In New Jersey, Horizon's Big Reach for Value-Based Care Runs Into Political Reality

If the state’s largest insurer created a plan that promised lower costs for consumers and employers, technology investments, and better healthcare quality, everyone would be happy, right?

Wrong.

That’s been the lesson for Horizon Blue Cross Blue Shield of New Jersey, which stunned the healthcare community last month when it unveiled its OMNIA tiered network plan. It’s the boldest attempt yet to move a state with some of the nation’s highest healthcare costs away from volume-based to value-based delivery. But OMNIA’s scope, and its potential to reshape the New Jersey market, has revealed a challenge of putting healthcare reform theory into practice: as healthcare experts and legislators alike have observed, rewarding quality will inevitably create “winners and losers.” In New Jersey at least, those who feel left out aren’t going down quietly.

For consumers, the plan offers lower premiums and out-of-pocket costs, in exchange for staying within a network of selected hospitals and physicians. Providers in the OMNIA partnership have agreed to lower payments in exchange for having patients directed their way. Unlike conventional narrow network plans, OMNIA doesn’t bar enrollees from venturing outside the network, known as Tier 1, but doing so will increase out-of-pocket costs. Who Horizon included in the alliance and how providers were picked has created an uproar, in part because so many details remain under wraps. Because it has 3.8 million members and an outsized share of the market, Horizon’s move could spell financial doom for those not in the network, critics charge.

Today, Horizon officials were grilled for more than 4 hours at a joint hearing of Senate committees that handle insurance regulation and health policy, amid calls to shelve OMNIA until more is known about how the plan was created. The hearing ended with the committee chairs calling for an investigation by New Jersey's attorney general into how the alliance took shape.

“Our hearing revealed that Horizon misrepresented to the public and legislators the makeup of the widely publicized OMNIA Alliance and failed to disclose all participating providers within the tiered system. In addition, the Department of Banking and Insurance may have violated state law and its own regulations by approving the tiered plans even though they did not meet the established requirements" Senators Nia Gill and Joseph Vitale, both Democrats, said in a statement.

For Horizon, OMNIA is a response to the national movement toward alternate payment models and more focus on preventive care. “Patient-centered care is not a novelty,” said Robert A. Marino, CEO of Horizon, in his testimony this morning. “The Affordable Care Act, President Obama, and states across the nation have pushed for this change.”

While some criticize Horizon, others fault state regulators for approving the plan in the first place. But OMNIA has shown that state laws, which look at each insurer or plan in isolation, may be inadequate to manage a marketplace undergoing dynamic change since the passage of the ACA. Rather than controlling healthcare policy, regulators suddenly found Horizon making policy for them. At its best, OMNIA could be a model for Blues in other high-cost states; at worst, OMNIA could speed the financial spiral of some safety-net institutions. Those concerns were on display today, especially among legislators from urban areas.

“It’s pretty apparent your definition of value is discriminatory,” said Senator Ray Lesniak, a Democrat from Elizabeth, whose city hospitals were left out of the alliance.

“We have a responsibility to say for all our state’s hospitals or all our states consumers, what will this mean to them?’’ said Vitale, who chairs the health committee and has overseen legislation to bring financial resources to safety net hospitals. “It wouldn’t matter if you were some obscure insurance company. It matters when Horizon does something.”

A Response to Consumers

“We’ve made a commitment to value-based care,” said Minalkumar Patel, MD, MPH, Horizon senior vice president and chief strategy officer, in an interview with The American Journal of Managed Care ahead of the hearing. Patel described OMNIA as the outgrowth of a multiyear investment in technology, systems, and knowledge on how to deliver care in ways that improve quality while squeezing out unnecessary costs. In recent weeks, healthcare experts have praised OMNIA for elements they believe will achieve the “triple aim” of improved population health, better patient experience, and cost reduction.

No one is debating that New Jersey spends a lot on healthcare. Horizon cited 2014 data from the National Association of Insurance Commissioners that the state’s healthcare costs are the second-highest in the country, and are rising 25% faster than the national average. Healthcare spending is a long-term problem here; 2009 data from the Kaiser Family Foundation (KFF) show that the state ranked first in spending per Medicare beneficiary, just before the start of ACA incentives to rein in those costs.

