Cover Story/Health Reform
Corporate America wants value for its insurance buck. And now it’s doing more than just asking.
It doesn’t like the way you run your operation. It thinks you’re inefficient, perhaps even outmoded. It considers your safety record atrocious. Some of its members are even looking for ways to stop dealing with you altogether.
Big Business is not happy with America’s health care system, and it intends to do something about it.
Private-sector purchasers for decades have clamored to improve, streamline and modernize the health care field. Five years ago, H&HN dubbed it “the Leapfrog Effect”—after the Leapfrog Group, a consortium of large, mostly private-sector purchasers, sought to force changes, in large part by directing business to providers that met certain conditions.
Yet for all the noise, little changed. Private health care costs continued to rise—by 168 percent during that time, according to a recent survey conducted by Watson Wyatt and the National Business Group on Health—while quality did not noticeably improve. You can almost see the steam shooting from corporate leaders’ ears.
“Are we frustrated? Yes. Can we tolerate it in the short term? Probably yes, we can,” says Al Rapp, corporate health care manager for UPS. “But can we tolerate the way things are run over the long term? No, I don’t think we can.”
The question is whether Big Business is finally ready to act. “Large employers to date have been way too timid. They don’t back up their rhetoric with action,” says Kenneth W. Kizer, M.D., former president and CEO of the National Quality Forum who is now CEO of the electronic health records provider Medsphere Systems Corp., Aliso Viejo, Calif. “If anything, purchasers underestimate their power.”
That may be changing. Last month, five of the nation’s largest employers put their money where their mouths are. Tired of waiting for health care providers to adopt information technology, Applied Materials, BP America, Intel Corp., Pitney Bowes and Wal-Mart Inc. announced the creation of a multimillion-dollar data warehouse giving employees access to their own electronic medical records. The $1.5 million project is intended to link hospitals, doctors, pharmacies and insurers. Consumers would be able to use the database to compare price and quality information. Clinicians could use it to better coordinate care.
But this isn’t just about providing information on lab results and medications. The business coalition, which is expected to add member companies, will apply its considerable market force to get hospitals and doctors to adopt electronic medical records, e-prescribing and other IT solutions. Employees will be strongly encouraged to go to providers that use these technologies.
Wal-Mart, a huge market force on its own, will push for hospitals to adopt bar coding. Insurers will be able to mine data—minus patient identity—to assess provider performance. “We think business can make the change happen faster than it’s happening today,” Wal-Mart Executive Vice President Linda Dillman said in announcing the initiative.
That’s not all. Major corporations are getting behind a Bush administration effort to not only accelerate IT adoption, but also to have providers disclose more price and quality information and to improve quality. Last August, President Bush issued an executive order requiring the departments of Defense, Health & Human Services and Veterans Affairs, as well as the Office of Personnel Management, to collect and share pricing and quality information with each other and program beneficiaries. They were also told to speed up adoption of health IT and embrace pay-for-performance programs.
HHS Secretary Mike Leavitt has pressed corporations to embrace those same “four cornerstones,” as he calls them. In a speech last fall before the Midwest Business Group on Health, Leavitt said he “aspires to have a grand movement” this spring where government and employers are demanding the same thing.
Influential groups such as the Business Roundtable, an association of CEOs of large corporations, are climbing on board.
“The business community is encouraged by the momentum behind efforts to empower employees with access to information that will improve the overall quality of our health care system and reduce costs,” Mike McCallister, CEO of Humana and chairman of the Business Roundtable’s Health and Retirement Task Force, said during a November meeting with Leavitt.
The private sector is flexing its muscles in other ways, including driving more business to providers that meet select quality measures, devising new employee benefit plans and proposing a new payment system.
Checking Out?
Despite all the headaches and the occasional threat, employers actually see the value of providing health care coverage to their employees, and in large part they intend to keep doing so. After examining data and surveying thousands of employee benefits managers, researchers for the Center for Studying Health System Change and the Commonwealth Fund determined that, overall, employers view health benefits as a critical tool to recruit and retain a quality workforce. “Rather than running for the exits, as they are often portrayed in the media, companies that offer coverage hold a positive view of health benefits, both in their role in attracting and retaining highly qualified employees and also in improving the health and performance of their workforces,” study authors wrote in the November/December 2006 issue of Health Affairs.
Employees also are partial to the present set-up. Hewitt Associates surveyed more than 18,000 American workers and found that most depend on their employer and health plan to make decisions on their behalf. For instance, Hewitt reports that almost 80 percent of workers worry that health care coverage will ultimately become unaffordable, but only 34 percent keep track of their current personal health care expenditures.
