Employers are beginning to create some disruption of their own in healthcare

The major financiers of our healthcare system are the government, through Medicare and Medicaid, and employers. As I have discussed in prior blogs, historically both the government and employers have taken somewhat of a passive role when it comes to our healthcare system.

I define passive as in sitting on the sidelines (or on a bench) and observing escalating healthcare costs and inconsistent quality and accepting it as a norm rather than proactively addressing the root causes (fee-for-service payment methodologies, lack of cost and quality transparency, and a less than competitive marketplace, etc.) in a sustainable manner. This passivity would apply on a societal basis to Medicare (see blog), and to employers on both a national and community level.

Passivity also applies to employers when they hire third parties, i.e., health insurance companies, employee benefit consultants and brokers, and they do not hold them accountable for performance.

This is all changing as both the government and employers are actively racing to find answers for high healthcare costs and inconsistent quality

On the government side of the ledger, traditional Medicaid is evolving to Medicaid Managed Care and traditional Medicare to Medicare Advantage. Both Medicaid Managed Care and Medicare Advantage take a proactive role in addressing healthcare costs and quality.

On the employer side, there is also an evolving activist role that hopes to provide some positive disruption in the world of healthcare. Some of these initiatives have been around for a while, but they are gaining momentum as employers decide it is time for them to take more of a leadership role in healthcare.

However, employers still have a long way to go. Since healthcare can vary by local community, there are pockets of regional leadership by employers, but historically the scenario has mostly been colored by apathy and a level of acceptance of whatever comes their way in terms of healthcare costs and quality.

In this blog, we will provide an overview of some of the employer-related initiatives that are occurring in local markets and, where needed, I will add my own thoughts and perspectives.

Employers and employees are evolving to prudent purchasers of healthcare services:

I know – euros instead of dollars, but I like the picture.

We all know the value of “shopping” related to your ability to get the best deal (cars, computers, cell phones, etc.). The value of shopping goes beyond the individual transaction. 

When “shopping” plays an integral role within a local community, it also sets the stage for ongoing cost-efficiencies and quality. Suppliers recognize that in order to be successful in a competitive market they need to demonstrate perceived and actual value to potential purchasers.

This concept applies to cars, computers and cell phones and it also can apply to healthcare.

How are employers facilitating shopping?

·     Health Savings Accounts (HSAs)

Proponents of HSAs believe that they will help reduce the growth of health care costs and increase the efficiency of the health care system. According to proponents, HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed, and make consumers more responsible for their own health care choices through the required High-Deductible Health Plan.[1]

·     Implementing reference-based pricing

Referenced-based pricing has emerged as one way for self-insured employers to control costs.

In a reference-based pricing model, the employer sets a maximum amount that they’ll pay for a claim. While there are variations of the payment system, most reference-priced vendors reimburse claims based on what Medicare pays plus a specific percentage. This helps plan sponsors cut costs by capping what the plan covers for some medical procedures where fees can vary widely as well as encourages shopping on the part of the employees. Example: joint replacement surgery.

·     Providing user-friendly cost-quality transparency tools for their employees

Transparency of health care prices is not a silver bullet that will solve all of the market’s problems, but you cannot have a market without transparency. It is the foundational step that, when missing, continues to cause us to stumble in our quest to improve the affordability of health care.

A great read relating to the value and the evolving impact of transparency on the market is the The Keckley Report, July 9, 2018.

The generational impact on "shopping":

The combination of advances in user-friendly technology and the generational shift that is occurring in the U.S. will result in a sustainable transformation of the healthcare sector.

Per a recent study by the Employee Benefit Research Institute: “Millennials are more likely than baby boomers and Generation Xers to get engaged in making health care decisions. For example, millennials are more likely than the other generational cohorts to say they tried to find the cost of health care services before getting care; found cost information; checked whether a health plan would cover care or medication; checked the quality rating of a doctor or hospital before receiving care; talked to a doctor about treatment options and costs; used an online cost tracking tool provided by health plan to manage expenses; talked to a doctor about prescription options and costs; developed a budget to manage health care expenses; and asked a doctor to recommend a less costly prescription drug.”

“The millennial generation numbers over 75 million, which is currently larger than the baby boom generation of about 74.9 million. In addition, Generation X is projected to pass the baby boom generation in size in about a decade.”