OMNIA is not designed for Medicare or Medicaid enrollees; rather, the tiered network is aimed at those beneficiaries that Horizon’s own data show the insurer has been shedding or cannot enroll at all: middle-class households, especially those in the small group and individual markets.

KFF data for 2013, the most recent year available, show that Horizon was the dominant insurer in all 3 major commercial markets, with 77% market share in the individual market, 54% in the large group market, and 57% of the small group market. However, that last figure was based on 2013 enrollment of just over 370,000; Horizon’s 2014 annual report shows small group enrollment fell to 268,000 in a single year.

“Small group and individuals are both price sensitive, and those are the consumers who have spoken loudest about the need for more affordable coverage,” Horizon spokesman Thomas Vincz said in an email to The American Journal of Managed Care. Marino testified that Horizon expects 250,000 consumers to enroll in OMNIA in 2016, with at least 70% from the small group and individual markets. Of these, an estimated 40,000 are currently uninsured and would enroll through the marketplace exchanges.

Enrollment in Medicaid, meanwhile, has exploded—from 577,000 to 776,000 during 2014; Medicaid enrollment now stands at 842,000, according to data provided by Horizon. Enrollment for 2014 in the large group market shrank less than 1%, and it dropped slightly among public employees as well.

Patel said outreach efforts launched in 2013 showed that Horizon’s enrollees had hit their limit in what they could pay out of pocket. If costs were to decline, then actual spending had to come down. “We can’t shift any more costs to the consumer,” he said. “Deductibles are high enough.”

OMNIA was created to tackle spending on the estimated 30% of healthcare dollars wasted in duplicate testing and lapses in chronic care management. “Getting at that seemed to be the most logical answer,” Patel said, and Horizon began examining which of its partners were best positioned “to crack that nut.”

The evaluation process involved multiple measures and includes publicly available criteria, such as CMS ratings, as well internal metrics developed by Horizon that include consumer preferences and which hospitals current enrollees use. In the interview and in testimony today, Patel said 75% of the metrics were purely objective, and two-thirds are publicly available.

Information from Horizon states the criteria included:

• Clinical quality ratings from CMS: the Medicare process of care score, Medicare outcome metrics score, and the adjusted readmission ratio.
• An evaluation of clinical offerings across a continuum of care, including inpatient, outpatient, post-acute, and ambulatory care.
• Investments or resources in value-based care.
• The institution’s size, scale, and number or Horizon enrollees served.

Finally, Patel said, Horizon used a process “to come up with a ranking of the institutions we believed had the capacity, capability and mindset to completely transform (their) business from volume-based to value-based reimbursement.”

The resulting alliance covers 6 health networks that include players like Robert Wood Johnson Health System, Barnabas Health, and Hackensack University Health Network, as well as the physician-owned Summit Medical Group. Within it are 22 hospitals and 24,000 physicians, who may see financial benefits if the partnership produces savings. An additional 14 hospitals will be considered “in network,” or “Tier 1” for consumers. These include Cooper University Hospital, which is affiliated with the new medical school in Camden, N.J., and a sprinkling of hospitals along the Jersey Shore. All remaining hospitals that accept Horizon coverage are in Tier 2.

Monthly OMNIA premiums were will be 15% lower on average, Horizon officials said in a statement released today. For some population segments, savings may be greater: a report this weekend in NJ Spotlight said savings for state employees would be as high as 23%. (Savings will vary, as about half of Horizon enrollees are fully insured, with the rest using Horizon products through self-insured plans.)

An Alliance, Not an ACO

What Patel describes for OMNIA echoes the “value-based” goals that are sweeping healthcare. Unlike fee-for-service models that reimburse every visit or procedure, alternate models reward those providers who help patients with chronic conditions manage disease and stay out of the hospital. Such an undertaking demands sharing information on a large scale, so doctors know which patients are at risk, which ones are missing appointments, or which ones are not taking medication. These patients can be targeted for intervention. The Northeast has been slower than some parts of the country to embrace value-based payment models, but that is changing. Even while the hearing proceeded, Harvard Pilgrim announced a population health venture in New Hampshire that will cover 80,000 patients.

