Managed Markets Monday: Who’s Driving The Bus?

Who’s Driving the Bus? The Rise of Consumer-Driven Health Plans

By Steve Toman, Account Director, Palio+Ignite Managed Markets

It’s no big surprise that healthcare expenditures have risen dramatically over the past few decades. The Centers for Medicare & Medicaid Services estimated that the United States spent nearly $2.6 trillion on healthcare in 2010, which is over 10 times the $256 billion it spent in 1980. And these costs have continued to escalate. Aon Hewitt reported in its “2012 Health Care Survey” that employers have seen the amount they spend on healthcare increase by 40% over the past 6 years, to an average of $8000 per employee. During that same time period, employee payroll and out-of-pocket expenses have increased more than 80%, to an average of $5000 per year. According to the US Bureau of Labor Statistics, healthcare costs represented 5.4% of total compensation in 1999 vs 7.3% of total compensation 1 decade later. This increase in costs to employees has had a significant impact on take-home pay, and has applied negative pressures to the overall economy. Some experts have suggested that the increase in employer health plan costs has been a major contributor to wage stagnation over the past 10 years.

So what are employers and payers doing about rising healthcare costs? One thing they are doing is offering consumer-driven health plans (CDHPs). These are generally defined as tax-advantaged payment accounts (health reimbursement accounts [HRAs] or health savings accounts [HSAs]) coupled with a high-deductible plan (deductibles typically in the thousands of dollars). Because CDHPs are less expensive than traditional low-deductible indemnity plans, as well as PPO, HMO, and POS plans, employers are moving more and more employees into consumer-driven plans. The idea is for employees to assume more ownership of their own health, and to bring some of the efficiencies of consumerism to healthcare. Other factors that are contributing to the development of CDHPs include:

  • Health insurance exchanges (HIXs), brought about by the Patient Protection and Affordable Care Act (ACA)
  • Legislation providing consumers with more options and transparency
  • Increased consolidation of providers (integrated delivery networks [IDNs])
  • New care models (accountable care organizations [ACOs])
  • Private companies and payers promoting cost-of-care transparency

CDHPs have the potential for significant savings in healthcare costs. Haviland et al studied the potential impact of CDHPs and reported last year in Health Affairs that if enrollment in CDHPs were to increase to 50% of the employer-sponsored non-elderly population, the national savings in healthcare expenditures would total $57.1 billion annually. That’s real money. Potential savings like these are driving the increase in CDHPs. Aon Hewitt found that in 2012, CDHPs overtook HMOs as the second most common benefit design. PPOs are the most commonly offered plans (79%), followed by CDHPs (58%), then HMOs (38%). In addition, 52% of employers who offer a CDHP do so as a choice for their employees, while only 11% offer a CDHP as a full replacement plan.

Although CDHPs may help participants and employers lower costs, participants may not always get the quality they have become accustomed to with more traditional benefit designs. The Employee Benefit Research Institute reported that CDHP enrollees have a lower satisfaction rating (52%) than those enrolled in traditional plans (66%). And only 45% of CDHP enrollees would recommend their plan to friends or coworkers, compared with 55% of those in traditional plans.

Despite these shortcomings, CDHPs are becoming an increasingly popular choice for employers, payers, and employees. These plans represent significant savings in terms of premiums, but employees do need to shoulder significantly higher out-of-pocket payments than they have in the past. With an increasing number of patients behind the wheel of their own healthcare bus, CDHPs represent a unique set of challenges to hospitals, physicians, pharmacies, pharmaceutical manufacturers, and other healthcare providers. 

Source: Haviland A, Marquis MS, McDevitt R, Sood N. Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually. Health Aff. 2012;31(5):1009-1015.

Managed Markets Monday is a weekly series that provides insight into what we think it takes to meaningfully and effectively communicate in the managed markets space. Follow up with Steve at

Palio+Ignite is an advertising agency revolutionizing healthcare and pharmaceutical marketing by leveraging the art+science of today with the technology+imagination of tomorrow.

Managed Markets Monday: The Evolution of Managed Care

By Carly Israel, Account Executive, Managed Markets at Palio

Managed care has become an increasingly important concept as the cost of healthcare remains at the forefront of national dialogue. But when did managed care start and how has it evolved since? Let’s take a look at the origins of managed care and the key time periods that have allowed it to evolve.

