by Sam Wollner, Market Lead, Lumeris
Faced with an overwhelming influx of COVID-19 patients to their hospitals, or bracing for it, health systems around the country are forced to make extremely difficult clinical and financial decisions. ICUs and emergency departments in some areas are near or beyond capacity. Elective and non-urgent procedures are halted, and staff are being redeployed to fight the pandemic or furloughed until more normal operations resume.
Stories from the frontline can be heartbreaking, but also inspiring. Emergency medicine physicians in New York, Detroit, and Italy have pioneered new techniques to share ventilators and save lives. LifeBridge Health in Baltimore and Under Armour partnered to turn a medical clinic into a PPE production facility. Munson Healthcare in Northern Michigan has partnered with a local distillery to boost supplies of hand sanitizers. Stories of innovation and new partnerships should give us all hope that we will emerge from this crisis stronger and more resilient.
As US healthcare rises to the COVID-19 challenge, this spirit of collaboration to support healthcare workers and deliver excellent care for patients should not be lost. Instead, it should be reaffirmed and extended.
Support from Payers: Will They Continue to Step Up?
In the near term, as health systems deploy resources to fight this virus in the trenches, or brace for its next attack, payers can help by providing the resources to sustain the fight. Health systems and payers need to work collaboratively to share data, develop analytics, and identify patients who need targeted interventions (e.g., patients at highest risk for COVID-19 complications). The largest healthcare payer in the country, the federal government, has taken the initial leadership in doing this. The CARES Act and follow-on stimulus packages provide $175B in relief funds for Medicare and Medicaid providers to help address unreimbursed expenses or lost revenue incurred in the prevention, preparation, and response to COVID-19. Hospitals will receive a 20% increase in their Medicare payments for treatment of a patient with COVID-19, and the Medicare hospital Accelerated Payment Program is expanded during the emergency period so that it applies to more types of hospitals and provides coverage for as long as six months. HHS can increase the amount of payment that would otherwise be made up to 100%, or 125% for critical access hospitals. Qualifying hospitals would not be required to pay down resultant loans for four months and would have at least 12 months to complete repayment without interest.
Some commercial health plans have followed suit on some of the measures that the federal government has provided. CVS Health / Aetna announced that they would waive cost-sharing for COVID-19 treatment. Shortly thereafter, and following political pressure, Cigna, Humana, United, and Anthem all followed suit. Blue Cross of Idaho announced advance payments to independent physicians who need financial support during the COVID-19 pandemic. United Healthcare is offering advanced payments and loans as well. Blue Shield of California, in addition to advanced payments and loans, is offering to expand value-based arrangements to transition providers to a monthly base revenue stream to help offset some of the volume-based revenue declines.
These are examples of some right first steps, but they are not nearly enough to repair the damage and position US healthcare for a more resilient future. Uncertainty remains about how payers can best support health systems through and on the other side of the crisis. Only a month after the CARES Act passed, CMS has already begun reevaluating the expanded advanced payment program and suspended parts of it in the meantime.
A Post-Pandemic World: How Health Systems Should Prepare
As health system executives assess the damage and plot the path to recovery from the COVID-19 pandemic, there are as series of questions worth considering:
- What are the operational, cultural, and financial costs that COVID-19 has incurred on the health system and its providers?
- How can the system gain the appropriate relief funds through the CARES Act and any follow-on legislation?
- Should the system accept accelerated advanced payments to help cover lost or postponed revenue from non-urgent/elective producers?
- How can the system partner with commercial payers to incorporate them into the organization’s long-term recovery strategy?
- How does the system develop a comprehensive payer strategy to minimize volume-driven revenue volatility into the future?
After emerging from the initial crisis, health systems will need to make strategic decisions on how to stabilize and solidify their business model.
Some health systems may pursue a “back-to-basics” strategy: double down on the traditional fee-for-service, volume-based payment models. This is an ostensibly logical decision, especially in the short-term, as volume could spike if patients seek care they may have put off during the height of the pandemic. This strategy, however, leaves systems susceptible to the same revenue volatility risk that the COVID-19 crisis exposed in a volume-based model.
Other systems may pursue a “diversification” strategy: they will look for new payment models that allow them to control more of the premium dollar and mitigate volume-based payment risk. These models usually require systems to take on additional accountability for outcomes, including downside financial risk if cost and quality metrics are not met. To do so requires a multi-year plan to develop new clinical risk-management capabilities and new collaborative relationships with the payers.
Meanwhile, whereas health plans seem to be weathering the pandemic well for the time being, they may look to reassess their business model when care volume normalizes. As a recession looms, commercial insurers may find it more challenging to simply raise the premiums on their customers. As they look for cost efficiencies, one area they may reevaluate is the clinical programs they currently operate. Some may determine they could be better served by collaborating with local health systems. Payers may be able to delegate certain capabilities, along with the commensurate premium, to providers who are often closer to patients and more capable of influencing care to achieve better outcomes at a lower cost.
Re-Imagining the Payer-Provider Relationship
The need to strengthen healthcare delivery in the US has perhaps never been higher. To do so requires a re-imagining of the payer-provider relationship. Lumeris is a company born out of such re-imagination. A decade ago, physicians and healthcare executives in St. Louis recognized that the adversarial relationship between health plans and providers had to end in order to provide higher value care for patients. This called for an innovative approach, with economics and data shared freely across the continuum of care. They created Essence Healthcare, the nation’s first collaborative payer. Under their model, Essence Healthcare did not own the continuum of care, but worked collaboratively with providers in a virtual integrated delivery system (V-IDN). Lumeris was created to bring the people, processes and technology developed through Essence and its V-IDN to other health delivery organizations on their journeys to population health management.
Today, Lumeris is working with health systems and health plans across the country in over fifteen markets. For example, we are partnering with a large academic medical center in the Northeast to enhance population health infrastructure and support their joint venture with a local health plan. The partnership focuses initially on driving outcomes for the Medicare Advantage population. Over the long-term, the partnership will leverage the infrastructure to enable a high-performing clinically integrated network to deliver better health outcomes, lower costs, and improved patient and physician satisfaction across multiple populations and payer contracts.
Changing the status quo will not be easy—this is really challenging work. But it would be a shame to let the lessons from this crisis go to waste. The opportunities and urgency for collaboration have never been more apparent. Creating a sustainable and resilient business model to deliver excellent care for the local communities is more important now than ever. Lumeris is ready to support health systems through, and on the other side, of the COVID-19 pandemic.
Continuing the Conversation
Health system executives, how are you seeing your business model evolve given COVID-19 impacts? Do you see the conversation with your local health plans shifting? How’s the level of collaboration in your service area?