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Launching a Payer Venture and Innovation Group: Options and Trade-Offs By Ezra Mehlman

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Spurred by the migration to new payment methodologies and a rapidly evolving competitive landscape, many managed care companies have launched venture and innovation programs. This article provides a high-level evaluation of the universe of model options accessible to payers who are interested in such programs.

The past five years have been a time of great uncertainty for health plan executives. Continued pressure on medical loss ratios, the migration to new payment methodologies, a rapidly consolidating competitive landscape, and sweeping uncertainties surrounding the individual market have combined to form a perfect storm, rendering the status quo untenable. In this frenzied environment of dwindling margins and regulatory confusion, managed care companies have begun to find new growth opportunities by experimenting with investment and innovation programs, or accelerators.1(superscript?)

Based on earlier work,2(superscript?) this article provides a high-level evaluation of the universe of model options accessible to payers who are interested in launching such programs. It draws on the perspectives of a number of nationally renowned experts in the field from several organizations at the forefront of innovation. One such organization is Horizon Blue Cross Blue Shield (BCBS) of New Jersey. Minal Patel, Senior Vice President and Chief Strategy Officer of Horizon, offers the following perspective: “Given the pace of innovation spurred by the Affordable Care Act and the flow of capital, Horizon recognized the need to work closely with entrepreneurs who are building capabilities required for us to continue to fulfill our mission which is to provide access to high quality, affordable healthcare with superior member experience (the triple aim). As such, we clearly defined those capabilities that we need to succeed and then began to socialize these needs with all entities that are in the ‘deal flow.’ Clearly articulating what these needs are must be a foundational task for any strategic investment arm so that we may efficiently source deals that fit our needs and more importantly, quickly decide upon which deals we will pass.”

Goals of Strategic Healthcare Investing

Payers generally seek to achieve 4 principal goals when considering whether to undertake investment and innovation opportunities (Figure 1):

  1. Financial returns. Many organizations establish investment initiatives to drive financial returns. By taking equity stakes in early- and growth-stage companies and growing revenue through customer relationships, payers can generate new sources of income that are not subject to the reimbursement pressures affecting the core business of reimbursing medical care.
  1. Operations improvement. Innovation programs offer payers a means to identify a pipeline of promising companies that can help them upgrade operations, reduce medical costs, improve outcomes, and expand access to care.
  1. Brand enhancement. Investment programs can serve as vehicles to enhance brand integrity in an increasingly competitive landscape through differentiation and expansion of market reach.
  1. Foster innovation. Perhaps most significant, commercializing new ideas enables organizations to cultivate an innovation- focused culture. Rob Coppedge, president of Direct Health Solutions at Cambia, describes his organization’s multi-pronged objectives in operating a strategic investing program: “Cambia views strategic investing as a tactic to advance its corporate mission to create an economically sustainable healthcare system organized around the consumer. We are not investing to prop up the current, broken healthcare system…. So while financial return is expected from each investment, we also look closely at the impact our companies are having on the transformation of the healthcare experience for consumers.”

Please read the entirety of the article at http://www.ajmc.com/journals/AJAC/2016/2016-vol4-n2/Launching-a-Payer-Venture-and-Innovation-Group-Options-and-Trade-Offs

Spotlight: Interview With Jet Health CEO – Jim Glynn

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photo_jglynnPrior to Jet Health, Jim was the President and CEO of Amerita, Inc., a leading provider of specialty infusion services which he founded in 2006 and sold to PharMerica, Inc. in 2012. From 2009 to 2015, Jim also served as a Director and member of the executive committee for the National Home Infusion Association.

Prior to Amerita, Jim held senior leadership positions with several national specialty infusion and home health organizations including Apria Healthcare, Gentiva Health Services and Coram Specialty Infusion Services. Jim holds a B.S. degree in Marketing from Northern Illinois University.

What is your vision for the Jet Health platform?

jet health logoI’d like Jet Health to become a company that makes a difference in the home health marketplace.  In my eyes, that means that we need to have sufficient scale. We need a strong service culture that values the customer experience. Jet has to be able to attract experienced clinicians in the marketplaces in which we compete in order to provide outstanding care to our patients. We need a culture and an environment that attracts those people and gives them reasons to want to stay. Our system and information platform must provide data to our customers on outcomes, patient satisfaction, and cost of careas well as management tools to help run the business efficiently and challenge the status quo.  We, of course, need to do all those things in a fully compliant manner. If we focus on these success factors, I believe we can make a difference in the lives of our patients and that Jet Health can become one of the top home health companies in America.

