Social Media & Hospitals : Managing the "Extended" Patient Experience

Patient experience for hospitals, includes the perception of the organization (the brand promise), the first interaction, the environment, all aspects of any visit, the ongoing relationship, inspiration, the roles and behaviors of the staff, and so on (Mark Tomazewicz). The patient has numerous touch points with the hospital – and his overall patient experience, is based on the experiences he has at each of these individual touch points. Whether he is looking up the hospital website, or seeking opinions from the people he trusts or is interacting with the customer services over phone, when is he actually visiting the hospital for either his own care or to accompany some one else, when he receives the bills from the hospital, when he is involved in follow-up consultations, the patient is undergoing a series of positive or negative experiences and all of this adds up to the total experience. Sometimes, these touch points may be “Virtual” – in the sense that, the patient is not really interacting with the hospital directly – A patient seeking the opinion of friends about the hospital or when he looks up information from the internet. Another aspect in the conventional world was that most of this touch points were “Active” – these occurred when the patient initiated it.

Social media – like facebook, twitter etc., definitely has extended the patient experience, by adding a large number of additional touch points for the patient. Additionally, not all of them are “Active” touch points; these could be “Passive” as well for the patient. The patient may be exposed to information about the hospital although he may not actively be seeking it. For example, a disgruntled patient may tweet about his bad experiences in a hospital to all his followers. It is important to understand that dynamics of social media are quite different from conventional media – it highly Propogative – meaning, any information travels very fast and to a much wider audience than conventional information channels. It is Persuasive as well, with strong evidence pointing out to this fact. Additionally social media is Persistent. A negative piece of information generated years ago could influence patients even now. Social media also has high Reach, meaning information reaches world wide. Social media is highly Collaborative – it involves a high degree of collaboration amongst its participants. And, results are more Measurable in social media, as compared to any conventional media. 


The increasing use of social media in today's world, present new and exciting opportunities for hospitals, to create and manage an "Extended" patient experience. Many hospitals have already begun tapping the power of social media already for various reasons - for instance - Henry Ford Hospital in Detroit, has used twitter to provide live updates on a robotic surgery (Link: http://www.ihealthbeat.org/Articles/2009/2/10/Hospital-Uses-Twitter-To-Provide-RealTime-Updates-on-Surgery.aspx) and later used youtube for sharing the video as well. This is definitely not a one off case - as many as 730 hospitals listed on this particular website, are all now using social media - with 337 youtube channels, 513 facebook pages, 549 twitter accounts and 95 blogs (http://ebennett.org/hsnl-full/). There are a large number of channels available in social media - social networking sites (facebook), microblogs (twitter), blogs, content sharing (flickr, youtube), message boards and forums, podcasts and RSS feeds The most commonly used web media in healthcare are of course (should not be very difficult to guess) - facebook, twitter, youtube and blogs. The numbers are really impressive, and do indicate that hospitals have already passed the "Early Adoption" stage

Hospitals can harness the power of social media – to create additional “Active” or “Passive” touch points, and positively extend the patient experience. There are plenty of additional touch points the hospital can create – like – information updates (for ex: may be a new breakthrough surgical procedure or a more potent drug), hospital related updates (for ex.introduction of a new service line or an event) , patient education, managing patient relationships (for ex. may be a simple birthday wish on patient’s 35^th birthday with an alert reminding the patients to have their blood glucose screened for diabetes hence forth), customer service (for ex. listening and responding to patient issues more effectively), crisis management (for ex. twitter updates regarding crises – like disease outbreaks etc.,), physician patient communication channels (twitter updates?) and so on. These touch points provide additional opportunities to hospitals to communicate and reinforce their brand message, correct any negative perception, strengthen patient relationships and build brand loyalty. Healthcare is a high experience service, and the brand image, brand perception and brand loyalty are all centered around the patient experience. Additionally social media can provide valuable inputs, with regard to brand perception, any negative or positive sentiment being propagated and competitive intelligence and so on.

