08/28/2014

Crafting your 2020 strategy? Don’t try to predict the future


by Jason Girzadas, Principal, National Managing Director, Life Sciences & Health Care, Deloitte Consulting LLP

Professor and economist Irving Fischer once stated, “Stock prices have reached what looks like a permanently high plateau.” While on the surface this phrase might seem fairly trivial, it has actually been burnt into many history books. Why? Because it was 1929 and Professor Fischer said this just before the stock market crashed and the country plummeted into the Great Depression. 

In my travels and conversations with our life sciences and health care clients, I hear a multitude of future strategies – frequently aimed at the 2020 timeframe – from leaders who are trying to predict the future of health care. Some prominent examples of these “future visions” include:

  • The empowered consumer: Consumers will be “empowered” and carry high-deductible insurance plans; they will be personally responsible for navigating the world of health care equipped with enabling tools and information
  • The perfectly managed (and paid for) population: Our health system will be defined by large and, mostly virtually integrated, care systems/teams that are paid (accountable) for actively managing the health of a population 
  • The big data panacea: The future world will be transformed by massive databases compiled from all sources that will be curated and analyzed to unlock insights that create breakthrough innovations that will improve costs, improve quality and safety
  • The seamless and unending technological network: The future will be defined by ubiquitous mobile and social technologies that allow for the virtualization of care and massive changes (improvements) in service levels and personalization
  • The iron fist of government: Regulatory pressures by federal and state bodies will continue to build, and more control will be wrestled away from the private sector
  • The weakened fist of government: Heightened budget pressures will limit the ability of government to sustain its current roles in health care overall. As such, we will see governments increasingly backing away from health care funding and providing care
  • The personalized medicine scenario: Life sciences and med-tech organizations will lead the transformation of the industry to one where personalized medicine is a widespread reality
  • The status quo scenario: Change occurs on the fringes, costs meander and the system only makes incremental improvements with the current industry stakeholders generally holding their positions

Do you recognize these visions of the future? While on the surface these predictions may not seem too far-fetched, I often think back to Professor Fischer and am reminded that no one can accurately predict the future.

So why try to do so now?

The trap that I see many leaders and organizations fall into is that they too frequently attempt to define a single, cohesive future vision despite the proliferation of trends and industry dynamics. The predictions are often linear – based on a single world view – and can create a false goal for a company and waste the time of management teams and boards of directors.

So what’s the alternative? Executives should develop a future strategy centered on scenario planning. In a world of increasing complexity and rapid change, the goal should be to identify several plausible scenarios (alternative future worlds) and identify the strategies that are core across all of them—no matter which world view plays out and turns into reality. It’s not about debating which one future vision is best or more likely.

Scenario planning also allows management teams and boards to identify important elements of a strategy that are contingent on a particular world view or vision materializing. This separation of “core” and “contingent” elements of a strategy can bring tremendous clarity, focus and alignment, as well as improve the efficiency of leadership teams who often get bogged down in strategy development initiatives.

Instead of endless debates using precious time to settle on a single world view, leaders can take an alternative approach, defining the plausible future worlds – which can and likely will include favorable and unfavorable scenarios – like the ones mentioned above.

Once organizations define the array of plausible future visions, then they can go about the important – and demanding – work of determining where they will compete and how they will win across a multitude of these scenarios.

In case you’re wondering, things did not turn out well for Professor Fischer. Economic experts say he lost his credibility after the great crash of ’29. Lesson learned? As life sciences and health care companies look to 2020, they should consider preparing for alternative plausible futures and align around those strategies that will be critical no matter how the future plays out. It might work better than trying to define and predict the future – and ending up in the history books.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

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Jason Girzadas, Principal, National Managing Director, Life Sciences & Health Care, Deloitte Consulting LLP

Jason Girzadas uses his nearly 20 years of experience to help many of the nation’s top health care organizations navigate challenges including industry reform, implementing the latest technology, creating operating efficiencies and improving performance. 

