Healthcare has become defined by rampant excess, so effective benefit managers will, of necessity, seek unconventional solutions. Established approaches are available now that will improve care and/or save considerable cost through clinics or high value niches.
Cancer care is a concentrated microcosm of broader health industry practices because it resides at the nexus of aspirational technologies, enormous costs, hope, and death. The cancer community’s pioneering valuation efforts and pushbacks against profiteering are remarkable because they offer sorely-needed context for clinical and financial decision-making, reflecting the imperative that we can’t afford poor cancer solutions much longer. The rest of health care can’t be far behind.
Posted 11/02/16 on The Doctor Weighs In
Bill Bestermann, MD, Medical Director at QualityImpact (COSEHC) Practice Transformation Network in Greenville, South Carolina, has spent the past few years training other physicians to optimize the care of patients with cardiometabolic disease. In a project sponsored by Louisiana Blue Cross, Dr. Bestermann worked with 700 primary care physicians to improve care and outcomes for patients with multiple risk factors. In 3.5 years, the percentage of hypertensive patients who achieved their goals rose from 47% to 67%, a 42.5% increase. Even more noteworthy, diabetics reaching their goals rose from 14% to 30%, a 114% improvement.
These results are clearly strong, no question. But most striking is that the treatments Dr. Bestermann advocates for are based on solidly established science. They have been disregarded, not because most physicians don’t believe in science, but because healthcare’s scientific foundation has been trumped by financial incentives.
A few days ago Dr. Bestermann shared a short response he had written to an ethics survey that, among other questions, asked this: “What is the most difficult ethical dilemma that you have faced in your career?” He wrote:
“A mountain of evidence shows that, in stable angina patients, optimal medical therapy (OMT) alone—simple application of proven drugs and lifestyle changes rather than surgical interventions—is as effective as OMT plus a stent. After a heart attack, OMT compared with usual care saves $22,000 per patient per year while reducing cardiovascular- and all cause-mortality 10-fold. In patients with type 2 diabetes, OMT reduces heart attack 4-fold, reduces stroke 5-fold, and reduces dialysis 6-fold. Louisiana Blue Cross has shown that, with the proper support, ordinary practices can easily produce OMT. Despite irrefutably strong evidence, financial incentives continue to dominate, framing bypasses and stents as answers.
The pervasiveness of inappropriate care is our medical system’s biggest ethical stain. We harm by delivering high-risk care that patients should not receive and by not providing the safe inexpensive care they should receive. This ethical collapse is everywhere, occurring every day in every state. We violate that fundamental medical aphorism ‘First do no harm!’”
This is a remarkable and heartrending statement, and all the more damning from a respected and field-experienced physician. It articulates the profound frustration of a doctor who puts patients’ welfare first, and whose confrontation with medicine’s “ethical collapse” is professionally and personally excruciating.
The excesses in cardiology permeate every clinical and financial sector of healthcare. For example, musculoskeletal care is about 20% of group health and 60% of occupational health spending, or between 4.0-4.5% of the U.S.’ gross domestic product. Comparative international data and evidence from best practice studies show that U.S. healthcare organizations deliver about double the musculoskeletal care of those in other industrialized countries. In other words, just the inappropriate care we deliver in this field is equal to more than 2% of the entire U.S. economy. A breathtaking figure and an indictment.
Squeezing out the waste
These problems are also opportunities. A U.S.-based musculoskeletal management company delivers better pain reduction, improved Activities of Daily Living, and improved range of motion in half the recovery time and at 60% of the cost of conventional orthopedic care. Oncology management companies are driving out 20-35% of cancer care costs, with improved health outcomes and better reported patient experiences. Companies focused on unnecessary drug spending are reducing those costs by 30% with improvements to quality and access. There are similar stories for surgeries, hospital costs, dialysis, hemophilia, management of high-cost cases, primary care, imaging, and on and on. Mainstream healthcare can be delivered with far better health outcomes and much lower costs.