The Early Years

In 1910, the Western Clinic in Tacoma, Washington began offering a variety of medical services to lumber mill owners and their employees in exchange for a premium payment of $0.50 per member per month. Often cited as the first health maintenance organization (HMO), the Western Clinic provided a range of services exclusively through its own providers. Over the years, this program expanded to 20 sites throughout Oregon and Washington and set the stage for similar prepaid medical care programs to develop.

During the period surrounding World War II, there seemed to be a shift in the way society thought about medical care. Employers began seeking health benefits for their employees, consumers began wanting improved and affordable care, and providers began pursuing enhanced patient revenues. As a result, several examples of early HMOs began popping up ‒ some of which are still in existence today. The Kaiser Foundation, which is still a prominent organization today, began in 1937 to provide medical care for workers who were building an aqueduct in southern California. Though these early organizations offered slightly different services, their goal was the same: provide affordable and improved healthcare and ensure a flow of patients and revenues.

The Adolescent Years

Though HMOs represented a significant shift in the way people sought out healthcare, it was not until the enactment of the federal Health Maintenance Organization Act in 1973 that HMOs began to play a more prominent role in the way healthcare was financed and delivered. The HMO Act, which was enacted during the Nixon administration, authorized start-up funding and ensured access to the employer-based health insurance market. There are several key features of this act that have helped shape the way HMOs operate:

  • Grants and loans became available for the planning and start-up of new HMOs
  • Specific state laws that restricted the development of HMOs were overruled
  • Employers with 25 or more employees were required to offer up to 2 optional HMO plans as part of their employee benefits package            

The HMO Act also established the process in which an HMO could become federally qualified, which had a major impact on the establishment and growth of HMOs. Federal qualification meant that HMOs would have access to the employer market and could receive federal grants and loans. Issuance of these regulations resulted in rapid growth of HMOs.

In the early 1980s, there were several developments that helped further shape the evolution of managed care. Preferred provider organizations (PPOs) were created to have plans contract with a limited number of providers to obtain services for their members at a discount. In addition, utilization review became an important aspect of healthcare management. Plans began to perform analyses of hospital claims to identify utilization, and many corporations initiated programs for preauthorization and review for inpatient care.

The Recent Years

The period between 1985 and present day can be characterized by 3 stages: innovation, maturation, and restructuring. Let’s take a brief look at each stage:

Innovation: Physicians and hospitals began collaborating to form integrated delivery systems (IDSs). IDSs had 2 forms: a single legal entity made up of hospitals and hospital-employed physicians and a physician-hospital organization (PHO) to contract with managed care organizations. PHOs did not become important to the managed care environment because their reimbursement systems did not support the primary goals of managed care, which are cost containment and efficient care.

Another major development during this time was computer technology advancement. Managed care plans began using improved computer systems to generate statistical profiles of the services provided by physicians. This technology served as a means to assess the efficiency and quality of care that patients received, and it provided a basis for the adjustment of payment levels to providers. In addition, advances in computer technology have led to a much more efficient way to process medical and drug claims, which has lowered administration costs and allowed for superior information to be available. The collaboration of physicians and new and improved technology led to rapid growth and success of HMOs.

Maturation: During the early 1990s, the growth of PPOs surpassed the growth of HMOs. Conventional health insurance continually declined, and Medicare HMO enrollment grew from 1.3 to 6.3 million by 1999. In addition, external quality oversight activities became an important aspect of the managed care industry. Entities such as NCQA began accrediting HMOs and many employers started requiring NCQA accreditation of HMOs they contracted with.

This phase also saw the change of cost management efforts, which were almost exclusively inpatient hospital utilization. A significant amount of attention started to be paid to ambulatory services, such as prescription drugs and disease management, in addition to inpatient utilization.

Restructuring: In the late 1980s, the relationship between managed care, the healthcare delivery system, and the overall marketplace began to change. Payers began creating hybrid products, which led to a restructuring of services by the players in this space. As group-model HMOs declined, HMOs began expanding their offerings to include PPOs, while some contracted with employers on a self-funded basis so the risk for medical costs remained with the employer. Major commercial health insurance companies significantly increased their involvement in managed care. As you can see, the managed care environment became more and more complicated.

