Archives for February 2015

In the News: Entrepreneur Features Tom Main on New Health Market

main-entrepreneur

Source: REUTERS | Carlos Barria via Entrepreneur

Tom Main, leader of the Oliver Wyman Health Innovation Center, contributed the article “The New Health Market May Be the Single Greatest Business Opportunity of Our Lifetimes” to the February 26 online edition of Entrepreneur. In it he lays out how, in the first half of this year alone, venture capitalists invested $2 billion in health tech and startups and the influx of investment capital is not expected to slow down.

He explains how the marketplace is ripe for change, with studies showing about 40 percent of the $3 trillion the U.S. spends on healthcare each year could be avoided. At the same time, he notes, the user experience of healthcare is falling behind. “The upshot of this shift is the emergence of Health Market 2.0,” he writes, “as healthcare transforms from a supply-oriented industry to one where consumers can take control over their own health.”

Three movements will define this new market: quantified self, pricing transparency, and smart care teams. Main further shares insights gleaned from conversations with incumbents and innovators on how industry players can survive this significant sea change. Says Main: “The creation of a new model of health and healthcare is perhaps the greatest single business opportunity of our lifetimes, both for innovators and incumbents.”

Proof Point: Partnering to Win on Medicare Prescription Drug Plans

patientcentered_tabIn many ways, Medicare Part D, the program that provides seniors with prescription drug coverage, has been a great success. For the nearly half of Medicare beneficiaries who have enrolled, it has provided medications at relatively low cost; the 2014 average monthly premium (weighted to reflect enrollment) is just $41.23. And costs to the taxpayer have been surprisingly low. In fact, net federal spending on Part D in 2013 was a stunning 50 percent less in Fiscal Year 2013 than the original Congressional Budget Office projections. Yet, while the program has essentially been a win for consumers, it has been a gauntlet for plans. Oliver Wyman Partner Jim Fields explains in “The Part D Dilemma” why it can be so hard. He shares below why scale matters in the consolidating marketplace:

For insurers, and especially for smaller health plans, Part D is a difficult business, dominated by a handful of players and marked by extreme pressures on pricing, in which it is hard to achieve even the limited margins permitted by law. Achieving economies of scale is the critical success factor as regulatory and compliance issues place a disproportionate burden on smaller PDP plans (see chart below). Small plans generate so little revenue that they are hard pressed to cover vendor costs (and certainly aren’t getting the most favored drug discounts and PBM rates). It is crucial to find a way to drive greater scale. There are a number of alternatives but they disproportionately require partnership: PDP plans can merge or collaborate to spread their PDP costs over a larger base. They can buy services from another PDP plan (or sell their own services to another PDP). They can form consortiums. The appropriate choice will depend very much on the circumstances the health plan finds itself in.

NYC-MKT08001-055-Part-D-BLOG_ex3But if this challenge is not met, the PDP business will become increasingly risky and untenable for small and mid-sized players over the next few years. The high fixed cost, low margin aspect of the Part D business clearly lends itself to economies of scale as a key success strategy. For new, small or geographically constrained plans the capabilities and timeframes needed to achieve the necessary scale on their own can be an insurmountable hurdle. Finding a partner creates a viable path to jump the scale curve. While outsourcing arrangements are a possibility and have been shown to work in some settings, they struggle from the fact that the contract holder still must maintain many of the regulatory compliance duties and several of the go-to-market activities.

The high fixed cost, low margin aspect of the Part D business clearly lends itself to economies of scale as a key success strategy.- Oliver Wyman Partner Jim Fields

[Read more…]

Slide Show: Extreme Price Sensitivity Defines Medicare Part D Landscape

Smaller health plans trying to compete on Medicare Part D are finding the deck stacked against them. One of the biggest challenges is the extreme price sensitivity of the Prescription Drug Plan (PDP) market, as illustrated by the slide below from Oliver Wyman’s new report “The Part D Dilemma.” The analysis by our government programs team shows that in June 2014, half of individual PDP enrollees belonged to plans with a monthly premium below $40. And 80 percent of the Medicare age-ins who selected individual PDP plans in the first six months of 2014 chose plans with monthly premiums below $30. This trend is exacerbated among Basic plan enrollees and as a result of federal rules that create strong incentives to maintain low premiums. “It should be no surprise that the PDP marketplace is competitive,” notes team leader Jim Fields. “Congress designed it that way.” Learn more here.