By now the dismal statistics on medical errors, duplicative work and uneven quality are all too familiar. “There’s so much frustration as to why hasn’t more progress been made on these issues,” says Helen Darling, president of the National Business Group on Health. And it’s not just payers that are frustrated. Hospitals hate the crushing paperwork burden, Medicare underpayments and the mind-numbingly complex nature of private-payer contracts.
“We’re all fighting a very strong headwind created by a negative payment system,” says Francois de Brantes, national coordinator for the Bridges to Excellence, a coalition of employers, health plans and others that pushes pay-for-performance models.
Paying for Performance
Employers increasingly support initiatives designed around payment. Most are geared toward paying for improved quality. Others include encouraging employees to use consumer-directed health plans, directing their business toward so-called “high-performance networks,” and pushing for radical payment reform.
The most ambitious of these is an initiative called Prometheus Payment, which takes the pay-for-performance concept to a new level. Prometheus, a nonprofit organization, has convened experts from a variety of sectors including general business, insurance, hospitals and academia, to propose a new payment landscape in which global—as opposed to episodic—case rates are established, and providers from across the continuum—including the hospital, physician, rehabilitation facility and home health care—are together reimbursed based on the performance of everyone.
“It’s grounded in what the evidence suggests is a bundle of services that should be delivered to patients, not in a silo way but on a wing-to-wing basis,” says de Brantes, who serves as national coordinator for the fledgling initiative.
The appeal of Prometheus lies in its ability to establish control over what happens “downstream” from the hospital. Take, for instance, a hip replacement patient. Traditionally, if a hospital discharges this patient to a rehab facility, the hospital’s work is done—it gets paid, and the patient’s outcome depends on a successful encounter with rehab. Under Prometheus, the hospital receives full payment only if the patient concludes rehab successfully. Therefore, the hospital has a financial incentive to contract with the best rehab facility in town.
The real promise of this model lies in its ability to treat chronic disease and avoid multiple rehospitalizations, says Mark C. Shields, M.D., vice president of medical management for Advocate Health Care in suburban Chicago and senior medical director of Advocate Health Partners.
“Instead of being paid based on a visit or a hospitalization, people would be rewarded for caring for a condition effectively over time,” Shields says. “What Medicare does is essentially just pay for widgets—an office visit—rather than encourage comprehensive care.” Demonstration projects are to begin this year.
Major corporations already have shown that they will get behind pay-for-performance concepts. General Motors, for instance, linked up with other stakeholders in Michigan in a program called “Save Lives/Save Dollars.” Launched last July, it is intended to hold providers more accountable for improving quality of care. The goal is to save $500 million over three years by getting hospitals and doctors to abide by specific clinical guidelines. Providers’ performances are posted at www.gdahc.org/save.asp.
The Holy Grail
A common refrain from big business is that information technology has to be a part of the solution. Yet there is deep frustration that every other segment of corporate America has been able to deploy innovative systems while health care lags far behind.
Some companies are taking matters into their own hands. Silicon Valley titans Cisco Systems, Intel and Oracle collaborate on a pay-for-performance program that rewards physicians and independent practice associations that use technology to share information and improve patient care. Seven San Francisco Bay Area medical groups and IPAs comprising thousands of doctors participate in the year-old consortium; while hospitals aren’t yet targeted for participation, they are affected. “This raises the bar for everybody,” says Jeffrey Rideout, M.D., Cisco’s vice president of health care, Internet business solutions group and corporate medical director.
Under the Silicon Valley Pay-for-Performance Consortium, medical groups and IPAs are rewarded for using the National Committee for Quality Assurance Physician Practice Connections program, which has already been implemented in Bridges to Excellence programs in several states. It’s not groundbreaking—“we’re pushing them in a direction they already want to go,” Rideout says—but it is another nudge toward IT adoption.
While pay for performance is often about carrots, there are also sticks. The Leapfrog Group is leading several employers and employer coalitions looking for ways to withhold payment to hospitals when a “never event”—one of 27 mistakes or other events that the National Quality Forum says should never happen (see Never Events Could Mean Never a Payment)—occurs. Medicare officials last spring announced that they too are looking for ways to trim payments for never events. And HealthPartners, the Minnesota-based HMO, last year became the first managed care organization to declare it would not reimburse providers whenever a never event occurred.
High Performance
While payment reform is in its infancy, corporations are getting more aggressive in finding ways to steer employees to what they consider top-tier providers. Years ago, managed care plans were developed in part to encourage employees to use a single, limited network of providers selected by plan administrators. But consumers clamored for more choices and managed care plans expanded their networks accordingly, thus undermining their original purpose.
