The U.S. Department of Health and Human Services’ recent announcement to move the Medicare program toward value-based payments is among the most promising recent developments in health care.
While changing the way we pay for care will not be easy, we believe that shifting away from fee-for-service to value-based payments could be a catalyst to a better, more affordable health care system in our country.
Three Benefits of Paying for Quality
There are numerous potential benefits to paying for quality rather than quantity, including the three we want to focus on today.
- We believe this payment shift has the potential to accelerate progress toward achieving the Triple Aim – defined as better individual care, better population care, and lower cost.
- We believe the payment shift by Medicare will accelerate the transition to value-based payments among commercial insurers – a major benefit to employers in terms of improved health for employees and greater affordability.
- We believe value-based payments have the potential to help slow – and possibly reverse – the epidemic of physician burnout in the United States, particularly among primary care doctors. Continue reading “Value-Based Reform”
Filed Under: OP-ED, THCB
Tagged: Employers, Fee-for-service, Medicare, payment reform, physician burnout, Quality, Triple Aim
Mar 2, 2015
The New Year always brings many changes. In addition to soon to be broken resolutions, this particular year ushered in strict mandates requiring employers with more than 100 full-time employees to either provide health insurance to those employees or pay fines of between $2000 and $3,000. We’ve seen many firms publicly respond to this by cutting benefits to part-time workers. Despite the criticism that often accompanies these decisions, in many, if not all, of these cases this move benefits employees. Without the offer of employer-provided insurance they get access to the ACA exchanges.
Part of the criticism stems from the implicit belief that firms “give” benefits to their employees out of some form of philanthropy. These benefits are just a tax-preferred (though not really for low-income employees) form of compensation, and research shows that increases in benefit costs result in lower wages for employees. The firms that have cut benefits will either increase wages or lose a lot of employees. (If they cut benefits, do not raise wages, and do not lose workers, then they must not have been profit maximizing to begin with; we highly doubt that firms like WalMart would have knowingly forsaken an opportunity to maximize profits.) Continue reading “It’s Past Time to End the Employer Mandate”
Filed Under: THCB
Tagged: ACA, Benefits, Employers, Obama, Staples
Feb 12, 2015
Starbucks, which taught America to love lattes, made news this week with the announcement of a new tuition benefit for its partners (Starbucks-speak for employees). At first glance this move seems like simply another benefit in Starbucks relatively (for its industry) generous compensation package. In particular, Starbucks has long been heralded for providing health insurance for all partners working more than 20 hours per week. It is this connection to health insurance that we wish to explore. While Howard Schulz the founder and current CEO of Starbucks has long said the firm offers health insurance because it is the “right thing to do” for their employees, we have always suspected a more profit maximizing goal for this compensation decision. If we put on our strategy hats (we are both members of Kellogg’s Strategy Department), we can deduce that as a profit-maximizing firm, what Starbucks giveth with tuition benefits it may soon taketh away from health insurance benefits. In the process, Starbucks may be heralding the demise of employer sponsored health insurance, something we have predicted in previous blogs.
Continue reading “What a New Benefit From Starbucks Teaches Us About the Future of Employer Provided Health Insurance”
Filed Under: Economics, THCB
Tagged: ACA, Benefits, Employee, Employers, Starbucks
Jun 17, 2014
By BRIAN KLEPPER
One of America’s most enduring mysteries is why the organizations that pay for most health care don’t work together to force better value from the health careindustry.We pay double for health care what our competitors in other developed nations do, but studies show that more than half of our annual health care spend
– equal to 9% of GDP or our 2012 budget deficit – provides zero value. Every health care sector has devised mechanisms that allow it to extract much more money than it is legitimately entitled to. Health plans contract for and pass through the costs of products and services at high multiples of what any volume-based purchaser can buy them for in the market. Medical societies campaign for excessive medical service values that Medicare and commercial payers base their payments on. Hospitals routinely over-treat and have egregious unit pricing. There are scores of examples.Decades of these behaviors have made health care cost growth the most serious threat to America’s national economic security. Medicare and Medicaid cost growth remains the primary driver of federal budget deficits.