Employers are starting to recognize the importance of value-based payment models that are tied to both risk & reward

I do like this picture! 

As discussed in a prior blog, some form of financial accountability and risk needs to be incorporated in our payment systems or the focus will only be on the cheese (money), and there would be no real incentive to address the long-standing structural issues on the cost side of the equation.

Bundled payments are an example of a payment methodology that has both a risk and reward component that would incent providers to be more cost efficient. Ideally, bundled payment should be tied to some form of value-based outcomes. Bundles are the payment methodology of choice for Center of Excellence (COE) services.

For additional information relating to the value of bundles payments read the following recent blog by Dylan Scott of Vox.

 Accountable Care Organizations (ACOs) (risk/reward)

An article titled, "Two Ways Employers Should Push ACO Arrangements To Evolve," written by Roslyn Murray & Suzanne F. Delbanco, discusses the relatively poor performance of Accountable Care Organizations to-date (with some exceptions) and what employers can do to change it.

Based on the available evidence and their conversations with experts, Catalyst for Payment Reform (CPR) believes that there are two important features that payers or ACO sponsors should incorporate into ACO design.

Financial Risk

Per the authors, “As experts jest, if ACO providers don’t take on the financial risk of caring for their population of patients (for example, only shared savings), it is like “vegan barbeque…or gin and tonic without the gin.” Payers’ ability to change provider behavior is likely to be negligible if they only reward providers with small bonuses for effective care a year after the fact. Greater financial accountability would encourage providers to promote preventive care and look for ways to cut waste.”

Alignment of Patient Incentives

The authors also stated, “By treating the ACO as a narrow network, the payer could pair it with a benefit design that offers lower premiums and minimal out-of-pocket spending for care from an ACO provider but little to no coverage for care sought outside of the ACO.”

Large U.S. Employers want to cause positive disruption in healthcare: We have a "New Boss"

Large employers are beginning to take a more activist role in healthcare as noted in a recent statement by the National Business Group on Health: “Health care cost increases continue to outpace workers’ earnings and increases in inflation, making this trend unaffordable and unsustainable over the long term,” said Brian Marcotte, President and CEO of the National Business Group on Health. “No longer able to rely on traditional cost sharing techniques to manage costs, a growing number of employers are taking an activist role in shaking up how care is delivered and paid for.” 

 Per the National Business Group on Health recent survey of employers, respondents are implementing alternative payment and delivery models such as high performance networks (HPNs), direct contracting with health systems as well as with Centers of Excellence (COEs)."

Virtual care has branched out well beyond physician consultations to include digital coaching, condition management, remote monitoring, physical therapy and cognitive behavioral therapy, all of which show the greatest potential for growth over the next several years. 

“The growth in virtual solutions largely reflects employer frustration with the pace of change in how health care is delivered. Interestingly, seven in ten employers believe new market entrants from outside the health care industry are needed to disrupt health care in a positive way. These disruptors include innovators from Silicon Valley and elsewhere, and employer coalitions,” said Marcotte.

 â€œContracting within the pharmaceutical supply chain has also not kept pace with today’s plan design reality,” said Marcotte. â€œThe rebate-driven supply chain model is antiquated given the growth in high deductible plans and is ripe for change.”

Amazon, Berkshire, Chase health venture

(Bloomberg) -- Atul Gawande, a surgeon and journalist who has written extensively about the U.S. failure to grapple with rising health-care spending, has been named to head a new health venture for Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co.

Employers are the largest providers of health insurance in the U.S., giving more than 150 million people access to coverage. Insurance premiums have soared 55 percent over the past decade, according to the Kaiser Family Foundation, contributing to the growing dissatisfaction voiced by employers.

“The naming of Gawande to head the venture suggests that it will take a broad look at how to approach fixing health care”, Ana Gupte, a health stocks analyst at Leerink Partners, said by email.

“The ABC coalition is looking not at the drug value chain in isolation, but more broadly at the overall health-care system across payors and providers of care delivery,” Gupte said.

Note: While somewhat dated, the 2016 Pacific Business Group on Health provides a good overview of employer initiatives hoping to address healthcare costs and quality.

Examples of innovative health insurance models and collaborations that can benefit employers

During times of disruption, individuals and organizations have an opportunity to rise above the masses and be amply rewarded for successes and innovations.