08/25/2014

Technology’s aim: Better, longer life


by JR Reagan, Principal, Deloitte & Touche LLP

The fountain of youth, it turns out, exists not in some distant, exotic land but right here in that vast repository of information known as big data.

Medical science is growing in leaps and bounds with the advent of cloud systems able to store previously unimaginable amounts of information; applications to sort, categorize, and connect that data; advances in genetic research; and the rapid expansion of digital and mobile technology. According to physician and author Eric Topol, innovations in technology have enabled us to learn more about disease in the past several years alone than in all of the rest of history combined.

The prognosis: not just longer life, but a better life for all, even in underdeveloped parts of the world.

Cellphones and tablets; smart monitors embedded in wristbands, headbands, wearable patches, shoe inserts, and other devices; and programs to analyze the data they produce can already provide us with up-to-the-instant, continual snapshots of our own vital signs. Our mobile devices can tell us our pulse, blood pressure, and blood glucose levels at any given moment, and give us a view of our sleep patterns, enabling us to keep track of our bodies’ health. Soon, we’ll be able to screen ourselves for various types of cancers. Pregnant women will be able to conduct and view ultrasound scans of their own developing fetuses. We’ll even be able to generate our own genetic maps and interpret the results.1

Think globally, treat locally

The data those technologies generate can now be sifted and studied to teach medical researchers more than ever about disease and its underlying causes. Physicians armed with this information will diagnose treatments specific to not only a particular problem, but also to the individual patient. Already, some medicines’ labels advise different doses—or no dose at all—depending on certain genetic variations. Doctors will be able to do the same by applying big-data trends to their patients based on medical history, genetic makeup, environment, lifestyle, and other factors.

The vast sea of data being collected and stored is also strengthening preventative medicine. Does a town or region have more than its share of cancer cases? Analysts will be able to spot the trend and pinpoint the cause. What role does physical exercise—or a lack of it—play in illnesses of the mind such as Alzheimer’s, or in preventing cancer, or in the development of diabetes? Is it ever too late to build bone density? Big data could answer these questions and more, including those we’d never even thought to ask.

An exciting new age

Doctors aren’t the only ones who stand to gain from these developments. Nutritionists, physical therapists, and even personal trainers may benefit from big data’s big-picture scenarios as well as having a detailed snapshot of each client. Patients, of course, will be the greatest beneficiaries of all.

Just as we shake our heads at some medical practices of the past, future generations will certainly view modern medicine with an incredulous eye. How exciting it is to live in the here and now, on the cusp of revolutionary changes that could foster greater quality of life for us, our children, and all of humanity in the ages to come. Now, what will we do with our longer, healthier lives?

This posting originally appeared in the Essays section of Deloitte University Press.

Source: 1 Karen Weintraub, “Will we all be tweaking our own genetic code?,” BBC News, Technology, September 18, 2011, http://www.bbc.co.uk/news/technology-14919539

JR Regan, Principal, Deloitte LLP JR Regan principal, Deloitte & Touche LLP, CISSP, CISM, CRISC is US Federal Chief Innovation Officer. He also leads the HIVE (Highly Immersive Visual Environment), a state-of-the-art demonstration and development center located with the Center for Federal Innovation in Arlington, Virginia.

 

08/21/2014

An M&A roadmap to enhance the chances of success


by Homi Kapadia, Vice Chairman, U.S. Life Sciences Leader, Deloitte LLP

It’s in the news nearly every week: another major acquisition, key divesture, large joint venture or significant licensing agreement. The competitive landscape for life sciences companies seems to be changing rapidly. As I recently stated in a Forbes article, life sciences companies have many different strategies for the future: some want to be more focused on pure plays in a given segment or therapeutic area, while others want to maintain a broad portfolio of businesses to manage different business cycles. Changes in the health care ecosystem such as expiring patents, shorter product life cycles, formulary coverage challenges, changing commercial models, growth in new markets and value-based reimbursements are all driving the need for companies to reassess their strategies and business models and explore potential M&A opportunities.