While many hospitals are already present on the social media, most of these hospitals look at social media merely as a communication platform or as additional avenues for advertising. Not many have realized that each of the extended patient touch points, are part of an integral whole. The overall patient experience today begins even before the patient actually needs and obtains some service from the hospitals and possibly never even ends (virtual).Thus while the “Real” patient experience is discrete, the “Virtual” patient experience is a continuous and on going process, and influences the “Real” experience. Thus both will have to be part of an integral whole – an integrated patient experience vision for the hospital. Social media strategy should also be integrated with the overall hospital marketing and the operational strategies. While the basic principle of social media – is to have a direct and straight conversation with the patients, hospitals will need to be careful about what gets communicated during these conversations. Patients have become more and more discerning, and any incongruence between a projected “Virtual” experience and the “Real” patient experience may have a serious negative impact on the hospital - it can be easily picked up the ever so discerning patients on social media, and could get propagated (twittered?). Another aspect hospitals will need to consider – is having effective feedback mechanisms in place. Social media, as I have mentioned before, is more measurable, and hospitals could do well to make use of this fact (google analytics, facebook analytics…). Each patient experience touch-point will need to be constantly monitored. Social media provide hospitals with multiple channels (social networks (facebook), blogs, microblogs, Q&A sites, podcasts, RSS feeds, message boards, forums and communities, content sharing sites and so on) and optimization of channels is another critical aspect, hospitals need to be sensitive about.

Some social media strategy success stories: http://www.launchyourmovement.com/2010/04/10-hospital-social-media-success-stories/

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m-Health : Healthcare Platform for the future

A few days back, we all heard the news of a surgeon using I-pad during a surgery (here's the link http://www.nbcnewyork.com/news/tech/Surgeons_Use_iPad_in_Surgery_All__National_.html) - while this news must have made waves wide across, this wasn't the least bit surprising for me. Simply because, to me, this was a trend long overdue. As far as I am concerned, we are just behind the curve when it comes to adaptation of healthcare on the mobile platform. And when we do catch up, the mobile platform has the potential to completely transform the way health care is delivered.The single most important reason, why the mobile platform has transformational potential its ubiquity - mobile penetrations levels have grown exponentially over the past decade, not just in the developed world, but in third world countries as well.

Mobile health, or mhealth - is definitely not a new concept, and over the past 5 - 6 years, we have seen a lot of demonstrations and pilots, many showing promising results in terms of healthcare access, potential to drive down costs and deliver better outcomes. These demonstrations have been mostly around education, diagnostic and treatment support, communications, remote monitoring and remote data collection.

The biggest advantage of the mobile platform, as mentioned above, is its ubiquity. Mobile is one device no one would want to be found without. In fact, these days - it has gone much beyond just having a mobile - what with the dearth of devices ranging from smart phone, PDAs to internet tablets with phone capabilities. This yields perfectly to the concept of  anytime anywhere health-care, be it for the patient or the provider. For instance, physicians can remain in touch with their patients, even when they are out of office. Lets say a patient calls the physician for some advice when the physician doesn't have access to his computer, the physician could potentially still look up the patient record through his mobile device and advise the patient over the phone. Another advantage with the mobile platform - more so, these days - would be the wide range of different channels for delivery within a single platform. Mobile platforms offers different channels for outreach - the core voice and SMS channels, e mail as well as the mobile internet. Each of these channels can be effectively utilized for various purposes like communication and outreach. Other advantages would be the availability of other channels on the same platform - like banking etc., which are increasingly getting linked to health-care (with the rise of consumerism), as well as increased context sensitivity (with value add - services like GPS etc.,).All these advantages would do wonders to parameters like health - care access and availability. In addition, mhealth also has significant potential to reduce cost of healthcare delivery - with concepts like mobile telehealth (telemonitoring and teleconsultations).

There is a lot of action already happening in the mobile - health-care space with various applications and solutions being developed. Various stand alone applications targeted at patients are already available - these mainly focus on provision of specific and pertinent information, medication compliance, reminders, health - status trackers etc., These applications, are becoming increasingly relevant, with more and more remote monitoring devices entering the market. It is very common place to find people with devices like BP monitors, pulse oximeters etc., these days. Many of these applications are available at a very low cost or even free - the one aspect which goes missing very often is the credibility aspect, particularly with stand alone applications based on information. With medical sciences evolving everyday, being uptodate and credible - presents a constantly moving target to the development community, the problem compounds more due to the fact that most of these stand alone application are developed mostly by individuals or small groups of developers.On the other end, the physician end, there are  applications for charge capture, note taking, e prescriptions, decision support (ex. epocrates Rx) and access to medical literature. Apart from these stand alone applications, many practice management platforms have also come up with mobile platforms.  Also - solutions have been developed using the mobile platform for hospitals. The potential for transformation is the highest for hospitals - where constantly access to information, communications and other road blocks often lead to sub optimal quality of care, adverse impact on quality outcomes. There are now solutions (for instance-Voalte) in the market - which address most of these problems - communications (physician to nurse, nurse to nurse etc.,), information access (access to the hospital networks, access to patient records, access to information sources on the internet etc.,) apart from quality (monitoring). Some of these solutions, leverage the existing infrastructure (like wireless networks etc.,) already existing in the hospitals.

