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SSM Health: Baldrige Pioneer Now Value-Based Care Model?


SSM Health
In 1872 St. Louis, all that would later become SSM Health could fit in the basket Mother Mary Odilia Berger, SSM., carried from house to house – bread for the poor, medical supplies for the sick and clean linens for her patients.  As she walked “with a very purposeful step,” people she met on the street would slip a donation in her basket.

Nearly 145 years later, woven in today’s SSM Health “basket” are 30,000 people – including 1,300 employed physicians – working in four states at 19 hospitals and more than 60 outpatient clinics.  In addition, the system operates an insurance company, two nursing homes, comprehensive home care and hospice services, a telehealth company and two Accountable Care Organizations (ACO).

Among the hospitals is the system’s first academic medical center, Saint Louis University Hospital, which it acquired earlier this year from Tenet, and a children’s hospital.  Most of the outpatient clinics and many of the physician employees arrived with the 2013 acquisition of Wisconsin’s Dean Health System.  Dean also brought a health system rarity, ownership of a growing pharmacy benefit manager along with a string of retail pharmacies and eye care centers.

Process, Purpose, Patient

The base of today’s SSM Health “basket,” with its focus on process, purpose (mission) and patient, took shape in the hands of another purposeful leader, Sister Mary Jean Ryan, FSM.  It took a dozen years, beginning four years into her leadership of a newly centralized system:

  • Process (1990): She and the system’s leaders committed to continuous quality improvement.  They aimed to “create a culture in which every employee at every facility and at every level of the organization would constantly seek to improve processes – every single day.”
  •  Purpose (Mission) (1998): Three thousand system employees, at all levels, in all locations, condensed a wide variety of mission statements into one succinct declaration:   “Through our exceptional health care services, we reveal the healing presence of God.”  The system had discovered it needed develop a more compelling mission after practicing with the Malcolm Baldrige National Quality Award criteria.
  •  Patient (2002): The system attributes its 2002 Baldrige Award to a focus on its core customers, patients, and “connecting the dots” from Baldrige criteria through core processes and results.  SSM Health had begun submitting applications as soon as health care organizations became eligible for the award, in 1999, and became the first in the category to win.

In July of this year, Quality Management Journal published a study comparing 34 Baldrige winners, including SSM Health, with their 153 geographically closest competitors.  It found that the “award recipients provided care equal to or better than competitors while at the same time providing a better patient experience.”

The “patient, purpose, process” culture SSM Health created as it pursued the award, and nurtured thereafter, has proven to be a dependable guide for the system amidst health care’s transformation from volume- to value-based care.

To Join or Not to Join

Earlier this year, SSM Health committed to put 75 percent of its business into value-based arrangements that focus on providing higher quality at lower costs by 2020.  It did so as one of 24 provider organizations participating in the Health Care Transformation Task Force, which also includes payers and employers among its members.  Dr. Gauroy Dayal, health care delivery vice president for SSM Health noted that the system “began working on transforming itself five years ago….when it began assuming risk and responsibility for improving the quality of care while lowering costs.”

On the other hand, because of its unique culture, SSM Health knows what not to join.  Several years ago, the system chose not to participate in the Medicare Shared Savings Program (MSSP) by creating a Medicare Accountable Care Organization (ACO).  It had concluded that the assignment of beneficiaries based on claims history, not choice, was inconsistent with SSM Health’s transparent, patient centered care model.

Instead, SSM Health embarked on a path to “True North,” as it explained in a Mayo Clinic Proceedings article, “The SSM Health Care Approach to Achieving ‘True North’:  Improving Health Care Quality While Reducing Costs.”   True form, it created a process based on a functional definition of accountable care.  The system then chartered five teams to design “an organization capable of assuming and managing global clinical and financial responsibility for the care of a defined population.”

The Volume to Value Process

Flashes of process appear continually from SSM Health as it makes the change from volume to value.  For example, the system has:

  • Created a methodology to eliminate unjustified variation in their medication formulary using available data from purchase history, quality management systems and electronic health records.
  • Established a “single source of terminology truth” that effectively manages and maps data to industry standards, ensuring accuracy across the enterprise in advance of ICD-10.
  • Developed more efficient processes for utilizing hospitalists, decreasing readmissions.
  •  Deployed a digital app, which learns and adapts to self-reporting patients, reducing 30-day hospital readmissions by 57%.

Even the legal department is doing its part, earning recognition as a 2015 Association of Corporate Counsel Value Champion.

