Health Plan Landscape for the Walk-in Operators

March 2016 - Health Plan Landscape for the Walk-in Operators
By Bernie Kuhn

The health plan industry survived the ACA implementation and the first few years of the new plan structures.  The rate of change isn’t slowing however.  Millions of newly covered lives (25% of which auto-renewed in January) on-boarded into the US health system.  Demographic trends and regulatory forces continue to change their business mix from group commercial to individual products.  But the effect of consumerism seems to be the big question.  High deductible plans haven’t driven price shopping so much as they’ve curtailed spending.  Plans have been making investments in consumer technology and engagement which will affect the walk-in business.

As this month’s newsletter is being prepared, the annual health insurance statutory reporting cycle is wrapping up and full year 2015 results hit in April.  Look for major announcements as plans merge for scale and to grow their Medicare Advantage volume (Aetna/Humana).  We expect to see several smaller Blue plans merge into larger plans.  Blue plans may compete amongst themselves (via Anthem/Cigna), and Aetna and UnitedHealth (via Optum) will continue to build their infrastructure as a service arm of health systems.  There may in fact be better money from running operations for health systems than in covering risk and chasing employers – the business case is pretty straightforward if/when a single or dual payer model occurs.  


Based on 2015 projections, some 18M out of 54M total eligible Medicare recipients are on Medicare Advantage plans.  Medicaid in its various forms now covers 72M+ lives – up 15M since ACA implementation – and those plans are also evolving rapidly.   Most walk-in operators may only care about the Employer and Non-Group columns – leaving half the population to seek walk-in resources elsewhere.  Having a clear strategy to skim high margin customers or serve the masses, and building accordingly, should line up with your overall playbook and payer strategy.

Health insurance and health plans used to be about deploying capital as a risk transfer business, plus expertise in contracting, actuarial, underwriting, and processing claims.  Capital is now cheap and the other functions are all about scale unless a plan is integrated with the provider.  Consumers are bringing expectations from other sectors to healthcare.  The opportunity lies in helping make better health decisions and upgrading the experience of the ______ (insert… Member? Customer? Patient? Yes?).

Walk-in operators should be paying close attention – these payers are going to get a lot smarter about steering business to your door – or away from it.


Most health systems are already familiar with Truven analytics – many use them for service line planning and patient analytics.  Large operators would benefit from these advanced tools where they have sufficient scale.  IBM acquired Truven for $2.6B last month.  IBM reports it now has health-related data on approximately 300M lives.  The goal is to run patient data through Watson’s artificial intelligence software, so that it works as a specialized digital assistant to physicians and health administrators to improve care and cut cost.  This points to a holy grail of health insurance underwriting among others.

Last summer CVS and IBM partnered to use Watson to predict the health of the pharmacy giant’s customers through predictive analytics.  From the J.P. Morgan conference in January 2016, “More than 50% of the U.S. population is within 10 miles of a MinuteClinic”. ,   CVS already handles pharmacy benefits management for about a third of the US and is one of the largest “health insurance” plans due to its Part D prescription drug plan (see this month’s Enrollment data).

So, if IBM, through its Truven claims treasure trove, and CVS can identify and predict health issues, and a plan can factor that into modeling, the next step would be to route the patient for the lowest cost, most effective point of care for the service and measure outcomes.  One could figure out a way to get around the local health system if needed, or in reverse bypass the traditional health plans in favor of a payer/provider design.  With this type of information, one could begin to predict performance for a self-insured employer’s plan, or health system service line, going out years.  

If these giants figure out how to integrate consumer behavior and profiling – searching for health on their phone, lifestyle / pre-disposed interests, social media patterns, characteristics like income, education, demographics etc. – it gets even more interesting. It would of course work with consumer-based purchase patterns like walk-in care.

Take a look at Accolade (  It picked up a $39M funding round from investors including McKesson Ventures and a subsidiary of Independence Health Group .  (Independence is the parent of Independence Blue Cross in PA, and rumored to be seeking a merger with another Blue.)  They claim “Across our customer base, Accolade is responsible for [driving utilization of]: 60% of usage for telehealth programs, 80% of referrals to second opinion services, and 10x the usage for price transparency tools” among their plan clients.  Quoted on their site, “…We’re building a world-class product development organization to design the next generation of cloud-optimized healthcare products and services. … to set the new standard for how technology and personalized service combine to reinvent the healthcare experience.”

Fidelity, one of the largest and most sophisticated investment firms on the planet (e.g. 401k plans, investments) has recently announced they are entering the health benefits private exchange business .  “…the same Fidelity employers have relied on for decades to help safeguard their employees’ financial futures. Fidelity Health Marketplace was created to expand our commitment to helping employees achieve the lives they want by helping them protect their most important asset, their health.”  

