Podcast Episode Transcript: Payer-provider collaboration: What’s in it for consumers?

With L. Gordon Moore, MD

Gordon Moore: Hello, and welcome to the 3M Health Information Systems Inside Angle podcast. My name is Gordon Moore, and I’m your host. Today, I’m talking with Mike Fay. He’s the Vice President for Health Networks and Innovation for Wellmark. Wellmark is a Blue Cross, Blue Shield insurer in Iowa.  Mike is involved in numerous strategic initiatives including innovation around products, providers, care management, trend management, strategic consulting with key groups. In addition to that, he provides strategic direction and leadership to network economics, network innovations, care innovation, consumer transparency, and provider contracting. Mike, as I think about all of those things that you do, it opens my eyes as I come from being a family medicine doctor and from the provider’s side of health care, there’s so much that health insurers do. So, welcome to the podcast, and let’s talk about what health insurers do in the U.S.

Mike Fay: Thanks, Gordon, and thanks for having me on the podcast.

Gordon: So, Mike, some folks will look at health insurance and think, “Oh, we should just get rid of insurance. It’s just adding complexity or taking dollars off the top and not letting those dollars flow to care delivery.” So, what’s the point of health insurance in the U.S.? Why does it exist and how does it work?

Mike: It’s a great question . So, I would say similar to what people think about with other insurance whether it’s your car insurance or your home owner’s insurance, you are buying insurance to protect yourself against health related injuries, illness and diseases. The role the health plan really plays is kind of that intermediary or go-between, so the employee or the member pays their premium, and in return, what they get is customer service. They get access to the benefits. We have a team of people that work with the providers to establish how much we’re going to pay for the services. They get the determination of medical appropriateness to make sure the services are safe for the member. The role of the health plan is really to help bridge that gap in understanding between an employer who’s paying a portion of the healthcare cost, the members that are being covered by it, and the providers who are delivering it.

So, there’s a lot of pieces to it, but in the end, I think you look at it and say, “What people would like is—they would like it to be hassle-free. I think they would like to have a better understanding of what things are going to cost so they can make more informed decisions, and I think over the last several years, health plans have made a lot of improvements in providing information so members are able to make better decisions about where’s the best place to go to have this service. We have programs that are centers of excellence called Blue Distinction Specialty Care. So, for knee and hip replacement, we can tell you the places with the best outcomes and a lower overall cost for you so people can go to places and get the best outcome possible. There is a lot of conversation about doing direct contracts. Like anything, volume and scale do matter. We adjudicate millions of claims every year. We set up millions of members’ benefits. So, there is an efficiency that comes with that scale. Trying to do it one employer at a time would be very challenging for both the employer as well as the providers that they would utilize.

Gordon: I think about the complexity of if I’m out there as a consumer trying to purchase healthcare services directly understanding whether or not an offered price makes any sense given the complexity of healthcare pricing and the lack of transparency around that. And so, how do I know if this is appropriate, if this is right, and that to me sounds like one of the natural places where health plans help rationalize and normalize pricing and negotiate on behalf of employers and those who get contracts through them. So, that’s the key piece, and in addition to that, there’s a vetting process that health plans use to make sure that the clinicians who are contracted with them aren’t, to be blunt about it, charlatans or bad actors. So, there are a bunch of roles, I think, that are not immediately obvious, but then make a lot of sense, and I think Wellmark has taken that to a really high level in terms of thinking about how to understand quality and to make sure that the providers working with them are focused on maximizing quality, minimizing unnecessary utilization of healthcare and things like that. What kind of programs do you have in place, and where is Wellmark going with that in the future?

Mike: You bring up a great point. It all starts with how do you verify that the people providing the healthcare services are appropriately trained, licensed, etc? So, in order for a physician, a social worker, a hospital, any type of healthcare provider to be in the network that Wellmark has built and maintained, they have to go through an extensive credentialing process and then they are recredentialed at least once every three years. So, you’re constantly validating that they have a current license adnd they’re keeping up with their continuing education. So, from a patient’s perspective, you know the providers in our network meet those minimum requirements and are maintaining those educational requirements. Now that you have them in the network, I think it becomes the question of how do you determine the appropriate way to pay for the services they provide, to provide the right incentives, and to help them reduce some of the administrative challenges of the whole insurance healthcare delivery process.

Some of the things we’ve done is we’ve automated and put most of our credentialing in electronic formats so providers can go out if they move, change their phone number, add a new practitioner to their group. They can do all of that electronically. It can be done in more real time as opposed to the old days of paper and faxing. And then when we look at the world and talk about how we pay our providers, you want to make sure those providers have enough incentive and it’s aligned with what they’re doing. So, in our market in Iowa, we have one fee schedule that’s based on the CMS relative value units and Wellmark’s conversion factors, and all physicians get paid the same for the same service. Do they all charge the same for the same service? Absolutely not, but we’ve tried to say, “These people meet our criteria to be in the network. This is what we’re going to pay for this particular service, and you’re free to go to any provider and get that service and the cost to you will be the same.”