As anti-managed care rhetoric became popular in political debates during the early 2000s, employers began competing for employees by offering fewer managed health plans. HMOs saw periods of decline and periods of growth, mainly as a result of increasing Medicare enrollment. Insurance carriers found it necessary to sell hybrid products that combined elements of HMOs and PPOs, in combination with an increase in cost-sharing with consumers.

Perhaps most importantly, this time period saw a significant amount of consolidation. Many small health plans were acquired by larger ones, and employers began moving towards national companies at the expense of local health plans. As you can see, the managed care environment has continued to become more complex as it has evolved.

It is clear that managed care has dramatically changed over the years. From its inception in the early 1900s up until the present time, managed care continues to evolve as new advances become available and as changes in the market and economy occur. With the advent of the Affordable Care Act, managed care is sure to play an increasingly important role in the healthcare industry. It will be fascinating to see how it evolves even further in the coming years.

Source: Kongstvedt P. Managed Care: What It Is and How It Works. 3rded. Sudbury, MA: Jones and Bartlett Publishers, LLC; 2009.

Managed Markets Monday is a weekly series that provides insight into what we think it takes to meaningfully and effectively communicate in the managed markets space. Follow up with Carly at

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

10 Seconds to Better Health – Mobile Apps that are Changing Healthcare

By Jim Mittler, PhD, Medical Director, Palio

Ask any professional athlete, and they’ll tell you: The key to peak performance lies in awareness and measurement. Awareness means knowing how you’re performing and how the surroundings – whether it’s the lay of a particular green at Augusta National or the distance to the right field bleachers in Yankee Stadium – impact that performance. And measurement means tracking what’s working (and what isn’t) with ever-increasing precision.

Together, awareness and measurement can turn an average performer into a superstar. And it turns out that, in healthcare, those two disciplines can have similarly big payoffs.

Healthcare professionals have known for years that feedback loops – whether it’s a blood-sugar measurement or a heart rate monitor – not only tell the patient how he or she is doing at the moment; such indicators also provide the patient with tangible metrics. People inherently want to do better; thus, providing relevant, real-time, personalized data can motivate them to change their behavior.

Biofeedback isn’t just a 1970s golden oldie idea – it’s a core tool for wellness. The current plethora of mobile healthcare apps springing up on phones shows that many pharmaceutical and healthcare companies know the value of helping patients record and monitor key data. But now, a Silicon Valley–based start-up is showing off a prototype device that takes such monitoring to the next level.

The company, Scanadu, plans to produce a small device that, held to the head for a few seconds, transmits readings of the patient’s heart rate, breathing rate, temperature, and other medical data to a nearby smartphone.

It’s a world of difference from the once-every-six-months collection of data taken during regular check-ups – and that’s the point, according to entrepreneur Walter De Brouwer, founder of Scanadu. De Brouwer says that rapid, hassle-free checking allows for long-term data collection and also allows patients to see how their health varies over time and in response to various life events and patterns.

As intriguing as the device is, the story of how Scandau tweaked it on the way to market is just as interesting – at least for pharma marketers:

  • Several designs and sensors were tested before getting to the goal of a 10-second test. More-accurate readings were sacrificed to keep the cost down – and keep the device from being seen as a major purchase needing approval from an insurance company
  • Picking where to test for readings was a marketing exercise as well – some locations gave good information for one reading but not others, and some testing methods were deemed too invasive
  • Even the color of the device was driven by data: Black, while helping to keep out light, was scary to children compared to other colors

Scanadu currently has an alpha-stage prototype but the commercial product is anticipated to be available in late 2013. The company’s ultimate goal? The medical equivalent of Star Trek’s Tricorder – and a more feedback-driven, participatory framework for medicine in which doctors and patients collaborate to make better decisions about health care.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.


#ChalkChat: Fire Drills Burn Brands


In this week’s #ChalkChat, Rob Kempton, VP, Brand Strategy Director at Palio, discusses how fire drills can burn brands and how to successfully avoid these situations.

Fire Drills Can Burn Pharma Brands

The most valuable asset of a pharma company is its product “brand” – the intangible that exist in the minds of the customer. Great brands are trusted and evoke a positive emotional response.

It takes significant investment and discipline to build a great brand with a clear and consistent purpose, but too often as a marketing or brand manager it can feel like your getting sucked into the weeds, where everyone is focused on the hot topic of the day – or what I call “A FIRE DRILL”.