At $400 billion, the global value of life sciences sector deals was eight times higher this year than it was last year at the same time. This uptick is expected to continue.1 Some of the recently publicized deals in the sector have involved U.S. firms buying foreign companies, which may allow them to relocate their headquarters overseas and benefit from lower tax rates. This approach is commonly referred to as an “inversion.”

As someone who has personally experienced a cross-ocean move (born and raised in India and then moved to the U.S. for my graduate education) followed by a west coast to east coast transition (driven by a transfer to lead one of our practices) – I can relate. Business opportunities, family, jobs, friends, lifestyle—for many, they’re all factors in the decision to make a big move. And as I think back on the moves I’ve made, I can vividly remember the bumps we experienced along the way. Between coordinating the sale and purchase of homes, enrolling children in schools in an unfamiliar area, transferring my spouse’s professional licensing requirements, moving personal property, and of course, relocating the family dog, a comprehensive roadmap could probably have saved us some time (and money).

As life sciences companies take steps to transform their business strategies through acquisitions, divestitures, or joint ventures, they could also benefit from a roadmap—a framework that allows them to prepare for the potentially bumpy road ahead while focusing on becoming more competitive in areas that will lead to business growth and sustainability. What are some key questions that should be mapped out before this monumental move?

  • Capabilities: What does the target firm offer that might enable us to strengthen our core capabilities, diversify our portfolio and expand product lines in our areas of priority?
  • Future growth: To what degree might we be able to increase our research and development (R&D) pipeline and accelerate our potential for future innovation? What potential does the target firm offer for tapping new markets and strengthening relationships with governments, providers and patients in those new markets? What product or therapeutic area synergies exist to promote further growth?
  • Reputation: How is the target firm viewed by customers and investors? To what extent might teaming with the target firm strengthen our brand recognition in markets that are important to our business? Will we expose ourselves to any risks given the target’s relationships? What potential impact could relocating our operations have on our reputation?
  • Governance: What are the change-of-control, board approval and leadership structure considerations?
  • Geographic location and physical environment: Does the target firm offer locations, facilities and resources that are well-suited for expanding our business? Is there political scrutiny where the target firm is located?
  • Culture: How easily and effectively might the organizational cultures of the target firm and our firm come together? What change management is needed to integrate the cultures?
  • Costs, financing and savings: How do the total costs of this option (due diligence, purchase price, reincorporation and integration costs, moving expenses, including those related to relocating governance and operations, etc.) compare to the costs of other potential deals? What financing alternatives are available? What tax rates, credits and deductions will apply? What potential does this option offer for increasing revenue (e.g., cross-selling the expanded portfolio and reaching new markets) and decreasing costs (e.g., operating synergies achieved by combining capabilities and resources)?
  • Selection process and acceptance: What specific negotiating steps, regulatory requirements and timelines would we need to follow? What are the chances our offer will be accepted?

Another looming question is, “What will Congress do?” Lawmakers are considering legislation to make these kinds of inversion deals less attractive, hoping to encourage firms to stay in the U.S. (see the July 25, 2014 and July 18, 2014 Tax News and Views newsletters). Proposed restrictions would require foreign shareholders to own significantly more of the new entity (50 percent or more) than they are required to now (at least 20 percent). If enacted the new rule would apply for the next two years, potentially making U.S. companies targets for large foreign acquirers. The possibility of such restrictions should be another significant consideration for firms.

More than ever, gaining a competitive edge depends on enhancing – not necessarily maximizing – capabilities. Enhanced capabilities require focusing on areas in which you excel, improving in areas that are important to achieving your goals and letting go of elements that might be holding you back.