We think that’s an important step. And then within the last few years through our work with 3M and the use of their value index score, we’ve also been able to compute a value index score or what we call a “quality score” from the member facing side for all of our primary care physicians. It’s built on several different claims-based metrics like well child visits, cancer screenings. It also includes 3M’s potentially preventable events, suites like readmissions, preventable admissions, preventable ED visits, and we’re able to produce a score on a scale of zero to five that we can actually put on our member portal. So, a member could go out, look at a number of physicians in the state or in their particular geography, and see their quality score. They could see what the procedure would cost in total, and then with their benefits what it would cost them out of pocket.

There’s also the ability for a member to offer a rating on a physician like you would do with Yelp or TripAdvisor. And so, essentially we’ve tried to work to make information available to members so they can go out and see quality and cost all in one location which allows the member then to make informed choices about where they go or what services they have. When you think about the facility side of healthcare which would be hospitals, nursing facilities, home care, etc., it is very confusing to members because what they generally see in public settings or when they get a bill for services is what we would call “billed charge.” Currently for Wellmark’s Book of Business, we pay on average for facility services about 40 percent of that charge. So, in essence, the hospital is writing off 60 percent of what they’ve billed and accepting 40 percent as payment in full. This does not make sense to consumers. How can any industry write off more money than what they’re collecting and still be viable and make a return?

It’s very challenging when you get into the cost of healthcare to get people to stop looking at what charges are being billed and to try to focus on how much is actually being paid for those services. So, historically, I like to use the example of what it was like when you were buying a car. There was always a sticker price on the window, but there was also an invoice price that the dealer actually paid for that car, and over the last several years through various Kelley Blue Book or Edmunds or now TrueCar or all of these services, people can go in and know before they actually even purchase a car how much is it going to list for, how much did it really cost the dealer, what the best price. I would love to see health care get to that point. I think we are a ways away from it, but the direction we’re heading is how do you get the right information in the hands of the members in a way that they can easily consume it and then use it in their decision making about care and where they get their care. That has to be a push we all work on.

Gordon: Yeah. I remember when I was setting up my own private practice in Rochester, New York, and for the first time, figuring out my own fee schedule and thinking about how to do that. Each contract I had with a different insurer could potentially come in with a different payment rate, and the contracts each said, “We’ll pay you what you ask for or what we allow in terms of a payment, whichever is less.” And so, I thought, “Jeepers.” I want to ask for the moon because some people might pay something closer to that. It seems a little bit irrational, but to do anything less than that seemed kind of dumb. So, I realized that there were often big gaps between the book price and what I was actually going to get paid, and what I was actually going to get paid was quite reasonable for the most part, but woe to the poor individual walking in off the street asking, “What’s the list price for X, Y, and Z that I pay out of pocket?” It’s like, “Oh, no. You really don’t want to pay that because it’s a false number.”

Mike: And the other complication is generally if you’re going to have any type of a medical procedure, there’s maybe more than one healthcare provider involved. So, if you’re having outpatient surgery, there’s going to be a hospital or ambulatory surgery center. There’ll be a surgeon. There’ll be an anesthesiologist. You may have an assistant surgeon. There may be an image or a lab test done as well. So, for that one procedure, you could end up with five, six, seven different bills from those providers who all then get paid different amounts, and you try to look at it and say, “Why am I getting all of these?” That’s when consumers say, “How much is this really going to cost me?” Their interest is in what’s the total cost for everyone included in the process not what each individual part’s going to cost. It’d be like buying a car one piece at a time. The tires are this. The seats are this. So, that’s, I think, one of the challenges and one of the things that consumers continue to be frustrated about is no matter who they ask, everyone can give them maybe an estimate of the price for their service but not the price for the total service. Another case is if it’s an individual visit to your physician’s office and you’re going to do one lab test, it might be more realistic to do that, but a lot of services involve multiple people or multiple provider organizations, and that just adds to the complexity that we have today.

Gordon: So, I think about that rationalization of payment, and it brings me back to the early 80s, before CMS flipped to the designated payment around diagnostic related groups, the DRG payment for inpatient hospitalization. Prior to that, hospitals were billing for each thing that they did: the number of bed days, the intensity of the care delivery, each Tylenol tablet and the like, and in some sense, the rationalization was to say that health economists can predict a bucket of resources  typically appropriate for a certain kind of illness and severity of the illness and that that payment is acceptable and appropriate, and rather than nickel and diming every aspect, let’s bundle that payment and rationalize it. So, what I see in that is a health plan has the ability to rationalize some of the payment, take some of the minutia that can be very frustrating, and the way you describe that now in the outpatient or ambulatory surgery center, it sounds like we need more moves there. Is Wellmark doing things like that?