What attracted you to the home health industry after your experience building a home infusion platform at Amerita?

When I left Amerita last year, I knew I wanted to build a new business. I had three criteria I looked to satisfy in the new venture: it needed to be in the healthcare service field, allow me to leverage the relationship capital and experience I had built in specialty infusion, and alignwith current healthcare trends (including improved outcomes, reduced cost, and increased access). The home health industry fits each of those criteria and it’s a market I know well from my days at Gentiva Health Services.

I expect that leveraging the lessons learned building Amerita will help make better acquisition decisions, direct our growth initiatives to deliver expected results, better leverage our balance sheet to more efficiently deploy capital, and help us forge important strategic partnerships with new key referral sources. I also have the opportunity with Jet Health to work again with Tom Flynn, a Managing Partner with SV Life Sciences, who backed me previously at Amerita.

What challenges do home health providers face in today’s market?

I believe running a compliant operation and caregiver recruitment / retention are the two big challenges for home health providers today. CMS has built a new payment model that penalizes poor service providers while rewarding those that provide excellent care and outcomes. Additionally, CMS will begin to implement a prior authorization process later this year that will tighten control on the flow of in-eligible patients. Successful providers need to stay current with CMS policy changes and tightly manage their operations from intake to reimbursement in order to maximize their reimbursement opportunities. On the recruiting front, caregivers are our product. Successful companies need to have multi-tiered strategies to recruit talent to provide quality patient care in order to respond to the growing need for clinical caregivers as the population continues to age and more healthcare services are provided outside the hospital.

Various health settings are increasingly look to incorporate technology to enhance value and improve the patient experience. What role do you see technology playing for Jet Health?

We see several opportunities for technology to enable the home health to improve the patient’s experience. We have embraced telemedicine-enabled patient care for frequent hospital re-admission diagnoses to reduce hospital re-admissions and serves as a potential application to improve deployment of services to our caregiver network.

What occupies your time outside of the office?

When I’m not working, I spend time with my family and often lose graciously at golf to my wife Janet. I am a novice “birder” and also enjoy cycling the coastline of southern California.

Applied Pathways Names New CEO

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Applied Pathways LLC today announced that healthcare industry veteran Steve Lefar has assumed the role of Chief Executive Officer and will join its Board of Directors.  Founder and current CEO John Feldman will continue in an operating role as Chairman of the Board.  Read more.

 

Key Points of Michael Dowling Talk at HEP Annual Meeting

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Michael DowlingMichael J. Dowling is President and Chief Executive Officer of Northwell Health (formerly the North Shore-LIJ Health System). With 21 hospitals, more than 450 outpatient physician practices and a full complement of long-term care services, Northwell Health is one of the nation’s largest health systems, with nearly $8 billion in annual revenue. Michael served in New York State government for 12 years, including seven years as state director of Health, Education and Human Services and deputy secretary to the governor. He was also commissioner of the New York State Department of Social Services. Earlier this month, Mr. Dowling spoke to the audience of the HEP Annual Meeting about issues affecting large hospital systems, the healthcare industry in general, and the Hofstra Northwell School of Medicine.

We’ve highlighted a few key passages below. A link to the full recording is available here.

On the unforeseen consequences of success in healthcare:

For anyone here who knows anybody with a heart disease of any kind, back in the 1970s there was not much anyone could do for you other than tell you to go home and rest. And just imagine what we can do for you today. I will argue that what we are suffering from these days is not a failure in healthcare but a crisis of success. We have been able to do so many things to keep people alive for so long that we now have a real problem figuring out how to afford it. Part of the problem with the cost of healthcare is that we can do a lot more than we could ever do before. Because of the success in healthcare people are living longer, therefore the costs go up. Therefore we’re suffering from success not failure.

On straddling two contradictory payment methodologies: 

The new model and the financial incentives are happening in some places but not others. You’re living in this world of paradox where you have a lot of your business working one way – fee for service – and other parts of your business working the very opposite way on value and some other parts of your business doing both at the same time. Just think of having a large workforce where you’re trying to get people to understand how to deal with that ambiguity where the incentives are aligned in one place but not aligned in another place.

