Is Disintermediation In Your Future? It Could Well Be

Feb. 25, 2021
As the senior leaders of four innovative patient care organizations agreed in a January 27 panel discussion, the emerging cost cliff facing the U.S. healthcare system is going to force providers to rethink their strategies

It was extremely gratifying to be able to moderate our panel “What’s Next in the Next 24 Months in Healthcare Delivery?” during our January 27 virtual conference on “The New Landscape of Care Delivery in 2021 and Beyond.” For one thing, I was joined on the panel by four nationally known industry leaders: Stephen Klasko, M.D., president and CEO of Thomas Jefferson University and the 14-hospital Jefferson Health, based in Philadelphia; Jeffrey Le Benger, M.D., CEO of the Berkeley Heights, N.J.-based Summit Medical Group/CityMD, with 900-plus practitioners and 80 locations across northern New Jersey and the New York City metropolitan area; Nick Lopocaro, CEO of the Huntington Beach, Calif.-based Landmark Health; and Adam Solomon, M.D., chief medical officer of the Long Beach, Calif.-based MemorialCare Medical Foundation. Individually and collectively, all four of these leaders are highly respected both regionally and nationally, for their organizations’ pioneering work in innovating around healthcare delivery.

What’s more, the discussion was highly stimulating, with all the panelists stimulating each other to share extremely thought-provoking comments and insights around where healthcare payment and delivery are going right now. And they should know: all are leading organizations that are showing us where the future is headed in U.S. healthcare.

And among the key questions we parsed, essentially boils down to this: which one or more of the key stakeholder groups in U.S. healthcare—employer-purchasers, federal and state and private payers, hospitals and health systems, medical groups, and consumers—will actually tip us into the future of U.S. healthcare? And how?

Here’s how I put it, about halfway through our discussion: “I’m going to go back to the Medicare actuaries, who maybe are like the messengers of the fishwives of Paris calling for the King’s and Queen’s heads. And I’ve been talking to people on the policy side at some of the associations, as to what they’re seeing happening. And as you all know, basically, things are getting more expensive; and one of the top advocacy people at an association said to me, there are really only two options, when it comes down to it: severe provider payment cuts, and really pushing on value. So that individual said to me, I think there will be even more emphasis on value in the new administration and Congress, and that they’ll fix some of the challenges in the MSSP [Medicare Shared Savings Program], and move forward. And I know a lot of you are involved in MSSP and in private ACOs, and there’s a lot of discussion around benchmarks, etc. But in Washington, there’s going to be a very broad discussion in Washington on where to go. Dr. LeBenger, with your organization’s big success in MSSP, what’s your perspective on how value-based contracting might move forward, based on what people are learning in pioneering organizations like yours?”

And Dr. LeBenger responded thus: “I do think they’re going to strengthen MA [Medicare Advantage]; one of the issues is that in MA, you can control the network. And in direct contracting, even though they can attribute to you, it’s a little more difficult. And we were in NextGen even before that. And you know, there’s consolidation in the marketplace, and then there’s integration in the marketplace. And when you have a really powerful, integrated model, where there’s one chart, and you can manage the patient really well and follow that patient around gaps in care and transitions of care, you really can save a lot more. So the government—they’re going to direct contracting and would like to move to a more capitated process, to control things. On the private side, the claims adjudication is such that it’s going to be difficult to move towards a capitated product, though profession cap exists in certain markets in the country. But in the New York market, you have a lot of ASO or self-insured business, and you can’t really go onto cap on that, but you can still manage the patient well in shared savings-based contracts. Per what Nick and others were saying, you really have to manage the 10 percent of sickest patients while monitoring rising-risk patients. On the private side, I don’t think their systems are up to it. We did a pilot study over seven years ago with Horizon Blue Cross Blue Shield of New Jersey, and now we’re moving to a fully capitated program in their fully insured business; but in the ASO business, it’s still going to be a shared-savings product. But we’re moving to that in the near future.”

In other words, there are no quick, easy paths into a future in which all the financial incentives are easily aligned for the purchasers, payers, and providers of healthcare. Dr. Solomon, whose organization has been active in value-based contracting for a very long time, noted that “We’ve been involved in managed care for 35, 40 years. And just maybe a decade ago, 90 percent of our business was full-risk cap; we were at risk for managing the population for both cost and quality. And because healthcare costs were continuing to escalate in general, employers said, we want to shift the burden of costs onto employees, and started to go into these PPOs, and little by little, they increased the deductibles. And there’s this assumption that employees will manage their own care, because they have financial risk. And there’s a conflict that occurs between choice and quality. And the assumption for the employer, and Medicare shares the same fallacy—that people should go and see whoever they want, and can find the best doctor.”

