Francois de Brantes on COVID-19, Healthcare Supply and Demand, and Episodes of Care (VIDEO)
Peter Wehrwein
Managed Healthcare Executive recently had a wide-ranging conversation with de Brantes about COVID-19, the healthcare sector and how the precipitious drops in utilization and provider revenue may affect the future of bundled payment and other alternative payment models.
To know anything about episodes of care and bundled payments is to at least know of François de Brantes. He has been working on them for decades and is among the best known proponents. De Brantes is now senior vice president of commercial business development at Signify Health. We recently had a wide-ranging conversation with de Brantes about COVID-19, the healthcare sector and how the precipitious drops in utilization and provider revenue may affect the future of bundled payment and other alternative payment models. These excerpts have been edited for clarity and length.
On hospitalizations and the potential for reducing inpatient admissions
We've seen that at least in the Medicare population, the volume of inpatient admissions that otherwise could trigger a bundle under the Medicare's Bundled Payments for Care Improvement Advanced decreased by way over 30%, to varying degrees depending on the specific type of condition. And while that seems to be creeping back up a little bit, the reason it went down is because most hospitals diverted hospitalization and encouraged people to stay at home in order to deal with what was expected to be a significant onslaught of patients with COVID. And in certain states like Massachusetts, Connecticut, New York, New Jersey, that did happen. In most other states, it was in low-double or single digits. But the effect was real.
The reason I'm bringing this up is because a lot of the patients whose care was deferred and who potentially should have been hospitalized could have been hospitalized at home. And we've seen some of these models that rely on greater flexibility tried, tested, piloted but ultimately abandoned. And you sit back, and you say, wow, if those patients could have gotten treated at home for that what otherwise would have been an inpatient admission. And so why not look at that today as an opportunity to lose some of those restrictions.
On how physicians have fared and how non-FFS payment might have helped
On the physician side, there have been dramatic decreases in the volume of patients. The advancement of alternative payment models has been very unequal. For the most part, it's concentrated on large hospitals or health systems - total cost of care or the accountable care organization-type arrangement that's valid for large hospital health system. It's not valid for the independent physician practice down the road from where I live.
That independent physician - who happens to be the father of a friend of mine - saw the volume of his office visits of Medicare patients go down by 90%. He had to lay off the physician assistant that's been in practice for 20 years. He's now looking to align himself with a larger group because he can't sustain that type of cash flow.
For him, if there had been some form of a global payment around management of patient conditions, it would have been a completely different ballgame because the revenue associated with that payment would have happened, and he wouldn't have to rely on individual services because what you have is a budget to manage a patient with one or more conditions for a period of time.
So I look at COVID as having shown us the flip side of the aspect of fee for service that we have been moaning about. When utilization goes down, it's a massive problem for the delivery system. But there are ways of dealing with it in an alternative payment models that actually made sense and could avoid the significant financial challenge that a lot of a lot of physicians - specialists and primary care physicians - are experiencing.
Physicians like my friend's father don't want to lose their independence as a practice. What they're looking for are companies like Aledade or, in our area, ProHealth, which is owned by Optum, because they still respect them being in practice, but they give you some degree of financial support when times get tough, and they give you other advantages. So it's different than I'm going to sell myself to a large hospital or health system, which, by the way, may not have the cash to buy - even with the bailout money.
On the demand for healthcare bouncing back
That lost revenue, in our estimation is not coming back. It's lost. Because if you have a hospitalization for patient who has an acute exacerbation of COPD that didn't occur because they were stabilized in another environment, then hospitalization is lost. It's not coming back.
What happens with now the inflection [is uncertain]. Is it going to be a true inflection back to where it was, is it going to happen in a short period of time, a medium period time, a long period time? I happen to think that it's going to take it's going to take a while. So you've got a net loss of revenue, there's going to be a continued loss of revenue for a period of time.
On the commercially insured population
For commercially insured patients, you have a double whammy. One, loss revenue is lost. Two, you've got a lot of people now who are unemployed or even if they're going to be re-employed, they have cashflow problems that are significant. The last thing they want to do is to shell out thousands of dollars for healthcare services. So we expect to see a utilization decrease across the board.
On ACOs, lower prices, and a more competitive environment
If you're an ACO today, you're going back to your payers and say send me more [volume]. I want more. And by the way, the deal that I made last year for those for the total cost of care for those patients, I'll give you 10% off if you send me more patients.