The rub is that reduced costs are counter to financial interests of the industry’s powerful stakeholders, and so the industry has been resistant to these better approaches. The good news is that unions and employers are demanding greater value, lending increased traction to high-performance firms. As excesses continue and purchaser pushback intensifies, opportunities to exploit the market’s vacuums will blossom, driving approaches that realign healthcare with our ethical aspirations.
Published 9/20/16 in Employee Benefits News
A telling revelation from a September 2015 Mercer survey of 134 worksite clinic sponsors was that “only 41% were able to provide ROI data.” Like vendors in other healthcare sectors, clinic vendors as a group can have wildly different and sometimes questionable ways of calculating health and financial impacts. As someone involved with this sector for some time, my guess is that an even smaller percentage of clinics actually deliver returns on investment.
Obviously it is in clinic vendors’ interests to claim that they save money. It is also in benefits managers’ interests to show that the clinic vendor they were guided to and chose performs. But if, on rigorous analysis, a clinic does not return more than it costs and/or can’t demonstrate enhanced health outcomes, what’s the point? You can claim — and many do — that better access provides worthwhile value, but that’s akin to putting lipstick on a pig.
Don’t get me wrong. Worksite clinics, when structured properly, are profoundly advanced structures that, over an initial three-year period, should drive far better health outcomes, return the sponsor’s investment and lower health plan costs by 20% or more. Benefits managers who aspired to those impacts undoubtedly drove clinic implementation in 29% of firms with 5,000+ employees in 2015, up from 23% just two years before, according to the Mercer survey.
In their best forms, these health centers can be comprehensive primary care medical homes that deliver life management care, walk-in convenience care, occupational health services, chronic disease management, referral management, and so on. They can deliver excellent primary care, but more than that, they can manage the full continuum of clinical and financial risks that drive appropriate and disrupt inappropriate care.
An inescapable and damning conclusion from the Mercer data is that many consultants guiding the choices of poor performing vendors may be asking the wrong questions, may be conflicted by relationships with those vendors, or both. Most probably are not held accountable for urging decisions that turn out to be hugely expensive for their clients.
Many simply don’t know what they don’t know. Clinics are deceptively complex structures. Conventional assumptions may not apply and, while a panel convened by the National Association for Worksite Health Centers (NAWHC) is working to develop consensus on appropriate clinic performance metrics, no standards exist yet. So for the uninitiated, ignorance is bliss until the hoped-for results fail to materialize.
The point is that finding a suitable clinic vendor is not a simple or ordinary benefits purchase. The fact that purchasers choose so few high-performing vendors suggests that better guidance — from consultants with deeper subject matter expertise — is needed. Holding consultants accountable for their recommendations by tying compensation to results is probably the best path to clinic performance. That would improve the clinic assessment process, the caliber of consultants performing the evaluations and hold clinic vendors to a higher standard, driving improvements throughout the sector as well.
Brian Klepper and Fred Goldstein
Published 8/17/16 in Employee Benefit News
Industry denials notwithstanding, reducing healthcare costs is fundamentally against nearly every healthcare organization’s perceived economic interests. That’s why it’s been such a struggle for purchasers to find healthcare organizations that deliver truly better health outcomes at lower cost. U.S. healthcare is built on a culture of excess: egregious unit pricing and over-treatment. Many organizations promise value but few deliver.
As Florida’s Gov. Rick Scott, former CEO of Hospital Corporation of America, pointed out at a venture capital conference a few years ago, “What business wants to make half this year what they did last year? That’s why the healthcare industry won’t fix the healthcare industry.”
Although direct contracting has gotten media attention lately, the term doesn’t adequately convey the depth of purchasers’ senses of frustration with and betrayal by the healthcare industry. Benefits managers’ and CFOs’ rage simmers below the courtesy that modern business practice demands, but that anger foments searches for better solutions in every healthcare niche. Employers and unions are quietly beginning to go around their brokers and health plans, which have often become the complicit contracting agents for the industry’s excesses. Seen from this perspective, direct contracting’s potential is virtually limitless.
