercial world as well.
And in that dynamic what we see is a cutting out
of the hospital as the middleman
and the hospitals are struggling
with the loss in volume from that.
Second related trend
is increasingly large physician practices scaling up
to meet the VBC challenges that MA presents itself
as an opportunity for top line revenue growth
and bottom line margin improvement.
About a fifth of physicians today
are in large medical groups,
what we would consider to be a hundred
or more physicians and about 50% of Medicare release today
are in MA products
that those physician groups are targeting.
Again, threatening to cut out sort of the IDN health systems
in the marketplace
and also increasing their negotiating leverage
with MA plans in their marketplaces.
And finally, we have sort of the more consumer orientation
that is happening in the marketplace today
with the development
of large ambulatory care centers of delivery.
We see this with CVS and Walgreens
in particular making dramatic investments
in their in-store clinics as well
as the rising up of standalone urgent care centers.
DMS has also contributed to this.
There's about 115, 116 now hospital
at home demonstration projects
that are underway in various stages of maturity.
All of this is starting
to really fundamentally change the course
of the river of demand of healthcare services
and forcing health systems, physician groups,
specialty practices to think about
what does the consumer journey look like today
and can we manage that journey going forward
with the existing assets that we have.
So it's a very interesting time
to be looking at the delivery,
the market for the delivery of healthcare services
given the macroeconomic challenges that folks are facing,
which by nature are gonna be temporary and transient,
but also looking at some of these more tectonic shifts
in how healthcare is delivered
and how healthcare is organized in local communities.
It's creating urgency in other words
for more and more providers to think more
and more seriously about alternative contracting methods
in order to make sure
that they have sustainable business models going forward.
And the way we've encouraged our payer
and provider clients to think about this
is that there are really two value levers
in value-based care and it's where we start
to see alignment between plans and providers.
And the first lever is growing market share in lives
because we do believe value-based care is a growth strategy.
It's not just an opportunity
to take unnecessary utilization out of the system.
It's an opportunity to grow the number of lives
that we are responsible for
as a partnership between plans and providers
by providing more affordable products in the marketplace,
richer benefit packages in the marketplace,
and easier access to their benefits
through the contracting mechanisms
that payers put in place with their networks.
Once you have all of those lives in those product,
then the next challenge largely is to make sure
that we're managing network integrity
and driving demand into the select networks
that we have put in place for those product lines,
so what we call share of wallet,
to make sure that when there is necessary
and required care to be delivered,
that it is being delivered by our chosen network partners.
Those are the value levers.
Those are the things that we measure.
Then the next question is are the enablers in place?
And we'll talk more and more about the enablement factors
in a couple of slides as we think about sort of
how do you assess a provider network's capabilities
for managing risk and managing populations at scale.
But all of this applies to all
of the different payment models that are out there today.
And CMS I have argued over the last 10 or 12 years has been
for better or for worse,
the most creative and innovative payer
that we see in the marketplace.
They have tried more programs with more results
with different types of providers
than just about any other health plan out there.
Largely because they have the scale to do it
and they have a congressional mandate to do it.
And they started with upside only MSSP models,
rewarding networks who are able
to manage utilization below certain thresholds
without penalizing them for going
over a pre-agreed upon benchmark.
Those upside models still exist today
in the MA and commercial world.
Quite extensively in fact,
and we tend to be relatively enthusiastic
about upside only risk models as a good point
at which to start this type of investment campaign
and this type of care model redesign.
It gives providers practice at ingesting new sets of data,
understanding how to analyze and model
that data to identify opportunities
for performance improvement
and clinical utilization improvement.
It gives payers who have adopted these models the ability
to identify which provider networks are going
to be good recipients of that claims data.
Are they gonna be collaborative
in generating new care models for the populations
that are enrolled in those products?
But it is in and of itself not an end game.
And I think CMS is increasingly thinking
about this as just a starting point,
but moving more and more providers
and more and more patients in the two-sided risk models.