Mike: Yeah. So, on the inpatient side, we’ve been using a diagnostic related grouping methodology. We use 3M’s outpatient refined DRG, so I believe today there are 326 diagnostic categories. One of the things we really like about the APR DRG model is that inside of each DRG, there are four levels of severity: minor, moderate, major, and catastrophic. And so, you essentially end up with about 1,300 clinically-based categories. So, you’re paying for the conditions the people are being treated for and the procedures they’re receiving. You’re not paying the hospital for how many days they’re there, how many MRIs they had or how many hours they were in surgery. You’re trying to provide the right incentives, and the thing that we think makes the model work really well is there are incentives from a provider’s perspective. Providers are getting a fixed amount to provide the best care and do it as efficiently as possible because they get paid that one per case payment.

On the consumer side, if you’re an employer and you have a healthier population, the likelihood you’re going to have a lot more lower-level inpatients days, level ones and twos as opposed to an employer that may have a lot more fragile, older and complicated population, and they may have more threes and fours. Because our model is transparent, what we pay the provider is what we bill the employer. Those employers who have lower risk patients pay less for inpatient care than those that have high risk, and the providers are also getting the benefit because if they see a higher risk member, they get paid more than a low risk member. So, the methodology seems to have the right incentives for both an employer and a provider.

On the outpatient side, it is a similar concept. We use the enhanced ambulatory patient grouping methodology which kind of takes a visit and puts it into significant procedures, medical visits, or ancillary services. But again, it provides that incentive to do what’s necessary, but not to do more volume just to increase your payment. It also makes it more logical from an employer member’s perspective because the costs are sort of grouped. Even though you do get an itemized bill from the hospital with all the lines that you talked about, the fact that you can roll it up and rationalize the amount that you’re paying for the service and that you’re paying similarly for similar people, it goes a long way with especially the employers that are paying probably 80 or 85 percent of the healthcare costs for their employees . If they know, for example, that two people on their workforce go in and have a baby, their cost is going to be the same unless those two people are very different from both a risk and a clinical need.

So, it’s been very successful. We’ve been using APR DRGs for over 12 years. I think we implemented right before Medicare came out with MS DRGs. We’ve been doing the ambulatory patient grouping for almost eight years, and so I think there’s a lot of value in using ways that allow you to think about it from a consumer perspective but also still have ways the provider feels they have an incentive to do the right thing and benefit in their decision making and management of those patients as well. I think the gap that still exists that we talked about earlier is we still don’t combine the professional services with either the inpatient or the outpatient. I know in some markets there’s more bundle payment, but they’re generally focused around very specific procedures like joint replacement or very specific members like people with diabetes. We’ve just struggled in our market the way the providers are organized to get bundled payment, the administration of claims all consolidated, but I think it’s something that you’ll continue to see more of in the future.

Gordon: Speaking of the future, where do you see Wellmark going with this sort of work to continually use data to inform work, improve quality, reduce unnecessary costs?

Mike: I think the consumers’ expectations are changing. I think part of that’s driven by things outside of health care. Ten years ago, I think most people would’ve gone to a mall or a store to purchase items, but the number of people that buy things online today or order things and pick them up has greatly grown and will continue to grow. So, I think peoples’ expectations of health care are going to continue to evolve. You’re going to continue to see care move out of the inpatient setting into an outpatient setting or into a clinic, and some services maybe even into the home. I think people have a mindset that with technology and the way the world is, more and more care can be delivered in what I would say nontraditional settings compared to historically. People also want very personalized care experiences. They want to know the care is being designed for them. It’s about them.

I think it’s more of how do you customize care kind of to the level of one? My parents’ expectation of health care and what my children’s expectation of health care are definitely different. My college age children will go online and do a telehealth visit. My parents would never consider doing that. So, I think making things available. I think, too, this idea of we broadening our concept of how you help people with their health, so can you prescribe or make available apps or self-care tools that would help people manage their condition. So, there’s a lot of programs out there that help people with managing their diabetes as opposed to having a case manager who calls you every two or three weeks from a health plan or a health coach from a physician’s office who follows up with you. Are there other ways you can help people help themselves?0

So, innovations like people being able to monitor their glucose level and better manage their diabetes or enhancements with pharmacy where people are able to reduce or change the number of medications they need to take to manage their condition. I do think quality is going to become more and more important. I think the perception of the public generally has been that all providers provide equal levels of care and the healthcare system in the U.S. is good, and I’m not saying it’s not. I think the question is for certain things, there are always places that may be better. And so, I think as people focus in on quality—I know one of the things that we always find challenging in our role at a health plan is getting a call from a friend or a family member and says, “I need to go have this procedure,” or, “I need to go see this specialist. Who would you recommend?” and that’s kind of like playing matchmaker.

