OMNIA fight: Documents reveal some claims by Tier 2 hospitals had merit

Hospitals may lose their legal battle against the state’s largest insurer over their exclusion from a partnership arrangement, but they have a symbolic win through the public release of confidential documents Tuesday.

After more than two years in court, and countless efforts to invalidate the OMNIA Alliance and tiered network plan, excerpts from depositions and a 2014 McKinsey & Co. report reveal some of the public, non-legal, claims the Tier 2 hospitals have made since OMNIA was introduced had merit.

The following was included in the documents, which were obtained by ROI-NJ:

  • Horizon Blue Cross Blue Shield of New Jersey was steering patients away from their hospitals, knowing it would take a financial toll on them;
  • Some Tier 2 hospitals scored in the same range as Tier 1 hospitals;
  • The scores hospitals received did not reflect only the quality of a hospital;
  • Higher-cost providers could weather the rate cuts necessary.

The documents, however, revealed no nefarious undertones in the methodology and decision by Horizon, which was the crux of the arguments the hospitals originally had.

Instead, the documents show the insurer spent significant time trying to figure out which metrics make the most sense to justify and support partners in the new approach to health care.

Specifically, Horizon wanted to save money for its members, and give itself a competitive advantage.

“Result in arrangements that are profitable for Horizon and appeal to providers given their range of choices,” according to the McKinsey report, was a goal.

Health care insurers currently reimburse providers based on per-service fees that are stacked on top of each other. The value-based approach aims to create single payments for providers to be compensated for everything they do for one patient. Both are most rewarding when there is a high volume of patients attached, but value-based reimbursement also pushes against greater utilization of costly health care services.

Tiered plans, which were not unprecedented in the state, are a way to incentivize providers pursue fewer services with the promise of higher volume from attaining a preferred status in the network plan — typically by lower out-of-pocket costs for patients. It also anticipates patients will choose the lower-cost provider when given an option.

OMNIA, however, differed from previous tiered plans. In those, hospitals were given equal opportunity to join. With OMNIA, Horizon did the choosing.

In 2015, at least seven hospitals were enraged and publicly called for Horizon to reveal its metrics and methodology for choosing the hospitals they did for Tier 1 and Tier 2 in the network plan, as well as the partners — which include the state’s largest health systems and the largest physician group.

Horizon has maintained over time that the goal was to lower the cost of health care for patients and itself and to try to change how hospitals and insurers work to address rapidly rising health care costs.

The documents, which were made public by Superior Court Judge Robert Contillo after NJ Advance Media joined the lawsuit with an amicus brief and sued for the documents’ release, show an organization experimenting with how to characterize the traits it needed in a partner health provider.

The metrics have been revealed over time, and Horizon eventually publicly acknowledged the steerage of patients away from Tier 2 hospitals.

There also has been significant change from the first draft to present day.

For example, Hackensack Meridian Health’s merger proved significantly beneficial for legacy Meridian Health. That’s because, according to the documents, Meridian didn’t qualify as a partner before the merger.

Meridian Health originally was slated as a Tier 2 provider, for a number of reasons, including the fact that it was in the same territory as what is now RWJBarnabas Health.

Barnabas, according to the McKinsey report, had a significant presence in discussions about the new idea.

Barnabas and Horizon had been in conversation, about trying to change their relationship in order to address high costs. So, when the hospitals who sued claimed the insurer had engaged with health systems prior to the McKinsey report, it was true.

“Specifically, they had mentioned Barnabas and they made reference to the fact that they were in these discussions with many hospital systems throughout … the state,” according to the deposition transcript of a McKinsey official.

But a new piece of information from the McKinsey report was that Horizon not only anticipated the backlash from the excluded hospitals, but it also planned a strategy to quell their anger. That is the method it has employed to whittle down the lawsuit from seven plaintiffs to just two — by offering value-based reimbursements focused on one specialty or area of strength for each provider.

When Horizon first rolled out its OMNIA tiered plan and announced the Alliance in 2015, it highlighted the goal of “low-cost, high-quality care.”

This was a sore point for Tier 2s, who felt they were being deemed low quality. But Horizon has reiterated over time that that isn’t the case.

Horizon discussed alternative strategies with McKinsey. The primary alternative strategy was a physician-centric strategy, which would include arming physicians with cost and quality data and letting them refer based on that, according to the report.

Meanwhile, Horizon also had to figure out the sales pitch to the Alliance partners in order to get them on board to accepting significant cuts in their reimbursement rates.

That is where the idea of only having one provider per county was born — playing into the conviction that Tier 2 hospitals had that Horizon was negating their quality.

On the flip side, Horizon identified that Tier 2 hospitals were going to take a financial hit.

Specifically, Horizon anticipated a 40 percent volume drop in emergency room visits and 60 percent drop in non-emergency visits for Holy Name Medical Center and Valley Health.

But that wasn’t the issue Horizon saw.

“We talked about sources of that volume in terms of the levers to be used to move volume. It was primarily — I can’t remember any other conversations other than benefit design, i.e., incentives for consumers to make that choice,” the McKinsey official said in her deposition.

“So, as we discussed, the view was to get a hospital to be willing to be a partner, which would mean they would have to bring down their revenues and potential profit, there would have to be some financial offset, so the view was if, for example, every hospital in the county was included as a partner, the economics wouldn’t work for that, frankly, for that hospital.”

And Barnabas and Hackensack were identified as the most expensive providers in their county, according to documents.

In addition, the insurer was well aware that the Department of Banking and Insurance had requirements for network access.

That is why Advocare had been selected as a potential physician group partner — because it has a large network — but, when Horizon restructured its metrics, Summit Medical Group rose to the top of the list instead, according to the McKinsey report.

The documents also shed light on the insurer’s fluid approach to the strategy which pursued even after the rollout.

In 2017, two years after introducing the network, Horizon shuffled providers between tiers, and added new Alliance partners.

But, at the end of the day, OMNIA was just supposed to be one new idea for the insurer, officials told ROI-NJ on Wednesday.

In its third year, the OMNIA plan doesn’t have the lowest premium in the state, but it has about 400,000 members — not enough to put any of the Tier 2 hospitals out of business.

And, as was expected in the long-term plan, the Alliance partners are still working on implementing a system-wide strategy to handle value-based reimbursements.