It could be a competitor press release; a regulatory body requesting you pull a campaign; internal personnel changes, or more commonly it is internal politics, where competing interests are challenging your resolve. It can derail your big picture focus, and before you know it, you’re chipping away at the brand equity (or the trust) that you’ve worked hard to earn in the eyes of your customer. So how do you know if these fire drills are having an effect on your decisions?


Playback is essentially a quick brand audit – an internal exercise you can do right now. Gather together all the product data, services and communications that make up the total brand experience, and lay them out on a table. Make sure you’re bringing in historical branded engagements because your customer has probably interacted with your brand from Day 1.

Now, with a bird’s eye view, what can you see? Is the brand promise clear? Is it consistent? Is there confusion? Is there complexity where there doesn’t need to be?

Next, sketch out the journey your customer takes (before treatment, at the point of treatment and while they are on treatment). Now layer all the brand engagements your product has created on-top of that customer journey.

Is your brand engaging with your customer at a point of relevance to them – or to you? Are we using the appropriate media? Have we understood the context of need at each point along the journey? Hopefully this exercise can go some way to showcasing where your brand may or may not be meeting all of its obligations to the customer.

The kids keep demanding more and more…

How many times have you been in market research and a few of you in the back room jump on a comment that a grumpy customer makes? Before you know there is talk of a new campaign!

How many times have you presented to the sales team, and been told that the campaign is getting old, and we need something new to talk about?

Don’t get me wrong. I’m not suggesting we should be blind to feedback. Brands should be dynamic. As a brand steward, you should be opportunistic about offering new ways of telling the story, but it when it comes to changing fundamentals – brand stewards must stick to clear brand management principles:

  1. Have a clear brand strategy process (or annual brand planning)
  2. Have effective internal structures
  3. Have a monitoring process in place

Regarding point 3, when it comes to monitoring, pharma companies typically measure brand success based on financial goals. But the best companies (Gilead and Pfizer being two such example), set up controls to understand and track their brands equity – the emotional relevance to their target customer – and have a clear sense of what services and communications matter. (note – digital media has also opened up new opportunities in regards to how we can measure relevance, with real time analytics)


In conclusion brand stewardship is hard. You’ve got to set direction; be opportunistic, but at the same time maintain strategic integrity in the face of competing interests.

If “FIRE DRILLS” are overwhelming, empower your communications agency to help. The best agencies can be an effective strategic partner, setting up process, providing brand strategy leadership, identifying insight, and implementing measures that can help direct decision-making and build consistent customer communications and services.

Thanks for following…

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat. Follow up with Rob Kempton @robonthemoon.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

The iPad: The Ultimate Writing Machine?


By Mike Smith, Senior Brand Strategist at Palio,

One of the most surprising things about the iPad is that it turns out to be a great tool for writing.

I say “surprising” because, at first glance, the incredibly popular device (80 million sales and counting, according to Apple) doesn’t seem like a natural for scribes – where’s the keyboard? What about the form factor? And, for the PC fans: What about your beloved Microsoft Word?

It turns out that many serious writers – from tech columnists to newspaper journalists and even novelists – think the iPad is not just acceptable, but actually preferred for consistently knocking out thousands of words a day. Some cheer the tablet’s “one app at a time” approach, which fills the entire screen and reduces distractions. Others who must dodge kids, dogs and other distractions to get the day’s writing done like the lightweight form factor that’s ready to get up and go at a moment’s notice.

Whatever the motivation, the key to turning your iPad into a professional writing tool lies in having the right accessories and software:

Find a keyboard that works for you: This is a very personal decision, but some writers give nods to the Logitech Keyboard Case and the ZAGGfolio keyboard case. Whatever your choice, don’t be afraid to step away from the Amazon store and go actually try one out at a brick-and-mortar shop before buying.

Process lots of information in a flip: Writing an article takes research and the occasional search for inspiration; and the Reeder app lets you quickly move through Google Reader feeds to separate the wheat from the chaff. Flipboard and Zite also get the job done.

Break it down into an outline: I don’t know a single writer who likes the outlining process, but there’s no better way to organize big projects. iThoughtsHD on the iPad is useful for quick mind maps, and Evernote – which syncs across all your mobile and desktop devices – is a great way to noodle through an outline while you’re on the run. Need to organize more than just an outline? Look at Chapters – Notebooks For Writing. It’s a solid tool for creating virtual notebooks full of notes, photos, PDFs – whatever your pre-writing research turns up.