For life sciences companies specifically, enhanced capabilities might mean getting more products into their pipelines, becoming more innovative, reaching new markets and expanding portfolios in ways that meet the needs of consumers who are becoming more value-conscious. If properly prepared ahead of time, through roadmaps and frameworks, and if done for the right strategic reasons, partnering or merging with another organization may be an effective option for business growth and sustainability.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

Homi

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Source: 1 Beth Kutscher, “Tax reform fears driving Big Pharma mergers.” Modern Healthcare, July 19, 2014

Homi Kapadia, Vice Chairman, U.S. Life Sciences Leader, Deloitte LLPHomi Kapadia is the vice chairman, Deloitte LLP, and leader of its national life sciences industry practice. A principal with Deloitte Consulting LLP, Kapadia has more than 28 years of experience at Deloitte. He has an extensive client-service background advising market-leading organizations in the areas of strategy, operations, enterprise applications and supply chain management, among others

08/18/2014

Benefits and barriers: Thoughts on the use of social media in health care


RespondtoDeloitteHealth

Social media has changed the way health care organizations connect with consumers and other stakeholders. In a recent Deloitte Health Sciences Dbriefs webcast, we asked approximately 1,500 professionals for their views and opinions on the use of social media in health care.

 Below is a snapshot of their responses. For more information on this webcast or to register for upcoming webcasts, please visit: www.deloitte.com/us/dbriefs/healthsciences

DeloitteCenterforHealthSolutions_social media_dbriefs

 

 

08/14/2014

Private health insurance exchanges: Bright long-term prospects clouded by continuing uncertainty


by Greg Scott, Vice Chairman and U.S. Health Plans Leader, Deloitte Consulting LLP

Any reasonable person (as I hope I am) who lives in Pittsburgh (as I do) knows better than to let cloudy conditions today obscure the promise of sunny days ahead. So it is with Private Health Insurance Exchanges (PHIX). Their bright future should not be clouded by the high uncertainty and slow adoption we see in today’s marketplace.

My optimistic forecast is drawn from many lively discussions with Deloitte Consulting LLP’s Retail & Exchange Strategies leader, Paul Lambdin. It is based on a simple prognostication of the incentive-driven behavior of key stakeholders over the next several years.

Employer choices will shape the direction, momentum and success of the PHIX marketplace. Employer groups will increasingly find that PHIX models of various stripes are viable vehicles for achieving a range of corporate objectives. These objectives include improved employee engagement; new product offerings; increased competition for health products and services; reduced administrative hassle; greater use of sophisticated technology; a shift to defined-contribution plans; and most importantly, lower and more predictable costs. Some employers will see PHIX as an option to exit the health insurance sponsorship business altogether over the longer term.

PHIX vendors will respond to marketplace needs and opportunities with more compelling value propositions and technical solutions. Today, there is no “killer app” in the PHIX marketplace. As in many early-stage markets, we see great diversity of strategies, sponsors, investors, entrants, technology platforms, products, pricing and more. Over time, a smaller number of more successful players will capture market share and competitive positioning. For these vendors, the most significant competition over the longer term will likely be the public exchanges.

Health plans will be motivated to play both offense and defense in the PHIX marketplace. Many leading health plans are in the competitive mix today, with a variety of proprietary, partnership and third-party plays and participation. For most health plans, defining and pursuing the right PHIX strategy is challenging and involves complex segmentation and forecasting. From one angle PHIX market developments provide health plans with the opportunity to capture new market share. From another angle they represent yet another threat of disruption and disintermediation. PHIX will likely drive substantial market disruption. Most importantly, PHIX market developments will introduce, incent and empower new entrants. In some cases these new entrants are likely to act as replacements for today’s incumbents. Provider-driven alternatives, such as accountable care organizations (ACOs), are examples of full replacement options that are likely to be enabled by PHIXs. Less dramatically but quite importantly, PHIX vendors can assume certain health benefits administrative functions that are today handled by health plans, often as part of administrative services only contracts with large employers. Health plans are therefore motivated to define their PHIX strategies in order to defend their role in the health insurance value chain.

