Top 2017 challenges healthcare executives face

Working as a managed care executive in today’s healthcare environment is a demanding role. According to Managed Healthcare Executive's 2016 State of the Industry Survey, challenges abound. Government requirements and mandates, such as implementing value-based reimbursement, are difficult to meet. Meanwhile, employing new technologies, such as electronic health records and data analytics, is no easy task. Pharmaceutical costs continue to rise dramatically, burdening the entire system.

The survey findings, based on 160 responses, show the biggest challenges that executives at health systems, health plans, pharmacy benefit organizations, and more anticipate next year. Here's a closer look at the survey results, and what industry experts say organizations can do to overcome them.

Challenge #1: Complying with new government requirements and mandates

When asked about the biggest challenge healthcare organizations face, a whopping 36.3% of survey respondents cited complying with new government mandates and requirements. Among these regulations, is the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which industry experts predict will be one of the biggest hurdles.  

Miro“Its payment methodologies are complex; it will require a large investment in time and resources to sort through it,” says Lauri Miro, MBA, RN, vice president, consulting services, Halley Consulting Group. “As MACRA combines elements of programs, including the Physician Quality Reporting System, the value modifier (or value-based payment modifier), and meaningful use into one program, healthcare providers and payers who have invested in earlier program infrastructure are left wondering what will come next. While changes are meant to address previous program deficiencies, the chaos created by frequent changes can make both providers and payers hesitant to invest in infrastructure changes needed to make timely transitions.”

For health plans, Gregory Scott, vice chairman and U.S. health plans leader, Deloitte LLP, views requirements associated with Medicare Advantage as a top concern. “Medicare Advantage comes with challenging and fluctuating operational and compliance requirements, and with unavoidable financial uncertainty-given the complexity and annual surprises surrounding CMS payment rates,” he says.

Furthermore, healthcare executives are struggling with lower reimbursement rates for services rendered under Obamacare plans. “The exchanges often have high deductibles, leaving patients to shoulder more of the upfront costs of care,” Miro says. “When patients can’t afford to pay their deductibles, providers are often not paid for services and patients may not seek preventive care that could avoid future disease escalation.”

Due to the unpredictability of populations served under the Affordable Care Act (ACA), current actuarial models are less reliable to accurately predict premium revenues, utilization levels, plan expenses, and expected profits and losses, Miro says.

Next: Experts' recommendations

Experts’ recommendations

A recent Deloitte survey found that more than half of U.S. physicians lack a basic understanding of MACRA. “Clearly, many healthcare systems have MACRA-related work to do, ranging from basic awareness education to detailed financial analysis to refreshed, MACRA-informed enterprise and marketing strategies,” Scott says.

His recommendations regarding Medicare Advantage are to develop improved capabilities in operations, finance, sales and marketing, provider collaboration, medical management, and compliance. “However, a significant number of health plans simply don’t have the technology platforms and capabilities to meet existing and future CMS requirements in compliant, profitable, and predictable ways,” he maintains. “Plans should invest in new technologies, which will result in strategic and financial benefits over the long run.”

In the ACA marketplaces, Scott says, “We anticipate-and frankly need-additional federal actions and program changes to sustain their viability. Health plans would welcome certain new rules and requirements (for example, around risk adjustment and special enrollment periods) that would improve ACA marketplaces.”

Miro says healthcare executives could lobby the government to allow slightly higher premiums while subsidizing deductibles for those who can’t pay for government-sponsored plans, which would add a new level of support to ACA programs. “Allowing plans that cover higher-risk patients to have a higher subsidized premium would help insurance companies to make a profit when participating in the exchanges,” she says. “By subsidizing deductibles, patients would be encouraged to get preventive services that could ultimately hold down their costs while healthcare providers would be paid for services rendered.”

Challenge #2: Implementing value-based reimbursement

Placing second among survey respondents’ biggest challenges is implementing value-based reimbursement, at 25.0%. Most participants, 68.6%, said they either had not yet started initiatives or had only started a few initiatives related to shifting toward value-based care.

Tuttle“The biggest challenge in implementing value-based reimbursement is managing change within clinical and financial environments,” says Henry Tuttle, CEO, Health Center Partners of Southern California. “Organizations need time to anticipate, strategize, and create new systems in order to be ready for implementation. Moreover, it can be difficult to get organizational leadership on the same page regarding investing in new processes and technologies.”

