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How should employers think about resetting health benefits post-pandemic?

Benefits Administration and Outsourcing|Health and Benefits
COVID 19 Coronavirus

By Drew Hodgson and Courtney Stubblefield | August 31, 2020

The COVID-19 pandemic has exposed problems in the U.S. health care system. Employers have an opportunity to help change the system by hitting reset on their health benefits.

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About our Hit Reset on Health and Group Benefits series

This series covers opportunities for employers to evolve their employee benefits strategies as we emerge from the COVID-19 crisis. Our experts provide recommendations on actions employers can take as they re-evaluate benefits priorities, financing and employee needs.

The COVID-19 crisis has jolted the U.S. health care system. The pause on elective care and many outpatient services is creating a new dynamic that is dramatic and unprecedented. Emerging and value-driven approaches to health care delivery like virtual care and nontraditional networks of providers were already in motion before COVID-19, but the pandemic has advanced those timelines. These developments are forcing employers to face new challenges, but also provide an opportunity to hit reset on employer sponsored health benefits that cover over 40% of the U.S. population.

As care returns to providers across the country — perhaps in fits and starts — and the economy works to recover, now is the opportune time for employers and health plans to take a hard look at how care is delivered today and to focus on the triple aim of improving:

  • Quality
  • Cost
  • Patient experience

How we got here

As of 2018, the U.S. health care system has expanded into a $3.6 trillion industry and continues to grow. There are elements of growth in the health care sector that are directly related to innovation that deliver high value while, on the flip side, there are many drivers of the increase in spending that deliver no value or even negatively impact population health. Just when we think costs cannot go any higher, the next statistics point to another 5% increase. This is driven by many reasons that are addressed in the 2019 Best Practices in Health Care Employer Survey Report; however, the recent pandemic has the potential to add increased cost into the system above and beyond what has been seen in the past due to post-pandemic surges in demand, increased costs of health care delivery in the pandemic environment and a host of delivery inefficiencies.

Drew Hodgson and Courtney Stubblefield discuss new options for health care delivery

The U.S. is unique in the way most care is delivered by “for profit” providers/systems often with misaligned incentives. Predicting the future involves following the revenue — and this is where the concern for the next few years is born.

Over the last few months, health care utilization has plummeted. Elective procedures ground to a halt. In April, physician visits declined by close to 60% nationally. Emergency room and urgent care centers became ghost towns (outside of New York), and people hunkered down to ride out the storm. The impact to the provider community was significant with large numbers of layoffs and a major hit to revenue. Physician groups that had not moved to value-based arrangements and still operated on fee-for-service basis saw their revenue plummet. Early indications are many physicians may be operating well below sustainable levels for the foreseeable future. As things start to pick up, what does this mean for costs?

Pressure rises

The first concern is unit cost pressure. As struggling hospitals and physician groups look for a way to survive, provider consolidation will likely accelerate, and fewer competing providers almost always means higher unit costs. We also expect that contract negotiations with the major carriers will be difficult as the major systems look to recoup lost revenue and offset potential future risk. There is also the difficulty facing insurance carriers as they negotiate with hard hit hospitals — but it may be difficult for insurers to argue with hospitals as the public views them as the heroes of the pandemic.

The second concern is utilization pressure, and that is more complicated and less transparent. Virtual care has exploded, and telemedicine visits have increased. What happens once we recalibrate to a new normal? Remember the earlier comment on “follow the revenue”? Providers can drive more revenue from a patient sitting in front of them than they can from a virtual visit. Think tests, scans, MRIs, blood work — the list goes on. There is a real potential for providers to push to bring patients back into the office setting, and then the financial pressure exists to recoup lost revenue by increasing services.

Another area of speculation is how the rapid expansion in digital health will impact both traditional and virtual health care utilization. Virtual care stands to help reinvent many forms of health care delivery if done properly, but offer the perverse incentives listed above if overused as additive to other outpatient care, priced too high or delivered in fragmented ways.

