How to Manage Your Healthcare Spend Better in 2022 - Paul Carter - HMA

The video provides an in-depth exploration of the self-funded health plan administration space, focusing on strategies for managing and reducing healthcare spend for employers. Paul Carter, Chairman/CFO of Hawaii Mainland Administrators (HMA), advocates for a fully integrated "Health Plan Administration" model that encompasses all core services—claims, networks, medical management, and advocacy—under one roof. This approach is presented as a necessary counter to the fragmented, multi-vendor solutions prevalent in the market and the restrictive, non-transparent models offered by large insurance carriers (Bucas). Carter argues that integration is crucial not only for operational efficiency and data exchange but also for effective member engagement, particularly in proactive cost containment programs.

A significant portion of the discussion centers on the shift from traditional reimbursement to Value-Based Pricing (VBP), which HMA implements through its proprietary Advanta solution. Carter defines VBP as moving from an unknown "charge down" approach (discounting inflated bills) to a known "cost up" approach (using a tangible benchmark like Medicare cost). He emphasizes that the success of VBP hinges on pre-service advocacy and intervention. By integrating the advocacy function directly into the TPA's core operations, HMA ensures that staff can intervene immediately when a provider calls for eligibility or prior authorization, guiding the member to cost-effective, high-quality care options before a high-cost service is rendered. This proactive model is designed to mitigate the "balance billing" and member angst that plagued earlier, reactive Reference-Based Pricing (RBP) iterations.

Carter identifies the two primary drivers of unsustainable healthcare costs: high-cost facility-based medical services and the specialty drug initiative. He stresses that any effective cost containment strategy must focus on these two areas, as they account for 80% of the total cost despite representing only 20% of the encounters. Philosophically, the speaker believes that the future of healthcare reimbursement depends on normalizing price transparency, empowering the consumer to ask for the cost upfront, which currently disrupts the leverage held by providers and carriers. Looking ahead, Carter predicts further consolidation in the TPA market and champions the use of "cash pay" mechanisms for high-cost services as a necessary tool to address access-to-care issues, ensuring providers accept payment and restoring leverage to the purchaser.

Key Takeaways: • The Need for Integrated Health Plan Administration: Fragmented, multi-vendor models create operational friction, data exchange issues, and inefficient member experiences. An integrated TPA model, incorporating claims, medical management, and advocacy, provides a cohesive platform necessary for deploying innovative cost-saving strategies. • Focus on the 80/20 Cost Drivers: To achieve material savings, employers must concentrate efforts on high-cost facility services and specialty drug costs, which drive 80% of the total spend, rather than focusing on marginal discounts for routine care. • VBP Success Relies on Pre-Service Intervention: Value-Based Pricing (VBP) must be implemented with a heavy emphasis on advocacy and clinical management that intervenes before the service is rendered, leveraging moments like prior authorization requests to steer members proactively. • The "Buca Conflict" Limits Innovation: Large carriers maintain total control over their health plan "box" and actively resist external innovation or customization, preventing employers from implementing aggressive VBP or integrated advocacy solutions. • Incentivize Member Behavior: To drive necessary behavioral change, employers must financially reward members for becoming "better purchasers" of healthcare, utilizing lower payroll deductions, reduced out-of-pocket costs, or even profit-sharing on savings achieved. • Cash Payment as an Access Strategy: The ability to facilitate immediate "cash payment" (not necessarily physical cash, but prompt payment outside the traditional billing cycle) for high-cost services is a crucial mechanism to overcome provider resistance and access-to-care issues often encountered in VBP models. • The Importance of the "How": While saving money (the "what") is easy to sell, the implementation (the "how") is difficult. Employers must actively communicate the "why" behind disruptive changes and commit to thorough member education to prevent employees from perceiving the changes as the company being "cheap." • Specialty Drugs are a Primary Cost Factor: The specialty drug initiative is listed alongside high-cost facility services as one of the two biggest financial problems facing health plans today, indicating the massive financial pressure these pharmaceuticals place on the payer system. • The Future of Reimbursement is Cost-Up: The industry is moving away from the unknown "charge down" model (discounting inflated bills) to a known "cost up" model, where pricing is based on a tangible, auditable benchmark like Medicare cost.

Key Concepts:

• Value-Based Pricing (VBP) / Reference-Based Pricing (RBP): A reimbursement methodology utilizing a known cost benchmark (e.g., Medicare) rather than unknown provider charge masters to determine payment, shifting from a discount model to a cost-plus model.
• Advanta: HMA’s integrated, proprietary solution combining pre-service and post-service advocacy with Medicare reference-based pricing technology.
• Bucas: An industry term for the large, dominant insurance carriers (Blue Cross Blue Shield, UnitedHealthcare, Cigna, Aetna) known for controlling market share and resisting external innovation.