As far as the platforms for mhealth are concerned, Apple's I phone has gained wide acceptance when it comes to smart phones.The RIM platform with its trademark Blackberry phone still holds sway over the business users. These two platforms would be obviously be the most important for health-care, as with any other m-commerce applications or services. Plenty of stand alone applications are already available - for the apple i- phone (check  -http://iphonemedicalapps.com/). Microsoft windows mobile devices, also have a relatively smaller but significant presence, with their biggest advantage of seamlessly being able to integrate with the laptops - most of which run on the windows - OS. Another platform which could be seen gaining a lot of traction in the market - would be the Android platform. Android does expose a lot of its APIs - which may lead to more development action for this platform and corresponding more applications.

There are still a lot of hurdles to be overcome, before mobile health can take off in a big way. Some of the biggest challenges - would be issues related to security, privacy and confidentiality. Establishing this will be a key priority for mobile platforms. Another aspect - would be that of integration. Unless different applications are seamless integrated to the patient records, the real power of mobile healthcare will never be tapped. It would be good to have an application that records BP, blood sugar etc., and does trending and alerts the patient when it suspects something is wrong. But the complete potential can only be realized if the application were able to push the information onto the patient's health record and make it available to the physician, in the next patient visit. Also - more sophisticated solutions will need to be developed, to completely exploit the potential of the mobile platform - like channel optimization etc., For instance, if an outbound message needed to be sent to the patient- the most optimum channel should be used, based on the patient's usage history. If the patient has been found most responsive to voice calls, that channel can be used. There are also wider and more far reaching implications on the broader healthcare delivery land scape - when mobile platforms will enable remote patient monitoring and remote consultations - these concepts have the potential to bring down health-care costs significantly.

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Provider Pricing : Necessary Evil or Competitive Advantage?

Providers, more often than not, treat the development of their CDMs as a necessary evil. Treading the fine balance between competitive pressures, cost compulsions, payer contract considerations, bad recoveries and charity write offs is a tall order for most hospital executives. Many providers apparently dont even seem to use any rationale in coming up with their CDMs, and in many cases, these CDMs are not even updated to reflect prevailing prices of healthcare services. While a bulk of reimbursements which providers in the US receive, may either be driven by contracts or capitation payments, a significant portion of payments still directly or indirectly use charges as a basis for pricing. For many hospitals this will range between 10 - 25% of their payments. Charge driven payments normally include Self Pay Patients, Payments where the Provider is non Par and in certain cases, Medicare and Medicaid payments. In addition, charges will be critical during rate setting negotiations with insurance companies. Also charges are used for outlier payments in various pricing methodologies - including medicare and medicaid (Ratio of Cost to Charges, also called the RCC, is used in some cases to re-imburse the additional costs involved in outlier cases). In spite of the importance of the CDM, many hospitals don't accurately maintain their CDMs. At many hospitals, the CDMs based on older versions of services codes were still being used. Also upto 70% of the codes defined in CDMs were never actually used.

Development of an up-to-date Charge Description Master will be critical for hospitals in the coming years, with emergence of market trends like price transparency and consumerism and regulatory pressures. There are already certain states which have either put in place or are planning to put in place, regulations for provider charges. For instance, it is mandatory in California, for hospitals to make public a copy of their CDMs. Consumerism is also growing, with many members taking an pro-active role in making their healthcare decisions by evaluating cost vs quality. This trend is definitely accentuated with increasing enrollments in CDH plans. With these trends, hospital CDMs are increasingly coming under the scanner from both regulator as well as the consumer ends. It will definitely become imperative for hospitals to work on their pricing, in order to attract patients, as well as avoid the financial cost of litigation and regulatory penalties.