On the challenge of local change management:

Change in some environments is so difficult because we are the engine of economic growth in many communities in New York. We are the biggest private employer in New York State. [In some of] those communities [we are] the only source of economic development. It’s the only employer, only place for jobs, there is nothing else. In broad swaths of that community other than healthcare. When you talk about why doesn’t this happen or that happen why don’t we close this? Because you’re dealing with people’s livelihoods in those communities. That’s why the politics of healthcare and healthcare change is so dramatically difficult. Brooklyn is going to be a wonderful example of this. Watch what is happening there over the next 12 months. This issue is going to percolate to the top in the press in New York.

On the key pain points and opportunities for large health systems:

  1. Growth, scale, and integration: It’s one thing to have a multiplicity of entities as part of an organization, but you’ve got to integrate them so they all work together. We have 22 hospitals now. We work as if they are all one. They’re all integrated with the same metrics, same leadership across the board. All back office functions are consolidated. I like to say that we run the organization as a business – it has a mission, but you’ve got to run it as a business.
  2. Care Management Infrastructure: Big organization in the healthcare space has to be very good at building a CMI so you can manage people’s care along the continuum. It’s not episodic care anymore. You’ve got to be able to manage the person’s transition and navigate it through the whole process of care from beginning to end.
  3. Quality Outcomes: We have to get better at figuring out how to compete on outcomes. What I mean by outcomes is it is not process. Just because you leave a hospital alive after surgery doesn’t automatically mean it was successful. What we should be measuring over time for example is if you leave the hospital after having hip replacement that you can return to work as a contributing member of society within a certain period of time. Not just 30 days after you leave a hospital. We need a whole new definition of what quality means.
  4. Consumerism: We’re a service industry. We need to be better about the consumerism movement. With all of the new technologies out there, the consumer will have much more access to information.

On disrupting the medical education paradigm:

We started from scratch. We had no history. We did the curriculum very differently. We went around the country and overseas and looked at where the most innovative things were going on in medical education. Remember we have a clean sheet of paper. I didn’t have bureaucracy to break down. I wasn’t a Harvard where you have 100 years or more of history that you have to tear apart before you can do something. We came up with a curriculum that does a couple of things:

  1. In most medical schools traditionally, you spend the first two years in classwork and you spend the second two years in a tertiary campus. We decided in the first nine weeks every medical student is trained as an Emergency Medical Technician (EMT). They are now a licensed entity in the state of New York. We now put them on our ambulance service (because we have the largest medical transport system on the east coast). We have them on the ambulances working with other EMTs and going into people’s homes from Day One. If they go into a person’s home in the ambulance and the patient needs to be picked up and taken to the hospital, then the medical student follows. If they have to go to the operating room, they will follow [the patient] into the operating room. They get hands on direct contact with the actual receiver of the care from Day 1.
  2. We have no lectures. It’s all small group sessions. We have no multiple choice questions or exams. We test in a simulation center. We have one of the largest simulation training centers in the US. So every 12 weeks they have to go into the simulation center just like pilots who are trained to fly planes. There is a scenario set up based upon their learning and they have to go in and demonstrate that they can actually do it. The school doesn’t encourage memorization. You don’t need to memorize anymore. All you have to do is Google it. What you need to be able to do is analyze, diagnose, understand, know how to do things rather than memorize.
  3. Everything is in teams.

The result has been that we now get between 8,000 and 9,000 applications a year for 100 slots. In the tests that they have taken so far, they come out way ahead of most other schools. Of the 16 schools in New York, we are now ranked number three in terms of the quality of the students, and we’ve only been in business seven years.

On teaching millennials:

They learn differently, assess differently, analyze differently, and appreciate differently than most of us in this room learned. The biggest challenge in any industry and especially in healthcare is changing how we create a learning experience that is different from what we’ve done in the past. I like to tell people that once you get your degree these days that you begin to forget what you learned immediately and relearn. In our organization, we put people into positions that they’ve never done before. Every administrator in every one of our hospitals has never before run a hospital. I would not hire a person that has been running a hospital for 15 years because I’ll get a hospital from 15 years ago. I won’t get a person with 10 years’ experience, I’ll get a person with one year of experience 10 times.

SCIO Health Analytics Announces Strategic Relationship With Lockton Benefit Group

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Lockton Benefit Group today announced a material investment in its InfoLock® data intelligence platform. The enhancements to the platform improve Lockton’s ability to partner with their clients to identify health trends and respond to areas driving the cost of health. Lockton uses InfoLock to advise employers on developing comprehensive health management programs to address the continuum of health risks across their working population. Read more.