 Given the high costs of healthcare, innovative initiatives and collaborations will be rewarded tenfold. The following is one example and potential ideas for innovative approaches that could play a significant role in addressing our high healthcare costs and inconsistent quality.

 Near-site health centers are emerging as a way for employers to deliver high-value convenient care to their populations. Near-site health centers are shared by multiple co-located employers. These centers include primary care, physical therapy, chiropractic services and acupuncture, behavioral health, health coaching and vision services, as well as transportation to and from the center.

 What other ideas or innovations are on the horizon or already out there?

• A benefit design that incents a consumer to continue to be a prudent purchaser of healthcare services even after their deductible has been met. Sharing in the savings with the employer?
• Apps that direct you to the nearest value-based providers for your identified healthcare need (MRI, lab work, doctor’s visit, knee surgery, etc.)
• The Primary Care Medical Home Model - This model will become more popular as we continue to go towards a risk/value-based payment environment.
• Technology that facilitates patient compliance
• Continued enhancement to technologies that allow for monitoring and delivering of healthcare in the home setting.
• Further modifications of the reference-based pricing model to make them even more market acceptable.
• What are your ideas?

Employers are increasingly turning to the more "active" self-insured model vs. the more "passive" fully-insured model (the power of data)

What is self-insurance?

Simply stated, employers who self-insure assume the financial risk vs. the full-insured model in which the insurance carrier assumes the risk.

Self-insured employers create their own benefit plan for their employees, pay health claims directly or through a third-party administrator, and buy stop-loss insurance to limit their liability. This process allows much more creativity in initiating innovative approaches to address cost and quality issues.

Companies that self-fund have access to every claim which allows them to better understand the drivers of their healthcare costs. With the power of this data, employers, with the assistance if needed of third-parties, can develop programs and initiatives to proactively address the healthcare needs to their employee population.

Employers can also, through the power of data, identify value-based providers in the community or, if needed, identify applicable Centers of Excellence to better serve their employee population while simultaneously achieving a more affordable healthcare benefit plan.

Employers are directing care through the use of benefit designs:

Value –based benefit designs:

Plans using value-based designs incentivize services that have a clinical evidence base and that can improve outcomes and reduce costs.

 Patients pay less for value-based services and more for lower-value services and treatments.

Benefit designs that direct employees to value-based providers of care

Through the use of data analytics employers can, on their own or with assistance of a third-party, identify value-based healthcare providers within or outside of their community. Benefit designs could then be developed to incent employees to utilize, when needed, such value-based providers.

Employers and wellness initiatives:

Poor lifestyles are a key contributor to high healthcare costs and unhealthy community. Employers are increasingly offering wellness-related programs with financial incentives. These programs typically include health survey or biometric screenings and incentives for efforts to stop using tobacco, lose weight, or take other proactive steps to improve health. 

One company on the cutting edge in working with employers on wellness initiatives is Bravo Wellness.

Employer initiatives to incent consumer engagement

Consumer engagement is a critical criteria in achieving optimal healthcare costs and better quality in both the employer setting and the community at-large.

Engagement transforms a consumer into a “prudent purchaser” of healthcare services. 

Engagement also transforms a patient into an active partner with their providers of care in addressing their health issues in a proactive manner.

Engagement turns a lose-lose scenario into one that is a win-win.

Employers can play a role in incenting this engagement on the part of their employees and dependents through the use of creative initiatives and benefit designs. Some of these incentives could potentially have both a “carrot and stick” approach.

Closing Comments:

While employers, rightly so, focus on their own employees’ healthcare costs and quality outcomes, they also have a vested interest in a healthy community.

 Both on a national and regional basis, employers need to play a more proactive role in creating a healthy and more affordable healthcare environment. This can be accomplished through increases proactive initiatives at all levels of societies.

 Employers should be sitting at the table with providers of care in creating a sense of urgency when it comes to transforming our healthcare system to one that is more value-based.

Thomas Campanella is the director of the Health Care MBA and an associate professor of health economics at Baldwin Wallace University near Cleveland, Ohio.

If you are interested in receiving a monthly summary of all of my healthcare blogs, you can respond to me on LinkedIn or e-mail Tom Campanella (tcamp@bw.edu) with your contact information.

Source of pictures: pixabay.com & pexels.com