Aepple?

According to this BloombergTechnology report, "some" customers of health insurer Aetna will get a discount on Apple's smartwatch. In the meantime, Aetna's employees will get the watch at "no cost" to " beta test a new wellness reimbursement program."

While media reports imply that this is one more step toward a Manifest Destiny of scaling healthful behaviors to lower U.S. healthcare costs, the Population Health Blog is more sanguine:

1. The impact of wellness programs - exercise promotion, healthy eating and lifestyle management - on short term health insurance claims expense is highly variable.  There's lots of peer reviewed literature like this that shows "fitness" is not a healthcare money-saving slam dunk.

2. In addition, wellness programs are far more likely to be successful if they are tailored, multi-modal and sustained over time. Kudos to Aetna, which linked the smartwatch to a broader employee wellness program that probably meets that gold standard.  As for the "other customers," the PHB doubts that the one-time provision of a wrist gadget will do anything to mitigate their healthcare costs.

3. It is the conceit of today's Silicon Valley Robber Barons to think that no problem is immune to their business models. Just like Carnegie and Rockefeller, the Gates and Zuckerbergs seem to believe that but for (their) information technology, the world could be a better place.  Apple's executives can't be blamed for its "features to help our customers live a healthy life" hype.

4. But even if some of Apple's executives are immune to the hype, their marketing department undoubtedly understands that "cause related" appeals to societal fitness builds brand. Plus, if the earned media helps deflect attention away from Apple's lackluster stock price and Aetna's other travails, all the better.

5. It's difficult to know for sure, but the PHB doubts that Aetna is deploying any of its customers' premium to underwrite their cost for the Apple smartwatches.  Rather, this is far more likely to be a group purchasing discount in which Apple agrees to less margin in exchange for a bulk purchase.  That's probably also part of the math for the Aetna employees, with the rest of the economics of the wellness program simply being part of Aetna's administrative overhead.  

Nonetheless, the PHB is intrigued by the downstream possibilities of a Wintel-like alliance between a major commercial health insurer and a major information technology company.  What's described above is small potatoes compared to the larger possibilities of data sharing*, big-data analytics, co-branding, mutual investments, joint ventures and administrative combinations.

Think Aepple.  You read it here first.

 

*After this post was published, this news report came out.

Three Downsides to Commercial Health Insurer Consolidation

Writing in The Wall Street Journal, Scott Gottlieb argues that the Aetna-Humana and the Anthem-Cigna combinations are evidence of waning insurer competition that is the direct result of Obamacare.  Not only are ACOs not a panacea, but the Affordable Care Act's insurance mandate to limit administrative costs is forcing Aetna et al to spread their costs over a larger base.  Dr. Gottlieb fears that the oligopolies won't be able to deliver on innovation and will limit consumer choice   

Too bad The WSJ didn't give him more print space.  If they did, Dr. Gottlieb may have also pointed to three other potential downsides to commercial insurer consolidation:

1) The concentration of risk: While having a small regional health insurer go bust is a big problem for hundreds of thousands of insurance enrollees, having a for-profit national insurer with tens of millions of enrollees go bust would be a national catastrophe. Think Lehman Brothers, Black Swans and Too Big To Fail.

2) Cronyism: Politicians and C-Suite executives no longer blush at the prevalence of the revolving door between government and all industry.  Health insurance will likewise be too regulated and complicated to leave to anyone other than insiders, who will naturally be unable to discern the line that separates their interests from the patients'.
 
3) Political Power: Will Washington DC and 50 states really be able to stand up to a handful of companies that dominate a fifth of the national economy?  Years ago, the commercial insurers remained silent while they were called "Fat Cats." The Population Health Blog bets that the next time a While House blames the insurers for rising costs, they won't remain so deferential.

Image from Wikipedia

Aetna Talks Exchanges

One of the stories behind the story of Affordable Care Act's successful passage and survival to date has been the silence of the commercial insurers. It's not a good political or technical sign for the health insurance exchanges when Aetna's CEO goes public like this.....

Aetna and the Fundamentals of Claims Processing

The Disease Management Care Blog doesn't think that an association between the timely payment of claims and smartly using claims data bases to spot quality lapses is incidental. What's more, shouldn't alerts to providers not only go out by phone, fax, mail and smoke signal, but electronically using the same system physicians use to get their money? Executing on all three is probably causal, but which causes which?

Something deeper at Aetna is going on. I quote CEO Ron Williams from the Q1 Earnings Call:

'Through our proprietary active healthcare engine, the clinical database which is an increasingly integral part of our business, we are able to deliver information that helps customers better manage quality and total costs. When combined with our broad array of technology tools for members that provide information about wellness, clinical quality, evidence-based care guidelines and other critical data, you essentially have, what I call our integrated proposition.'

Health insurance claims data bases are notoriously unwieldy, slow and traditionally designed for one purpose and one purpose only: to render a predetermined payment for a covered service for a covered member. The process is typically laborious, requiring a small army of IT and benefits managers using the 'hand-grenade' approach: close is good enough. While there are many anecdotes of unnecessaary provider payment delays and denials, the DMCB knows from his insurance days that the system can also result in provider over-payments.

Getting this right is hard work. It takes huge investments in human talent and information systems. What we're learning is that once the get-it-right foundation is built, the strategic implications are enormous.

Like much of the industry, Aetna is taking an unexciting and commoditized process and turning it into a competitive information advantage. However, Aetna appears to be executing particularly well. Accurate and efficient claims processing is what enables timely payment, quality improvement, patient empowerment, provider alerts, personal health records, pay for performance that doesn't lead the way in catching the ire of State Attorney Generals and competitive disease management programs.

As an aside, does anyone realistically think Medicare as usual can pull this off? Think again.

Maybe the contrast between Aetna's recent earning reports versus competitors Cigna and Wellpoint is not incidental either.....

Time will tell.

Check Out What Aetna is Up To

If you’ve been reading Joe Paduda’s blog (it's a new blog link on the right), you may already be aware that Aetna’s stock avoided the recent market drubbing experienced by some other big health insurers. So, when a transcript from a recent Analyst Meeting became available, the Disease Management Care Blog donned the extra thick reading goggles, warmed up the coffee and read and searched for the ingredients behind Aetna’s recent success. Much of the presentation was all about underwriting, cost controls, market segmentation and exceeding customer expectations (and not using healthcare industry benchmarks by the way), but scroll on down through all that 6 point font and check out what CMO Troyen Brennan had to say.

Or, don’t read it and rely on this bulleted summary provided gratis by your ever faithful DMCB:

• They are converging disability, pharmacy, behavioral health, electronic medical, hospital, any clinical and its own claims data in algorithms to compare and contrast their providers’ care vs. best practices. They’re committed to continuing to use this information to influence patient and physician behaviors in many ways to reduce variation and increase quality.

• They are not worrying at all about the cost of an army of 2,500 health professionals who are responsible for interlocking wellness, disease management, pre-certification, concurrent review and case management laced with coaching and advocacy. They feel they and their customers are getting their money’s worth.

• Despite hostility from state Attorney Generals and organized physician groups, they are throttling full speed ahead on Centers of Excellence, preferred networks and patient steering. Transparency may help diminish the enmity, but from their customers’ point of view, the savings are just too compelling.