Federal and state governments will also play influential roles in shaping the PHIX future. The most consequential move that government might make would be federal repeal of the corporate tax deduction for employee health benefit costs. This move could have the greatest chilling effect on the PHIX marketplace, but requires a degree of policy, political and legislative alignment that seems highly unlikely in the foreseeable future. Less dramatically and more likely, federal and state governments could take a number of other legislative and/or regulatory measures that could complicate the development, operations and ultimately penetration of PHIXs. However, the most likely influence of government will be in the realm of public insurance exchange administration. If and when government-run exchanges reach critical mass of enrollment, operational excellence and popular acceptance, public exchanges will crowd out some significant portion of the private exchange business.

The PHIX market will continue to evolve at a measured pace as the many stakeholders work through their options to maximize value in a complex and dynamic marketplace. Certainly, the pace of PHIX activity has hastened significantly in the past year. The comparatively slow evolution of the PHIX marketplace should not cloud our vision of how impactful PHIXs will likely be across the U.S. health care system. Private health insurance exchanges may well be the most important private sector-led health insurance market development of the decade.

Read the entire Health Care Current here and subscribe at: www.deloitte.com/centerforhealthsolutions/subscribe.

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Greg Scott, National Sector Leader, Health Plans, Deloitte Consulting LLPGreg Scott was recently named national sector leader of Deloitte’s Health Plans Practice. He not only has an extensive background in professional services but also as a corporate executive and policy leader given prior positions at Anthem and the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services).

08/11/2014

Preparing for FDA social media guideline implementation


The FDA has released new guidance regarding utilization of social media for advertising and promotion of pharmaceuticals and medical devices. This long-awaited guidance is the start of numerous specific guidance documents addressing defined issues in social media.

As companies search for new and effective ways to reach health care professionals through non-personal channels, the emergence of short-form media options is increasingly becoming a meaningful marketing and information dissemination platform. However, the legal, regulatory and safety professionals need to begin conversations with the commercial and marketing teams to take full advantage of the new communication channels, while remaining compliant. Effective processes and controls will need to be put into place to enable companies to leverage these platforms; and, in order to use these platforms, companies will need to have modified review and approval pathways to facilitate expedited approvals to keep pace with the speed of social media posting.

From the guidance it appears that the FDA's biggest concern is that some social media platforms “may not enable meaningful presentations of both benefit and risk”, especially when products have complex indications or extensive serious risks. We believe social media promotion will not be a suitable promotion platform for most drugs, but pathways to utilize these mechanisms for low-risk products may develop. In deciding whether to take advantage of social media, companies need to consider:

  • Risk prioritization: Identification of which drugs may be suitable for social media promotion.
  • Processes: Processes should be efficient enough for companies to realistically leverage social media platforms where information moves much faster than traditional communication pathways.
  • Approvals: A strong link between creative and marketing agencies, brand, legal, and regulatory review teams will need to be developed and tightly controlled and sufficient review and approval pathways should exist.
  • Governance: With constantly evolving technology, a governance structure should be set up to facilitate decision-making, provide guidance and oversight.
  • Monitoring: Monitoring should be set up to provide oversight of compliance with social media and other regulations, e.g., adverse event reporting and advertising.

Some steps that companies can take to facilitate compliance with these guidance documents, as well as prepare for potential future guidance documents, should include:

  • Inventory of company-owned social media sites: Companies should work to develop an inventory of their social media sites to enable oversight of the sites, platforms, accounts, and pages that they own
  • Controls for new company-owned social media: Development of controls and approvals to enable oversight new social media accounts or pages
  • Processes for approval of content: Development or modify processes for approval for content being posted to social media sites that are owned by the company to allow for efficient and effective legal and regulatory review of information
  • Auditing and monitoring capabilities: Auditing and monitoring capabilities to ascertain if all social media guidance and regulations are being followed should be implemented and auditors should be trained to deal with these new media outlets

These steps not only directly address the recent guidance documents, but also help prepare companies for future guidance and regulation around social media. They also will allow for proactive monitoring of social media platforms for other risks, such as Adverse Events, reputational risks, and monitoring of potential off-label promotion situations. Therefore, it is not too early to get prepared to capitalize on these new channels for non-personnel communications with customers.