On the other hand, charges developed based on sound economic principles can be a source of competitive advantage. Hospitals typically suffer from bad ROIs, due to a variety of reasons - poor AR management, below par payments by medicaid and medicare segments, bad revenue cycle management, weak negotiating power for contract negotiations with large payers and so on. With low ROIs, hospitals increasingly are finding it difficult to raise capital for working capital as well as their capital expenditure needs, let alone strategic investments like expansions or mergers and acquisitions. With a diligently developed CDM, hospitals can address many of these issues and work towards a healthy ROI.

The key factors to be considered in hospital pricing, even before ROI considerations would be direct and overhead costs of health-care services rendered, utilization ratios for services, under recoveries and charity write offs, Under payment for services by medicare and medicaid, and in some cases, contractual arrangements with payers. The primary area of focus for hospitals would be to ensure accurate capture of direct and overhead costs - since this will be the primary basis for pricing. These costs should be adjusted to accomodate under utilization of services. Additional adjustments will need to be performed for under recoveries, charity write offs, medicare and medicaid underpayments, as well as losses due to contractual arrangements with payers. It is absolutely necessary for hospitals to invest in systems, that can track all these numbers, integrating across disparate systems where they lie hidden. Ideally this should be done at a service code level (with some kind of a logical basis for overhead allocation), failing which this can be done at slightly aggregated levels and costs ascribed to services based on relative weights.  Once the base price is arrived at, a growth adjustment should be used to arrive at CDM prices. The growth factor should take in to account the increase in cost of capital to maintain business at current levels, as well as provide for a good level of ROI, in order to facilitate investments into strategic areas like organic and in organic expansions, apart from investing in social responsibilities, innovation, education and research. For most hospitals, the growth adjustment will translate into anywhere between 8 - 12%, depending on whether it is based on conservative, most likely or aggressive growth scenarios. Hospitals could also go one step further, and apply price increases selectively on services which yield the maximum ROI, rather than perform an across the board adjustment.

In the real world, pricing may be influenced also by additional compounding factors. The compounding factors which may change the variables may be competitive pricing pressures, quality based contracts, packaged services, regulator pressures (which may create cap price increases), dramatic technology shifts, development of alternative healthcare delivery mechanisms like retail health-care clinics,  Free standing Ambulatory Surgical Centres etc.,

Movement to ICD 10 and CPT 5 - presents providers with a unique opportunity to transform their CDMs. Providers should make use of this opportunity to transform the process of pricing into a source of competitive advantage. while this will be more easier than done, it will neverthless prove to be a wise investment for hospitals to thrive and not just survive in the coming years.

Terms:
Charge Description Master (CDM) - The Charge Description Master (CDM), or chargemaster, is a comprehensive listing of items that could be billed to a patient, payer or healthcare provider.

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ICD 9 - 10 Migration Strategy - Lessons from the MS - DRG conversion Project

CMS will be moving over to an ICD 10 based version of its MS-DRGs 26.0 by 2014, and has already completed the DRG conversion effort a while back. This was preceeded by a pilot conversion for MDC 6 - which in essence validated the approach taken for this conversion effort. DRG grouping, as we know, relies heavily on ICD CM / Procedures codes, and would be a good reflection on the possible approaches as well as issues involved in movement to the ICD 10  CM / PCS standard. There are some good lessons which can be taken out  of this conversion effort into most of the payer processes impacted by the movement to ICD 10.

The migration to ICD 10 will result in a myriad of challenges to payer business processes and systems. Impact on payer systems and applications will be felt more in some of the bigger payers which use homegrown systems for most of their processes. For most other mid sized and smaller plans, the dependence on vendors will be higher and most of their conversion efforts would be focussed on re - defining their processes in the ICD 10 vocabulary. Right now, going by the strategies of some of the major players in the market, it wouldn't be unsafe to assume most payers are currently looking at limited remediation solutions, while very few of them are looking at crosswalk solutions (A deadline focussed quick fix, but my guess is, there has to be complete migration at some point in time). Not many payers are looking at this opportunity as a transformational opportunity at the moment, what with a lot of attention diverted at the impact of healthcare reform .

For payers using either of these approaches, the MS-DRG conversion project, gives some valuable pointers for the migration effort, particularly the restatement of their businesses and processes in the ICD 10 CM / PCS language. First, it is a clear validation of the accuracy of the backward and forward GEMs published as a reference document by the CMS to assist stakeholders in their migration effort. In this project, the GEMs were successful in producing mappings which didn't need reviews for about 95% of the cases - which validates the mapping accuracy of the GEMs. (This is not lost on many vendors, who have already come out with automated forward and backward mapping solutions for ICD 10). Second, it provides simple and useful pointers, for payer SMEs to redefine business, as well as processes, while preserving the logic embedded in the processes - for example, redefinition of rules of medical necessity, or restatement of coverage in ICD 10 and so on - easily a majority of the rules can be restated in ICD 10 terms using mapping approaches suggested below, with minimal tweaking of the rules themselves.