To regain those tight controls, during the past five years or so, some employers have provided workers with incentives to use networks of doctors and hospitals that meet certain cost and quality thresholds. UPS is dipping its toe into these waters by using the plan for approximately 90,000 nonunion employees via United HealthCare and Aetna, predominantly for specialist physicians. Union contracts prevent the company from expanding the practice. Another problem is ensuring that insurers use the same measures to rank providers.
“I’m a strong believer in this, but there’s a challenge—the consistency of measurements among health plans,” Rapp cautions. “Our people aren’t going to understand it if a physician is considered ‘high-performance’ in one plan but not in another. That just wouldn’t make sense.”
GM has been doing something similar since 1991. The automaker undertakes a rigorous assessment of health plans it contracts with every year and gives each a ranking. Employees are offered financial incentives—mainly lower out-of-pocket expenses—to enroll in plans with the best scores. Over the years, GM has seen low-scoring plans improve and compete more for enrollees, Bruce Bradley, director of health policy at GM, told H&HN last May.
It Comes Back to Cost
In the business world, it’s all about metrics—the old saw that you can’t improve what you can’t measure. The notion came late to health care, but now entire hospital departments are devoted to measuring quality.
The debate today rests on what exactly should be measured, how to do so accurately, and how to ensure the results are fairly and accurately reported. Corporations want measures to focus on clinical quality so their employees get the best treatment to remain healthy and productive. They also want measures of efficiency to ensure that hospitals are good stewards of their money.
The Leapfrog Group is testing two measures of efficiency at the hospital level: readmission rates and risk-adjusted length of stay. Purchasers want to ensure that they’re not held liable for a hospital stay longer than “average” and that their employees are not readmitted to the hospital unnecessarily. “These measures are promising,” says Suzanne Delbanco, Leapfrog’s CEO. “They’re not the end-all, be-all, but we think they’re good measures. They get directly at resource use.” Once the measures are tested, hospitals may have input on their use through the National Quality Forum consensus process or a similar venue.
Corporations—with the help of insurers—are also using technology to harvest data and inject themselves into the quality debate. Take ActiveHealth Management, an Aetna subsidiary that analyzes claims data, runs it through a system with an up-to-date electronic library of medical literature, and then suggests interventions. It is, in effect, a partial EHR. “We had the notion that it might not be perfect, but it is certainly enough to identify opportunities for meaningful improvements in care,” says Lonny Reisman, M.D., ActiveHealth Management’s CEO. “We might not note every piece of information in the record, but it would be more than we would have if we had none.”
The 8-year-old company uses this record to provide clinical decision support and related services to 12 million members, contracting initially largely through employers that fund their own health plans. “Those are the people who were looking for solutions,” Reisman says. “We would have no business if employers weren’t committed to improving the system.”
The push to evaluate efficiency is part of a larger movement to measure and publicly report data on all aspects of hospital care. CMS has designated some measures for its Hospital Compare Web site. Other prospective users of the information include consumers, whether under the consumer-directed health plan model or not; employers and health plans to gauge the quality of hospitals for contracting purposes; states or third-party performance reporting entities (e.g., HealthGrades); and hospitals for internal quality improvement and benchmarking purposes.
“Employers want value,” Shields says. “Employers understand that health care is a tradeoff, in which lowest cost of care is not necessarily the highest value—but they want to be sure they are receiving value, and we have to find a better way to deliver that.”
Spotlight on Quality
The combination of newly available quality data and the push to drive down costs has led to the proliferation of employee benefit packages that are more focused on quality. Employers assess everything from IT use to whether providers adopt patient-centered care models, all geared toward getting value for the purchasing dollar. However, in a review of literature on such plans for the California HealthCare Foundation, PricewaterhouseCoopers found that for most, only partial evidence exists that they improve quality or limit or reduce costs. When it came to provider selection, PwC found that employers are less attracted to choosing benefit packages that direct their employees to high-quality providers if those packages cost more.
This jibes with the findings of Jim Winkler, a principal in the health management practice at Hewitt. As much as they are loath to admit it, he says, many employers, especially smaller ones, focus on the dollars alone. “Quality and cost are both important to employers, but the reality is, until somebody proves that quality saves money, cost will trump quality in any of those deals,” Winkler says.—Philip Dunn is a freelance writer in Chicago.
| Average Premium Increases in 2006 | By Firm Size | By Funding |
| All small firms | 8.8% | 8.7% |
| All large firms | 7.0% | 6.8% |
Source: The Henry J. Kaiser Family Foundation and Health Research & Educational Trust, Survey of Employer Health Benefits, 2006
This article 1st appeared in the January 2007 issue of HHN Magazine.
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