That's where we see a lot of the MSSP tracks today
presenting various levers and various models of upside
and downside risk as well as the ACO reach model
that they rolled out about a year ago.
This is the first year live with that
where they really are taking a fee
for service chassis in Medicare and saying,
"Okay, now we're gonna hold you pretty much at full risk
for this population
without fundamentally changing the benefit model
and giving patients freedom of choice."
It's a risky model,
but it is sort of the natural evolution
of where CMS has been taking the debate
over the last decade or so.
Now that's CMS.
But what we continually advise our clients,
our provider clients as well as our payer clients is that
for these models to work, it needs to work at scale.
You need to be able to do it across all of the,
as many of the populations that you serve.
And that necessitates providers going to their plans
in their marketplace to build upon the successes
that they've had in those CMS programs
and leverage those lessons learned
into private contracting arrangements.
You can do that by mimicking the CMS models
upside downside risks and ACL models
or depending on the maturity level
that you've attained through those experiments,
moving into full cap risk arrangements
with your payers in your marketplace.
There's a wide plethora of payment models
that are out there,
but they essentially exist on this continuum.
Now you've noticed,
I haven't talked about bundled payments very much
in these types of payment models,
and that sort of does betray a little bit
of our point of view on bundles.
I think bundle payments can be a good tactic embedded
in one of the four payment models you see
at the bottom of this slide.
But in and of itself,
it's not really a value-based care approach
to a marketplace.
And that's because it is still largely dependent
on volume and fee for service.
And what we have found in certain markets
is in both Medicare as well
as in private pay bundle payment arrangements
is that some provider networks are really good
at managing bundles.
They can make significant margin
on particular types of bundles
and then they end up doing more.
So while they're optimizing their episodic risk performance,
they're actually sub performing on a total cost of care
for a population standpoint
because they're just doing more and more volume
of things that they're really, really good at.
So I think that's an an important element
of why we talked about operating risk
as one of those four risk models
that we're not overloading our specialty groups
with too much volume simply
because they're particularly efficient
at a particular procedure.
Talked a little bit earlier about growth
and why this really is a growth model
and we lay out a little bit of the math on this slide.
Attribution as a growth metric.
I think this is sort of second nature
for a lot of payers to think
about growing the enrollment that they have
in particular product lines,
but it's a new model for a lot of providers out there
in the marketplace
and it really does require some education
to think about attributable lives
and what the opportunity is
to grow your primary care footprint
and the productivity of that primary care network.
And I won't get too much into the details here.
But what we have found is that there
is significant productivity growth available
in a lot of these primary care networks.
They can certainly think about partnering
beyond their existing owned
or aligned primary care practices
in order to have more exposure
and more visibility into more lives.
But what we see the real lift being
is on that share of wallet capture.
How much of the medical spend
in that MOR is leaking out of the network
and how much of that can we pull back?
And that is going to be driven
by how well you partner with the independent groups
in a marketplace,
how well designed those networks are,
and how well information is shared
across those different practices
and with the health system itself.
That upside is going to be top line revenue growth
for most health systems with the proper contracts
in place that can still represent an overall decrease
in total cost of care for a given population.
The trade-off there is in the denominator.
Now what we're really looking
to do here is grow the denominator
so that the average per capita spend is lower,
but you're doing it across a much broader population.
That becomes immediately attractive
to health plans who are looking to grow.
And it becomes immediately attractive
to health systems who can fundamentally execute
against that referral management.
And that's where incentives start to align
and that's where you can really
build some very interesting partnerships
between payers and partners, payers and providers,
and start to contract and memorialize those agreements
in those contracts.
Those contracts then need to really talk
about four big things in order for this to work.
And the first is those contracting models.
Have we gotten a risk correct?
Is the revenue diversification something
that we can live with
and does it give everybody the best chance
to grow in attributed lives and share of wallet?
