By Tom Emerick
At more than $2.5 trillion in total, U.S. health care costs now comprise a staggering 18.2% of our GDP. This figure has been rising rapidly over the last few decades. Health costs are eroding wages, diminishing our global competitiveness, and bankrupting the government.
What’s more, from the perspective of businesses, this problem is likely to get much worse. As the government seeks to cut back on its health care spending, doctors and hospitals will charge those with private insurance more to make up the difference. Until now, the only choice has been to start rationing care, something American workers vigorously oppose.
But many employees are realizing that there has to be some kind of trade off. They are watching their paychecks shrink while their co-payments rise. There has also been a massive wave of new research pointing to an insidious trend: Doctors over-prescribing costly procedures to boost their own profits.
The U.S. health care system is ripe for abuse. The attempt to “manage” health costs in the 1990s backfired, leading Americans to trust their doctors much more than their insurance companies or benefits managers. What’s more, since few of us ever see the “real” prices providers charge our insurance companies, we don’t know how much we are really paying and why our premiums are skyrocketing.
Hospitals are not required to post quality metrics that would help patients or benefits managers make intelligent decisions about where to get care, we end up being strongly influenced by marketing and the “reputation” of our health care providers.
Most consumers are unaware of what the quality of care is, how many excessive procedures a facility performs, how much more it charges than their competitors, or how many more infections patients get there, but we know the hospital has a terrific reputation for doing cutting-edge research and having the latest advanced technology.
Resistance to Change
The public is oblivious to the gross variation in quality and ethics among health providers. How can we evaluate the care we receive? Many people are at their most vulnerable when visiting the doctor and want to believe everything. Many clamor for additional, useless interventions after exhausting all reasonable efforts, wanting “something” even when nothing will help.
When Americans are told that certain procedures are of dubious value, or outright harmful, they typically suspect the real issue is cost: “You just don’t want to pay for Granny to get that back surgery,” they counter. They never suspect that the complex procedure might put Granny at tremendous risk of harm, do nothing to ease her discomfort, and net the doctor and the hospital a huge reimbursement.
An equally big factor is that health care is such a huge part of our economy – $2.5 trillion plus – that the industry lobbyists are among the most powerful group in Washington. There is no simple way to trim our health care bill without taking money from someone’s pocket.
Whose pocket should it come from? Politicians will not answer that question. Only we can. It is time for America’s businesses to begin demanding from the health care system exactly what we have always had to deliver to survive: Value. Instead of giving our health care providers a blank check, demand quality care for a reasonable price.
Really Managing Health Benefits
For businesses, the first step is to immediately trim the wasteful and excessive procedures. The safest way to do this is to first focus on the 6-8 percent or so of employees who incur 80 percent of health costs. At a time when a single procedure can cost $1 million, it’s not difficult to see how certain patients quickly fall into this category. Unfortunately, few benefits managers realize that a good 10-20 percent of these most serious and complicated cases are being mismanaged: Patients are either misdiagnosed or the doctor is just making poor treatment and surgery choices.
Businesses need to start sending their sickest workers for second opinions at hospitals that have certain key characteristics: They track their outcomes meticulously; doctors are not paid based on their volume of procedures; particularly expensive procedures must be prescribed as a team, specialists coordinate care; doctors are accountable and overall costs of treatment are typically lower because the quality of care is better.
Such facilities do exist. Most have long operated on different business model than the typical American hospital. Instead of making their profits by volume, they profit by efficiently delivering high quality care. They include the Mayo Clinic, the Cleveland Clinic, and Geisinger Health Systems.
Businesses can immediately design an attractive health care benefit offering that takes advantage of second opinions from exceptional hospitals. This will cut health costs overall, even after travel costs. Businesses that cover more than 5,000 employees should reach agreements with “high-cost” diagnosis providers. Lowe’s, for example, has contracted with the Cleveland Clinic for cardiac surgery. Some patients will refuse the second opinion but most will embrace it, particularly if it saves them from an unnecessary, invasive procedure.
Popular but Ineffective Notions
Businesses should embrace wellness and preventive care because it’s the right thing, but don’t look for big results. The 6-8 percent of patients who spend the most health care dollars usually have serious illnesses and may be past the point where wellness and prevention can help. Further, some people are going to come down with very serious illnesses anyway.
“Value-based purchasing,” high deductible health plans, and most forms of “disease management” also have their place. Those deal with only 20 percent or so of business health care plan spending, however, and will become increasingly irrelevant in managing health plan costs. Any savings from those is being lost in the world of ultra-expensive care: transplants, ventricular assist devices, valve surgery, complex heart surgery, end-stage heart disease, and multimillion dollar cancer cases.
Start Cutting Costs Now
Businesses can start can start to cut costs now by working with insurers to figure out who the “A+ grade” health care providers in their own market are, then load their networks with those providers. They should educate their employees about how useless and dubious care takes money out of their pockets and paychecks and harms people.
“Change is hard,” the old cliché goes, but we are rapidly approaching the point in time where businesses have begun to realize that not changing how they provide health care benefits will bankrupt them.
Businesses should cultivate relationships with health care providers who profit by delivering quality care, not just more care. Businesses can do this today — and there is no time to waste.
(Tom Emerick is President of Emerick Consulting which designs employee benefit programs for small, medium and multi-national corporations. Previously, he was Vice-President of Global Benefits for Wal-Mart and held similar positions with Burger King, British Petroleum and other corporations. Emerick has been a member of the U.S. Chamber of Commerce Benefit Committee and a presenting speaker at the World Health Care Congress.)