The structure of OMNIA is unlike anything previously seen in New Jersey. Patel said it will evoke strengths of the nation’s best-known efforts in end-to-end integrated care, systems like Kaiser Permanente in California or Geisinger in Pennsylvania. The key difference, of course, is that those giants put the insurance plan and the provider network under one roof; while Horizon will not own any of the OMNIA members, the mission is for partners to collaborate to lower costs overall, instead of trying to pass costs to one another’s balance sheet.

More than one Horizon official today mentioned the aggressive goals for value-based reimbursement in Medicare that have been announced by the federal government: 30% for 2016, and 50% by 2018. HHS Secretary Sylvia Mathews Burwell outlined these priorities in January 2015 with “Better Care, Smarter Spending, Healthier People,” which outlined a host of initiatives to achieve goals in Medicare and beyond. The ACA vehicle for delivering reform has been the accountable care organization, or ACO, which allow for shared risk and shared rewards, depending on performance.

OMNIA is an alliance, not an ACO. Most of the health systems involved have ACOs within them, and Patel said those will continue to operate, typically under the umbrella of the Medicare Shared Savings Program. The alliance will function as a hub-and-spoke relationship, with Horizon at the center, executing separate risk-sharing agreements with each partner. Under questioning from Gill, chair of the commerce committee, Horizon officials said there is only upside risk, no downside.

Can the alliance expand? Over the long haul, perhaps, Patel said, but the investment required for members demands a longer-term commitment than a single year. This is due, in part, to the HIT improvements required for the level of information that Horizon envisions. During testimony, Horizon officials said their agreements did not foresee major changes before the 3-year mark, and there are no assumptions that mergers between hospitals outside the network and those within will enlarge the pool.

Beyond that, the Horizon relationship is not designed to meddle in the day-to-day affairs of its partners. “We are working through the governance and decision-making priorities,” Patel said. As with any value-based relationship, the priority is how the patients fare overall.

Criticism From Those Left Out

While OMNIA has won praise from some healthcare opinion leaders, it’s also drawn fire from several mayors, legislators, and even the sister who represents the state’s Catholic hospitals. Only one Catholic hospital was included in Tier 1, which led to accusations that Horizon had purposely excluded them as a group, a charge that Horizon denies.

If value-based care is the goal, said Sister Patricia Codey, SC, an attorney who is president of the Catholic HealthCare Partnership of New Jersey, then Horizon’s criteria for selecting alliance members are a mystery. “The most important criteria are quality indicators and cost-effectiveness,” Sister Codey said in an interview with The American Journal of Managed Care. “It seems like the driving factor here was size and scale, which can be detrimental to value.”

NJ Spotlight reported recently that a challenge for the Catholic hospitals may be their size. These hospitals, and others that are not part of health systems, may lack the financial cushion to operate during the lag needed to evaluate performance and distribute payments under value-based models.

Tier 1 leaves out hospitals in Elizabeth and Trenton, the state capital; also excluded are all hospitals in Burlington County, a huge area south of Trenton that stretches from the Delaware River to the Jersey Shore. In doing this, the insurer ran afoul of advocates for the poor, say that Horizon is leaving out institutions that are vital to those they serve. Sister Codey and others question how some hospitals with strong, publicly accessible quality scores or records of efficiency have been excluded, while others with high spending remain. Most of all, legislators pressed today why criteria for inclusion have been withheld, both from the committees and apparently from regulators. Finally, some asked whether it’s appropriate for the state’s largest insurer to dictate a facility’s success or failure. “Hospitals will suffer consequences of this,” Vitale said. “That’s not your job.”

Asked by The American Journal of Managed Care how Horizon evaluated urban hospitals, which have been shown in studies to suffer in some CMS ratings because of the population they serve, Patel said that the process risk-adjusted where appropriate, and that some hospitals with large numbers of Medicaid clients were included. Uptake of OMNIA will not be overnight, he said, and he does not share the grim predictions for those institutions outside Tier 1.