Over the past decade, 79% of the growth in household income has been absorbed by health care
. Health care’s relentless demand for an ever-increasing percentage of total resources compromises other critical economic needs, like education and infrastructure replenishment.Health care costs have been particularly corrosive to business competitiveness. Three-fourths of CFOs now report
that health care cost is their most serious business concern. Commercial health plan premiums have grown almost five times overall inflation
over the past 14 years. Businesses in international markets must overcome a 9+ percent health care cost disadvantage, just to be on a level playing field with their competitors in Australia, Korea or Germany.The health care industry’s efforts to maximize revenues have been strengthened by its lobby, which spins health policy to favor its interests. In 2009, as the Affordable Care Act was formulated, health care organizations fielded eight lobbyists for every Congressional representative, providing an unprecedented $1.2 billion in campaign contributions to Congress
in exchange for influence over the shape of the law. These activities go on continuously behind the scenes and ensure that nearly every health care law and rule is structured to the industry’s advantage and at the expense of the common interest.Health care is now America’s largest and most influential industry, consuming almost one dollar in five. Only one group is more powerful, and that’s everyone else. Only if America’s non-health care business community mobilizes on this problem, becoming a counterweight to the health care industry’s influence over markets and policy, can we bring health care back to rights.
Continue reading “How Business Can Save America From Health Care”
Filed Under: Uncategorized
Tagged: CFOs, Employers, Health Care Costs, Health care spending, National Business Coalition on Health
Jun 12, 2014
In ancient Athens, the philosopher Diogenes wandered the daylight markets holding a lantern, looking for what he termed, “an honest man.”
It seems since the dawn of the consumer economy that customers and buyers have traded most heavily on a single currency – trust.
Three millennia later, our financial system still hinges on the basic premise that the game is not rigged and any trusted intermediary is defined by a practitioner who puts his client’s interests ahead of his own.
Anyone responsible for procurement of healthcare may feel like a modern-day Diogenes as they wander an increasingly complex market in search of transparent partners and aligned interests. The art of managing medical costs will continue to be a zero-sum game where higher profit margins are achieved at the expense of uninformed purchasers.
It’s often in the shadowed areas of rules-based regulation and in between the fine print of complex financial arrangements that higher profits are made.
Are employers too disengaged and outmatched to manage their healthcare expenditures?
Are the myriad intermediaries that serve as their sentinels, administrators and care managers benefiting or getting hurt by our current system’s lack of transparency and its deficit of information?
Continue reading “ACA 101: An Employer’s Search for Objective Advice”
Filed Under: THCB, The Business of Health Care, The Vault
Tagged: Benefits, brokers, consultants, Corporate America, Costs, Employers, Hospitals, Human Resources, Incentives, Insurers, Michael Turpin, purchasers, The ACA, the business of health care, Uwe Reinhardt
Apr 10, 2014
The conversation has changed.
The old conversation: “You cost too much.”
“But we have these sunk costs, patients who can’t pay … ”
“OK, how about a little less then?”
The new conversation: “You cost too much. We will pay half, or a third, of what you are asking. Or we will take our business elsewhere. Starting now.”
“But … but … how?”
Exactly: How will you survive on a lot less money? What are the strategies that turn “impossible” to “not impossible”?
The old conversation arises from the classic U.S. health care model: a fully insured fee-for-service system with zero price transparency, where the true costs of any particular service are unknown even to the provider. The overwhelmingly massive congeries of disjointed pieces that we absurdly call our health care “system” rides on only the loosest general relationship between costs and reimbursements.
It’s a messy system littered with black boxes labeled “Something Happens Here,” full of little hand waves and “These are not the droids you’re looking for.”
With bundling, medical tourism, mandated transparency, consumer price shopping, and reference pricing by employers and health plans, we increasingly are being forced to name a price and compete on it. Suddenly, we must be orders of magnitude more precise about where our money comes from and where it goes: revenues and costs.