Demand from patients unfortunately may amplify these problems. With limited physician openings and practice operating requirements during the pandemic that reduce access, those with health care needs may have less ability to self-direct care or “shop around.” This could disproportionately impact more intensive, complex care where needs are urgent, quality is critical and costs can be more variable.

Taken together, these dynamics point to the emergence of a stronger seller’s market in health care, even more than before COVID-19. That’s if employers and others representing the payers’ and patients’ interests fail to act. So what can we do to prepare in anticipation of a potential spike in both unit cost and utilization in the coming years?

How employers can respond

Employers have the keys to the car and can truly drive change. When employers act, the market will move; they — along with their allies — have to be bold. Solutions exist in the market today but navigating the vast array can be challenging. Some are in their infancy, some simply don’t go far enough, and for many, the integration needed to truly ensure the right patient experience and care is missing.

Today it feels like you cannot open an email without hearing about a new innovative solution claiming to shave 20% off your health care costs; most of which are false. Current and emerging solutions include:

  • Narrow or high-performing networks
  • Direct primary care
  • Centers of excellence
  • Virtual care/Digital solutions
  • Direct-to-employer health system relationships (directly contracting with a health system)
  • Condition-specific solutions
  • Onsite or near-site clinics
  • Concierge and advocacy models, including quality-based steerage

All of these solutions, in one form or another, should have the same ultimate goal: the drive to quality first. Quality and cost vary dramatically across the U.S. and even within markets or ZIP codes. Steering care to the highest quality and most efficient providers is the critical component on health care strategy and should be the focus of all plan sponsors. If there is one area that we should hit reset on, this is it.

The pandemic may present opportunities where employer and provider-side incentives may be more aligned than before the pandemic. At this moment, physicians are likely to view capitation and forms of performance-based payments more attractively than fee-for-service. Solutions that will steer volume to health systems may appeal to hospitals in a new way. New channels of revenue directly from employers are doors many hospitals want to open. These dynamics are new, and with change-focused sellers and buyers, real advancement is possible.

Steering care to the highest quality and most efficient providers is the critical component on health care strategy.

The biggest risk to health care costs and employers today is to do nothing. To achieve change, employers can focus on local market analytics, quality evaluation and helpful tools (such as Willis Towers Watson’s Scout).

Local market analytics


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Market analytics showing cost drivers by total and major market employer population. Cost drivers include musculoskeletal, cancer, general, maternity, gastrointestinal, heart/circulatory, nervous system, injury and trauma
Market analytics: Cost drivers by total and major market employer population

When we think of assessing health care delivery, data is key. It is critical to evaluate cost drivers at the local market level to help identify opportunities for improvement. This is essential, not simply nice-to-have. It will define and shape your strategy. These analytics will not only look at key clinical drivers, but also facility-specific data to help us identify areas for quality improvements. We can look at data at the diagnosis level for inpatient charges and understand how utilization and quality are driving cost in the market. For example, we can look to see utilization and cost for joint replacements within a given geography and identify areas where efficiency and quality can be improved. When you are able to pair cost with quality, you have a powerful story on how best to improve how care is delivered.

Quality

Quality has always been an important component of care delivery, but with the growth of value and risk-based payment models, and the application of the triple aim framework to care delivery, the ability to measure quality has gained importance. By analyzing risk-adjusted mortality, complication rates, readmission rates, patient safety and inpatient quality down to the physician level in over 30 clinical categories, your organization will be well-positioned to make informed delivery decisions. Quality is not only critical when evaluating how care is delivered today, but also in analyzing high-performing networks, centers of excellence and any direct-to-provider contracts for tomorrow.

Tools

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The Willis Towers Watson Scout family of models are good examples of interactive tools that can help you assess health care delivery solutions. They allow you to map a population to all major carrier networks and selected carve-out solutions to better understand access and fit for a population, plus map every hospital in the U.S. to the employer population and layer in quality metrics around multiple clinical categories. At a glance, it is easy to identify areas of concern and also potential solutions to client-specific problems. The power of this new capability lies in the ability to filter through population demographics and market-level information in order to identify areas that can help with the triple aim.

Authors

National Health Care Delivery Practice Leader

Courtney Stubblefield
National Solutions Leader

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