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Negotiating Outside the BoxRecent Trends in Managed Care ContractingFlorida HFMA 2018 Annual Fall Conference
September 7, 2018
Michael StubeeChief Operating Officer
Managed Care
Where we’re going we don’t need roads…
1
Objectives
• Understand what purchasers (payors, employers, and
individuals) are looking for from providers
• Determine which initiatives, if any, apply to a given market or
organization
• Learn how to integrate these efforts with traditional
contracting activities2
Orlando Health Overview
• Not-for-Profit
• Founded in 1918
• Statutory Teaching
Hospital
• 9 acute care facilities• 3,300 total beds
• Level One Trauma Center
• Arnold Palmer Hospital
for Children
• Winnie Palmer Hospital
for Women and Babies
• 46 outpatient centers
3
• 155,000 annual
admissions
• 380,000 annual ED
visits
• 15,000 annual births
• 3,000,000 annual OP
visits
• 600 employed
physicians
• 23,000 team members
• $3.8 billion annual net
revenue
Orlando Market Facts• Orlando MSA (Lake, Orange, Osceola, Seminole)
• Projected 2017 population of 2.5 million
• 23rd largest MSA in the country
• 8th largest year-over-year change nationally in 2017
• Estimated labor force of 1.3 million
• Payor mix distribution:
• Commercial (non-ACA) 43%
• Individual (ACA) 9%
• Medicare 17%
• Medicaid 17%
• Uninsured 14%
• December 2017 inpatient market share:• Florida Hospital 42%
• Orlando Health 34%
• HCA 11% 4
Orlando Health’s Value-Based Journey
• 183,000 total lives under value-based arrangements
• CIN with 3,000+ providers
• Market-leading quality indicators
• Current programs:• BPCI participation for CHF, CABG, TJR, stroke
• MSSP track 1
• OH employee health plan
• Cigna CAC
• Florida Blue APO
• Aetna Whole Health
• United Medicare Advantage
• Disney arrangement
• Optum SJS Bundled Payments5
So, why not just launch a health plan?• Actuarial risk
• Scale
• Adverse selection
• Infrastructure• Actuaries
• Capacity – acute care and ambulatory
• Expertise• Sales and marketing
• Administrative
• Market forces• Large employers
• Municipalities
• Brokers
• Competitors 6
7
Initiative # 1:
Direct-to-Employer Contracts
Central Florida Experience
• In 1990s and 2000s, both OH and FH had agreements directly
with employers• Orange County Government
• Universal Studios
• Smaller employers
• In recent years, only Rosen Hotels has entered into and
maintained such a deal locally
• New attention around this concept in Central Florida, led by
Disney• Largest employer in area (73,000 employees)
• Already doing this in California
• Other national, regional, and local organizations are exploring8
Disney Arrangement
• Largest direct-to-employer arrangement in country• Upside and downside gainshare
• Total cost of care targets, including pharmacy
• High dollar truncation and risk adjustment
• Quality benchmarks
• Two distinct channels, based on PCP selection:• Orlando Health Network
• Florida Hospital Network
• For 2017, used the existing Cigna platform with patient crossover between
networks allowed
• Starting in 2018, no crossover allowed, other than for emergency services
• Heavy emphasis on patient experience9
What’s Next on the Horizon?
• National employers already doing this in other markets, with varying degrees of
success or failure• WalMart – Emory, Cleveland Clinic, Mayo Clinic
• GM – Henry Ford Health System
• Boeing – Providence-Swedish Health Alliance
• Regional drivers• Florida Healthcare Coalition
• Florida Retail Federation
• Publix Supermarkets
• Market forces• Municipalities
• Major self-funded employers
• Associations10
The Broker Issue
• Brokers are used by most employers for
managing benefits
• Not just their health insurance
• Analyze cost data
• Brokers and payors focused on discount percent
• Not an accurate depiction of reimbursement
• Does not account for utilization
• Different commissions from different plans
• Broad networks typically yield higher commissions
• Incentivizes maintaining the status quo
• Could make it difficult to innovate11
Key Questions to Address
• Is this an employer we want
to partner with?• Employee demographics
• Benefit plan designs
• Can we accommodate their
needs?• Volume shifts, particularly in primary
care practices
• Call centers/concierge service
• Ancillary benefits12
• Do we want to take risk,
and how much?• Gainshare corridors
• Quality bonuses
• Do we have in-house
expertise?• Actuaries
• Contracting
• Customer Service
13
Initiative # 2:
Narrow Networks
Here we go again…
• HMOs fell out of favor toward the
end of the 1990s
• In 1999:• Gallon of gas was $1.22
• US postage stamp was 33 cents
• Dow closed above 11,000 for first time
• World’s population exceeded 6 billion
• Euro currency was created
• President Clinton was acquitted of perjury
and obstruction charges14
Rise of the Narrow Networks
• Unchecked growth in
healthcare spending
• More cost shifting to
consumers
• Patient Protection and
Affordable Care Act in
2010
• Increased emphasis on
Medicare Advantage15
Current Orlando Market Activity - ACA