We must find ways to discover how each part of the strategy affects others. And we need some ability to forecast how outside forces (new competition, new payment strategies by employers and health plans, new customer handling technologies) will affect our strategy.
Key Strategy Questions
For decades, whenever some path to profit in health care has arisen (in vitro fertilization, urgent care, retail, wellness and the others) most hospitals have said as if by ritual, “That is not the business we are in.” As long as we got paid for waste, few health care organizations got serious about rooting it out.
And most have seemed content with business structures that put many costs and many sources of revenue beyond their control.
In the Next Health Care, the key strategy questions become:
Filed Under: THCB, The Business of Health Care
Tagged: consumer driven health, Costs, Employers, Healthcare organizations, Joe Flower, Reference-based pricing, the business of healthcare, Transparency
Mar 28, 2014
The most significant force for health system transformation in the United States is employer activism.
This month’s decision to delay the Affordable Care Act’s employer mandate until 2016 coupled with dramatic increases in health insurance premium costs assures employers will play a stronger role going forward.
57% of all companies provide health insurance covering 149 million in the population. But participation varies widely by industry and size of company.
Participation: Manufacturing (72%), Services (65%), Transportation/Utilities/Communications (62%), Agriculture/Mining/Construction (60%), Wholesale (54%), Healthcare (51%), Financial services (49%), Retail (29%) (Kaiser/HRET Survey of Employers)
Size: Smaller companies under 199 are less likely to provide health benefits than larger companies, though premiums they pay to insurers are slightly lower than their larger counterparts.
Declines in employer sponsored coverage declines are due to costs, not the Affordable Care Act. Consider: the percentage of non-elderly workers with employer-sponsored coverage decreased from 68% in 2000 to 61% in 2009 before the law passed.
Employers pay 82% of health costs for singles and 71% of costs for those in their family health plans. Over the past decade, they have shifted more financial responsibility to their employees.
- Premiums for employers from 2003-2013 increased 80% but employee contributions increased 89%.
- At the same time, employers have reduced coverage for retirees and dependents, and in many industries, kept wages low to offset health cost increases.
Continue reading “Employers 2.0″
Filed Under: Uncategorized
Tagged: Cost Control, Employers, Paul Keckley, The ACA
Mar 25, 2014
T was never a star service tech at the auto dealership where he worked for more than a decade. If you lined up all the techs, he wouldn’t stand out: medium height, late-middle age, pudgy, he was as middle-of-the-pack as a guy could get.
He was exactly the type of employee that his employer’s wellness vendor said was their ideal customer. They could fix him.
A genial sort, T thought nothing of sitting with a “health coach” to have his blood pressure and blood taken, get weighed, and then use the coach’s notebook computer to answer, for the first time in his life, a health risk appraisal.
He found many of the questions oddly personal: how much did he drink, how often did he have (unprotected) sex, did he use sleeping pills or pain relievers, was he depressed, did he have many friends, did he drive faster than the speed limit? But, not wanting to rock the boat, and anxious to the $100/month bonus that came with being in the wellness program, he coughed up this personal information.
The feedback T got, in the form of a letter sent to both his home and his company mailbox, was that he should lose weight, lower his cholesterol and blood pressure, and keep an eye on his blood sugar. Then, came the perfect storm that T never saw developing.
His dealership started cutting employees a month later. In the blink of an eye, a decade of service ended with a “thanks, it’s been nice to know you” letter and a few months of severance.
T found the timing of dismissal to be strangely coincidental with the incentivized disclosure of his health information.
Continue reading “What If Your Employer Gets Access to Your Medical Records?”
Filed Under: THCB, The Vault
Tagged: Al Lewis, data breaches, Employers, personal health records, Privacy, Vik Khanna, Wellness, workplace wellness programs
Mar 25, 2014
A recent blog on HBR.org proposed to deliver “The Cure for the Common Corporate Wellness Program.” But as with any prescription, you really shouldn’t swallow this one unless all your questions about it have been answered. As a physician, a patient, and a businessman, I see plenty to question in Al Lewis and Vik Khanna’s critique of workplace wellness initiatives.
