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…

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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

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• 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

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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

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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

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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

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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

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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

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Key Takeaways

Know Your Market

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Providers

Employers

Brokers

Patients

Payors

Competitors

Market

Know Yourself

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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

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Questions