Many health systems actively seek direct contracts with employer and union purchasers, making convincing cases about cutting out the middleman’s share, but caveat emptor. Prudent purchasers should ask two questions: Can the health system show data on successful health outcome improvements and reduced costs for an employee group or other at-risk groups? Will the system guarantee performance by putting their fees at risk against targets that can be validated? A “no” answer to either should be a deal breaker.
The Boeing Company’s contract with MemorialCare Health System for its 37,000 southern California employees and dependents is a step in the right direction. Boeing built performance target language into the contract, ensuring MemorialCare has no incentive to over treat. MemorialCare CEO Barry Arbuckle laid out his organization’s progressive position in clear, pragmatic terms.
The Boeing contract, he says, will allow MemorialCare to “earn certain incentives or, if we don’t meet certain criteria, incur a loss on that particular aspect. There is no incentive to keep people in the hospital and go to multiple specialists. For us, this is where healthcare needs to go.”
Many health system executives are far more reluctant. Even in the best case scenarios, purchasers shouldn’t imagine health systems will be willing to cut unit pricing or over-treatment patterns to the bone. To preserve the prosperity they’ve become accustomed to, most will offer glacially incremental cost reductions (or more likely some reduction in cost versus expected trend, such as numbers that can be manipulated). While many health systems promise to deliver better value, presumably translating to lower per patient revenue and margins, we’ve heard more than one CFO say, “Why take less until we have to?”
The Boeing-MemorialCare contract is notable because it’s between a large, well-known employer and a leading healthcare institution. The deal shows thoughtful purchasers with leverage and progressive health systems are no longer standing on ceremony and are entirely comfortable betting on circumventing health plans with old arrangements that often provide little to no value.
Even with the leverage their local dominance lends them, large institutions may not necessarily dominate healthcare marketplaces in the future. Around the country, small, specialized, scalable organizations have learned to manage care and cost in high-value healthcare clinical and financial niches, such as cardiovascular conditions, musculoskeletal disorders, cancer, drugs, surgeries, primary care, hospitalizations, imaging, large case management and centers of excellence.
Some are willing to take financial risk against performance targets that reflect significantly better health outcomes at costs that can range between 25-50%lower than conventional care within a particular niche. Savings across targeted niches can be greater than 20%. This is the tip of an iceberg that could ultimately restructure much of current healthcare purchasing arrangements.
These will be the real disrupters that direct contracts will empower, but only if employer and union benefit managers see beyond the conventional and are willing to swap out vendors who persist in delivering excess rather than quantifiable value.
Cancer care is a concentrated microcosm of broader health industry practices because it resides at the nexus of aspirational technologies, enormous costs, hope, and death. The cancer community’s pioneering valuation efforts and pushbacks against profiteering are remarkable because they offer sorely-needed context for clinical and financial decision-making, reflecting the imperative that we can’t afford poor cancer solutions much longer. The rest of health care can’t be far behind.
Striving for ever-higher earnings, drug companies large and small are relentlessly increasing pricing on old and new drugs because they can. They can because the industry successfully deployed lobbyists who persuaded a receptive Congress to heavily favor their interests, spinning laws away from regulatory controls and toward payment at any price. These circumstances, nurtured by pharma itself, make a 55-fold price increase possible and legal, if outrageous. And that’s the elephant in the room.
Brian Klepper
Published 5/27/15 in Employee Benefit News
Over the next few years, drug manufacturers will release a host of new drugs that are more complex and, in many cases, more effective than we’ve had access to in the past. There will be better solutions for common problems, and new solutions for uncommon ones. Specialty drugs, many of them “precision therapies,” will offer tremendous promise for better health outcomes across the breadth of human health and treatment.
Not surprisingly, most of these drugs will have breathtaking price tags, often a high multiple of conventional drugs. Specialty drugs are an exploding growth industry, with spending rising almost 20 times as fast as conventional drugs. Unless something changes, in just another five years we’ll likely spend more on specialty than non-specialty drugs. Or, for that matter, on doctors.
The Hepatitis C drug, Sovaldi, made headlines last year when a course of treatment was pegged at $84,000. But with hundreds of specialty drugs in the pipeline, that was just an early example. Drug companies argue that these new products are harder to develop and manufacture, that they are more targeted than old-style drugs and worth the additional cost, and that they need to recover the costs of failed drug efforts. Some of this is indisputable.