Or the deal that you know I was willing to make on the episode of care, maybe it was upside only, with whatever. I'm willing to take my price down by X thousands of dollars, and I'll give you a full guarantee for 90 days. Because your fixed costs are your fixed costs. And if your revenue has decreased substantially, you're not going to be able to make up that those fixed costs quickly. So we're seeing the supply side of the industry [seeking] more volume wherever they can get it and being willing, as a result, to strike the deals that they weren't willing to strike before COVID.
That gives me encouragement at two levels. First of all, it lays bare the deficiencies of the fee for service system because in a full employment, fat healthcare system environment you get price increases where you can, you get schedule increases where you can, you get volume where you can. When you actually have to compete for value, you have a different a different mindset.
And on the other side, you've got employers who are struggling financially. They've lost revenue. They're going to not going to make up that revenue anytime soon. So how do you compensate for that? You're going to find ways to cut costs. And that means you're going to want to strike deals and bargains wherever you can.
We are shifting towards a more competitive - even in markets that are highly consolidated - environment because providers are now hungry for business and they cannot jack up their prices, because there's no appetite and there's no ability for employers and individuals to pay more for individual services. So everyone is in a cash crunch, recessionary environment in which if you want to stay afloat, you have to find a way to make a deal.
So I actually think that the combination of all those things is going to accelerate some forms of episode of care payments because you want to make a deal.
On COVID-19 and provider consolidation
I think most of us have been worried about consolidation for a long time. And the dire straits of many provider groups can lead to further consolidation into larger hospitals and health systems. But I think even for the larger ones that are well capitalized and getting a lot of bailout money…most physician acquisitions by hospitals and health systems end up being money losing, so you're buying business and consolidating in the hopes of something happening down the road. That's your way of buying volume or, by consolidating the market, you can create more pressure on price increases.
But the pressure on price increase is going to be very tough to exert. Finding the discretionary cash to buy the practices, even if you're well capitalized, is going to be, I think, difficult. Even though the banks have lots of money and the Fed is backing them, the appetite for tax-exempt bonds from organizations who are suffering significant losses isn't going to be huge.
On payment models: risk versus uncertainty
I hope to have a Health Affairs blog post over the next couple of weeks with two co-authors, Meredith Rosenthal, from the Harvard School of Public Health, and Jeroen Struijs, about the difference between risk and uncertainty. Providers are very willing to take on risk. What's challenging to them is when the model proposed by the payer has so much uncertainty built into it that it becomes a game of chance as opposed to a game of skill. And what we're seeing in the programs that are designed so that it's not a game of chance, but it's a game of skill, there's great uptake. The Medicare Bundled Payments for Care Improvement is a great example. You've got tens of billions of dollars of episodes of care that are being managed by providers, fully at risk, across the United States.
And in the programs that we're working on in the private sector, we see demand and uptake on at-risk episodes of care, partially because of the design quantifies the risk and gets rid of the uncertainty that really makes it very, very difficult for providers to say to say yes.
On Signify Health
It takes two to tango. So you can have a delivery system, eager to strike bargains on episodes of care, you can have employers eager to take those deals. But unless you have someone in the middle that can help the demand and the supply side meet, it may not happen.
The carriers are coming out of COVID with surpluses that they likely are going to have to redistribute back to employers, at least the fully insured employers, because their medical-loss ratio may end up by being lower than 80%. And so the from the carrier perspective, things are OK.
They're not OK for employers, they're not OK for providers. So part of the role that that we at Signify need to play is [to be] that matchmaker and continue to do that on an accelerated basis, [although] we're not the only ones. There are other organizations.
On Signify Health and his career working on bundled payments and episodes of care
I'm really excited about the ability and the programs that we're bringing live that includes all kinds of episodes. And I think it is the first time in my career where we're bringing programs, to go live, on chronic conditions, including substance use disorders, long-term procedural cases like maternity, basic procedures - you know a whole panoply and library of episodes that cover a large swath of medical spend. I've been hoping to get to the point in my career where I'd work for an organization that could do this stuff, broad scope and at scale. And we're finally there. It took a long time, but we have two programs that are going live in the next 60 days. And it's really exciting.
And so once that's done, you know, then the next phase, and I am looking at trying to figure out now how to do cancer episodes. And we're working with one of our customers, Regence BlueCross BlueShield, on a potential pilot around cancer episodes. It's very early. We're still trying to figure out how it could work.
The folks who are in this and understand the potential for these programs, really want to see it expand and want to see the scope expand. There are lots of challenges. There's lots of barriers. There are lots of unknowns. But the demand side and the supply side are finally meeting together on broad scope programs. So that's what I'm continuing to work on, and I see the demand for it increasing.