Then the next question
is are we giving our beneficiaries the tools
that they need in order
to access their benefits most effectively?
And this is kind of a new dynamic
that we have seen emerge with payers
over the last three years
and we, I think we saw the seeds of this planted
during the summer of 2020.
About four months into the public health emergency,
health plans were in very good shape.
People were not going in for elective care.
There wasn't a lot of unnecessary demand
in the healthcare system at that point in time.
But I think gradually,
very quickly health plans realized
that at some point, those individuals
who were not seeking care were not just those
who were avoiding elective care.
They were individuals who were scared
about coming in but had real chronic healthcare needs.
And at some point, they would come back into the system
and they were gonna be much more expensive
and much sicker than they would've otherwise had been
if they'd been able to maintain their care regimes.
So plans got pretty smart in some respects
and in many markets about reaching out
to those rising risk and identified risk populations
to keep them engaged with their benefits
to keep them engaged with their providers.
And what we saw was a lot of collaboration
between health plans and their networks
to make sure that those at-risk populations were able
to maintain their health during a time
of great uncertainty in their ability
to physically access a physician office
or an emergency room.
Those are good lessons to have learned during the pandemic
and I don't think that they were limited to the pandemic.
They are lessons that we should mature and integrate
into the way we think about benefit design
and patient access and beneficiary access going forward.
Because what we have found in a lot of the engagements
that we have done in Optum Advisory
is that the more you can get those patients
to engage with their benefits in a predictable way
that leaves them satisfied with the experience
is that you also end up with better outcomes
and lower total cost of care.
And then finally, I think what what we're looking
to do in a lot of these joint contract
payer provider partnerships is to memorialize some
of these new care models
and make sure that those care models are jointly designed
by partnerships in place
and that some of the ongoing care management functions
are delegated down to providers.
This is where I normally tell a quick story
about sitting on a panel a few years ago
with a representative from a large national carrier,
a representative of a physician group.
And I was representing health systems on that panel.
And it had nothing to do with what I said,
but it had something to do
with what the representative
of a national insurance carrier said,
which was that we hate risk as payers.
We really hate the idea of having to manage risk.
And I remember sitting in that panel thinking,
"Well, that's why insurance companies exist.
It's to manage risk."
So I was a little befuddled by the statement.
And afterwards, I asked him what he actually meant
by that statement.
And he said, "Health plans are great at pricing risk.
We have tremendous actuarial assets
that can help us price that risk for beneficiaries.
But we can't manage risk because we have beneficiaries
and risk is managed at the patient level."
And he wasn't trying
to make a needless semantic distinction.
I think he was making very meaningful distinction
that risk is managed at the patient level,
that patient, that the most direct relationship
that will inflect that patient's behavior
is with the provider.
And we need to do a better job of delegating down
to those providers, utilization management,
care management, prior decision making,
and functions that have normally existed
at the payer level but that we have historically struggled
in doing a good job with.
To a certain degree,
we could help price that risk correctly,
but then delegate the responsibility
for managing it down to providers and for that,
new care models should be memorialized in those contracts.
So that gets us to sort of our large structure
and our maturity model for value-based care.
And I think this applies
to all of the partnerships that we think about.
The first is on your strategy
and we're really looking to answer three questions there.
One is, who do you want to take risk on?
Medicare, Medicaid, commercial.
How much risk do you want to take?
Upside only, upside downside, or full capitation?
And third, who are you gonna partner with
to go into this market with this new type of contract?
What's your governance model going forward?
Once you've established that north star,
then the next question is who's gonna go on
that journey with you?
And that's the network build and management function
that you see on the top left there.
I'm not necessarily just talking
about clinically integrated networks here.
I'm talking about a network that is sufficient
to treat the patients that you have.
And I know that sounds somewhat reductive,
but if you think about Medicare Advantage
or Medicare ACO populations,
that network is gonna have to include skilled nursing
and home health facilities
that do more than just meet rate requirements.