But in most cases there is no evidence that drug pricing is connected to hard business costs or patient value. Prices often seem capricious, making it difficult for purchasers to understand the relationship between additional cost and new impact. For example, U.S. cost for a new cholesterol management drug, referred to at this point only as PCSK9, is expected to be $7,000-$12,000 per patient per year, compared with about $1,000 on average for conventional drug therapies. Is there a credible patient health benefit that justifies this level of cost increase?
The magnitude of the potential cumulative cost is staggering. Projections have estimated that the PCSK9 market alone could easily reach $100 billion/year, or about 1/33 of the U.S.’s current total health care expenditure. And, of course, like PCSK9, many of these are maintenance drugs, not cures, with annual costs that recur for life.
Then there is the dramatic difference – often 300% to 1,000% – between the pricing here and in other developed nations, where we can assume that drug sales also are profitable. Gilenya, a multiple sclerosis drug, can cost almost six times here what it does in Spain, according to the International Federation of Health Plans. There are many examples.
Despite widespread knowledge of health care excesses and premiums that have grown at a multiple of general inflation for more than a decade, business has doggedly continued to participate in health care coverage. It’s entirely reasonable, then, for drug companies to believe that organizational purchasers are too pre-occupied with other matters to mobilize around a problem like specialty drug costs. Nor do employers and unions want to take a hard line. After all, what benefits manager wants to tell an employee that the company won’t pay for a new medicine that could improve her child’s life?
Questions to ask
Purchasers might ask a couple questions. First, what additional measurable value does a new drug offer? This is hardly cynical. One recent study found that most cancer drugs approved by the Federal Drug Administration over the past decade do not increase length of life, and nearly all had dreadful side effects that wreak havoc on quality of life. Once FDA approval had been achieved, though, pricing averaged $10,000 per month, independent of the drugs’ performance.
Second, what is pricing tethered to? What cost components, exactly, are used to develop U.S. pricing, to make the drugs so much more expensive here than in other countries?Legislation requiring this kind of transparency is now pending in several states. Not surprisingly, drug companies oppose it.
The possibility of specialty drug pricing financially overwhelming business and union health plans is real. Purchasers will be alarmed to find that their drug costs are growing much faster than other, already exorbitant health care spending. CFOs and benefits managers will watch their specialty drug spending, and calculate. To their minds, excessive specialty drug costs could capsize their plans, making it untenable to maintain good health coverage without compromising some other important health plan benefit. Just as worrisome, these costs will substantially increase their already heavy health care burdens, eating into the bottom line.
Because most every business and union offering coverage will be affected, specialty drugs could become the issue that finally mobilizes organizational purchasers against the broader problem of health care profiteering. Businesses are coming together, collaborating with common purpose, trying to learn more, searching for ways to manage specialty drug costs, and finding themselves frustrated by their lack of meaningful options. That’s a prescription for a mobilized response.
In their zeal for even greater profits, specialty drug manufacturers could finally lay on the straw that breaks the tolerance of the nation’s health care purchasers for excessive health costs. If that happens, almost certainly, health care will finally change.
Brian Klepper, a health care analyst and a Principal of Health Value Direct, and is based in Atlantic Beach, Florida.
Posted 12/02/13 on Medscape Connect’s Care and Cost Blog
The catchy title of a recent Harvard Business Review Blog post, The Big Barrier To High Value Health Care: Destructive Self-Interest, suggested that the Institute for Healthcare Improvement (IHI) is forging arrangements that can overcome fee-for-service reimbursement’s propensity to drive excess. As the honest broker, IHI could advocate for arrangements of mutual self-interest based on the right care, better outcomes and less money. Employers and unions would get lower costs, with improved health and productivity. Health systems and health plans would win more market share (at their competitors’ expense), realizing longer term relationships that could facilitate sustainability as market forces intensify.