Fidelity also led a $400M funding round for Oscar (a health insurer startup), making a bet on consumer-driven health plans : “Oscar is …pairing up with integrated provider networks such as Tenet Health in Texas and Providence in California” (also both walk-in operators, e.g. Carespot/Medpost urgent care and Walgreens/Providence retail clinics, respectively).

Note that these groups understand sophisticated analytics, consumer / customer experience, have their own benefit plans, and are putting their money to work building smarter health plan products and services.


Healthcare providers continue to make inroads in the plan space.  For the last decade, J.D. Power and Associates has published a Member Health Plan study .  Interestingly (perhaps obvious) the integrated plans consistently score some 100-200 points (on a 1000 point index) higher – there is no separate brand or image to the consumer, and no question of “who” their healthcare comes from.  For dominant health systems, why they are not in the health plan business probably speaks to an opportunity – just as with walk-in operations, these brands will intrinsically index higher and have a competitive edge.

Intermountain Healthcare (with 30 urgent care centers), as an integrated payer/provider, has introduced a product with a set annual health plan rate increase for employer clients (4% !) through its 22 hospitals and 1,400+ doctors.  By locking in employers over a multi-year program, and by vertical integration controlling its own costs, it can win recurring, high margin business on the provider side and command a competitive edge on its plan.  With health care benefits as one of the biggest expense items on any employer’s income statement and having had a decade of wild increases, every CFO and benefits buyer in the US will be demanding something similar should Intermountain prove successful.

Sutter Health (with 26 urgent care centers) launched its HMO products for individual, small, and large-group plans in January 2014, now serving 37K people in northern California.  While it has 25 hospitals in its network it has openly stated it is only writing coverage where it has “adequate network of primary care and specialty providers” to cover members.  This novel concept – as the organization grows and builds its geographic coverage – it will write business for those areas.   If we were taking bets, we might wager their an urgent care platform is a strategic asset to establish a presence, build the medical group with the referral volumes, and extend into attractive markets with its high margin integrated payer/provider products.

Payer/provider integration has other benefits.  Assume that providers spend 5-10% of every dollar of net revenue on payer contracting and revenue cycle; further assume that payers spend 3-5% of their premiums or equivalent revenue on the same.  In the case of being vertically integrated, the cost savings from not having the complexity in the middle is huge – skip the third-party gateway, reduced denial/audit overhead, no drawn out contract negotiations, rate adjustments actually follow the cost drivers, etc.  Data sharing is simpler and less contentious.  Not only does the integration drive savings, it is also is clearly linked to satisfaction (see J.D. Power references).

Kaiser Permanente is the giant in the space and originated the HMO model.  UPMC, Geisinger, Spectrum, Henry Ford, and other large system-based plans with walk-in access points are also large health insurers with the opportunity to compete head-on with traditional commercial carriers.  These integrated plans should see similar branding and vertical integration efficiencies.


Value-based care and bundling continues to be an endless topic.  We’ve had several clients inquire on the rules now being put in place by large payers for their systems with respect to bundled payments.  The going rates for health system operators are superior to private operators, and the value-based payment structure may sweeten that further.  It is clear the plans haven’t figured out a coherent set of requirements for the urgent care business at large (and likely don’t understand it well enough amongst them to agree). Several paraphrased excerpts from a February 2016 Healthcare Financial Management Association (HFMA) report:

CMS.  Health and Human Services Secretary Sylvia Burwell targeted 30 percent of fee-for-service (FFS) Medicare payments to quality or value through alternative payment models (ACOs, bundled payments) by the end of 2016 and 50 percent of payments by the end of 2018.  …  It showed positive quality results – lower hospital readmissions and higher patient experience.  But only one of seven regions over four years generated savings for Medicare.

Anthem.  Chief medical officer at Anthem: “We’ve all committed to meet or exceed the secretary’s goals of 30 and 50 percent… For those of you living day-to-day on the provider side … that’s where we’re going as health plans.” … The cost performance of the model ranged from no improvement to 8 percent savings when compared with enrollees not in the programs, with an overall average savings of 3.3 percent.”

UnitedHealth.  Chief medical officer at UNH:  “...Value-based payment models help reduce hospital admissions and improve “overall cost trends”… Secondary savings have been derived from finding sites of care with lower unit costs…  Value-based payment is a starting point, and it is absolutely essential… But we contend that is insufficient by itself to really move the needle on value.”  UNH found PCMHs in FFS-based performance contracts provide about 3 to 5 percent savings and value-based payment has provided 1 to 6 percent savings. The company has been able to get savings to increase “to the double digits” by adding those two approaches to so-called virtual integration, which includes data analytics and best practices.   UNH is moving away from bundled payment programs, with some exceptions.”  “We’re not fans of bundles for a variety of reasons,” including a pattern of churning utilization among supply-sensitive bundles and concerns about attribution.