There are high quality skilled nursing
and home health agencies who can manage populations
on the extended tail of a post-discharge admission.
It's gonna look different in Medicaid
and it's gonna look different in commercial,
but whatever it is, and then you can do all three.
Those networks have to be bespoke to those populations.
The next question is what are you gonna ask them
to do differently from a population health management
and coding perspective?
Are the care models in the care transition programs
being put in place sufficient
and scalable enough on the provider side
to manage the volume
that those populations are going to represent?
And this requires a lot of change management both
at the practice level as well as
at the inpatient point of care as well.
You're still gonna have a lot of necessary care.
And so we wanna make sure that we're getting
that operational episodic risk right
through improvements in our care delivery.
It's still gonna matter that we manage length of stay
in all institutional settings effectively.
It's still gonna matter that we take advantage
of site of service arbitrage across all of our populations.
All of that is gonna sit on an data analytics
and reporting platform that ingest the right level of data
with the right cadence and produces the right level
of granularity for decision makers
at the provider level to make decisions
about where performance improvement initiatives need
to take place.
And finally, we wanna make sure
that the enterprise risk is appropriately priced.
And that is something that providers
have very little experience in.
Providers, payers have a great deal of experience in.
And we wanna make sure
that there's a new equilibrium established
for payers and providers to jointly negotiate
what that risk needs to look like.
This is a long-term strategy
and I won't get into the ones on the side,
the enterprise governance, organizational commitment,
and change management because that's its own webinar.
But what we're really talking about here
from a value-based care standpoint is patients.
We need these new partnerships to have a three
to five year point of view on this new opportunity.
These are not that thick payoff in 12 months.
It does require sort of a multi-year
and in many cases a multi-product line approach
under a single infrastructure
that the payer and provider partners have decided
to erect around their communities
and around the different populations
that live in those communities.
But it really does require folks
to take that three to five year point of view.
We'll talk about a couple opportunities here
that are probably top of mind for a lot of folks.
And the first is the Medicare imperatives.
And I'm sure many of you're already familiar with this,
but Medicare Advantage is insanely popular.
Medicare Advantage is taking most of the growth
in the over 65 population today.
These are a few MSAs that we've charted out
to show just how popular Medicare Advantage
has become over the last few years.
And this is true largely across the country
and I don't really see that waning anytime soon.
CMS has a couple key priorities
that they're constantly trying to achieve.
The first is protecting the Medicare trust funds,
and the second is making sure
that their beneficiaries are happy.
And Medicare Advantage is extremely popular
for any number of reasons
that I'm sure many of you are more familiar with than me.
But this is the direction of travel
for the over 65 population.
And for providers who are seeing more
and more of their volume represented
by the over 65 population,
they have to have a new approach
to that population in order
to make the economic models work for them.
And there are really three ways
to make these economic models work.
It is to make those MA products more profitable
for the plans that sponsor them
and on whose licenses these products ride.
And the first is to get accurate patient coding in place.
Now I realize that there's a lot of discussion
around how HCC scores are calculated
and will be calculated going forward
over the next three years.
It's not going away,
but it will be constrained a little bit
by some of the decisions CMS is making.
Nevertheless, for provider networks to show value,
they have to be able to show in part
that they're good at coding the visits that they get.
The second is your total cost of care and your star ratings.
Are the providers in the network
providing the necessary level of population health
that you can bring down total cost of care
and are they providing a consumer experience
that will help the plan achieve the maximum level
of star ratings in this new regime,
which is largely based on consumer satisfaction.
And then finally, is this a high value network?
Back to some of the capabilities we talked
about in the maturity model.
Is this a network that is relatively seamless,
operates as a network,
has fairly seamless referral patterns,
and provides the provider network itself
its share of gains in demand.
So we're minimizing that leakage.
Increasingly the payer clients that we work with,
that's really what they're looking for from their networks.