• ACA originally saw three main entrants: Florida Blue, Humana, and United
• Florida Blue utilized Blue Select and My Blue networks
• Was initially only Orlando Health for acute care facilities
• HCA later added statewide
• Humana and United used their broad networks
• United left the ACA market at the end of 2015 and Humana left at the end of 2016
• Florida Blue recently added Florida Hospital to all networks
• Primary care networks still fairly limited
• Ambetter (Centene) and Molina entered part of market for 2017
• Ambetter includes FH and HCA; expanded to include Orange County in 2018
• Molina includes only HCA
• Oscar launching 1/1/19, with just Florida Hospital 16
Current Orlando Market Activity - Group
• Orlando Health partnered with Aetna in 2018 for Aetna
Whole Health-Orlando
• New upside/downside gainshare ACO product
• OH the only acute care facilities in the network at this time
• Primary care network limited to Orlando Health CIN
• Specialist network limited to providers with OH privileges,
plus other Aetna-contracted providers to fill gaps
• Product is sold alongside the Aetna broad network
• Employers don’t have to restrict choice
• Employee gets to make individual cost/benefit decision
• Premium differential can be 10-15%17
Current Orlando Market Activity - Medicare
• Medicare Advantage networks are generally broad for acute care facilities
• CMS network adequacy/geo-access standards
• Patient choice has historically been important for sales
• Heavy MSO presence driving referral behavior
• At-risk primary care physicians sensitive to cost factors
• Recent acquisitions of groups by Humana and United
• Florida Hospital has its own private-label product
• Historically existed in Brevard and Volusia counties
• Looking at expanding to other markets
• New entrants coming to market
• Network construct is less of an issue 18
Key Questions to Address
• Rate vs Volume• What is the price of “exclusivity”?
• How do you avoid going too low?
• Actions by competitors• Who is moving first?
• What is their value proposition vs yours?
• Reactions from payors• Are their business models being disrupted?
• What is current state of your relationship?
• Receptiveness of market• What connections do you have with employers?
• What relationships do you have with brokers?
• What is your standing in the market? 19
20
Initiative # 3:
Bundled Payments
Different Types of Bundles
• Bundled Payment for Care Improvement (BPCI)
• Voluntary CMS program
• Retrospective model
• Can include acute and post-acute care
• Comprehensive Care for Joint Replacement (CJR)
• Mandatory CMS program
• Retrospective model
• Includes acute and post-acute care
• Commercial initiatives
• Optum Spine and Joint Solution (SJS)
• Blue Cross Blue Distinction Centers (BDC)
• Direct-to-employer efforts 21
Orlando Health Experience
• BPCI Participant since 2015 in 5 programs across 18 DRGs
• Including THA/TKA in all but 2 facilities
• Areas with strong acute leadership
• Identified episodes with post-acute waste
• Positive results in most, with some fluctuation in CABG and CHF
• Not doing BPCI-Advanced; will become CJR facilities 10/1
• CJR Participant at Health Central and South Lake
• Entered agreement for Optum SJS program this year
22
Optum Spine and Joint Solution (SJS)
• Prospective bundle for total hip, total knee, and
some spinal fusions
• All-inclusive payment for acute episode
• Anchor hospital pays providers from bundle
• Readmission window is covered
• Post-acute care is excluded
• Currently offered only to United clients
• Employer pays an access fee to program
• Member incentive to choose COE
• Employer saves on episode cost of care
• Employer also shielded from readmission risk
• UHC could look to export this to other carriers 23
Direct-to-Employer Efforts
• Large, national employers have been doing this for years• Destination programs (Cleveland Clinic, Mayo, etc.)
• WalMart
• Lowe’s
• Pacific Business Group on Health
• Local coalitions are exploring these options• Traditional and non-traditional bundles
• BUCA carriers (other than United) have been slow to innovate
• Engaging third party entities to administer
24
Key Questions to Address
• What types of bundles?• Prospective vs retrospective
• Include post acute or not
• Who will administer?• Traditional carriers
• Self-administered
• Other third parties
• Who will participate?• Employed vs non-employed
• Post acute facilities25
• What is the right price?• Market rate
• Additional discounts
• What is quality worth?• Productivity
• Readmission costs
• Employee satisfaction
• Where do you start?• Easiest to bundle
• Self insured groups
26
Key Takeaways
Know Your Market
27
Providers
Employers
Brokers
Patients
Payors
Competitors
Market
Know Yourself
28
Beware of
FOMO
Stay in Your Lane
Surgery is Risky
Be Best
Go forth and contract
• Determine fit into overall managed
care strategy
• Leverage existing payor agreements
• Develop relationships with community
stakeholders
• Don’t be afraid to ask for help
29
30
Questions