Comments on the draft guidance are being solicited through September 16.

This post original appeared on the Deloitte Center for Regulatory Strategies blog which provides  insights, experiences and perspectives on the latest regulatory developments and trends in the financial services, energy and resources, life sciences and health care industries.

 

For more on social media in health care, tune in to the Health Sciences Dbriefs webcast "Navigating the Rapidly Evolving Social Media Landscape in Health Care" on Tuesday, August 12, at 1:00 p.m. ET.

 

Seth Whitelaw is a director in Deloitte & Touche LLP’s Governance, Regulatory and Risk Strategies practice. He has more than 20 years of experience in the life sciences and health care industries in the areas of food & drug law, as well as corporate governance and compliance for medical devices, pharmaceutical sales and marketing, and pharmaceutical research and development.

Nicole Schumacher-Crow is a manager with Deloitte & Touche LLP.

08/07/2014

A policy wonk’s delight: The Social Security and Medicare Trustees report


by Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP

Over the years I’ve had the privilege of working in health care policy and research in a variety of areas, but in my heart, I am a Medicare payment policy person. Each year a number of reports come out on a more or less regular basis – the president’s budget, the Congressional Budget Office’s (CBO) long-term budget forecast and others. These reports are a policy wonk’s delight and help set the stage for new opportunities and constraints in future payment policy changes.

Most recently the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, which includes the heads of four government agencies and two public trustees, released their annual report. Each year this report educates Congress and the public about the fiscal health of the Medicare and Social Security programs. True to form, this year’s report contains a few tidbits that ought to keep my fellow policy wonks talking for at least a couple of weeks.

Medicare spending: slow and steady – for now, anyway
This year both the CBO and the Trustees found that Medicare spending is slowing. There were also two additional bits of good news: Part B premiums are not going up, and the program has added some years to its fiscal future. In my opinion, the phenomenon of slow growth in Medicare spending has been interesting. Some policy experts expected the economy to slow spending growth in the private insurance marketplace. But, what they did not expect to see was the lower spending in Medicare because for years the benefit designs and prevalence of secondary insurance have stayed the same and many people enrolled in Medicare do not work so they are less affected by high rates of unemployment than working people. However, budget estimates expected that the Affordable Care Act (ACA) would help the slowing as the law contains a number of provisions designed to reduce Medicare spending (e.g., reductions in payment to Medicare Advantage plans, hospitals and other health care providers).

One impact of the longer period of fiscal stability for Medicare is that program-wide payment cuts triggered by high spending will be further delayed. The ACA calls for establishing a commission called the Independent Payment Advisory Board (IPAB) that would oversee a process of developing recommendations to Congress to cut Medicare spending in response to high spending in the program. The IPAB has been one of the more divisive policies in the legislative history of the ACA and it has not even been established – much less active – because of the slowdown in Medicare spending.

Future outlook: storm clouds on the horizon
The “good news” from the Trustees about Medicare also came with a caveat – things may be looking up for now, but the long-term trend is worrisome. As a society we should not be complacent. Public Trustee Robert Reichauer said during a briefing last week that in the long term, spending is expected to increase at rates higher than gross domestic product (GDP), and stakeholders should be considering action soon to change that trajectory. The Medicare Payment Advisory Commission has said for years that it would probably be easier – and less disruptive to the health care system – to try to change that trajectory now rather than waiting to take action until the problem gets even bigger down the road.

Several options are evergreen for long-term structural changes in Medicare. These include moving to premium support, changing benefits and coverage (including that of supplemental coverage) to make beneficiaries more cost conscious and raising the eligibility age. Each of these has pros and cons and different levels of impact depending on their design and when they are implemented.