And I think that's largely new.
A lot of this is largely new
to the networks that we work with
on the provider side of the shop.
That model is probably gonna sustain itself going forward,
but there's a lot of pressure on that model going forward.
And we lay out some of those pressures here
and we've talked about most of these
over the last 40 minutes or so.
The expiration of some
of the pandemic related rating adjustments
going away this year,
it's gonna make star ratings a whole lot harder.
Only about 51% of MA plans had a star rating four
or more this year.
That's down significantly from 2022.
And that's largely because of the change,
the ongoing change
towards a more caps focused survey Medicare beneficiaries.
But also because of some of expiration
of the pandemic relief that congress put in place in 2020.
This heightened focus on health equity
is becoming a really interesting challenge
for MA plans as well as providers to start to grapple with.
Health equity is still a relatively new dynamic
that is creating some uncertainty
and some disequilibrium in these partnerships
to try to figure out how to address it most effectively.
I think there's a lot of innovation happening in this world
and I encourage it and I think
that there should be ongoing innovation
in this because I don't think right now there
is a right answer in how to approach the inequities
that we see in our communities.
I think there's a lot of experimentation
and innovation happening,
but I don't think we're to a new equilibrium
in how we incorporate that into our benefit models
and into our network designs.
We've talked about the narrowing opportunities
in coding that CMS roll out in their advanced notice earlier
in the spring and then in the final notice last month.
This is gonna put pressure on top line revenue opportunities
for MA plans as well as
for those taking delegated full cap arrangements
from MA plans on the provider side.
It hasn't completely eliminated it,
but I think it is going to change the points
of emphasis away from top line revenue growth,
more toward managing total cost of care
and really starting to get at some of
that previously unaddressed, unanticipated,
and unnecessary demand.
And finally, we've talked about cap surveys.
All of this requires some partnership.
I don't think a payer is gonna be able to do this
on their own and I don't think a provider network
is gonna be able to do it on its own.
It's gonna require the combined thinking
and the combined insights from both sides
of that equation in order to come up
with sustainable solutions to this challenge.
And I think it's worth coming up with an approach,
a joint approach to this because for providers,
MA is really the only place left for them
to find margin in the Medicare population.
Right now, they basically break even on Medicare populations
and they basically break even
on Medicare advantage contracts,
whereas all of the value right now,
all of the excess value
or all of the margin is focused on the provider.
Around 8% to 10% margin for most
of the payers that we work with.
In order to grow, we think MA plans are gonna have
to be willing to sacrifice some
of that margin down to providers
in order to grow membership.
There is no other place for providers to get that.
There is in the commercial world
and that's largely where we've seen providers make money
over the last few years.
But given some of the challenges
that we have seen in site of service reallocation,
some of those disruptive tectonic trends
that we talked about earlier,
this is becoming less and less available
to most health systems as they are starting
to feel themselves marginalized
by some of the new market entrants.
So they are gonna have to double down
on their Medicare advantage bets
and they're gonna have to double down
on the discussions that they have
with their community health plans
in order to make sure that everybody can grow
in a way that is sustainable going forward.
That's the Medicare challenge.
Medicaid opportunity is a little bit different.
And in some respects from an analytic point of view,
much more interesting in some respects
because these populations have
such heterogeneous needs going forward.
And it is so difficult to keep these lives long enough
for some of these population health investments
that you make in these communities
to really take hold and generate a positive ROI.
But we have seen that it can be done.
We have seen, in our experience,
at least within Optum Advisory,
we have seen plenty of Medicaid managed care plans,
provider sponsored Medicaid managed care plans
really succeed in their ability
to deliver high quality care to their communities
as well as make some top line revenues
and bottom line margin.
But to do that, they've had to become very aggressive
in a couple of areas.
One is to get very aggressive in their approach to analytics
to understand what are some of the underlying trends
in the Medicaid populations that might hide something
that is gonna come back in later years
and start to really affect their ability
to make margin on those delegated arrangements.
