Cautious Optimism

Towards the end of the year, I had to provide the board a recap of 2009 and my predictions for how the new year might play out. (I’ve attached the Summary and Overall Market Background sections at the end of this entry in case you’re interested.) We’re now three months deep into 2010 and I’m trying to calibrate how different this year is from 2009, and whether my guesses are proving out.

So far, the payer marketplace seems to be rallying, at least tentatively. People are returning calls, showing early signs of interest, talking about budgets and planning new initiatives. Hiring, both within health plans and among vendors selling to health plans, also looks to be on the upswing. Passage of the health reform bill has many payers trying to decipher exactly what it means to them(reimbursement rates, regulatory hurdles, etc.), but on the whole the mood is upbeat and engaged.

Of course, much of this assessment is anecdotal, drawn from my own sales efforts, conversations with peers and customers, the increasing rate of (unsolicited) calls from recruiters. (Please note, I’m happy where I’m at.) Still, the overall payer market is clearly different, and generally better.

Do you agree? What are you seeing? And what metrics, measurements or observations do you find instructive? I welcome your comments.

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Summary
Selling to the payer channel will remain a challenge in 2010 as health plans continue to struggle with a ‘perfect storm’ of reduced memberships, reduced reimbursement, economic recession, and impending healthcare reform legislation. That said, the overall sales climate should improve as more forward-looking payers begin to look to reduce medical loss ratio…

Overall Market Background

To understate the obvious, the healthcare industry has been overwhelmed by dramatic forces:

Economic and demographic forces –
Reductions in covered lives(esp. among commercial plans) and corresponding reductions in premiums
Reductions in Medicare Advantage(MA) membership
Increased membership in Medicaid as people lose jobs(and commercial coverage) and qualify for coverage
Reductions in reimbursement rates across both Medicare and Medicaid
Aging trend in the US that will cause Medicare ranks to climb dramatically as the funds to finance it fail to keep pace

Policy and healthcare reform –
The outcome of any dramatic, impending policy changes remains unknown
Dramatic exodus of plans that ‘dabbled’ in Medicare

The typical health plan response to these forces has been predictable and underwhelming, and consistent with expectations. Their focus has been on reducing administrative costs, headcount, and postponing new projects. Strategic initiatives have been placed on hold as plans adopt a “wait and see” approach. It is important to note that payers generally move at a glacial pace when adopting new strategies, and while it is our expectation that the market will remain in this state for the next year, more forward-looking plans will start adapting to the new market conditions, if only tentatively and with caution.