Will CIGNA Remake The Health Plan Marketplace

First published here on the Health Care Blog
America’s health plans are floundering. If their job has been to provide the nation’s mainstream families with access to affordable care (let’s leave quality out of it for the moment), they have failed miserably, though they were very profitable along the way, at least until Q1 2008. In 2008, the Milliman Medical Index – an estimate of the total cost for health coverage premium and out-of-pocket costs for a family of four – was $15,609. Now it is almost certainly above $17,000, more than the total income of more than one-third of American households.

To many health plan execs, these are simply market dynamics that must be accommodated through new product and service designs. I just attended a health plan conference where the overarching themes were the transition away from group to individual coverage, and the use of incentives and touch points like texting, email, and ergonomic Web interfaces to cultivate member competency, loyalty and retention.

These are important steps forward but, to me, the discussion tiptoed around the more glaring problem – costs this high have exhausted many purchasers’ ability to pay, and are rapidly shrinking health plans’ commercial market and profitability.

Several health plan execs at the conference pointed to the care delivery and supply sectors as the drivers of cost, but that is, at least in part, also an evasion. As payers, health plans can design incentives for more efficient care delivery. They can exert significant pressure on cost growth through many simple but demonstrably effective mechanisms: empowering primary care, leveraging market forces by making cost and performance transparent throughout the health care continuum, paying for results rather than for procedures.

But the harsh truth is that for about 10 years health plans, like all major health care sectors, have focused on anything but cost management for a simple reason: it has been in their short-term financial interests for health care to cost more. (Fully insured plans earn a percentage of total revenues. The large carriers who administer self-funded or ASO (Administrative Services Only) plans have raised administrative fees as claims costs have risen.) The problem is that the long-term consequences of that strategy have arrived.

* * *

It has been nearly a decade since, in November 1999,
UnitedHealth Group announced that they were curtailing most utilization management activities. Their announcements said that the complexities of pre-certification had actually increased overall costs. And, of course, the process was typically cumbersome and often idiotic, infuriating doctors and hospitals. In a sense, this moment signaled the transition out of the first major phase of managed care, at least as hopefuls like me thought of it, and into a period of relative dormancy.

Like other health plans, United did a poor job conveying to employers and patients health care’s enormous waste and financial conflict, or the seriousness of the approaches necessary to turn those problems around. The physicians’ rebuttal – that accountants and clerks, rather than doctors, were making health care decisions – was well received in the marketplace. Ultimately, nearly all health plans followed suit. The sun set on that era of aggressive medical management.

What remained unsaid, though, was that fewer controls over care, combined with a reimbursement system that rewarded more procedures, would accelerate overall cost growth, and that the health plans, whose profits rose in absolute terms as total revenues rose, could ride that wave. And that’s how it played out. Between 1998 and 2005, health care premium grew 60 percent, or 2.4 times as fast as in the previous seven years. As last week’s Robert Wood Johnson report notes, premium growth between 1996-2006 rose nearly eight times as fast as the growth in personal income.

* * *

One of managed care’s more hare-brained ideas was slotting primary care physicians (PCPs) as “gatekeepers.” This meant that, faced with a patient whose condition warranted referral to a specialist, the PCP would likely lose touch with that patient’s care. Inside primary care,
declining reimbursements translated to more patients, with less time available for any one patient. Meanwhile, specialists enjoyed increasing pay and were rewarded for doing more, though not necessarily the right, procedures. The continuity of care between primary and specialty physicians gradually eroded until it was all but forgotten. One of health care’s major check-and-balance mechanisms was lost, and costs skyrocketed.

The evidence that primary care should have primacy in any health care system is simple but compelling. Consider that about 30 percent of American physicians – family physicians, internal medicine physicians, pediatricians, and gynecologists – provide primary care, and that about 70 percent are specialists. In virtually every other developed nation’s health system, the ratio is approximately reversed. Their costs are about half ours, and their quality is typically as good or better.
Primary care’s effectiveness in creating better health at lower cost throughout a population is well documented in other health systems and in our own. Studies focused on the US also show that more access to primary care lowers mortality rates, but the same is not true for specialty care.

