Brian Klepper and Tom Emerick
Published in abbreviated form 8/14/12 in Workforce Management
Independent of whether the Affordable Care Act remains, public and private purchasers are unlikely to see meaningful health care cost reductions from policy w the near future. Our national policy paralysis undermines our ability to address serious problems, especially when it involves changes to the flow of money to influential organizations.
But that’s a dysfunction of our Legislative process. Why has it extended to the commercial health care marketplace? Why have employers failed to manage health care and its cost as aggressively as they oversee every other aspect of their businesses? Why have they passively paid double what purchasers in other developed nations pay for what they know is often spotty quality? Why have they tolerated the health care sector’s egregiously wasteful behaviors, and not demanded strict adherence to evidence and science? Why haven’t they worked together and, as the largest purchasers of health care other than government, used their market leverage to drive better care at lower cost?
It’s no secret that American health care is excessive. In 2008, the consulting firm PwC estimated that 54.5 percent of all health care expenditures – almost $1.5 trillion annually in 2012 – provides no value. Still, most businesses acquiesce to consultants and vendors who suggest minor tweaks but mostly protect the status quo.
Nearly every part of the health care industry has developed mechanisms to increase cost and block transparency and accountability. Ask a health plan for claims data, and it will likely respond with a contractual prohibition against using the information to make doctor and hospital performance comparisons. Try to determine which physicians within a specialty consistently produce the best outcomes at the lowest cost for a given clinical condition, and you’ll likely find the data are unavailable. Check your hospital claims over the past several years, and you may find rapidly rising pricing of frequent procedures to compensate for declining patient volumes.
Often there is no clear understanding of what works, or rigor about efficacy. Wellness and prevention services are the rage now with employers, and there is no question that they can help patients learn healthier lifestyles and stave off becoming sicker. But there is scant data showing that these programs save money, especially with any immediacy.
The approaches with the greatest savings potential remain underutilized. Perhaps most important is using established centers of excellence to ensure the appropriateness of the care for the sickest patients, who can consume immense resources and are often mismanaged. (Mayo Clinic often finds that patients referred for organ transplantation have been misdiagnosed.)
Primary care has been politically undermined over the past two decades. But it is finally experiencing a renaissance due to overwhelming proof that it improves quality and drives down cost. And some employers are pursuing volume-based arrangements that acquire high value products and services more cost-effectively than are available through their health plans’ networks.
In policy, the health care industry, representing less than one-fifth of the economy, has utterly outmaneuvered the non-health care business community that comprises the other four-fifths. Health care organizations with a stake in reform contributed $1.2 billion to Congress in 2009 to get influence over the process, while employers, also with a huge stake in the outcome, largely stood by and watched. The result is the contentious battle we’re witnessing now, with few prospects for improved quality or efficiency.
The impacts of employers’ malaise on health care are far reaching, seriously threatening America’s economic security. A recent RAND study calculated that almost 80 percent of all household income growth is now siphoned off by health care, leaving only one new dollar in five for other needs, like infrastructure replacement or education.
Fixing America’s health care cost crisis will require payment reform, greater transparency of cost, quality and safety performance, and re-empowering primary care. But those reforms cannot occur so long as policy is driven by the special rather than the public interest.
Bringing health care’s excesses back into balance will require the focus of America’s business leaders, both in policy and in the marketplace. Non-health care business is the only group that is larger and more influential than the health care industry.
In policy, we need a concerted effort that can be a counterweight to the health industry’s campaigning.
In the marketplace, employers’ relationship with health care must be guided not only by the compassion of human resources but by the hard-headedness of finance and risk management. Poor performing and unaccountable physicians, pharmacy benefits managers, hospital services and health plans should be dismissed and replaced with vendors who demonstrate that they enhance patient well-being while protecting purchasers’ financial interests. Collaboration with other like minded employers is the quickest path to changing how health care works in a community or the nation.
Because America’s health policy and market environments have become so dysfunctional, it falls to the nation’s business leaders to help us achieve health care change that works for all patients and purchasers. We see no other way.