When it comes time to put words on a page, you’ve got options: From Pages (the first iPad app sold in the app store), to Clean Writer’s super-clean interface and under-a-buck price point, there are a lot of choices for generalist writing apps. Looking for something a bit more project specific? My Writing Nook is optimized for ebook writing, with tools to help break content down into chapters easily. And iA Writer is a minimalists dream, designed to get all the options and distractions out of the way so you can start hitting the keys.

Polish that prose: Unless you paid far, far more attention in English class than most of us, you should pick up Advanced English Dictionary and Thesaurus – an app that covers the two most-used books on any scribe’s desk. Like Grammar App HD, another excellent app, it works offline.

It may not look like a battered old Smith-Corona typewriter, but the right apps and accessories turn the iPad into a formidable writing powerhouse. What are your favorite writing tools?

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.


Facebook’s Flawed – But That Doesn’t Mean You Can’t Make It Work


By Jon Fisher, Technology Manager at Palio,

Is Facebook cursed? You might think so after the last few weeks.

First GM dramatically announced it was pulling its $10 million in Facebook advertising just days before the dotcom darling’s IPO. The automotive behemoth’s experience with ads on the social network reflected that of countless smaller businesses, many of whom were disappointed with poor ROI on their advertising dollars.

Then, the hugely anticipated coming-out party on Wall Street turned into a stock-market rout that’s resulted in burned investors, lawsuits and even an “umm… oops!” from California tax officials who thought they’d see a massive influx of revenue from the event.

And most recently, there’s the announcement that more than 80 million Facebook accounts are fake – something the company acknowledges, but hasn’t offered a solution to monitoring and removing false accounts.

It’s hard to find the proverbial like button in any of that.

Although there have been missteps by the company, there has also been success for some advertisers. It’s no stretch to say that while there has been little to support the notion that paid advertising on Facebook is tied to real, bottom-line results, some companies are making it work.

But, they’re doing it without paid ads.

At Fast Company’s CoCreate blog, they’ve looked at some of the most successful Facebook efforts that didn’t involve advertising and have come up with a remarkable list:

A&E Parking Wars. Way back in 2007, the show’s marketing team created a Facebook game about parking. Players controlled a street and a handful of parking spaces and advanced in the game by parking on friends’ streets and issuing tickets to their “unlawfully” parked cars. It was compelling engagement, and 400,000 players signed on to Parking Wars in two months, with total users growing to over 1.5 million. It was an early example of a truly social game that involved players’ Facebook friends.

Intel Museum of Me. More recently, in 2011, Intel allowed Facebook users to create a shrine to themselves and then (virtually) walk through it. After users connected through Facebook, the app pulled images, words, location, and other info into a three-minute video walk-through of your own museum, complete with white walls, other patrons, and music. The effect was powerful.

Take This Lollipop. If people thought Intel’s Museum was a touch creepy, they were in for a deliciously upsetting treat with “Take This Lollipop,” a Halloween project created by a production company. The app “dares” users to connect with Facebook and when they do, they’re delivered into the world of a scary-looking loner who pores over the personal details of your life and seemingly sets off after you.

Burger King Whopper Sacrifice. The 2009 app allowed users to relieve themselves of “friends” in exchange for a coupon for a Whopper. Facebook shut the app down not long after it got rolling but not before 200,000 friends were disappeared.

Ikea Facebook Showroom. In 2009, the retailer’s agency created a campaign based on photo tagging. The manager of a new Ikea, Gordon Gustavsson, posted photos of showrooms on his profile and Facebook fans were able to tag furniture items with their names to win them, and in so doing, they created huge ripples across their social networks. It was a one-off, but the campaign won many awards and showcased a low-cost, low-tech approach to the real power of social networks as a mechanism for participatory, consumer-driven advertising.

Facebook has transformed creativity in advertising, but not through paid ads. The best campaigns involved investment in the brands, but not large media-buy checks to Facebook, and have shifted communications thinking around the consumer.

That’s a bottom-line problem for Facebook, but it’s also an incredible opportunity for breakthrough brand marketing.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

© 2011