Here are few of the basic pointers from the DRG conversion project:

• The most apparent and seemingly intuitive way to start would be to pick up all ICD 9 codes, find out their counterparts in ICD 10. The project did just the opposite, they finalized all ICD 10 codes instead,  and reverse mapped it to ICD 9. While this approach would be slightly more time consuming initially, it will save far more time in redefining process logic. Forward mapping - will may not completely ensure preservation of embedded process logic - given the fact that ICD 10 is a more comprehensive list, and in a majority of cases, more specific. Also, since the migration is being done to handle an ICD 10 world, it would be far more intuitive to have the ICD 10 codes and then assign them to positions where their ICD 9 counterparts would exist currently. This kind of reverse mapping was used in the DRG conversion project.
• Definition of mutually exclusive lists for diagnosis codes - essentially segregation of  the MANY to ONE kind of mappings from ICD 10 - ICD 9. This is the easiest part and can be handled by standard mapping tools available in the market (based on the GEMs). Also there could be some possibilities of MANY to MANY mappings, but may not have an impact - since they may belong to a same logical category (for instance,   an MDC category for a DRG code). This part also refers to independent mappings, meaning each of the codes in ICD 10 had no dependence on another in the list. For cases where there was a dependence, clustering (mentioned below) was used
• ONE to MANY mappings (one ICD 10 code mapped to more than one ICD 9 code) could result in more difficult situations than the one mentioned before. This can potentially be handled using conditional rules - just like the ones used for clustering (mentioned below).
• Resolution of conflict situations for diagnosis codes - a frequency based mapping resolution could sufficiently handle most of the situations. Exceptional scenarios may be handled using rules based mappings. The DRG conversion project, predominantly used the frequency based maps, based on medPAR data
• Clustering - in some places, a group of codes (diagnosis / procedure) used in combination. There is no issue, if the mappings are unique (code 1 + code 2 in ICD 10 always representing code x in ICD 9). Trouble arises, if any of the codes are shared. For example, if code 2 in ICD 10 is used in clustering for Code X and Code Y in ICD 9. Both these situations could theoretically be handled using conditional rules. 
• ICD procedure codes will present the maximum issues, since the largest change has happened in the ICD procedure category. PCS codes are not merely more specific, and include additional codes, but are also specific by anatomical sites. This resulted in OVERTLY broad ICD 9 code assignments in the DRG conversion project. To handle this, the assignments were done based not just by reverse maps, but also by MDC associations (rough indicator of anatomical system involved). For payers, a combination of frequency based and rules based maps may be needed, in additional to logical categories - like anatomical sites, to produce accurate mappings.

Any mapping tool, apart from using the GEMs for straight forward maps, should ideally provide analytical solutions to derive frequency based maps as well as be able to produce clusters and aid payer SMEs to develop business rules for the resolving conflicts.

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Healthcare Reform - Pharmacy Benefits (Medicaid, Medicare Advantage and Medicare Part D)

The PPACA and HERA - are expected to have some impact on pharmacy plans as well. Most changes are targeted at Medicaid and Medicare, though.

Transparency Related Regulations 
MA-PDs, PDPs and plans participating in health exchanges will be expected to additionally report on a few additional parameters -
1. Mail order / retail prescription volume ratios, as well as generic dispensing rates.
2. Rebates and discounts, as well as the percentage of the rebates / discounts passed through to the plan sponsor
3. Spread Pricing Percentages (difference between what health plans paid for the prescriptions vs what the PBM pays its suppliers)
This will translate into additional federal and state oversight of PBM businesses. Parameters such as mail order vs retail, generic dispensing rates etc., should be part of standard reporting for most PBMs and should n't mean much. But disclosure related to rebate pass throughs and spread pricing percentages are likely to cause a lot of discomfort to PBMs - since traditionally this has been the core business models of PBMs - aggregate demand and negotiate for bulk discounts. But over the last 4 - 5 years, a lot of hue and cry has been raised with regard to the need for more transparency in the PBM business,and regard rebate pass through in particular. This initiative is clearly aimed at addressing this concern.