The substance of IHI’s description was less satisfying, though. Their principles – common goals, trust, new business models, and defining roles for competition and cooperation – are obvious ingredients in any workable business arrangement. But the authors never talked about the money. That left plenty of room for skepticism by those of us who have heard more than one CFO ask, “Why should we take less money until we have to?” What, exactly, is the incentive for health care organizations to moderate their care and cost patterns?
The harsh truth is that, so long as fee-for-service (FFS) reimbursement remains in place, we won’t make headway against the immense excesses that have plagued US health care. FFS pays for piecework, so it encourages more services while failing to appreciate results and value. All services are considered appropriate, so all are reimbursed without differentiating what results in better outcomes. All health care professionals and organizations, except for primary care, benefit from this structure, so it has become nearly impossible to dislodge.
Reform has held out the promise of moving payment from volume to value. But it is still mostly an aspiration and, no doubt, the rank and file of the health care lobby is working hard to assure that it stays around as long as possible, independent of external pressures. Most Accountable Care Organizations, for example, are still paid under FFS, which is why so little real progress has been made in changing the ways care is delivered.
A recent Medscape article asked whether FFS might really disappear. It pointed out that while recent reports from four prominent health care policy groups – The Robert Wood Johnson Foundation, The Bipartisan Policy Center, The National Commission of Physician Payment Reform and The Brookings Institution – had all strongly advocated for a transition away from FFS and toward some form of value-based reimbursement, CMS’ progress toward this goal has been glacial. Paul Ginsburg, the highly respected Director of the Center for Studying Health System Change, notes that Medicare hasn’t announced that it will drop fee-for-service or reduce reimbursements for physicians who continue with it.
That, of course, is welcome news to most doctors. Many physicians are adamant that FFS should remain, and that their clinical judgment is not influenced by money. But the truth is murkier. There is a mountain of literature on unwarranted practice variation and overtreatment, and their relationship to income.
Most physicians also have nagging doubts about money’s role. In a 2012 survey by the Physicians’ Foundation, 86% of almost 14,000 responding doctors admitted that “Money trumps medical care” was either very important or somewhat important in medicine’s decline.
In the worksite clinic sector, which caters to employers who have become value-sensitive, many vendors, including my firm, have stepped away from FFS reimbursement. Instead, they pass through operational costs with no markup, and then charge a per employee (or per enrollee) management fee. This means that they have no financial stake in delivering unnecessary care (or denying necessary care). Their clients evaluate their performance through measurable changes in health outcomes and cost. It is in the vendor’s interests to implement mechanisms that drive appropriateness inside the clinics and, to the degree possible, downstream, throughout the continuum.
The differences between this and conventional, FFS medicine are profound. FFS reimbursement has transformed much of health care into a merchant enterprise in which the central incentive is to order more products and services, for the margin associated with each one. In the clinic model, the goal is to manage the process as effectively and efficiently as possible. It is a payment model that is more aligned with the interests of the patient and the purchaser.
There are a range of alternative payment models that make a great deal more sense than what Americans are saddled with today, with more rational incentive structures for care. The health care industry will continue to fight hard to protect the excesses it has come to take for granted. As with the rest of meaningful reform, it will fall to business, the most important health care purchasers other than government, to come together to drive approaches that can bring health care back into balance. The industry is counting on business to remain unfocused and ineffective. The question is whether businesses, as health care purchasers, will remain impotent or learn to leverage their collective heft.
Posted 2/15/13 on Medscape Connect’s Care & Cost Blog
Health care’s purchasers crave certainty. But complexity – and therefore uncertainty – rules. Assurances are hard to come by.
The most common question asked by prospective clients of my onsite clinic/medical management firm is how much less their employee health benefits will cost if they deploy our services. They often expect that we’ll review their claims history and nail down what their health care will cost once we’re involved. Looking in the rear view mirror can inform the future, but it isn’t foolproof.
The Complexity of Health Care Risk
The challenge here is that so many different mechanisms contribute to the need for care, the ways care is accessed, the ways care is delivered, and the ways it is priced. Even mechanisms that, in isolation, are strong, often are inadequate in the context of larger cost drivers.
