Preparing for consumerism: the top 10: health plans and providers alike should prepare for consumer-driven health plans with this list of 10 strategic imperatives

Health Management Technology, Oct, 2004 by John Hummel, Simmi P. Singh

Consumer-driven healthcare (CDH) is coming soon to an employer near you, and it will have a sizeable impact on your institution, your job and your technology infrastructure--or will it? This topic is high on the list of CEO, CFO and CIO concerns in both payer and provider sectors. How much attention should be paid to getting ready for consumerism? Where, on the continuum between "a flash in the pan" and the "next, big thing," should this phenomenon be placed?

It is difficult to accurately predict how this phenomenon will play out across regions of the country. However, the market is moving toward increased consumer participation and even activism, both in financial terms and in the way patients interact with clinicians.

Here are 10 strategic, operational and IT considerations to think about as you shape your consumer-centric initiatives. Decisions regarding the relevance to your organization should be based on a detailed analysis of the individual characteristics of your marketplace.

1 Study the design constructs underlying each CDH product in your market as it is created or becomes available. Most CDH offerings consist of a high-deductible health plan (HDHP) coupled with one or more of the following:

* Healthcare Reimbursement Arrangements (HRAs), which are basically unfunded promises reflecting an employer's intent to cover eligible charges up to a certain amount;

* Flexible Spending Accounts (FSAs), which are employee-funded and expire every year, but bring with them the advantage of tax-exempt dollars that can cover a wide range of healthcare costs;

* Healthcare Savings Accounts (HSAs) that will likely eclipse all forerunners in the rate that they are adopted by health benefit providers. HSAs pack a triple punch when it comes to taxes; contributions to the accounts, growth within the accounts over their lifetimes and expenditures from the accounts (on covered items) are tax-free.

The myriad possible variations have profound implications for healthcare leaders. Payer executives need to study plan designs to ensure that they can deliver the functions most required to differentiate their organizations' offerings in the marketplace. Provider executives need to study the designs being adopted in their individual marketplaces to prioritize their investments and figure out which competencies (and datasets) will make or break their organizations' ability to support these offerings. Payers and providers need to align portal and data management strategies to enable this to happen.

2 Work with market advisors, local employer consortiums and payer partners to make fundamental assumptions about the short- and long-term impact of this phenomenon oil your market. HSAs are an asset management tool, and their introduction has prompted a number of banks such as JP Morgan Chase and Mellon Bank specializing in asset management to enter the business. Insurers such as Aetna, United and Anthem are leading the market in this realm, along with CDH-only players such as Destiny Health and Lumenos. As you prepare your strategy, you will need to:

* Understand the first generation of products launched within your market;

* Study early entrants and their marketing approaches;

* Evaluate regional and national lessons learned during this period;

* Forecast what the next generation of CDH is going to look like and model the tactics that those entering the market are likely to use to move market share.

Many experts believe the early momentum for adoption is going to come from small employers who offer HDHPs and who will now make them HSA-qualified and start to offer HSAs as well. Other experts believe large employers may increasingly offer HDHPs as their no-premium basic option and couple them with HSAs to entice employees who do not want to pay the mandatory copays and higher premiums associated with the higher coverage PPO-type options. Either way, a preliminary assessment of existing experiences in your region could make the difference in ensuring you have a focused strategy going forward.

3 Building on your baseline assumptions, construct specific models to play out the effects of the most likely scenarios on your market. The development of scenarios and models will be helpful in laying out the modifications in business processes and technology systems that need to be considered. The scenarios and models should help identify:

* The impact of this trend on your IT organization and budget;

* Your organization's strategic plan and vision for CDH, along with a plan to enable technological changes;

* The ROI to your institution if you were to decide to become a leader in this space within your healthcare market;

* The likely impact of payer- and provider-side scenarios on the market shares and margins of major stakeholders.

At the height of the managed care revolution in the mid-1990s, the variation in how managed care played out in different regions of the country was startling. Parts of California had utilization rates for inpatient beds below 1,000 days per thousand enrollees (for Medicare managed care enrollees) at the same time that markets like Iowa ranged between 2,500 and 3,000 days per thousand. Even within similarly advanced markets, different methodologies played out: Southern California moved sharply toward capitation, while Minnesota, an equally advanced market, moved toward broad-scale adoption of per diems.