Hundreds Attend Gibbons Healthcare Program
August 30, 2011
On August 11, 2011, Gibbons P.C., the 230-attorney regional law firm headquartered in Newark, New Jersey, and Summit Medical Group, the state’s largest physician-owned multi-practice group, co-sponsored the executive briefing “The Rapidly Changing Healthcare Delivery Model: Its Impact on Employers, Providers, Brokers, and Payors,” held at the Hilton Woodbridge in Iselin. The event attracted more than 300 attendees, representing insurance companies, benefits brokers, and physicians, hospitals, and other healthcare providers, along with educators, economists, and employers of all sizes from a cross-section of industries throughout the state.
In their opening remarks, Frank T. Cannone, Esq., who chairs the Corporate Department at Gibbons, and Jeffrey D. Le Benger, MD, Chairman of Summit Medical Group, emphasized the timeliness of the topic and its particular prominence in the country at this time. They summarized the major transition taking place in the healthcare industry – driven not only by the Affordable Care Act (ACA) but also by continually rising healthcare costs and insurance premiums, as well as global competitive pressure – that is transforming the healthcare model in the U.S. into an integrated supply chain. All the various links in that chain, including employers, providers, brokers, and payors, are now grappling with many pressures and uncertainties, in order to determine how they fit into this new model, which new challenges and risks they face, and how they can fully leverage their potential for business growth within the new system. Mr. Cannone and Dr. Le Benger reiterated that this program was designed to help them do just that.
The Honorable Leonard Lance, member of the U.S. House of Representatives for New Jersey’s 7th District, delivered the program’s first keynote address. Rep. Lance is a member of the House Energy and Commerce Committee and its Subcommittee on Health. His district, nicknamed the country’s “medicine chest,” includes more employees in the pharmaceutical and medical device industries than does any other district in the U.S. Rep. Lance, who did not vote for ACA but did vote for its repeal, discussed the uncertainty with regard to the law’s constitutionality, which he expects the Supreme Court to consider in the new term beginning October 1, and whether this uncertainty is affecting job creation. He then focused on the challenges the new law could create for small and mid-size employers, including new fees that may or may not be balanced by tax credits, while also pointing out the opportunities within the law’s current form for increasingly rewarding value and quality.
By way of example, Rep. Lance discussed Accountable Care Organizations (ACOs), a new model for the organization and delivery of care. The ACA lays out the basic structure for ACOs, which are overseen by primary care physicians and share risks and accountability if care coordination fails. Essentially, physicians and hospitals within an ACO share in the savings they generate through more efficient care.
Additional opportunities for innovation were explored in the second keynote address, by Jonathan Bush, Co-Founder and Chief Executive Officer, athenahealth, Inc. (NASDAQ: ATHN), introduced by Simon J. Samaha, MD, President and Chief Executive Officer of Summit Medical Group, who referred to him as not simply a forward thinker but a “forward speaker.” Mr. Bush noted that, traditionally, reform reaches up from grassroots pressing change, so the ACA may mark the first time reform was planned centrally. He posited that successful reform involves three distinct components: bold innovators who risk trying something different; many sellers willing to take chances on those innovators; and a large pool of buyers for these innovations. These conditions allow freedom to explore. With healthcare, however, there are many buyers but relatively few payors, sellers are increasingly consolidating, and, via reform, governments are actually defining the product – conditions more likely to lead to declining product and service variation.
Mr. Bush then focused on the areas where innovation can still take place. For example, employers have more flexibility with their benefits plans, because complexity is being managed down. Smaller and smaller employers can now self-insure, a situation ripe for innovation. The opportunities, then, for creative business growth lie with individual practices, providers, and employers in New Jersey, to create a more diverse buyer base and seller base.
The program’s first panel, “New Opportunities Under Healthcare Reform,” was moderated by Leemore S. Dafny, PhD, Associate Professor, Northwestern University’s Kellogg School of Management. Dr. Dafny is also Research Associate for the National Bureau of Economic Research and an adviser to the Congressional Budget Office. She summarized the theme of the panel, to “Start with a crazy idea and then shape it down.” Panelists were:
- Richard G. Popiel, MD, MBA, President and COO, Horizon Healthcare Innovations (Payor)
- Christopher T. Olivia, MD, MBA, Senior VP of Strategic Planning and New Venture Development, Highmark (Provider)
- Joseph M. DiBella, Managing Director and Executive VP, Conner Strong & Buckelew (Broker)
- Hercules Angelatos, Senior VP, Business Administration/Finance, Region Americas, Hapag-Lloyd (America) Inc. (Employer)
The panel discussed how healthcare reform has created tremendous activity in the marketplace, but a realignment of the industry would have been necessary regardless, since the U.S. has a national healthcare spend of 17 percent of GDP, with inconsistent care, quality, and performance – an unsustainable situation. Demands are increasing, given, for example, an aging and increasingly overweight population, though marginal payments to providers are decreasing. Healthcare exchanges, a major component of ACA, are anticipated to introduce a new level of competition. The panelists suggested repeatedly that shifting focus from rate/volume to cost/quality would minimize inefficiency and waste, and make organizations more attractive to consumers. They also continually reinforced the importance of patient engagement, coordination of care, and the total episode of care (as opposed to individual procedures). The major emphasis, however, was the departure from a fragmented, disorganized delivery system to new alignments, integration, and coordination across the supply chain categories – providers, employers, brokers, and payors all working together in creative new ways to innovate product and service delivery, manage costs, maximize quality, and grow profits.
The program’s second panel, “The New Players and Partnership Alliances in a Co-opetition World,” came to similar conclusions. Moderated by Harborne (Gus) Stuart, PhD, Visiting Professor at New York University Stern School of Business, the panel featured:
- Barry H. Ostrowsky, Esq., President and COO, Barnabas Health [f/k/a Saint Barnabas Health Care System] (Provider)
- Charles R. Catalano, President and General Manager, CIGNA HealthCare (Payor)
- Deborah A. McEwan, Executive VP, Brown and Brown Metro, Inc. (Broker)
- Charles T. Wall, Senior VP of HR and Communications, United Water (Employer)
The panel launched its discussion from the concept of “co-opetition,” the blending of cooperation and competition. One company’s profits are one piece of a larger value creation. Co-opetition applies when players in a healthcare transaction realize that the other players with whom they are negotiating and/or competing are often their partners in creating the economic “pie” in the first place. Co-opetition is about each player knowing its piece in value creation and improving performance by understanding the other players in the system, which fosters a realignment among all participants in the delivery system and lowers costs. The panel used the term “healthcare delivery team” to illustrate this point.
As did the first panel, this panel returned to the question of individual consumer engagement. One of the parties in the supply chain is the patient, often forgotten. During realignment, the other parties should become a source of lifestyle support, become involved in the lives of consumers to make sure they get sick less frequently. While employer benefit plans often function to find, develop, and reward talent, the panelists maintained that benefits must also activate the employee in the new delivery model, which should focus on consumer-directed plans. The creation of such plans – the very kind of innovation and opportunity players hoped the changing healthcare system would provide – requires “co-opetition” among providers, payors, brokers, employers, and consumers.