Updated methodology: more treats for the policy wonks
An important change to the methodology in the report is how the Trustees treat physician payment. Until this year, the report’s actuaries have followed the CBO’s precedent in estimating spending given current law. But, after the 17th time that Congress voted to patch the sustainable growth rate, it seems the actuaries have shifted their models to assume that small increases, rather than huge cuts, will be made to payments. As a result, these predictions could lead to more stable estimates for Part B premiums and Medicare Advantage payment rates, both of which flow from the actuaries’ overall spending estimates. If the CBO were to follow this precedent, it could improve the chances of making changes to physician payment policy, which were derailed this year. Because the CBO uses current law as its baseline for estimates, the cost of reversing the physician payment update policy has been estimated to be $150-$200 billion. If the baseline were changed to a forecast based on what Congress is likely to do over time, the cost to reverse this policy could be much more modest or even budget neutral.

The Trustees Report also contains actuarial forecasts for the Medicare Advantage (MA) program and projects that MA beneficiaries will grow to 30 percent in 2018. These estimates are more optimistic than earlier ones when policymakers were concerned that the ACA’s MA payment cuts would slow enrollment growth. The CMS demonstration tying MA payments to quality (at levels that exceeded those called for in the ACA) has helped to offset the cuts.

Ultimately it will be really interesting to see whether Medicare spending continues to slow down, and if so, what we can attribute the slow growth to – successful value-based care initiatives or a sea change in perception about the market? A slowdown in the introduction and dispersion of new technology? More people in MA with changes in benefit and network design and care management.

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Sarah Thomas, Director of Research, Deloitte Center for Health Solutions, Deloitte LLPSarah Thomas is a director with Deloitte Services LP and the director of research for Deloitte's Center for Health Solutions. Sarah has experience in public policy, ranging from reimbursement to addressing issues such as quality in Medicare, Medicaid and the private health insurance market, including health insurance exchanges and marketplaces.She has more than 13 years of government experience.

08/05/2014

Findings from a survey of my son and health insurance: Meet the “intransigents”


by Sheryl Coughlin, Research Lead, Deloitte Services LP

The Deloitte Center for Health Solutions has recently spent time researching what young adults know and think about health insurance through our survey of young adults age 19-34*. The results were recently published in the report “Young adults and health insurance: Not invincible—but perhaps convincible." While working on this study, I decided to road test a few ideas on my unsuspecting in-house young adult and oldest of our three boys.

Opening with “What do you think about health insurance?” wasn’t a good start. A pained expression, slightly raised brow, and a quick glance up from the laptop were all I got. “Okay, well…what about a monthly premium?” I then tried. Much better. He quickly converted that to an annual amount which he decided to be a sky-high figure that he couldn’t afford. And to be frank, he had no idea what it would buy. He thought that health insurance sounded like a good idea, but it was clear that he had no real understanding of what it was, let alone how to get or pay for it.

[Note to self: family health literacy campaign = CLEARLY OVERDUE]

As a parent, this is a timely reminder. Annual physicals and school vaccinations mean that all three boys have been in regular contact with the health care system over the years. Perhaps a "failure to launch" on my part, but leaving the family cocoon and on the brink of adulthood, my oldest should have the skills and knowledge to begin to be responsible for managing his own health. And yet, like many of his peers, has a long way to go.

My son represents a subset of the young adult population that emerged in our survey that covers young adults at many different stages of their lives and with differing needs.

For many of the young adults, what matters most to them about health insurance is overall cost and perceived value for money. Those who purchased insurance say they did so to avoid paying medical bills and for the peace of mind it gives them. Those who decided to forgo health insurance say they did so for two reasons: they believe that they cannot afford insurance and they do not see its value.

ReasonsforRemainingUninsured

Those who remain uninsured are an interesting group, and deeper examination shows two distinct sub-groups–- “the interested” and “the intransigents.” “The interested” have clearly considered obtaining health insurance. They visited HealthCare.gov or had done their homework, checked out eligibility for programs such as Medicaid, and sought information from family and friends. But, at the end of the day, many concluded they just couldn’t afford health insurance. Interestingly, this group considers themselves to be "less healthy" than their peers.