And the second area of major investment
is investing in the community.
And this is where Medicaid is really quite different
from other VBC arrangements.
It's that emphasis on community assets
that can address these populations in place
and address some of their social determinants
of health in an effective way.
Medicare Advantage,
I think the playbook there is pretty straightforward.
We talked about some of those elements a few minutes ago.
And Medicaid, what we have seen work,
and this slide is, comes to us from our sister company,
the Advisory Board,
and I think they've done a really nice job here
of identifying some of the community resources
that they have seen in their best practice research,
certainly that we have seen in our consulting engagements
that overemphasis that over indexing
on community health workers, clinical social workers,
behavioral health, and social determinant analytics,
that is really gonna provide much greater access
and insight into the the needs of those populations,
which is very different from a fully insured commercial life
and very different
from a fully insured Medicare advantage life in general.
One example I'll give you.
We had a health system client
that was taking delegated risk on Medicaid
and they articulated to us what they called the $20 problem.
They operated and served a community
that had very little in the way of public transportation
and those folks may be
in the Medicaid managed care arrangement.
And after they left the hospital,
they faced this $20 dilemma
because after they left the hospital,
they were prescribed a drug or a suite of drugs
and they were scheduled for a follow-up visit
with their primary care physician.
But that patient,
that beneficiary could really only afford one
of those two options.
They could either get a Uber to CVS
or they could get an Uber to their physician practice,
but they probably couldn't do both in a timely enough way.
So the investment there was to determine
from a community health worker perspective,
let's go identify those who have transportation needs
and then let's just provide the transportation
to the beneficiary.
It's easy enough to spend $20 on the Lyft ride
or the Uber ride if what we're doing is getting
that person compliant with their medication regimen
and mitigating the risk
that they're gonna have a a flare up
or an emergency room visit later
that's gonna cost thousands of dollars.
That's a trade off that they were willing to make.
And that's not the most necessarily creative arrangement,
but it is a little bit of that outside of the box thinking
that you can only get when you have community health workers
in the community assessing for social determinants
and then coming up with an actual cost effective solution
to it going forward.
That's the investment in the community.
The investment in analytics,
we talked a little bit about here
and I'm gonna sort of wrap up here
so we spent some time on Q&A.
Same client.
Looking at sort of trend lines over time
and in aggregate, the trend lines were pretty good.
What the trend trendline analytics
were hiding were two things.
One was catastrophic expense
amongst a population that's in the,
that sort of that middle row there,
you see that 24.3% non-chronic decline.
That's decline in their MLR.
These non-chronic folks who had catastrophic events,
whether those were accidents, organ transplants,
that's hidden in the trendline numbers.
When that trendline reverses
and the catastrophic events decline over time,
what they end up finding is almost a 20% annual increase
in spending on chronic care conditions.
Asthma, diabetes, CHF and COPD in particular
that you see down there on the bottom right.
They needed to understand
how much catastrophic expense was either masking
or outperforming their ongoing chronic trend spend line.
And until they were able to get it that level of granularity
and identified those patients with asthma,
diabetes, CHF, and COPD,
they were unable to figure out where
to invest their population health programs going forward.
This is a level of granularity in the analytics
that is available through the claims data.
If you know and commit enough time to really getting down
to that level of care and understanding of the populations.
That in Medicaid,
that's where we spend a great deal of time working
on these Medicaid value based care arrangements,
figuring out the community needs
and making sure that the analytics are flying
at the right altitude to provide us the understanding
that we need in order to understand
where we might be vulnerable in the next 6 to 12 months.
So with that in mind, I think we get you right
about 10 minutes to the top of the hour.
I'm just back to the questions
that I sort of proposed at the top of the discussion here.