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Point of View: Why It’s Important to Play in the Medicare Part D Market

Oliver Wyman Partner Jim Fields

Oliver Wyman Partner Jim Fields

Medicare Part D presents a bit of a conundrum for health plans. It’s in high demand and a gateway to larger opportunities, yet significant profitability challenges make it difficult to run solo. In the new paper “The Part D Dilemma,” Oliver Wyman Partner Jim Fields describes why Part D is so difficult and how health plans can minimize the risk and maximize the benefit of remaining in this essential line of business. Three questions for Fields below:

  1. Why should health plans offer a prescription drug plan?
    Part D is an essential tool in establishing a relationship with seniors—a relationship that can in the long run be used to introduce them to a whole array of higher-margin products such as Medicare Advantage and Medicare Supplement plans. Remember, Part D is the only commercial product in Medicare that requires seniors to make a decision or face a penalty. For many, it is their first real contact with Medicare and the first time that they need to ask what they need out of Medicare and what other products they might require. In our research, 73 percent of seniors who buy a PDP plan buy some other product from the same payer. No one can pass up that kind of marketing opportunity.
  2. Why is Part D so hard for smaller health plans?
    An under-sized, free-standing PDP by itself is a very difficult business to be in. Part D plans don’t bring in much revenue—only about $75 per member per month, compared to $750 per member per month for Medicare fee-for-service. But it costs roughly as much to run a PDP plan as to run a Medicare Advantage program. You have similar regulatory costs, similar legal and actuarial costs, similar customer service costs. But you only have a dime to pay for them, where a Medicare Advantage plan would have a dollar.
  3. Is that why you say that health plans need partners for Part D?
    Yes. There are a number of alternatives to drive greater scale but they disproportionately require partnership. For example, Humana partnered with Walmart on a Part D plan. That yielded access to drug sourcing, distribution methods, and preferred networks, plus the benefits of an instantly recognizable name. That kind of partnership is largely out of reach to individual PDPs, but there are real possibilities for health plans that band together in coalitions.

Part D is an essential tool in establishing a relationship with seniors—a relationship that can in the long run be used to introduce them to a whole array of higher-margin products. – Oliver Wyman Partner Jim Fields

Health Insurers, Retailers Partner to Change Consumer Behavior

Source: UnitedHealthcare

Source: UnitedHealthcare

Earlier this month, UnitedHealthcare’s Wisconsin subsidiary announced a new program with Roundy’s, a regional grocery store chain. The program, titled Healthy Savings, provides different discounts every week on a variety of healthier foods. This follows other similar partnerships: HumanaVitality and Walmart launched a national program to incentivize people to eat better through savings on healthier foods, while Anthem works with a number of retailers to provide a range of discounts on healthy living products and services. Oliver Wyman Principal Graegar Smith, who works at the intersection of healthcare and retail, offers the following take on how to optimize these promising new partnerships:

By working together, health insurers and retailers have an opportunity to achieve mutual benefits: reduced healthcare costs and increased store traffic. At the same time, enrollees can potentially win with improved health and wellness. But to effectively create these upsides, health insurers and retailers must constructively engage not just consumers but also healthcare providers and the food manufacturers.

A closer look at United’s new Healthy Savings program highlights several appealing features. The program, as described, allows enrolled consumers to choose the products they want ahead of time, presumably at home or using a mobile app. Consumers then shop for these items at their local Roundy’s banner store and present their Healthy Savings membership card at check-out. The discounts are taken off automatically. The program also provides additional discounts on produce or fresh products for buying certain discounted packaged food products. Surrounding the program is information on general nutrition and how to prepare foods in a healthy way.

As programs like this become more common, partners can ensure success with these 7 steps:

  • Engage healthcare providers. Providers’ recommendations are a powerful tool and can encourage consumers to use the program. Payers and retailers must engage in a meaningful amount of outreach and education with the provider community to make sure they fully understand program details, particularly the guidelines used to determine eligible items and the dietary standards being followed for certain conditions like diabetes or high blood pressure.
  • Tailor designs for each target consumer segment. Payers and retailers need to identify all the unique segments that exist and assess where the potential impact is greatest, both from the consumers’ perspective as well as the various program partners. Ask what’s going to improve customer retention, increase overall shopping basket size, or affect profitability.

But to effectively create these upsides, health insurers and retailers must constructively engage not just consumers but also healthcare providers and the food manufacturers. – Oliver Wyman’s Graegar Smith

[Read more…]

HealthBuzz: The Week’s Trending Topics in Health & Life Sciences

In Fort Worth to launch the #bluezonesproject with @mayorbetsyprice @fitworth @texashealth #Foxnews:

Proof Point: Iora Health CEO on Demonstrating Primary Care Impact

Iora Health CEO Rushika Fernandopulle

Iora Health CEO Rushika Fernandopulle

One of the boldest examples of what tomorrow’s primary care could look like is provided by Iora Health, an entrepreneurial startup founded in 2011. Iora is not a matter of tweaking traditional primary care, says CEO Rushika Fernandopulle. Instead he is trying to completely redesign it with a focus on coordination, coaching, and strong patient relationships. In the following excerpt from an interview with Tom Main, founder and leader of the Oliver Wyman Health Innovation Center, Fernandopulle describes how his team is having an impact on patient satisfaction and clinical outcomes. Read the full interview here.

The price of entry, I think, is patient engagement, and we have patient satisfaction that’s off the charts. We use a thing called Net Promoter Score to measure how people like the practice. It asks how likely you are to recommend us to a friend or colleague on a 0 to 10 scale. You take the people who love you and the people at the low end of the scale. You subtract them out and get a net number.

proof-point-iora-healthAirlines throw parties when they break zero. Most healthcare institutions score in the 30 to 40 percent range. Cleveland Clinic scores 51 percent. The best places in the country, the Amazons and Zappos, score in the 80s. We consistently score in the 90s.