Sure there are other factors that make our costs higher – access to technologies, lifestyle issues, demographics, and a dozen more – but nothing has as strong or pervasive an influence as the straightforward relationship between the generalist and the specialist. If it is there, then controls for reasonable care are in place. Without it, as the Dartmouth Atlas has shown repeatedly, specialist and inpatient settings are rife with “unwarranted variation” – waste.

* * *

Onsite clinics are re-emerging into the American workplace at an astonishing rate. (Disclosure: I have a relationship with
WeCare TLC, an onsite clinic company based in Lake Mary, FL.) About one-third of Fortune 1,000 employers already have clinics in place, and surveys show that one-third more will have installed them by the end of 2010.

They are proliferating among jumbo, large and mid-sized firms throughout the country. Although some less-than-astute consulting firms have pronounced that they can only work for firms with more than 1,000 employees, they are scalable when properly deployed. Many employers with as few as 150 employees have implemented them successfully.

Onsite clinics typically provide comprehensive primary care. In most situations so far, they sit in front of, but are separate from, the employer’s health plan. By investing in the clinic, the employer reduces health plan expenditures. This arrangement works best when the employer’s health plan is self-funded. In fully insured plans, the savings would accrue to the insurance company rather than the employer. But even fully insured employers can benefit enough from occupational health savings and employee morale to more than justify a clinic.

The best clinics are complex machines. They

  • Fully empower the primary care physician by providing good decision-support tools, by allowing them to spend more time with each patient, and by encouraging them to collaborate with specialists on their patient’s downstream care. It is worth mentioning that doctor-based clinics often seek to replace the care available on the health plan network, while nurse-based clinics typically are about supplementing the health plan’s care.
  • Incorporate incentives that encourage physician performance and clinic use by employees and their families.
  • Use a full complement of internal health IT tools – health information exchange, data repositories, analytics to identify patients with risk, analytics to conduct provider profiling, electronic health records, decision-support, internal performance monitoring – to manage clinical and administrative processes, as well as external tools – Web-based scheduling, personal health records, incentive and engagement programs, and linkages to consumer-facing Health 2.0 sites – that help patients become more involved in and aware of their own health and care.
  • Develop creative purchasing arrangements for high cost items like drugs, labs, and equipment.
  • Offer onsite health/disease/lifestyle management using trained nurse coaches.

Onsite clinics create their impacts in at least four major ways. They:
  • Exchange higher health plan costs for routine care for much lower costs inside the clinic. For example, costs for physician visits, drugs and labs provided through the clinic can be a fraction of what they generally cost through the plan.
  • Provide face-to-face management of patients with chronic disease, who consume as much as 70 percent of a typical population’s health costs.
  • Facilitate the collaborative management of patients who need specialty and inpatient care.
  • Integrate personal health services with those for occupational health – workers’ compensation, human resources testing (like pre-employment screening, drug screening, Department of Transportation exams), retention and recruitment, and productivity (absenteeism and presenteeism).

Not all clinic firms are created equally of course, and some have much better medical management models (and performance) than others. Most – but not all – I’ve encountered so far incorporate most of these elements.

But the effectiveness of onsite clinics is also related to their convenience and to the trust they’re capable of engendering in patients. These characteristics allow them to become fully-realized medical homes, places that patient feel comfortable turning to for care at any time, and places, to borrow NCQA President Peggy O’Kane’s phrase, where the clinicians are thinking about the patients, whether or not they’re in front of the doctor.

In its most basic terms, a clinic is really borne out of a covenant between an employer and a doctor, using the clinic firm as the vehicle, to do an end-around on the health plan. (Because effective clinics reduce health service utilization throughout the continuum, health plans may feel that they are, in part, disintermediated by them.) The employer pays the physician more to become more involved with each patient in the clinic and everywhere else that care is needed. In return the employees and their families receive better quality care at lower cost.