Once understood, organizations must become fluent in their total cost of care. “It’s impossible to determine savings and value without understanding this important, and sometimes elusive dollar amount,” Tuttle says. “Reimbursement based on value requires understanding the full continuum of expenses, developing one cost structure, and having the flexibility to control care within a fixed-care environment. Hot spotting within critical high-risk, high-cost areas is always a good place to start, such as discharge planning, transitions of care, assigned but not seen patients, or those on medication-assisted treatment or with behavioral health integration challenges. When working across multiple systems, it is important to incentivize partners to first understand costs, and then align these incentives across systems to give partners reasons to collaborate and control costs. Without proper motivation, it can be difficult to understand cost drivers accurately across the care continuum.”

WelterAnother challenge associated with the movement toward value is pacing. “While many providers are still largely paid on fee-for-service methodologies, healthcare executives know that they must transform their organizations clinically and technologically to better manage the health of a defined population,” says Terri Welter, MS, principal, ECG Management Consultants. “Most health systems are participating in value-based reimbursement arrangements such as Medicare accountable care organizations or shared savings, or even shared-risk contracts with a commercial health plan, but they are challenged to establish specific strategies and plans to move more patients and subsequent revenue into these arrangements within an uncertain timeline.”

As health organizations move into value-based payment environments, seamless teamwork across the organization will have to replace a world of silos. “That means that leadership teams will have to work more closely than ever in confronting the challenges of population health management, data analytics, acquiring and implementing the right technologies, and entering into new types of risk-based contracts,” says Peter Kerr, managing director, FTI Consulting. “As a result, senior executives will have to develop expertise in areas of healthcare that they may previously have considered beyond their bailiwick, and work comfortably with others on new terrain.”

KerrFurther, as they move into a value-based environment, health plans and health systems will have to confront the challenges posed by a more consumer-driven system in which they demand greater transparency, better communication, and more information about value.

Payers will also have to develop capabilities to explain products, network design, and quality and outcomes measures in ways that are clear and compelling to consumers. “This will be no small task for an industry that has not historically been oriented to the individual market,” Kerr says. “For health systems, one immediate challenge will be developing greater capabilities in explaining consolidation and acquisitions.”

Next: Experts' recommendations

Experts’ recommendations

AltmanHealthcare executives can better deal with challenges from implementing value-based reimbursement by understanding their patient population and demographics. “They should have a complete understanding of the value-based contracts being offered, including contract lengths and quality metrics that are being tracked,” says Rebecca Altman, managing director and leader of the Population Health Strategy practice at Berkeley Research Group. “It’s also important for executives to take a look at care management activities and ensure that they are correctly sized and scaled around the appropriate patients, which will help in the long run. They should also work to fully optimize the electronic health record (EHR), which can offer insights into patients’ utilization patterns. Hardwiring into the EHR’s standardized processes and evidence-based clinical pathways will help to reduce the cost of certain routine procedures (e.g., total joints, coronary artery bypass grafting, chronic conditions).”

Once an organization has a value-based contract in place, continuous performance improvement and accountability must be in place, Altman says. Physician leaders, front-line staff, and other team members should be actively engaged to ensure the contract’s success. This ultimately comes down to how the health system incentivizes staff to meet their contracted quality outcomes.

Moreover, to effectively implement value-based care, organizations that traditionally operated as competitors must become collaborators. “It is no longer feasible for systems to operate in isolation, particularly when it comes to providing data on common patients,” Tuttle says. “Both human and digitally-run systems must talk to one another.”

Challenge #3: Technology acquisitions, investments, and implementations

Technology acquisitions, investments, and implementations ranked as the third greatest challenge, as cited by 19.4% of survey participants.

Organizations that lack a chief information officer who is tasked with leading technology initiatives may experience the most hardship in this area, Tuttle says. “Organizations are often at the mercy of software vendors when they do not have in-house expertise to assess their needs,” he says. “It’s hard to recognize good software from bad software prior to implementation, especially since healthcare IT providers have honed the appropriate marketing messages to position their products as population health management solutions, aggregators, and supporters of value-based care.”

Another challenge is the actual implementation of technology. “Projects can take months to fully implement and require the project team to answer questions about how the software will work and where it will gather and disseminate data without fully understanding the implications of the decisions made,” Tuttle says. “It’s likely that no single software system will meet all existing needs; rather, organizations need a suite of interoperable clinical care and business intelligence products to ensure data integrity and the successful transmission of data to various stakeholders.”

One of the reasons the Health Resources and Services Administration (HRSA) continues to provide technology funding for health centers is because it understands that this is not a one-time investment or static issue, says Tuttle. Recently, HRSA provided $87 million in grants to health centers for delivery system improvements through technology. “Even though health centers have been investing in technology solutions since the mid-2000s, it is clear that continual attention is necessary in order to improve patient outcomes and coordinate systems,” Tuttle says.