Process at SSM Health may be very rewarding, but it is certainly not easy.  Take clinical device technology.  Teams now have data at their fingertips enabling business decisions based on fact, data such as mean-time-between-failure, according to Heidi Horn.  However, “It took a vision and years of work and tenacity by all 100+ team members of Clinical Engineering Service,” she added.

SSM Health’s commitment to process likely played a decisive role in its merger with Dean.  Although both organizations had worked together for decades, neither assumed a successful integration would necessarily follow.  In fact, SSM paid “an excessive amount of attention” to culture, according to Dr. Dayal, who originally had been with Dean.   An “organizational heath index” of several hundred parameters characterized the two cultures, identifying the presence or absence of overlaps.

SSM Health More Like Dean

Trustee Magazine reports that, as a result, SSM Health has become more like Dean since the merger, putting doctors on the board and appointing Dayal and another physician to lead two of its three divisions.  Objective accomplished, because SSM Health acquired Dean not for its financial assets, but for its talent, knowledge and capabilities, especially around health plan and physician practice management.  As Dayal explained, the 90-year-old, fiercely independent, physician-run Dean has given SSM the capabilities needed to transform into an integrated value based organization.

Operating a health plan since the 1980s and a population health model since 2009, Dean can accept performance risk for almost 70% of its business.  An innovative medical value program brought clinicians, staff and data analysts together to identify opportunities to improve clinical processes and care management.  The program used claims data from Dean’s insurance arm and electronic health records from area hospitals owned by SSM Health – before the merger.

Now, after the merger, the fully integrated SSM Health Care of Wisconsin now offers some of the lowest public exchange health insurance costs in the state for Janesville-Beloit consumers in Rock County south of Madison, on the Illinois border.  It did so through its St. Mary’s Janesville Hospital, Dean Health System and Dean Health Plan.

In fact, when Rock County consumers select health coverage, they choose between health providers, not health insurers.  Competing in the same area is a similar fully integrated health system, also with an insurance component, Mercy Health System.  Citizen Action of Wisconsin, which compiled the rate comparisons, gave both Dean and Mercy four-star ratings.  Only Gunderson Health Plan received five stars.

“Vertical integration has a lot to do with the lower rates,” explained Dean’s Jamie Logsdon.  “When you’ve got a network, such as Dean and St Mary’s Janesville in that market, they are all working together to provide more efficient care.”

Twenty-five years in the weaving, the “basket” that is SSM Health could very well be a model for value-based health care.

Express Scripts 2020: Back to the Future?

Express Scripts

The clocks are ticking for Express Scripts.  Having achieved formidable “size and scale,” how will the nation’s largest pharmacy benefit manager synchronize with value-based health care?  With each day, between the medical and pharmacy benefits, the time to value is diverging.

Time to Value

Under fee for service, the time to value is relatively short for both benefits.  The physician bills soon after an encounter.  Similarly, the patient (for the most part) uses her pharmacy benefit to get her prescription, after which Express Scripts pays the pharmacy, collects a rebate (on a brand) and bills its client.

In value-based health care, the time to value lengthens to include outcomes and, as a result, expands to include many more inputs.  As Michael Porter explained, using the Institute of Medicine as his source, “Because care activities are interdependent, value for patients is often revealed only over time and is manifested in longer-term outcomes.” According to Porter, “The only way to accurately measure value, then, is to track patient outcomes and costs longitudinally.”

Value Based Health Care

By 2020, 75% of commercial payments will be through value-based arrangements, if the Health Care Transformation Task Force — a coalition of providers, payers, purchasers and patients – has its way. In 2014, 38% of payments to hospitals were value-oriented, compared to 10% for specialists and 24% primary care physicians in the outpatient setting, reported Catalyst for Payment Reform.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) wants 30% of Medicare payments in alternative payment models by the end of 2016 and 50% by the end of 2018.  The percentage stood at 20%.  Alternative payment models include Accountable Care Organizations (ACOs), advanced primary care medical home models, bundled payments for episodes of care, and integrated care.

Great Value from Express Scripts

To be sure, Express Scripts has added substantial value to the pharmacy benefit transaction.  It led the conversion to generic drugs, most notably and unprecedentedly when it moved against Pfizer’s Lipitor with simvastatin (generic Zocor) in 2006.  Now, Express Scripts’ drug exclusion announcements are routine events and its public campaign against high priced specialty drugs compelling.  The company has also narrowed retail networks and, for nearly a year, excluded Walgreens.

For years, Express Scripts has mined its mountain of data for insights and it pioneered the application of behavioral economics to the pharmacy benefit, in an effort called “consumerology.”   The company now has its own research laboratory, to which Medco’s Therapeutic Resource Centers and RationalMed program have been important additions.  Using these assets, the company has driven drug costs down, promoted greater use of lower cost drugs and achieved stronger adherence to drug regimens.

Better adherence can indeed lead to improved outcomes, thus increasing Express Scripts time to value, as demonstrated by its ScreenRx® program.  However, the company’s value proposition remains tethered to the pharmacy benefit transaction, instead of the ultimate clinical outcomes of value based health care.  At most, its contribution to those outcomes can be inferred, but not routinely measurable — yet.

Drug Payment Models

Take the pay-for-outcomes vs. pay-for-performance conversation now underway between Express Scripts and some drug manufacturers.   For its newly approved heart failure drug Entresto, Novartis proposed an initial discount with a performance bonus if it successfully lowered hospitalization rates in patients suffering from the condition.  The company said Entresto does a better job of preventing heart failure deaths and hospitalizations than lower cost alternatives already on the market.

Express Scripts was not buying it.  Instead, the company countered with an indication-based model, emphasizing its “elegance.”  It would differentiate pricing for specific cancer drugs based on how well they work against different types of tumors.

“Unlike the outcomes-based rebate systems that have been tried by others in the past, our model won’t require plans to reconcile payments long after-the-fact based on downstream health outcomes of a specific patient,” responded Express Scripts.

However, a leading pioneer of outcomes-based rebate systems has been Cigna, which Express Scripts client Anthem is set to acquire. Cigna’s arrangements have involved Merck’s diabetes drug Januvia (sitagliptin), the EMD Serono multiple sclerosis drug Rebif (interferon beta-1a) and, recently, Gilead’s hepatitis C drug Harvoni (ledipasvir/sofosbuvir).  Cigna based the Harvoni contract on elimination of the disease.

Hepatitis C

Arguably, disease elimination would reduce high cost liver transplants – a significant and valuable outcome.  Presumably, that is why Cigna, Anthem, Aetna, Humana and United Healthcare – with their longer, medical benefit time to value equation — all contracted with Gilead for Harvoni. They did so exclusively, presumably for better discounts.  Prime Therapeutics, owned by a number of Blue Cross plans contracted for both Harvoni and AbbVie’s Viekira Pak.

Meanwhile, Express Scripts contracted exclusively and presumably at a deep discount with AbbVie for Viekira Pak, excluding Harvoni from its 2015 formulary.  Viekira Pak is a four pill a day regimen to Harvoni’s one pill, with similar effectiveness and different safety profiles.  The latter comes from a review by Advera Health Analytics, which analyzes real world outcomes data.

Payer Cost

Advera Executive Vice President, Jim Davis, argued that exclusive deals emphasize the payer trend of focusing on immediate savings rather than overall outcomes, total cost of care and most importantly patient safety.

He echoed findings of a 2014 survey by the consulting firm EY that found “payers are highly focused on immediate cost containment, which means that the longer-view approach that emphasizes outcomes and keeping total costs down is irrelevant to payers.”

Express Scripts clearly is not alone in its short-term focus on controlling immediate costs.  However, it alone of the major PBM’s has the shortest time to value horizon because its “center of gravity” remains the pharmacy benefit transaction.

Competitor Time to Value

Both Caremark and EnvisionRx are subsidiaries of providers CVS and RiteAid respectively.  CVS recently inked a big data deal with IBM’s Watson cloud to predict patient health and RiteAid is pursuing innovative care initiatives with EnvisionRx.  OptumRx, and now Catamaran, are part of UnitedHealth Group, which concentrates on linking “demographic, lab, pharmaceutical, behavioral and medical treatment data.”

Synchronizing Express Scripts

Often offered in answer to the question of how Express Scripts will synchronize with value-based health care is a merger or other arrangement with Walgreens mirroring CVS/Caremark.  That may be part of a solution, but it will not be the entire or sufficient answer.

Also not the answer, but still important, Express Scripts should remain independent and continue to leverage its size and scale to lower drug prices.  Ironically, its assault on Giliad’s Solvadi and Harvoni, and then its exclusive contract with AbbVie, lowered Giliad’s prices, benefiting Express Scripts’ competitors.

Anthem Contract

It is through Express Scripts’ relationship with Anthem that the PBM can extend its time to value horizon and synchronize with value based health care.

Key will be the creation of a new, outcomes-focused collaborative thrust involving Anthem’s HealthCore, which is conducting real world evidence research with drug manufacturers, Cigna and its innovative payment models and the Lab at Express Scripts.  The only alternatives would be losing the Anthem business or relegation to functional role, much like Medco’s with UnitedHealth Group, the pending 2013 loss of which led to Express Scripts’ acquisition of Medco in 2012.

Notably, Anthem CEO Joe Swedish told investment analysts during a conference call on his company’s acquisition of Cigna “We do believe there’s significant value and opportunity from a better pharmacy contract.”  Cigna CEO David Cordani, who will serve as COO of the combined company added, regarding Cigna’s PBM business, “We have meaningful optionality relative to the program as it stands, and you should think about that optionality as being preserved and further expanded.”

Back to the Future

In the face of this challenge, Express Scripts would do well to go back to the future, twenty years ago when it launched a visionary effort to link pharmacy and medical claims.  Embodied in a “before-its-time” subsidiary called Practice Patterns Science (PPS), the initiative sought to build clinical data warehouses for health plans that organized all of a patient’s financial medical claims into meaningful, condition-specific, longitudinal episodes of care.”

Express Scripts’ CEO at the time, Barrett Toan, explained, “Having identified an episode of care for a patient, the drug therapy costs for the episode are compared to the associated medical costs.  What we’re finding is, in some cases, the drug costs are helping us control the overall costs.”   He pointed to a $380 reduction in epilepsy medical costs resulting from using a newly approved drug costing just $30 more.   An episode is a time line, which may be long or short depending on the nature of the disease.

Epilogue

With the DeLorean time machine at the ready, enter target destination California and target date April 3, 2015.   Flux capacitor powered, you will arrive in a Federal court where Dr. Douglas Cave won a $12 million patent infringement suit against UnitedHealth Group over the PPS technology.

Cave had been president of PPS and, when Express Scripts shut down the subsidiary.  The company gave him the intellectual property rights, including the disputed patent for physician efficiency measurement.  He now operates Cave Consulting Group in San Mateo, California, and filed an anti-trust suit in July against UnitedHealth Group alleging UHG obtained its patent laws fraudulently and violated anti-trust laws.

Boeing, Going, Gone: The End of Group Health Insurance

Boeing Headquarters

Come the fall, when benefit enrollment is in full swing, Boeing employees in St. Louis and South Carolina will have a new option – one of their local health systems, in addition to current coverage alternatives from Blue Cross and Blue Shield (BCBS) plans.

Boeing announced last week that it has directly contracted with Mercy Health Alliance, an accountable care organization (ACO) in the St. Louis bi-state region, and the Roper St. Francis Health Alliance ACO in South Carolina’s coastal low country.  Express Scripts is managing the pharmacy benefit and the Health Care Service Corporation of BCBS Illinois will help with administration and paper work.

Greater Savings, Improved Health, Better Experience

By working directly with the ACOs, Boeing hopes to save money for itself and employees, improving employee health and enhancing service for a more positive employee experience.  Boeing South Carolina executive Beverly Wyse told WSCC-TV the company is applying the same logic to healthcare as it does in building Dreamliners, with a commitment to more quality, reliability and lower costs.

Boeing estimates employees will save $350 to $1,000 per person per year on monthly payments, deductibles, copays and prescription costs.  Mercy executive Donn Sorenson told the St. Louis Business Journal Mercy could cut per family health care costs by more than half to $6,000 from the large-employer average of $15,849.  He plans to do it with greater attention to preventative and maintenance care.

In negotiating Preferred Partner ACO contracts, Boeing puts a high priority on access and convenience.  Primary care appointments are available for acute conditions same day and within 72 hours for any condition.  The wait for a specialist appointment can be no longer than 10 days.  In addition, each Preferred Partner provides extended hours, a dedicated phone line with care navigators, a member website and phone apps.

Competition in Seattle

Additional Preferred Partner arrangements are in the works, understandably because Boeing’s formula appears to be working.   A year ago, Boeing contracted with two ACOs in the Seattle area – Providence Swedish Health Alliance and the UW Medicine Accountable Care Network.  Of the 27,000 eligible employees and 3,000 retirees, about 18,000 signed up for one of the ACOs in roughly equal numbers.

In Seattle Boeing has pitted two prominent health systems against each other, creating a retail, consumer market within its large employee population, much like a private exchange.  Through their ACOs, both systems have assumed upside and downside risk, absorbing an insurer’s traditional role.

Instead, BCBS Illinois collects and provides data, in addition to performing administrative services as in St. Louis and South Carolina.   Boeing’s relationship with BCBS Illinois could be a plus, if the manufacturer decides to implement a private exchange.  BCBS Illinois has its own, Blue Dimensions, private exchange platform, which offers “many of the same features of online shopping.”

Boeing’s Health Care Endgame

In fact, the Seattle competition may foreshadow Boeing’s endgame, according to Tory Wolff of Recon Strategy.  Boeing “is setting up its market to transition to a provider-consumer type market.  We do not expect it to be too long before Boeing starts transitioning its employees to defined contribution.”  The impact would be substantial.  The company spends $2.5 billion on health care for 480,000 employees, dependents and retirees in 48 states.

Assuming Wolff is right, look for Virginia Mason to become a third option for Boeing’s Seattle employees.  In St. Louis, SSM and its newly acquired Saint Louis University Hospital could become a second option.  In time, BJC Healthcare/Washington University Physicians will conclude their shared brand – without an insurer intermediary — can attract more Boeing patients.   In South Carolina and other major Boeing locations, expect the same.

Private Exchanges – Small but Growing Rapidly

While Boeing approaches a private exchange, where employees get a broad range of coverage options and a defined company contribution, other large employers have already made the plunge. These include Walgreen Co., CVS Health Corp. and IBM, at least for retiree benefits.

Admittedly, private exchange utilization is still extremely small.  There are six million participants this year, up from three million in 2014.  However, by 2018, 40 million people likely will choose coverage on a private exchange, according to an Accenture study.

Aon Hewitt attributes the projected surge to a number of factors, including lower cost.  The average annual cost increase to employers completing a second year renewal 2.6%.  Large employers with similar benefit structures saw increases of 6.5% to 8% this year.

However, the most significant driver is a 40% excise tax on “Cadillac” health benefit plans scheduled for 2018 implementation under the Accountable Care Act.  Imposed on family and individual plans respectively costing $27,500 and $10,200, the tax could impact as many as 48% of employers in its first year, according to the benefits consulting firm Towers.

According to Accenture, private exchanges are a “compelling alternative” for employers who want to accomplish two goals simultaneously – control cost and administrative burdens, while still providing health coverage.  They are very aware that 76 percent of consumers see health insurance as the primary or an important factor for continuing to work at their current employer.  In fact, employer involvement in facilitating health benefits matters as much if not more than the employer’s financial contribution.

Sam’s Club Now, Amazon Soon?

Typical operators of private exchanges include health insurance companies and benefit consulting firms.  However, small employers may rely on an unlikely source to provide their employees with coverage options, Sam’s Club, which has collaborated with Aetna to offer the Aetna Marketplace for Sam’s Club.  Employers can offer a defined contribution plan or make a flat, pre-tax contribution an employee can apply to his or her plan choice.  (Recently proposed IRS rules could negatively affect the latter option.)

Can Amazon be far behind?  Perhaps not.  Both Wal-Mart and Amazon are engaged in a fierce battle for consumer loyalty.   There is no public evidence suggesting an Amazon move toward offering a private exchange.  However, Amazon Web Services has been touting its deep association with Oscar Health, a technology-driven, health insurance start-up, which could be serving as a learning platform for Amazon.

What is surely not far behind is the end of group health insurance, supplanted by a rapidly growing retail market for health coverage.  As blogger Joe Markland has observed, “a single 10,000 person employer will become a firm with 10,000 retail buyers.”    In addition to the 40 million in private exchanges by 2018, Accenture predicts there will be 31 million participants in public exchanges, up from 15 this year, for an overall 71 million consumers.

Retail Market Driving Insurance Mergers

This burgeoning retail market is the primary driving force behind the mergers of Anthem and Cigna, and Aetna and Humana, respectively.  Yes, greater size will provide negotiating advantage, but within a model that is quickly becoming obsolete.  In fact, insurance industry critic Wendell Potter observed last year, “If the Boeing strategy flies, health insurers as middlemen will be history.”

Agreeing, Leavitt Partners notes that employers want benefit options that will drive a world-class, healthy, productive workforce.”  However, it concludes, “the current composition of intermediaries cannot meet these demands on yesterday’s technology and workflows.”

Instead, health insurers are racing to avoid commoditization.  They have to reposition to add value differently in the new retail paradigm.   Instead of pounding out reimbursement deals with providers, they will need to collaborate, creating differentiated coverage alternatives for retail marketplaces.

More important than added scale, success for these insurer mergers will depend on the integration and expansion of initiatives such as:

Ultimately, successful health insurers will be collaborators instead of intermediaries, creating value with, not at the expense of, providers in a retail marketplace.

For more on this topic, see Employers Chasing Health Care Rainbows and Branded Narrow Networks:  Gold Value at Bronze Prices.