With their opening generalization that “many wellness programs” are deeply flawed, the authors dismiss a benefit enjoyed by a healthy majority of America’s workers. Today, nearly 80% of people who work for organizations with 50 or more employees have access to a wellness program, according to a 2013 RAND study commissioned by the U.S. Department of Labor and the U.S. Department of Health and Human Services.
It’s not clear whether the authors are intentionally dismissing or simply misunderstanding the wealth of data that shows how wellness programs benefit participating employees. The RAND study summarizes it this way: “Consistent with prior research, we find that lifestyle management interventions as part of workplace wellness programs can reduce risk factors, such as smoking, and increase healthy behaviors, such as exercise. We find that these effects are sustainable over time and clinically meaningful.”
Lewis and Khanna, however, don’t focus on such findings. Instead, they question the motives of a company for even offering a wellness program, which they slam as an “employee control tool” and “a marketing tool for health plans.” And, in perhaps the most baffling statement of all, the authors suggest that workplace wellness initiatives are “trying to manipulate health behaviors that are largely unrelated to enterprise success” (emphasis mine).
Let’s consider that piece by piece. What are the behaviors that corporate wellness initiatives are trying to influence? According to the RAND study, the most common offerings — available in roughly 75% of all wellness initiatives — are on-site vaccinations and “lifestyle management” programs for smoking cessation, weight loss, good nutrition, and fitness. In short, companies want to reduce the risk that their workers will get the flu, develop lung cancer, or suffer from the many debilitating conditions linked to overweight and a sedentary lifestyle. How could these initiatives be deemed “largely unrelated” to the company’s success?
Continue reading “In Defense of Corporate Wellness Programs”
Filed Under: THCB, The Business of Health Care
Tagged: corporate wellness, Employers, Rajiv Kumar, workplace wellness programs
Feb 21, 2014
So many old rules in health care and insurance no longer seem to apply.
I keep stumbling upon situations, where, what used to be up is now down and what used to be down is now up.
No one seems to know for sure how things will settle out under the new reality created by Obamacare and the even more unpredictable reactions to the law by health care companies, employers and, most especially, you and me.
I’ve started using the term “weightlessness” to describe this state we’re in. Picture the astronauts on the international space station, floating through a room, flipping at will, as likely to settle on a wall or on the ceiling as on the floor.
That’s what life is like under Obamacare now—for physicians, hospital administrators, insurance executives, benefits brokers and employers.
Here are a few examples:
1. I wrote last week about how a chunk of workers, even at large employers with generous benefits, would actually get a better deal on health insurance from the Obamacare exchanges than from their employers. So their employers are starting to consider whether they should deliberately make health benefits unaffordable for those low-wage workers, so they can qualify for Obamacare’s tax-subsidized insurance.
That could be good for both employers and employees. The effect on taxpayers, which would switch from granting a tax credit to employers to instead granting it to the employees, is unclear.
2. Even though insurers were certain that price would be king on the Obamacare exchanges, that hasn’t led most customers to buy the plans with the cheapest premiums. As I wrote Friday, 76 percent of those shopping on the exchanges in my home state of Indiana have picked the higher-premium silver and gold plans, with only 24 percent picking bronze plans.
“There are a few geographies where we believe we are gaining share despite lower price competition which points to the value of our local market depth, knowledge, brand, reputation and networks,” WellPoint Inc. CEO Joe Swedish said during an January conference call with investors.
It’s possible that’s a result of older and sicker patients being the earliest buyers on the exchange, and that as healthier people buy coverage, they’ll gravitate to the low-cost bronze plans. But that hasn’t happened—which, as I wrote on Friday, has proved wrong hospitals’ concerns about the super-high deductible bronze plans.
Continue reading “The Weightlessness of Obamacare”
Filed Under: Uncategorized
Tagged: Benefits, Employers, Insurers, J.K. Wall, Milliman, Obamacare, Risk adjustment, Subsidies, the business of healthcare
Feb 18, 2014