Optimizing an EHR is another challenge. Because EHR vendors used proprietary technology to create their software, programs from different vendors don’t talk to each other, depleting optimization of the data stored within the systems. A recent mandate from the Obama administration requires different EHRs to interface with one another across organizations. “This can be challenging, especially in light of HIPAA compliance, patients not wanting to share their personal information, and recent data security issues,” Altman says. “Further, clinicians may not have had sufficient training to use an EHR.”

Finally, hospital data teams and analysts struggle to get meaningful data out of EHRs, says Altman, whose statement lines up with the survey’s results, as 49.3% of respondents reported that their organizations are not doing well with using big data to improve healthcare quality and reduce healthcare costs.

In fact, only 11.9% of participants said using big data is making a big impact while 38.8% report coming a long way but still have a lot of work to do. Often, health systems and hospitals have to engage outside vendors to slice the data into meaningful and actionable data with which to make clinical decisions,” she says.

Next: Experts' recommendations

Experts’ recommendations

Experience using technology to manage population health and health disparities is relatively mixed in healthcare, says Tuttle. “Learning from others who have had success with employing technologies and engaging in partnerships will allow leaders to see where overlap occurs, identify commonalities, and outline what differentiates them from their healthcare colleagues,” he says. “It’s then up to executives and organizations to identify a value proposition that takes advantage of the things they have learned and provide a better experience for patients, successful business practices for the organization, and a healthier community.”

In addition, with so many parties interested in big data and predictive modeling, it makes sense to determine what degree of analysis should rest with each part of the delivery system. Partners would benefit from talking to each other about the modeling they are doing or plan to do. “It is best to determine who benefits from the information provided by a given solution, and therefore who should purchase and maintain it,” Tuttle says. For example, predictive modeling for major cardiac events is likely best performed by health plans or large healthcare systems rather than primary care physicians.

Altman advises employing resources to find a vendor that can educate and create optimal solutions. “Begin building analytic teams that can study populations covered by value-based contracts,” she says. “The team should contain analysts, clinicians, and finance administrators. Also, leverage state or local disease registries, as well as health information exchanges, as those can be valuable resources.”

Challenge #4: Addressing rising pharmaceutical costs

Among the survey respondents, 10.6% cited addressing increasing pharmaceutical costs as their top challenge.

According to Zachary Hafner, partner, consulting division, Advisory Board, rising costs in pharmaceutical drug spend are driven by several factors:

• Unit cost inflation,

• The mix of drugs in the market (skewing increasingly toward high-cost biologics, cancer treatments, and other specialty drugs),

• Benefit designs that allow for consumption if a drug is available vs. if the drug is effective (in an era when more drugs are coming to market for a broadening range of issues), and

• The complex system that rewards providers, pharmacy benefit managers, and pharmacies for volume.

Hafner“Despite the fact that healthcare executives’ enterprises influence a tremendous amount of total spending, they have little ability to impact factors driving drug cost increases,” Hafner says. “Even the largest payers and health systems are small relative to pharmaceutical players from a negotiating power standpoint-which is based on volume. Given that pharmaceuticals today account for about 20% of total healthcare spend, the extreme trend of inflation in pharmaceuticals translates to a total healthcare cost growth trend well in excess of the consumer price index.”

Next: Experts' recommendations

Experts’ recommendations

Working together, payers and providers can leverage benefit design, data, and delivery to build more robust medical management programs geared toward pharmacy-to review and align on formulary, to perform better pharmaceutical reconciliation for complex and chronic patients, and to drive efficiency as it relates to sites of care for drug administration, Hafner says.

Altman would recommend working with local retail pharmacies that can provide generic drugs, especially for high-risk patients. “If a patient can take a generic drug, put them on the most cost-effective one,” Altman says. “Promote those relationships with clinical teams and patients.”

Currently there is a Senate bill (#1048) awaiting approval that addresses transparency and cost control of pharmaceutical drug prices. “Until this bill passes, the United States will remain the only country that does not regulate pharmacy pricing. Thus, when insurance companies don’t cover rising costs, the cost is put on the patient,” Altman says. “Health systems often see patients with frequent visits to the emergency room or with several readmissions because the patients cannot afford or obtain their prescriptions. Those increased numbers of visits and readmissions ultimately penalize the health system, making it difficult for some health systems to reduce readmissions or utilization.”

Miro is a proponent of lobbying. “Lobbying efforts to allow Medicare and Medicaid the ability to negotiate with pharmaceutical providers might be a good starting point,” she says. “People in the United States pay more than those living in Canada, Mexico, and the European Union on average for any given drug,” she says. “If the United States paid the average of the prices paid by those three countries for medications, we could reap huge savings. What’s more, the United States pays for most pharmaceutical research while other countries enjoy far lower drug costs.”

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.