Said Sister Codey, “I guess it’s a slow death as opposed to a fast death?”

At today’s hearing, Michael Maron of Holy Name Hospital, one of the facilities left out, addressed the frustration of those hospitals. “Perhaps most egregious, OMNIA did not choose the safest hospitals in the state based on Leapfrog scores, as only 33% of the Tier 1 hospitals received a “A” compared with 59% of the Tier 2 hospitals.”

In the interview, Sister Codey said a problem with the alliance, especially given the lack of transparency, is that “it implies that certain hospitals failed to meet performance standards,” she said. “This inference could cause reputational damage to all the Tier 2 hospitals, not just among OMNIA subscribers but across the entire market.”

At the hearing, those fears were repeated by Sister Codey’s brother, Senator Richard A. Codey, a Democrat, and by Senator Diane Allen, a Republican from the county left with no Tier 1 hospital. Allen said hospitals outside the alliance fear patients will view them as second rate, even though some are in the top tier in other insurers’ plans.

“It may not have been a message you intended, but it is a message they have received,” Allen told the Horizon leaders.

Despite the lower premiums, Sister Codey doesn’t see OMNIA as a win for consumers. “Why should they have to pay more to go to the hospital of their choice?”

Where Are the Regulators?

Horizon’s plans have run squarely in to the New Jersey’s localized way of delivering healthcare, where the loss of providers who serve the poor is viewed not merely in healthcare terms, but also as a black eye for its representatives. This is a state where Bayonne officials once issued debt to cover the local hospital’s costs until it could be sold out of bankruptcy, and where the Princeton Healthcare System still covers transportation to a facility opened in 2012 for the low-income residents who had walked to the old neighborhood hospital.

Of note, hundreds of New Jersey elected officials themselves are enrolled in the self-insured State Health Benefits Program (SHBP) and carry Horizon cards—so the exclusion of “my hospital” is felt personally. In the case of Trenton, the failure to include St. Francis Medical Center—which is well-known for its cardiac care—is a particularly deep blow, since the capital has already seen the loss of a hospital and an emergency room, which relocated to the suburbs.

The effect of OMNIA on overall healthcare delivery, not just on cost for some, has experts wondering: where are the regulators? When asked specific questions, the NJ Department of Banking and Insurance issued the same statement to The American Journal of Managed Care given to other outlets, which reads in part:

“Under regulation, review of health insurance plans for network adequacy is vested in the Department of Banking and Insurance. As per its usual procedures, the Department performed all of its required due diligence in a timely manner and treated this request for a tiered offering as it has treated all previous tiered offering applications,” said spokesman Marshall McKnight.

Before the hearing, DOBI declined to provide the date the plan was filed, when it was approved, or answer whether the department asked Horizon to make changes, although Horizon officials said during testimony the process took about 60 days and became final shortly before it was unveiled September 10. DOBI’s statement said it relied on 2 sections of the administrative code that deal with provider networks and network adequacy. A review of those sections reveals the limits on DOBI’s authority: requirements detail travel times and distances for consumers seeking primary care physicians, acute care, specialists, pediatric and obstetric care, but they do not address whether the department can intervene to protect the broader health of the market. Also, only the primary care requirements define access in terms of travel time through public transportation. The potential lack of access to obstetric care for some patients has been criticized; in response, at the hearing Horizon officials said they had agreed with DOBI to add hospitals for obstetrics in Trenton and Burlington County.

The Horizon officials were pressed for commitments to address geographic gaps in some areas, and to answer why they had not included University Hospital in Newark, a major trauma facility. They declined, but promised to review these decisions.

"From my perspective, the state has been too passive," Linda Schwimmer, CEO of the New Jersey Health Care Quality Institute, told NJ Advance Media before the hearing. Schwimmer, who has previously worked for Horizon and for DOBI, observed, "The overall ... impact on the hospital system and the essential safety-net hospitals is the crucial policy issue, and it doesn't seem to have been top of mind for anybody when this was designed or approved."