How close to first off premium risk
do we want our providers to be
for which populations in which types of partnerships
and what kind of assets are we gonna need
to develop as part of that partnership
in order to successfully manage
that level of risk with that level of population.
And with that, I think I might turn it
over to Sherry to facilitate any Q&A.
Sherry: Thanks Erik. We do have a a few questions.
The first one is, what role, if any,
do you see for pharma as part of these models?
Is it an outcomes based contracting or payers
and providers open partnerships
with pharma that extend
beyond that into health equity for et cetera?
Erik: Health equity is the first frontier I think
for pharma partnerships in these models.
I think certainly we've seen some sort
of innovative contracting to address some
of the social determinants
for the Medicaid population in particular.
I think outcomes based contracts
are really interesting in this realm.
And I'll be honest, I'm not quite sure
that outcomes based contracts
have gotten to a level of maturity
that we know what the best practices there are,
but I think there's a lot of attention spent
on pharmaceutical pricing
and I think that's certainly nothing
that we can ignore in these contracts.
But I also think that there's an access issue
that we're probably missing
with a lot of our at risk populations
and I think being able to reconcile the medication regimes
that they're on,
making sure that they have access
through discounting programs and the like
and the ability to manage the outcomes of those populations.
It goes beyond sort of the pharmaceutical contract
and gets into what does that contract mean
for what the physician practices
and the physician extenders need to do
in order to follow up once those scripts are filled.
I think there's, it's a,
I think largely been approached
as sort of a bilateral equation
to solve between the pharmaceutical company
and the risk bearer.
I think it's a little bit more multidimensional than that.
We have to sort of tease out what that's gonna mean
for physician follow up,
physician extended follow up to make sure
that the patients are taking the drugs the way
that they need to.
And I think pharmaceutical companies,
at least in my limited experience with pharma,
is that they have good ideas
about how to engage the provider networks
to make those contracts as valuable as possible.
But I think it's early days.
I think it's very early days
in figuring out what best practice there is.
Sherry: Okay. We do have a couple other questions.
How is the lack of data available impacting things
and what can be done to improve it?
Erik: So, yeah. I get that question a lot.
There isn't a lack of data.
There's a lot of data in healthcare as everybody is aware
and I think we're sort of past this as an industry,
but I think it's relatively recent
that people were waiting for complete data sets.
We want clinical, we want claims,
we want social determinants,
we want it all before we can do anything.
And I think we're largely past that.
I think claims data in and of itself can tell you a lot.
Now there's a latency to that that I acknowledge
and if you're looking
to do real time performance improvement claims data,
it's not gonna be a sufficient data set
for you to use.
But if you're doing long-term planning,
and trying to figure out an analytical basis
on which to base the investment decisions that you make,
certainly from a pop health perspective,
claims data can give you a lot.
I think the challenge has been making sure that
that data is shared with the provider networks
that you're asking to perform either
in a value-based contract or not.
I think providers would tell you,
health systems would tell you
that they don't have enough access
to the claims data for the populations
that they serve.
And that is more of a legal
and negotiating question
than it is whether there's oil in the ground.
There's plenty of oil in the ground to be drilled,
but you need to have those contracts in place
that enable both parties to be able
to take advantage of that asset.
I think now we're in a world where we're starting
to integrate clinical data with that claims data,
which can produce more real time data for sure
if we can aggregate it and model it effectively
to drive maybe near real time performance improvement.
But there are all sorts of questions
about sharing that data back with the payers
because the providers can own the clinical data.
So there's, again,
there's plenty of data assets out there
that can provide properly modeled,
the right level of insight
into the populations that you serve.
It's just a question of sitting down
and making sure that both parties are getting
what they need out of it.
That's the first order challenge.
I think the second order challenge is making sure
that you have the ability and the resources in-house
or through a third party to model the data
in a way that is useful and will tell you something.
One of the things that we have found
is that there's plenty of data reporting,
but there's, but that data reporting is serving sort
of very discreet financial needs
and when shared with clinicians,
with physician groups and with practices,
it doesn't really give them much to act on.
