by Bill Copeland, Vice Chairman, U.S. Life Sciences & Health Care Leader, Deloitte LLP
Earlier this year, we discussed New Year’s resolutions for each of the health care industry sectors—health plans, health care providers and life sciences. During that same month I set my own, and they were generally similar to the resolutions I set every year—eat better, drive slower and read at least two books my 13-year-old likes so that we can talk about them together.
But, just as many of us do around this time of the year, I’ve been reflecting on which of my resolutions I have been able to keep versus those that might need some additional focus. How did I do? As of my mid-year checkup, I’ve eaten a lot of broccoli and squash, but I’m still speeding and I’ve yet to read The Fault in Our Stars or The Giver in their entirety.
New Year’s resolutions are hard to keep. Especially when you consider that only about 8 percent of people ever fully stick to them.1 As we look across the health care system, it’s apparent that each of the sectors has made some progress on their respective resolutions for the year—but there is still work to be done:
Have health plans made new connections?
2014 was a pivotal year for health plans, as the health insurance marketplaces ramped up and plans worked with the U.S. Department of Health and Human Services (HHS) to enroll millions of Americans. As a result, we could have lower uninsured rates in the country. However, health plans know little more than they did in January—though the numbers from open enrollment are largely final, and they know the younger, healthier enrollees waited until the last month, the risk profiles of the enrollees are still somewhat unclear, and premium rates for 2015 have yet to be settled in many states. Health plans are still trying to recover from the higher call volumes to customer service, billing and collection issues and knowledge gaps in their new subscribers’ understanding of what they purchased.
New arrangements and collaborations abound between health plans and providers – for example one health plan’s patient-centered medical home initiative was able to lower costs to $130 million less than projected while increasing quality of care. Joint effort has been key: health plans have relied on the collaborative spirit of health care providers to produce the positive results from these programs. Since January 70 accountable care organizations (ACO) have been announced.2 While the first step can be the most important, there is still a need to invest in new capabilities required to make the transition. And of course the need for a financial imperative that rewards the innovators.
Increased out-of-pocket spending is catching up with consumers, and only one in five of the insured population feels well prepared for their future health care costs.3 While our Survey of Young Adults and Health Insurance revealed that this age group understands that insurance helps them avoid unwanted costs and gives them peace of mind, plans could do a better job of communicating value and helping them navigate the insurance world. This could become even more critical if last week’s court cases head to the U.S. Supreme Court and the argument against the subsidies is upheld.
Have health care providers tried anything new?
With new patients coming in their doors almost every day, value-based care arrangements have begun to take the center stage. The first national survey of private and public ACOs found that more than 50 percent of the ACO respondents identified themselves as physician-led organizations. These ACOs were found to be more capable of managing care in the outpatient setting.4 Furthermore, while adoption has been somewhat slow, the number of providers and hospitals that have attested to Stage 2 of Meaningful Use continues to grow.
However, some providers still have work to do in the area of quality: This fall the Centers for Medicare and Medicaid Services (CMS) will finalize the list of hospitals that will receive payment reductions due to their poor performance. As of April 760 hospitals were on the list, and the hospitals in the lowest 25 percentiles could see a 1 percent reduction in their Medicare payments next year. Also, providers have faced increased scrutiny around cost after the release of several datasets over the last six months. These datasets have shed new light on spending patterns. The second half of 2014 will likely see continued pressure for trying out new business models that allow provider groups to take on more risk while managing costs.
Have life sciences companies learned any new languages?
In May the Chairman of the House Energy and Commerce Committee Fred Upton and Representative Diana DeGette announced their campaign, A Path to 21st Century Cures.”5 Since then, stakeholders from across the life sciences community have stepped in to offer insights around clinical trials, incorporating the patient perspective, and digital health care. In a response letter to the committee, the Pharmaceutical Research and Manufacturers of America (PhRMA) echoed the sector’s focus on enhancing clinical outcomes and patient-reported outcomes for new models based on value.6 In addition, recent action in mergers and acquisitions in the pharmaceutical sector could allow companies to refine the focus of their business as they scale up within particular areas of specialization and exit others. Through such deals, companies could have the opportunity to be more involved in population health and disease management initiatives. As providers begin to be held to stricter quality measures (especially as a condition of payment), these capabilities could become critical areas of collaboration for life sciences companies.
Generally, the rate of health care spending growth has been decreasing—Medicare spending alone is expected to be $1,000 lower per person than was projected in 2010.7 But, efforts can’t stop there. As with all health care, patient care should be at the center of business strategies. Patients are ready to partner: seven in 10 consumers express willingness to take a health status test, and six in 10 would take a test to determine best personalized treatment.8 As the industry strengthens its emphasis on value, the clinical, safety and economic impact of products will likely continue to be in focus.
Winston Churchill once reportedly said, “To improve is to change; to be perfect is to change often.” I’m sure few of us believe that absolute perfection is possible. But, improving starts with setting realistic goals (i.e., resolutions) and revisiting them early and often. Now, please excuse me while I read the last few chapters about Hazel and Augustus in the sad story about two teenagers who are all too familiar with our health care system.
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1Auld Lang Syne: Success predictors, change processes and self-reported outcomes of New Year's resolvers and nonresolvers, by John C. Norcross, Marci S. Mrykalo, Matthew D. Blagys , University of Scranton. Journal of Clinical Psychology, Volume 58, Issue 4 (2002).
2Becker’s Hospital Review, “70 Accountable Care Agreements Announced So Far This Year,” July 9, 2014
3Deloitte Center for Health Solutions, “The quest for value in health care: A place for consumers,” 2014
4Colla, Carrie H., Lewis, Valerie A., Shortell, Stephen M., and Fisher, Elliott S. Health Affairs, “First National Survey of ACOs Finds that Physicians are Playing Strong Leadership and Ownership Roles,” June, 2014
5House Energy & Commerce Committee, A path to 21st Century Cures
6PhRMA, “Enhancing the Ability of Biopharmaceutical Companies to Discover, Develop, and Deliver 21st Century Cures,” June 1, 2014 Letter to the House Energy and Commerce Committee
7Kaiser Family Foundation, “The Mystery of the Missing $1,000 Per Person: Can Medicare’s Spending Slowdown Continue?” July 8, 2014
8Deloitte Center for Health Solutions, “Survey of U.S. Health Care Consumers,” 2014
Bill Copeland is the U.S. Life Sciences and Health Care Leader for Deloitte LLP and the sector leader of the practice's health plans group. Bill helps companies and governments better address the direct challenges and extended ramifications caused by new developments with ICD-10, electronic health records, health insurance exchanges and accountable care organizations.