You’re trying to set someone up with a provider you think will provide a good experience, and part of it’s the clinical training aspect, but part of it’s also the personality. So, I think people’s expectations about being matched and more aligned with providers who have similar expectations, personality styles, interests is going to be more important. We see it in our market. A lot of the large clinics advertise and promote their new physicians in the clinic. You can go to their website and read a bio about the physician, and it’s not just where they went to school. It’s truly a, “Here’s kind of my philosophy of medicine,” or, “Here’s how important my relationship with patients are,” and I think that’s going to continue to evolve as well.

Gordon: Give me an example of a specific thing a health plan might do in that context to help move things forward.

Mike: I think there’s a couple of things. One of them is we’re trying to help with early identification and ways to potentially intervene. Asking, “Do you really have to wait for someone to get a clinical diagnosis of diabetes before you can assist them?” Because most people are pre-diabetic before their diagnosis. So, are there things you can do sooner in people’s lives to help change that trajectory? Providing education, and other information. I also think one of the things is to provide tools to the member so when they’re out looking for a provider. So, for example, I live in the Des Moines, Iowa market and I’m looking for a new family doctor. How do you make that information available so it’s not just telling me who’s the closest to my house or who’s the closest to my work or what medical school they graduated from? How do you express that information in a way that people can make more informed choices?

We’ve always had this concept and we don’t have it developed yet, but how do you help match people up to physicians that are most likely aligned with what they’re looking for? Is it a survey of five or six questions? Is it looking at their historical use of health care and helping them be aligned? I think there’s a role that we can play as a health plan to help steer people, but people always want to have choice, so I don’t think it’s ever saying, “Mike should only go see Dr. Gordon Moore because he’s the one and only.” I think the question is who are the right people or the right types of physicians that you’re looking for? We live in a world where people like to know what other people think, so making the reviews of other patients available for perspective patients to review is important. We generally get a lot of positive feedback from members that they like to know what other people’s experiences were. So, I think you’re going to continue to see those things evolve, too.

Gordon: It’s interesting. The way you describe it, I have this vision of kind of like a consumer reports score card that shows several different aspects where I as the consumer can choose which are more important or less important to me, but I can see the rankings on things like how well do they interact, what med school did they go to, how often do they do this procedure, what kind of quality outcomes do they have, what’s the cost of going there, and then I can say, “Okay. Their practice is 50 miles from me, but given those parameters, I think I’ll go.” That’s kind of where you think you’re going?

Mike: Yeah. I think that’s how you kind of have to look at People used to think they’re board certification was really important. I can tell you based on interactions with our customers, most people don’t understand what board certification is. They understand having to have a license. So, I think you’re right: The things that are more important to people proximity and things like that. If I have children, I want the doctor to be close to their school. If I have a specific condition, maybe there’s a certain type of specialist. Maybe I want an internist as opposed to a family physician. I always tell the story of having four children, two boys and two girls. Until they were probably 11, 12, 13 years old, we went to a multi-practice pediatric group that had both men and women doctors and none of them cared, but at some point, it became very important that they only went to a doctor that was of their same gender.

So, the boys wanted to see a male doctor and the girls wanted to see a female doctor, but for a period of their life, they couldn’t care less, and I think it’s the same concept: What’s really important to you and how do you help people sort through that? So, like you said, with consumer reports, if I’m buying a new television or dishwasher, is noise or sound more important to me than the quality of machine or some of the features, and I think you’re trying to do the same thing by putting the information out there. Again, we have to be careful not to go too far. Too much information is probably as much of a challenge as not having information, so I think you have to find that balance where people get enough information and they have the ability to prioritize it and end up with the results that they’re looking for.

Gordon: That sounds like a perfect place for health plans as having that somewhat third-party view stepping back and saying, “Here’s a whole network of clinicians and practices, and here’s what we know about them, and here’s information that we can share that can help people make the best decisions.” That’s a great vision. Mike Fay, I want to thank you very much for your time today.

Mike: I appreciate the opportunity, and like I said, I think we’re going to continue to see health care and consumers’ expectations of health care continue to evolve. I think those in healthcare delivery and health plans have to continue to find ways to work and collaborate together. Having the opportunity to hear and learn about what’s happening in other parts of the world, there isn’t a perfect healthcare system. We just have to figure out how to keep making ours better and meeting those expectations of our customers since they are the ones who are paying for it.

Gordon: Well, thank you very much, and thank you guys for listening to the 3M Inside Angle podcast.

Mike: Thanks.

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