Aetna.  CEO of Aetna Accountable Care Solutions: “committed to move 75 percent of their contracts into value-based arrangements by 2020.  The insurer has found the most success when it was able to establish “full-thickness relationships” as the preferred partner of health systems… financial cost of reduced average length of stay and readmissions, with Aetna finding additional patients for the provider to make up for the lost revenue. In co-branded insurance plans launched with providers, Aetna utilized technology to identify leakage rates and to start managing patient referrals to increase their stability.”

Our take-aways?  CMS lives in the complexity trap of believing more sophistication is the answer.  Capturing a few percent in savings doesn’t make sense compared to vertically integrated delivery and flat-out lower cost delivery.  Anthem has publicly staked itself with Vivity and needs to make that work (3.3% savings?).  Aetna is selling solutions to health system CFOs which drive revenue and may emerge as the white-label operator of health system plan products.  UnitedHealth is the smartest and most pragmatic, and they aren’t seeing the value – they admit it’s a lot of work to get single-digit savings.  Most relevant comment in our view: “finding sites of care with lower unit costs”.


Each of the segments – commercial lines, Medicare Advantage, Managed Medicaid – are incorporating experience-centered features.  The plans with commercial lives that they hope to convert to Medicare Advantage are suddenly dealing with an end consumer-buyer instead of a benefits manager.  (Note: this is where Humana for example, with its chain of Medicare clinics in Florida, dominates.)  The health plans have figured out that customer satisfaction and ease of use matters – and may be a critical factor for renewals in coming years.  Consumer-driven influence will begin to shift the balance of power from health plans unless they control the consumer as the member’s healthcare champion and budgetary coach.

In J.D. Power’s annual rankings for health plans (both commercial and Medicare Advantage lines) , the health plan business as an industry by itself is one of the firm’s lowest ranking on an overall satisfaction scale (compared to overall satisfaction level with financial services, travel, consumer goods/autos, etc.).  Some key take-aways from their national survey of 30K+ members include large gains on scoring when a plan emphasizes communications and digital integration.  With a nod to the inherent value of competition, those members tended to have higher satisfaction in states with a more competitive market (<50% Blue dominated).  High deductible plans across the board had the weakest consumer scores.

UnitedHealth is testing new approaches to integrated delivery.  An example is Harken Health, its new subsidiary that will be taking on the exchanges (ironically after it made a stink about ACA losses from the exchanges).  From the Chicago Tribune last October , “In 2014, UnitedHealth put together a small group of employees, led by Tom Vanderheyden, vice president of business development and innovation, to come up with something new. Acknowledging the frustration of consumers over the complexity of insurance, Vanderheyden said the group looked outside the industry at companies known for good customer service. For example, he looked to the simplicity of the menu at the Chipotle restaurant in rethinking how an insurance company should design a plan.”  This plan is anchored to their clinics as part of the product .

We expect 2016-2017 will see dramatic shifts in consumer perception of managed care across market segments.  Every plan appears to be trying to upgrade its consumer-facing touch points.  These shifts will occur as a result of consumer expectations from other services industries now being expected of healthcare.  For examples, we took a look at how the payers are connecting through to the walk-in space.

A quick review of Google Play (apps for your Android phone) had some amusing screen shots of how the biggest plans deploy technology; Anthem somehow decided to cram the details from a card onto a screen?  But kudos for Urgent Care on the Main Menu.


Kaiser’s app shows how much more integrated they are as a payer/provider; in their app one can go from plan benefits to appointments to records to finding care.


A few views of UnitedHealth’s app (including a map to urgent care centers affiliated into BCBS of South Carolina!).  Under a new program, data collected from plan members using fitness wearables will be sent to UnitedHealthcare Motion app.  Members can earn up to $1,460 in reimbursement account credits based on their usage – basically feeding the plan further information on the health and activity on members.


It doesn’t take a great leap of imagination to see how this could shape the walk-in market.  Each operator needs to build a brand and be front/center with the buyer.  The only competitive advantage for private operators may be superior service.  Luckily the buyers can and do change health plans, and the walk-in businesses will be there to serve them.  Look for these digital tools and remote data collection to be bigger features in coming years as the plans learn consumer tech and how to capture the actuarial value on these sources.

Advance Planning for 2017-2018

•    Develop an active strategy for working with and integrating into payers in your market
•    Figure out how your operation fits into the tools and products being sold by payers
•    Those evergreen payer contracts signed years ago are due for a refresh – and you need market intelligence and analytics to make a compelling case for rate and volume
•    Coordinate with local systems and large self-insured employer plans on their quality initiatives to learn what they are doing and how you may be able to serve
•    Get your customer experience story together and have a third-party vet your strengths and weaknesses

*Year to date enrollment data for 2015 from SNL Financial are included in the appendix; Contact us if interested in further information.  Data presented are not completed for FY2015.

Bernie Kuhn is a principal at Merchant Medicine LLC.  Please contact