And I think modeling it in such a way
and getting 'em out,
getting that modeled data out to those physician practices
in a way that they can actually use it,
that's the real art of all of this
and that requires some change management
on the part of the physician groups.
Sherry: Okay. Beyond what's mandated by stars,
where do you see the biggest area
of investment for BBC implementation?
Erik: I think it depends a little bit on product line.
In Medicare Advantage, I think we continue
to see post-acute models of care being maybe an area
of underinvestment by both plans and providers.
It represents a part of the continuum
that I think honestly represents
probably the biggest near term savings
that are available to these types
of value-based care arrangements.
I think post-acute isn't super well understood
by acute care hospitals.
I don't think it's super well understood
by most primary care physicians
and I don't think MA plans totally understand
what the levers are there
and I think there's a lot of opportunity in MA
to get better at managing length of stay
in skilled nursing, to manage people out
of skilled nursing and into home health models,
and to manage people in the community.
So in Medicare Advantage,
I think that's where the biggest investment is.
I think in Medicaid,
I think it's in social determinant data collection
and analysis and tying that
to some of the health equity objectives in Medicaid.
That is, again, I think this is a very new field
even though we've been talking about it for a couple years,
it's still very new.
And I think that's where, you know,
if I were in a Medicaid managed care arrangement
or I was taking on that level of risk,
I would've been making significant investments
in SDOH because I think that's a,
that field hasn't been delimited yet.
I think there's still a lot of variables
that we probably don't understand very well
that if we did, it would give us a lot more insight
into how to engage with the community
and some of the community stakeholders like school clinics,
churches, senior centers, community centers, YMCAs,
where you can start to address some of the health inequities
and actually start to inflect patient's care.
So in those two product lines,
that's, those are the two areas
where I find there to be a lot
of fertile ground for farming.
Sherry: Okay. I know we're at the end of our session,
but we've got one quick question.
Why is patient satisfaction key to successful programs
and what happens when the patient doesn't buy in?
Erik: Yeah, great question.
Two things I think come immediately to mind.
The first is you wanna own the life.
I mean, ultimately the corner of the realm
in value-based care is owning the life
and having that life as long as possible
because you're gonna be making investments
on behalf of those lives in population health
and care management programs
and sometimes the return on that investment
is gonna require more than one benefit period.
So keeping the patient happy and satisfied so they stay
in your insurance product gives you a much longer runway
in order to realize the return
on some of those investments
that you're gonna wanna make anyway.
So I think that's the first reason
patient satisfaction matters so much.
I think the second reason it matters so much,
and I sort of alluded to this maybe middle
of the presentation,
is that you do want a lot of your patients actually
to engage with their benefit plans
and to engage more aggressively with their providers.
And making that hard ultimately is going to result
in worse health outcomes and higher spend.
If it's just too much of a hassle
to schedule a colonoscopy for particular individuals,
then a lot of colonoscopies are gonna go undone
and some of those are gonna result
in cancer going down the line.
Making it easy on the other hand,
while it's gonna cost you a lot in maybe May,
it might prevent the occurrence
of a real acute, expensive episode 16 months from now.
And I think patients are pretty smart
and I think they know what easy looks like today
because of their experiences in other product lines.
Not healthcare, but consumer retail,
airlines, banking, what have you.
That all looks easy. Healthcare looks hard.
And making it easy for them to engage
with their benefits I think will result
in them being happier.
You'll keep them longer
and you'll ultimately have better outcomes.
Sherry: Well, thanks. That's the end of our questions.
And I want to thank everybody
for attending today's showcase session presented by Optum.
I'd also like to thank the Optum team
for a great presentation.
Remember that today's session has been recorded
and will be posted along with the slide deck
and some additional information
on the value-based payment showcase event page
on the ACAP website under vendor showcases.
Thanks again.