Medicaid Related Regulations 
For Medicaid, Pharmaceutical Manufacturers contract directly with HHS to obtain medicaid coverage for their prescription drugs and pay rebates to the HHS. The rebates would be either 15.1% of the AMP (manufacturer reported average manufacturer price) and Manufacturer best price (lowest price per unit for any buyer for that manufacturer) - for branded drugs and 11% for generics currently. Every quarter pricing data is provided to HHS by the manufacturers. The HHS then calculates the rebate amounts based on the actual drug utilization data. This rebate amount is normally shared between the federal government and the states. The healthcare reform act proposes an increase in minimum rebates on branded drugs to 23.1% (from 15.1%) and on generics to 13% (from 11%). Federal government will retain a higher percentage of the rebates. In addition, Medcaid MCOs will be eligible for Sec 340B (healthcare pricing act) which was previously open only to state medicaid programs and some non profits. Also some drugs previously not included in the benefits have been included (Benzodiapenes, Barbiturates and smoking cessation drugs).
As far as pharmacy plans are concerned, this may have a minimal impact or low impact, mostly administrative in nature.

Medicare Advantage Prescription Plans and Medicare Part D impact 
Reduction of the Donut Hole Gap 
Currently, Part D members hit a coverage gap (commonly referred to as the 'Donut Hole') - once their drug costs have gone beyond a specified threshold. The members are responsible for 100% of their drug costs in this range, till they hit the amount when catastrophic coverage kicks in. In 2010, patients who hit the donut hole will be eligible for a refund of $250. Starting 2011, the donut hole will be subsidized for branded drugs by pharma manufacturers to the extent of 50%, the remaining 50% is to be paid by patients through 2012. Starting 2013, medicare pays an increasing percentage of the patients 50% till it levels off in 2020 at 25%. So in 2020, the cost sharing for the donut hole would be 50-25-25 (pharma - patients - medicare). For generic drugs, medicare contribution to donut hole will begin with 7% in 2010, till it levels off at 75% in 2010. The idea behind this - is clearly to eliminate the donut hole. In addition, the threshold for catastrophic coverage will also be reduced to decrease the impact of the donut hole.
pharmacy plans are not likely to be impacted to a large extent by this regulation, except for changes in their plan administration and claim processing set ups.

Increase in Drug Coverage 
Given that the drug coverage in part D is described as "all drugs covered in medicaid", Part D will now have to include coverage for Benzodiapenes and barbiturates (used for treatment of epilepsy, cancer, or a chronic mental disorder).
From a Pharmacy Plans Perspective, This may have a slight upward effect on premium costs, due to increase in coverage.

Additional Formulary Requirements 
Plans will need to include all available drugs in their formulary for classes / categories identified by the secretary (protected classes).
This particular regulation has the potential to drive up drug costs for prescription plans and in turn, the premiums, if a large number of classes / categories are designated as protected by the secretary of the HHS.

Simplification of Annual Beneficiary Election Period 
Open enrolment period for MAs are eliminated and beneficiaries can return to their Traditional and Part D plan within the first 45 days of the year if they want to. Also the annual co ordinated election period for Part C and D plans has been increased by 1 month. This is likely to lead to administrative simplification.

Improved complaints systems, Uniform Exceptions (Forms) and Appeals Process
This regulation is likely to lead to administrative simplification for Pharmacy Plans.

RDS - Removal of Tax Deductibility
The RDS is a subsidy offered by the CMS - which provides payments to the extent of 28% to retiree drug plans offered by employers and unions.The RDS amount currently is tax deductible. As of 2010, RDS impacts 4000 plan sponsors and 7 million members.  The healthcare reform act proposes to remove the tax deductibility from 2013. The cost to large corporate sponsors is expected to be high - AT&T has estimated the cost to be $1Bn and Verizon - $970 mn. The plans will need to start booking the financial impact as of 2010, due to changes in tax deductibility.  Plans may also experience additional administrative costs as sponsors may consider migrating to other retiree plans, if found financially better or may decide to stop offering retiree benefits altogether.