This means that while predicting results in general terms is straightforward, doing so with any precision or specificity is a challenge. My firm can point to consistent previous performance with other clients, and show that in most cases we generate a 15+ percent overall savings on group health expenditures, net of the clinic investment. And we can detail how our management of the process is both broader and more targeted than the management of risks before we arrived. But while we’ll sometimes guarantee certain performance targets, we also know that the cards can and will sometimes fall against us.
Even Useful Management Approaches May Prove Inadequate
In the onsite clinic sector, vendors often describe the savings they’ll generate in terms of “replacement” costs. They may argue, for example, that a clinic office visit will cost $X less than on the health plan network. Drugs and labs will cost $Y less in the clinic’s dispensary than they would outside.
This is certainly true. Many primary care services can be delivered more cost effectively in a clinic than in a conventional primary care practice that is trying to optimize the revenue opportunities available through fee-for-service reimbursement.
But a clinic’s unit cost savings may not be large enough to reduce overall health plan costs. Health plan performance is shaped not just by clinical management, but also by financial and administrative influences. Even good primary care, which we know creates positive impacts throughout the system, isn’t an adequate check on a system that, over decades, has developed many often subtle ways to extract more money than it is legitimately entitled to.
The failure to address the robust mechanisms that underlie care and cost may account in part for the fact that, even with the addition of screening, care managers and other components, most medical homes developed in traditional primary care practices have been unable to demonstrate measurable savings or health improvements.
Vectors Of Health Care Risk
It can be useful to list some of the drivers of risk, as a way of developing a broader strategy.
Of course there are the conditions that require care. Health care must tend to the entire range of health experience: pregnancy, injuries, diabetic episodes, incontinence, heart attack, arthritis, neurological disease and everything in between. Frailties can come on us suddenly, in a stroke or a fall, or be progressive and chronic, as with asthma or cancer.
In groups or regions, these issues may be spun by cultural tendencies. Some behaviors generate or exacerbate health conditions. And, as the Dartmouth Atlas makes clear, health care providers in different markets may respond to the same conditions with entirely different care and cost patterns.
But our health system also has financial incentives that encourage overtreatment, drive up pricing, keep information isolated, and steer patients to particular sites, often independent of appropriateness or performance. Quality and cost results can vary wildly, depending on which doctor was seen, whether information could be seamlessly exchanged, whether the care was coordinated, and many other factors.
Layer on top of this whether people are willing to engage in their own health. Will they participate in approaches that are designed to identify problems and follow a regimen to manage ongoing conditions?
We also know that incentives can influence lifestyle, how care is accessed and how it is adhered to, and therefore the health outcomes and costs that result. Carrots and sticks can encourage patients to follow rules built around what’s known to work: doctors and services that offer the best value, letting the primary care physician be your patient advocate and guide, bringing specialty information back to the primary care doctor.
And then there’s just plain poor health and bad luck, which drive catastrophic cases, the fastest growing area of health care cost. People in automobile accidents or suffering major illness. Munich Re recently reported that the percentage of cases that exceed $1 million grew seven-fold over the past decade. Many high cost cases involve misdiagnosis and mismanagement that result in poor quality and excessive cost, one reason behind Walmart’s recent Center-of-Excellence contract announcement.
Multi-Vectored Problems Require Multi-Vectored Solutions
The deeper point is that much of this turmoil can be managed more effectively but that doing so requires a multi-focused effort. The emerging models for improving care and cost can’t only rely on primary care, or selecting better doctors and hospitals, but will leverage incentives, data-driven narrow networks, volume-based contracts, clinical decision support, care-neutral reimbursement, and a host of other mechanisms that can bring health care back into homeostasis.
In other words, the new way of managing care isn’t just about replacing a higher cost service out on the plan with a lower cost one in the clinic. It’s about changing the care patterns and many of the structures that support that care. It’s about better ways to manage the processes that undergird care and cost. And while it may be difficult to precisely forecast the result each time, it isn’t hard to understand that the path to that result is less rigged, better for the patient and better for the purchaser.