In contrast, “the intransigents” didn’t visit any health insurance websites. Affordability is also a key barrier for this group. But in addition, “the intransigents”’ are distinguished by many who are disinterested or disinclined to buy insurance and unconvinced about value for money. And, a small number are basically opposed to insurance and not interested under any circumstances. These look to me like the younger members of the cost-conscious and disengaged "Casual and Cautious" consumer segment – identified in Deloitte’s ongoing consumer segmentation studies.

 

CasualandCautious

The challenge for those charged with policy and advocacy, as well as for health care providers and health plans, is how to engage young adults like my oldest son and his “intransigent” peers. Here are some things to consider:

  • They may be young and healthy now, but as they age they will likely require health care just as much as the rest of the population. New low-cost insurance products that include smaller provider networks and direct distribution channels that target the unique coverage needs and interests of this group could go a long way in delivering a product that is affordable. New entrants to the market could disrupt the traditional channels.
  • Friends and family are important sources of information and guidance. Communications, information, and resources targeting these networks may well be as impactful as directly targeting the young adults. Also to keep in mind, mobile-friendly capabilities should be considered as mobile technology is widely used by young adults as a main source of Internet access.
  • Navigating the health care system and health insurance are new experiences for many young adults. Key steps may include developing road-maps and peer-supports to educate young adults and their supporters about health insurance, personal health management and about the health care system – for example, how to find a primary care doctor or how free preventive care works.
  • Peers are influential. Vlogging (video blogging) is increasing in popularity and early-movers are leveraging these to promote products and services. Engaging influential vloggers with a genuine interest in health and wellness may present opportunities for spreading the message about the why's and how’s of health insurance, framed through the vlogger’s thoughts and opinions on health, wellness, beauty, and fitness.
  • Research has found that new health insurance enrollees tend to "go with the crowd" learning from others who have more information and experience. Some suggest that more people may take up insurance if having it was the norm rather than the exception. For example, strategies that reinforce positive social attitudes about having health insurance may encourage people to “join the team” and sign up for coverage.1

At the end of the day, I hope that there will be high-quality, accessible information readily available to those like my oldest son who are just entering this new world of insurance, as well as opportunities for some of the intransigents to turn into "smart shoppers" and get good, affordable coverage.

 

Sheryl CoughlinSheryl Coughlin is a research lead at the Deloitte Center for Health Solutions, where she leads objective and data-driven research and thought-leadership. Sheryl has deep expertise in health care research, organizational strategy, and performance management in private and public sector health care organizations.

 

*Deloitte conducted an online survey of 500 randomly selected young adults age 19-34, between April 9, 2014 and April 23, 2014. Respondents were those who were uninsured as of September 30, 2013, and either remained uninsured or had subsequently become insured through various avenues.

 1Katherine Baicker, William J Congdon, and Sendhil Mullainathan. “Health Insurance Coverage and Take-Up: Lessons from Behavioral Economics.” The Millbank Quarterly 90, no. 1 (2012): 107-34.

 

07/31/2014

Remember those New Year’s resolutions? It’s time for a checkup


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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Sources:
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, Vice Chairman, U.S. Life Sciences & Health Care LeaderBill 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.

07/29/2014

Thoughts on the future of digital health


RespondtoDeloitteHealth

The potential of digital health to transform the health care industry is profound, but as yet, unrealized. In a recent Health Sciences Dbriefs webcast, we asked approximately 1,400 professionals for their views and opinions on the future of digital health.

Below is a snapshot of their responses. For more information on this webcast or to register for upcoming webcasts, please visit: www.deloitte.com/us/dbriefs/healthsciences

For more on the future of digital health, check out The four dimensions of mHealth: People, places, payment, and purpose

 

CenterforHealthSolutions_Dbriefs_Results_DigitalHealth

 

 

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