High Income Premiums increased for Part D 
There is no direct impact on Prescription Plans

Low Income Benchmark Calculation Change and 'De Minimis' rule 
This is targetted at Part D plans - to reduced frequent changes in enrolment for beneficiaries. Impact of medicare Part C will be removed from the calculations of medicare part D low income subsidies. This is done because, Part C premiums are generally lower, since they can apply the rebates of part A and B to the Part C premiums (11% to reduction of premiums. An additional 5% can be applied to increase of benefits - but that shouldn't impact the premiums). This may mean lower administrative costs for prescription plans, higher subsidies - but in some regions where there is a high rate of medicare advantage enrolments, there could be some uncertainty for the plans.

Authority to Deny Bids
The secretary will be enpowered to deny bids which may proposed increased cost sharing or decreased coverage. Since this restricts the ability of plans to tweak with cost share or coverage to keep premium costs lower, this may result in increases in premiums cost - but this may be very low impact.

Additionally there are some areas which may have a tangential impact on PBM operations -

1. Sunshine act provisions for disclosure of any potential for conflict of interests between physician and physician groups, GPOs , Pharmaceutical manufacturers as well as medical devices companies, 
2. Reporting for samples of prescription drugs provided to physicians as part of marketing 
3. Enabling the FDA to authorize generics for biologicals / specialty drugs, with the definition of a new approval pathway for the same

Related Posts By Me:

Impact of Healthcare Reform on Health Insurance Industry - http://healthreflect.blogspot.com/2010/02/hi_13.html

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Healthcare Reform and the US Health Insurance Industry

If the PPACA (Patient Protection and Affordable Healthcare Act) lives true to its objectives, insurance coverage would have reached to 94% levels by 2018, leaving behind an estimated 23 mn uninsured - mostly illegal immigrants, younger population or people under the poverty line. While this would truly be a giant leap in terms of health insurance coverage, I am not really sure if those percentages would really translate into healthcare access as such. Anyways - that and the issue of health-care cost containment, would be another discussion altogether.

Meanwhile the PPACA, I am sure would be a matter of concern to insurance companies. There are definitely provisions in the bill - which, for all the good intentions behind them, would still add to the complexities of a business, already so convoluted and ridden with an enormous amount of regulation. While it is difficult to determine precisely the nature of impact on the insurance industry - due to lack of clarity of the details of the implementation, we can definitely deduce the impact at a high level. Below - I will be analyzing some of the provisions of the bill, which have a big impact on the Insurance industry.

The formation of  Health-care exchanges over the long run - are expected to homogenize the products, develop competition in a market place, where the industry concentration is really high (most states have one or two dominant players) and over the long run, keep premium costs low. Although there is a good chance of this happening, I am some how inclined to believe that the effects may not be as drastic as expected. Personally I believe, that the dominant players in the market place would turn into price setters for the smaller players.

Another big threat to private insurance companies - would be having to compete with a state sponsored public health option - which, in intent, is supposed to be the insurer of last resort.Details are unclear on how this will ultimately be implemented, but is definitely bound to have an impact.

Also another aspect is that of reduced payments for medicare advantage (Health and Education Reconciliation Act) - based on a MedPAC study, the CBO has proposed to change the MA payment metholodology - linking it to FFS payment rates. This is expected to result in a cost savings of $140 Bn. For insurance companies, carrying MA plans - the impact would be directly in terms of lower payments from Medicare. Without the exact implementation numbers, it may be difficult to guess to what extent this will impact medicare carriers, but definitely there is a downward impact. There will definitely be an increase in MCR for this line of Business, vis a vis, the other lines of businesses. Also - this may be a loss making proposition for the carriers, given that there is limited flexibility for them to pass the increased costs on to the consumers through premium hikes.

Another big impact to health insurance, could come from Medicaid expansion - able bodied individuals with incomes at or below 133% of poverty line, would now be eligible for coverage.This is expected to add coverage to an additional 32 million people. Medicaid contractors in general, would definitely see an increase in enrolments for their medicaid business. It remains to be seen, what would the precise impact of this regulation on the insurance business be. 

Most of the provisions directly affecting the insurance companies - are mostly aimed at individual or small group business - obviously where the coverage gaps are the maximum. But these provisions may have the undesirable effect of driving private insurance companies away from these markets altogether - since these provisions may make the individual markets more expensive - and will definitely get reflected in premium inflation - it will definitely be higher than direct health care cost inflation, in order to accomodate the new provisions.