The reality, Solomon noted, is that the healthcare system lacks the transparency and tools to help guide consumers to make the most cost-effective choices, from the standpoint of their employer-purchasers. As a result, he noted, employer-purchasers have been pushing their employees into high-deductible health plans that have actually discouraged their employees from seeking the upstream care that would better control costs overall. As a result, he said, “We’re seeing a shift now to at-risk platforms where we collaborate with the employer, where if we’re able to improve outcomes and save costs, both we and the employers save. And conversely, if the costs are higher, the health system has to chip in some dollars back, so the employers aren’t on the hook.”

Furthermore, as Dr. Klaslo noted when I asked about it, “We’ve heard for 15 years that employers will send their employees to Hopkins or Mayo or Cleveland Clinic; but the direct-to-employer model just hasn’t really panned out as might have been expected. And apart of the reason has been immense lobbying.” In fact, Solomon noted that “The reason why the employer can afford to pay for the patient to fly, with their family, to get care at Mayo Clinic, get put up in a hotel and get evaluated there, is because half of those patients who were told locally, once they were evaluated, they were told, you don’t need spine surgery, you just need physical therapy. That’s where the savings come from, it’s from averting over-utilization. And as someone who manages the care of a quarter of a million people locally, I see which are the surgeons in my community whom I know, if you see them, you’ll get multi-level spine surgery, and if you see that one, you’ll get conservative care, and monitoring, with surgery as a last result, and you’ll get a good outcome.”

So inevitably, these tensions between and among the various stakeholder groups in U.S. healthcare will continue, but the real danger remains for non-innovative providers—hospitals, medical groups, health systems—to become disintermediated, if and when they fail to keep up with either their existing local-market competitors or the disruptor entities moving into healthcare, such as Aetna/CVS, Walgreens, and other entities that might be able to bring greater convenience to healthcare consumers while maintaining efficient cost structures. Who will move first? Consumers? Payers? Purchasers? Providers? What will have to happen, on a certain level, will be for major, clear shifts to take place in local markets across the country, shifts that push all the stakeholders forward in a particular direction.

Meanwhile, could organizations like Landmark Health begin to disintermediate traditional provider organizations? To some extent, it’s possible. At the very least, they could siphon off enough patient care revenue to push traditional hospitals and medical groups into ever-more-slender revenue margins, leaving them incapable of innovating as they need to, to keep up with the emerging trends in healthcare.

We already know that a large number of organizations are coming into the healthcare system in order to manage specific types of chronic diseases, or multiple chronic diseases at once, as well as specific situations. The question is how quickly and significantly all of these niche provider organizations might begin to disintermediate the traditional large bricks-and-mortar hospitals, medical groups, and health systems, leading hospitals to become extended ICUs serving the most acute and expensive patients, even as more and more elective surgeries are performed in outpatient surgery centers.

And of course, there’s the wild card of the emerging hospital-at-home programs, which are very exciting, as they’re beginning to care for significant numbers of patients in their homes, not only reducing their chances of infection during this ongoing pandemic, but also keeping patients in the most healing environment possible, if the right technology and care management processes are in place—the home.

Meanwhile, the pace of hospitals and medical groups moving into risk-based contracting remains another open question. But what’s clear is that, as I noted in our session, leaders in Congress and in the Biden administration are continuing to face an accelerating cost cliff, with the strong possibility that the overall U.S. healthcare system’s annual expenditures will top $6 trillion within several years (the COVID-19 pandemic might have temporarily slowed spending, but that slight dip is inevitably expected to go back to normal again soon). As advocacy leaders for the major healthcare associations have told me, ultimately, Congress has only two options in the face of rapidly accelerating healthcare costs: massive and painful provider reimbursement cuts, or a strong push into value-based payment, including, yes, two-sided risk-based contracting.

Obviously, in a national healthcare system as dizzyingly complex as ours, it can be difficult to get all the stakeholders to “row in the same direction” at the same time. But as we head ever closer to that cost cliff, the policy imperatives will inevitably end up pushing on the contours of the care delivery system, and therefore, on providers.

Meanwhile, my money is on the innovator organizations in U.S. healthcare—including those represented by the leaders who participated in my January 27 panel. Whatever specifics emerge in the federal healthcare policy landscape, those organizations’ leaders will be on top of things—and will help lead the way towards the future.

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