But in my experience, employers investigating a clinic want to understand why, structurally, a clinic will improve care and save them money. The decision to implement is directly tied to their experience that, for whatever reasons, the health plan is NOT going to help them reduce costs. They understand the reasoning that primary care, delivered from the clinic platform, will produce better results.

The explosive growth of onsite clinics is sensible. Within the twin dynamics of high cost health care and an economic downturn, they reduce risk and cost, and return a solid return on investment. They create dramatic improvements in both quality and cost – most report relatively rapid savings of 15-30 percent and reductions in annual cost growth – by delivering preventive, primary care, chronic disease management and acute care coordination services that impact both personal and occupational health.

* * *

Over the last couple years, CIGNA has emerged as a hotbed of innovation. At the conference a couple weeks ago, Ingrid Lindberg, who as CIGNA’s Chief Experience Officer leads its member communications efforts, gave a terrific talk on their efforts to create clearer and easier communications for its members and target markets, leveraging modern design and Web-outlets like YouTube, Facebook and Twitter. The other health plan representatives in the room were clearly impressed.

And then I spoke to a national authority on wellness/prevention programs, who volunteered that CIGNA had come very far and was perhaps the most advanced health plan he’d seen in its implementation of wellness/prevention.

But it is CIGNA’s clinics that seem the most telling. In 2008, CIGNA opened clinics for its own employees in 4 Eastern locations. Now, in 2009, it encourages employer clients with 1,000 or more employees to implement these structures.

Because clinics are such powerful platforms that integrate a wide variety of health care functionalities, this move could be interpreted as saying two very important things about CIGNA’s leadership and strategy.

  • First, it suggests that CIGNA has broken from the conventional thinking among health plans and decided to pursue actions that can significantly drive down overall claims costs. 
  • Second, it suggests that CIGNA has decided to back the primacy of primary care, and could create financial incentives for primary care coordination that would be available to community-based PCPs.
If CIGNA were indeed pursuing these paths, it could optimize its clinics’ effectiveness through modifications in its health plan designs, creating strong efficiencies in the market, and reducing claims costs and premiums for its fully insured and self-funded clients. If it’s pricing became sufficiently differentiated from other health plans who do not have these mechanisms in place, it might capture tremendous market share from other plans. If it could reduce cost enough, it might even produce new products that are affordable again to employers who have been priced out of the market by the old system.

If CIGNA paid primary care physicians more to spend more time with patients and to become engaged in their downstream care, it could trigger the boost that primary care needs. Providing leadership on this issue could begin the healing that primary care so desperately needs, and provide reason again for medical students to become generalists. The empowerment of primary care, and the hunger of PCPs to be allowed to practice more capably, could amplify CIGNA’s quality/cost management efforts.

These were such tantalizing prospects that, rather than simply speculate, I called and spoke with Jeff Kang, MD, CIGNA’s Chief Medical Officer. Dr. Kang told me that, three years ago, CIGNA engaged in an enterprise-wide strategic effort that resolved to change many aspects of its business to optimize service for their customers. I’m paraphrasing here, but he said, “I know many companies will tell you this, but in our case it is true. We are not simply reacting to the crisis. We were determined to make an effort to become the best health services organization possible.”

Dr. Kang confirmed that CIGNA will aggressively pursue its onsite clinic effort, that they do see primary care and medical homes as key to creating improvements, and that they have many plans in these and other areas. He emphasized that primary care was only one of many efforts.

The proof will be in the results, of course. It is more than possible that other major health plans are headed in equally innovative directions, and that I simply am unaware of their efforts.

But, so far, CIGNA appears to be sincere, focused and far ahead of other plans in creating a new, very powerful model of health care delivery that does actually heed the lessons of the last 20 years.

If they, or any health plan with similar aspirations, succeed, they will take the market and change the ways all American health plans operate.

And that would be good news indeed for us all.

About Brian Klepper

Brian Klepper is a health care analyst, commentator and a Principal in Worksite Health Advisors.
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