The PPACA, fixes the medical cost ratio - at 85% for large business and 80% for small / individual businesses. Simply put, this means, insurance companies will have to use 85%(or 80%) of the healthcare premiums directly on paying back medical claims. This puts up a limit on how much insurance companies can spend on administrative costs, sales / marketing, agent commissions, law suits, other expenses while also having to make a profit. This has the potential one of the most significant provisions, in terms of impact to the payer operations. While the intention behind the provision would definitely be to drive efficiencies in payer operations, the problem would be that this provision would might actually end up driving up premium costs. Simply put, if an insurance company - theoretically can not achieve the level of efficiencies required to pay for all the expenses and to make a profit with the given percentage on the current premium incomes - all they would need to do is increase the premiums, in order to increase the absolute dollar available - as the MCR remains pegged at 80/85. Again - there is much uncertainty regarding how this provision is to be implemented. If these ratios are applied at an aggregate company wide level - companies will still have a margin of errors - across LOBs or states / regions. But things may change, if these ratios are implemented state-wise. In some of the highly regulated states - like NJ or NY - the impact may be lesser, but the impact may be higher for some of the less regulated states like Georgia etc., But overall, insurance companies could be tempted to tweak premiums upwards, to maintain or increase the absolute dollars available to cover expenses if MCR ends up more than 80/85. All said, the most likely impact - increase in premiums. Particularly for the individual and small group businesses - due to the higher expected MCRs for these groups.

Also missing is - anything to incentivise (from this perspective) faster and more serious adaption of wellness programs, disease management programs or care management programs - aiming at cost containment. It is not clear on where the expenses for cost control and quality initiatives (Care Management, Wellness Management) appear in the MCR- whether they are part of the 20% or the 80%. If they are part of the 80%, it will definitely be a disincentive for insurance companies to even invest in these initiatives.Right now, it remains to be seen - as to how the HHS will issue regulations based on the legislation.

The act also includes a provision ensuring insurance companies will not be able to decline coverage based on pre existing conditions. Again, simply put, the expectation of additional medical costs - related to coverage of people with pre-existing conditions will be factored into premiums, pushing premium costs upwards. While the intention of this provision, is definitely to extend coverage to the set of population, which could find it the hardest to get coverage - it is also incongruent, on a few grounds. First, there is the risk of adverse selection - people may not opt for coverage during their healthier years and opt in - when they get ill. Second, this will clearly increase the burden of higher premium costs for the healthier population in the pool. Worse still, all the healthy population need to figure out is that, they really dont need to be paying the premiums (and can get away by paying a penalty - which will be a fraction of the premium cost), when they are healthy - they could always opt for coverage when they get sick- thus forming a vicious cycle of premium cost inflation and an increasingly unhealthy risk pool. Again, this would be for the individual business - due to the smaller risk pool. This may drive the insurance companies away from this line of business altogether.

There is also a provision - to enforce first dollar coverage for a list of services considered preventive services or screening. The direct impact of this provision will again - be an increase in premium rates, to cover for loss of member responsibility amounts. But there is another impact which payers may need to think about - increased likelihood of healthcare fraud. This is an opportunity for inappropriately filing claims under preventive services or screening services - to avoid paying any member liability amounts. This will again drive up cost of claims and premium rates, in addition to the direct impact.

There are other provisions related to elimination of annual and lifetime benefit limits.Again - the direct impact of these provisions - would be premium cost increases. Also - with the elimination of the annual benefit maximums and lifetime benefit maximums, there is definitely the risk of over utilization of services and may additionally add to premium cost increases. Also the provision - to ensure insurance companies dont rescind policies when the member falls sick - this appears sound in principle and may not be a critical issue, but may marginally add to premium costs.

There is also the provision to extend coverage to dependents - under their parents' policies till the age of 26. This again will add to the premium costs, but not likely proportionately - since these dependents are likely to be healthy and not add as much to the medical costs.

Overall - the PPACA and HERA - will definitely add to the challenges insurance companies face - both in the short, as well as the long terms. It may be tempting in the near future for private players to opt out of the individual markets, given the risks involved with the implementation of this bill. Additionally - this bill, will most likely push up premium rates and thus, health insurance costs overall. It is also not possible to exclude the scenario of a movement towards a single payer system, in the distant future. But for the foreseeable future, we may be looking at increasing consolidation - since the smaller payers may not be able to hold out- in a highly regulated market place, and of course, once the public option is available - it may act as a price setter (a dominant firm oligopoly?) and (may?) influence the market place.

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Impact of Healthcare Reform on Pharmacy Benefits, Medicaid , Medicare Advantage and Part D plans

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