So patients love it. And our clinical outcomes are much, much better. Take hypertension. We know for a fact we need to control people’s blood pressure. When people walk into one of our practices, only 55 percent of them with hypertension are under control. It’s embarrassing! And that’s the national average. Our number is above 90 percent.

And then there are the economics. We get independent academics to take each of the people in a practice, match them to someone who’s not in the practice, and then follow the true trend lines out. It’s what CMS does to evaluate their demos. Short of randomizing people, which is tricky, that’s the best way to do it.

[Read more…]

Slide Show: A New Role for Pharma in Healthcare Value Chain

The illustrative example below from the deck of Oliver Wyman Partner Mark Mozeson shows how drugmakers can combine a range of services to meet the needs of patients, providers, and payers simultaneously in a holistic, integrated fashion. “We believe basic wraparound services will continue to be market entry requirements for any new drug,” he explains. “Value solutions are different. They offer pharma a pathway to a new role in the healthcare value chain, providing new opportunities for differentiation, especially for early movers, and leading to superior customer experience, patient outcomes, and value capture by pharma.” More on pharma’s “three paths to value” here.

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In the News: Esther Dyson Improves Health One Community at a Time

medifuture_wellville_logoTech pioneer, journalist, and venture capitalist Esther Dyson spoke at last fall’s MediFuture event shortly after launching her Health Initiative Coordinating Council (HICCup). After a nationwide search, five communities were selected to participate in the Way to Wellville challenge aimed at producing visible improvements in five measures of health and economic vitality over five years. HIT Consultant Contributing Editor Erica Garvin caught up with Dyson last week about how the cross-country initiative is “the beginning of something transformative for health.” Read the full article here. An excerpt:

Dyson is set out to build a microcosmic model of how to fix the U.S population’s greater health problems, not simply by examining how to improve the health system or enhance education, but also by devising effective efforts and ideas born out of internal resources as opposed to external pressures. HICCup’s aiming to take on large-scale problems with a small-scale approach—or as she describes it— one community at time.

Still, how will the Wellville Five’s efforts differ from what’s already been attempted? After all, Michelle Obama’s efforts to provide better lunch choices in U.S schools have been met with scrutiny, ill-appetizing photographs, and snarky hashtags from disgruntled teens. But Dyson says the difference will be in what the data can teach them on a smaller scale when it comes to devising better methods and supports that could later be applied to the greater population over time.

“We’re not just promoting healthier choices,” she said. “We are helping schools to construct kitchens and buy equipment, to change procurement practices, to train kitchen workers to cook, and not just pour things into and out of vats. In each state/region as well as nationally, there are regulations around school food, and how to pay for it, which make change difficult.  Those are among the challenges we will help the communities to address.”….

Currently, the healthcare world is abuzz with excitement about how wearables will improve health. However, Dyson brings up a good point in that technology can only take you so far. What good is a Fitbit, if you don’t have a safe and affordable place to exercise? What value does PHM software hold without meaningful actionable strategies to improve outcomes? So, Dyson sees the Wellville Five as the perfect place to test technologies and services that could make a difference, and she and Brush welcome the opportunity to talk with those who think they have something to offer to the project. “The whole purpose is to provide evidence and to inspire other communities to follow our lead – at least along the paths that prove successful.”

HealthBuzz: Google Health Search, Anthem Cyber Attack, Brain Meds, Precision Medicine, Vaccines +

healthbuzz1Google is working with physicians at the Mayo Clinic to provide accurate descriptions of medical conditions in search results. Amit Singhal, Google’s vice president in charge of search, explained in USA Today the motivation behind the program:

When you’re a parent in India or Brazil or sub-Saharan Africa, and your child is sick and all you might have for help is your smartphone, this information might really matter.

In response to concerns over its recent cyber attack, health insurer Anthem posted an FAQ and a personal note from President & CEO Joseph Swedish on its website. Swedish shares:

Anthem’s own associates’ personal information – including my own – was accessed during this security breach. We join you in your concern and frustration, and I assure you that we are working around the clock to do everything we can to further secure your data.

Ryan Watts, director of neuroscience at Roche’s Genentech division, in Forbes’ “The Coming Boom In Brain Medicines”:

I do think that it’s early days. There has been a fair amount of overpromising in neuroscience drug discovery. We have to understand there are going to be a large number of failures and little incremental victories that will start to build, and then you’ll see things cracking open.

Cloud-based EHR vendor Practice Fusion has released an online patient check-in tool, reports MedCity News. Said Practice Fusion Founder & CEO Ryan Howard:

We will eliminate the need for our patients to fill-out hundreds of millions of pages of paper forms over the next year, and more importantly, make sure that this valuable face-to-face time is devoted to talking with a patient about exactly what that patient wants to discuss about their health concerns.

More trending topics: