Increased Access to Care
To access medical care today, consumers have many different options. From urgent care to virtual care, consumers have the ability to access quality care 24/7. Increased access to care is great for the convenience factor; however, it is also driving up overall utilization. Today, it is common for consumers to receive care in a non-traditional setting and consumers are becoming more willing to receive care outside of a traditional office setting. The report states that out of a group of consumers with employer-based insurance; 60% received care in an urgent care setting, 25% received care in a retail health clinic and 11% utilized a virtual visit. Increasing access to healthcare is expected to decrease costs in the future, but right now, we are experiencing increased utilization and employers must balance access to care and unnecessary demand. It is hard to determine if the utilization of non-traditional care is directly related to increased access or if consumers are choosing these non-traditional options instead of higher-cost options such as a visit to the ER. Regardless of the reasons, utilization is up and will affect trend for the coming year.
Over the next year, we will continue to see an increase of providers and health system mergers. HRI estimates that by 2019, 93% of metropolitan areas will be considered highly concentrated markets in terms of hospitals. When providers merge, they increase their negotiating power due to decreased competition within the marketplace. It is expected that megamergers will reduce costs long term through economies of scale and efficiencies of an integrated system, but for 2019, this integration will most likely provide upward pressure on trend. This is likely caused by two ways. First, after a megamerger prices will increase because of the larger entity that the smaller entity merges with will likely have higher overall reimbursements causing the scale to tip upwards. Secondly, due to increased negotiation power, megamergers put upward pressure on total costs which causes more leverage on the insurance carriers to increase reimbursement levels.
Physician Consolidation and Employment
As in a megamerger, the same effect occurs when physicians consolidate with other physicians groups, hospitals and health systems. Physician consolidation will likely cause efficiencies and lower prices in the future, but we are yet to see any prices for medical care decrease because of it. Decreased efficiencies associated with larger systems and facility fees physician are required to bill patients as part of a larger health system result in short-term price increases. Within the RTP and Triad region of NC, we are seeing physicians leave independent practices to become part of a larger healthcare system. Physicians working in highly concentrated markets can charge 14-30% more than those working in less concentrated markets. For a market to be concentrated, consolidation must occur allowing the health systems to have more negotiating power and less overall competition. Although we are seeing consolidation causing upward pressure on trend, we are also noticing that physicians have more resources to spend a longer amount of time with patients to help coordinate care and create more value with system delivery. Physicians in larger healthcare systems see an average of 20 patients a day and those who work independently are seeing around 23 patients a day. Increasing value is important and coordinating care is essential to reduce overall cost in the future. However, the fact that less patients are seen on a daily basis with physicians that are part of a larger healthcare system could cause an imbalance between the supply of physicians and the demands of patients, which could increase the price of services in the future.
The flu season of 2017-18 was one of the worst seasons we have seen over the past several years. The flu’s impact on trend is immediate and the following year trend deflates back to average levels. The 2017-18 flu season added around 20 points to trend for the 2018 year. There are projections that say the 2018-19 flu season will be an average flu season so we are expecting that trend to drop 20 points back to normal levels for 2019.
PwC surveyed employers in 2018 and 72% of those who responded offer advocacy services to their employees. Advocacy services help employees manage their care. Care advocacy programs started in response to the popularity of high deductible health plans over the last several years. As more and more employers implemented HDHP’s to help mitigate their costs, they saw a need for a service to help employees navigate the health care system and choose care that made sense for their needs and their wallet. Care advocacy is essential and can help lower utilization and increase efficiencies. As navigating medical care becomes more complicated with the lack of price transparency, there will be a continued need for assistance to make informed healthcare decisions.. Advocacy services assist with price transparency and help members get the care they need. Care advocacy programs try to steer patients to lower cost options and attempt to decrease ER visits and inpatient stays. By steering patients to lower cost options, care advocacy programs can decrease costs, improve outcomes and patient experience. Although these programs are beneficial to employees and provide high touch, it is hard to get employees engaged with care advocacy programs. The average healthcare consumer does not utilize the healthcare system enough to remember to utilize a care advocacy program. As long as employers continue to promote and educate their employees about the importance of care advocacy programs we can expect these programs to cause downward pressure on trend for the coming year.
High Performance Networks
High performance networks are comprised of a group of providers that partner with insurance carrier, or healthcare system, and agree to provide high quality care at a lower cost. High performance networks are becoming more popular as 45% of employers surveyed by HRI said they would choose a high performance network if offered lower premiums, lower deductibles and access to quality healthcare providers. By participating in a high performance network, providers are promising quality outcomes and reducing overall costs and utilization. Employers are noticing the importance of high performance networks, because of the downward pressure, they do not compromise the quality of care their employees have access to. Therefore, as long a high performance networks continue to lower utilization, increase the quality of care, and control healthcare costs, we can expect downward pressure on trend.
While healthcare costs are predicted to increase at a single digit rate in 2019, the cost increase is still a challenge for employers. To discuss how these factors could impact your organization’s medical costs please contact a consultant today.