Really Managing Care and Costs

One of my favorite health care stories is about Jerry Reeves MD, who in 2004 took the helm of a 300,000 life health plan in Las Vegas, including about 110,000 union members, and drove so much waste out of that system – without reducing benefits and while improving quality – that the union gave its members a 60 cent/hour raise. There was no magic here. It was a straightforward and rigorously managed combination of proven approaches.

Dr. Reeves’ work betrayed the lie that tremendous health care costs are inevitable. To a large degree, the nation’s major health plans abetted this perception when they effectively stopped doing medical management in 1999. (Most have recently begun managing again in earnest.) The result was an explosion in cost – 4 times general inflation and 3.5 times workers earnings between 1999 and 2009 – that has priced a growing percentage of individual and corporate purchasers out of the health coverage market, dangerously destabilizing the health care marketplace and the larger US economy. In 2008, PriceWaterhouse Coopers published a scathing analysis suggesting that $1.2 trillion (55%) of the $2.2 trillion health care spend at that time was waste.As the chief sponsors for most Americans’ health coverage, businesses have struggled to cope with health care cost while identifying value. Large American businesses, with tens or hundreds of thousands of employees, have recruited high profile benefits professionals – think of Jill Berger at Marriott, Ned Holland at Embarq, Peter Hayes at Hannaford Brothers or (the recently retired) Cecily Hall at Microsoft, each with terrific reputations – who, with their staffs, orchestrate sophisticated campaigns focused on the health of their employees and their families, and on the cost-effectiveness of their programming. Even so, few large firms provide comprehensive, quality benefits at a cost that remains consistently below national averages, and for years now America’s CEOs have routinely reported that their top business concern, health care, is their most unpredictable, large cost.

For mid-sized business, though, – here I’m referring to firms with 200-5,000 employees – the task is significantly more difficult. Health benefits managers in these companies have far fewer resources, typically work alone without the benefit of staff, and are often overwhelmed by the complexity of their tasks. Held accountable for their organizations’ health costs, they often default to whatever the brokers and health plans suggest.

But a few excel. For them, managing the many different issues – e.g., chronic disease, patient engagement, physician self-referrals, specialist and inpatient over-utilization, pharmacy management – is a discipline. A couple years ago, I was introduced to someone like this.

Barbara Barrett was trained as a paralegal. She is now General Manager of TLC Benefit Solutions, Inc., the benefits management arm of Valdosta, GA-based Langdale Industries, Inc., a small conglomerate of 24 firms with 1,000 employees, engaged primarily in wood products for the building construction industry, but also in car dealerships, energy and other concerns.

Valdosta is rural, which puts health benefits programs at a disadvantage. Often there is only one hospital nearby and so little cost competition. Rural Georgians also may have lifestyles that make them prone to chronic diseases, which are expensive. And so on. You get the idea.

Here’s the interesting part. Since 2000, when Barbara assumed responsibility for the management of Langdale’s employee health benefits, per employee costs have risen from $5,400/year per employee to $6,072/year per employee in 2009. That’s an average health plan cost growth of 1.31 percent per year.

I compared Langdale’s health plan cost growth to the average commercial coverage inflation rate for an employer with 200+ employees provided in the Kaiser Family Foundation/Health Research and Educational Trust (KFF/HRET) 2009 Employer Health Benefit Survey. The calculation showed that, in that nine years, Barbara’s management allowed Langdale to provide its 1,000 employees and their families with comprehensive medical, dental and drug benefits for $29 million less than the average of other firms that size. That’s a nine year savings of $29,000 per employee, or an average of $3,200 per employee per year lower than the national average. All without reducing benefits or transferring the cost burden to employees, and while quantitatively improving quality.


So how did Barbara approach the problem? Here are a few of her steps:

Under her leadership, Langdale set up TLC Benefit Solutions, a HIPAA-compliant firm that administers and processes Langdale’s medical, dental and drug claims. This allowed Barbara to more directly track, manage and control claim overpayments, waste and abuse.

The claims also gave her immediate access to quality and cost data on doctors, hospitals and other vendors. She supplements these data with external information, like Medicare cost reports for hospitals in the region. This allows her to identify physicians and hospital services that provide low or high value. She then created incentives that steer patients to high value physicians and services and away from low value ones. When complex services necessary to treat certain conditions are not available or of inadequate quality or value locally, she shops the larger region, often sending patients as far away as Atlanta, three and a half hours away.

She analyzes the claims data to identify which patients have chronic disease and which patients are likely to have a major acute event over the next year. Chronic patients are directed into the company’s opt-out disease management/wellness/prevention program. Acute patients are connected with a physician for immediate intervention.

She provides Langdale’s employees and families with confidential health advocate services that explain and encourage use of the company’s wellness, prevention and disease management programs. And she uses incentive programs to reward patients who enter these programs and meet targets.

Barbara has mounted many more initiatives in group health, but her responsibilities also extend to life, flex plan, supplemental benefits, retirement plan, workers’ compensation, liability and risk insurance. The results for Langdale in these areas include lower than average absenteeism, disability costs and turnover costs.

The point is that Ms. Barrett and Langdale have been pro-active, endlessly innovative, and aggressive about managing the process. That attitude and rigor has paid off through tremendous savings, yes, but it has also produced a desirable corporate environment that demonstrates that Langdale values its employees and the community. The employees and their families are healthier as a result, and are more productive at work. This has borne unexpected fruit. The industries Langdale is in have been hit particularly hard by the recession, and the benefits savings Barbara’s efforts generate have helped save jobs.

Barbara Barrett and many others like her on the front line are virtually unknown in health care. Most often, their achievements go unnoticed beyond the executive offices.

But they manage the health and costs of populations in a way that all groups should and could be managed.

Brian Klepper is a health care analyst.

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64 replies »

  1. I would limit this option to those who could, in effect, demonstrate that they could handle the additional financial risk by proving that their income was above an appropriate minimum threshold.

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  3. I believe the price of MRI and CT machines will drop below the million dollar threshold set by Govt. This will keep util rate at 62 per cent. Business as usual. Without tort reform the number of marginally necessary studies requested will not change. You would not belive the number of cancers found earlier using this technology. It does save may lives.Remember the most cost effective care is NO care.The president will not be subject to the same constraints he is passing on to the feeble masses.Just ask him. He as already admitted this.

  4. “My needs as the employer, one paying the bill, aren’t always the same as the plans either.”
    …..or the employee…..
    And is it accurate to say that the employer is the “one paying the bill”?
    Isn’t the employer just one more intermediary in the payment process chain that begins with the patient and ends with the doctor?
    Whatever the employers pays for insurance is in lieu of wages, so it’s not really the employer’s money to start with.
    And then there are the tax exemptions which make us all the ones paying the bill.

  5. I usually use word, mainly for the spell check, might not believe this but I spell like a third grader, but occasionally intend to write just a quick note so type it directly. Something in the back of my mind about an ounce of prevention and pound of cure.
    A cafeteria plan would allow that, you can offer any plans you want under it. I would still imagine people who wanted to abuse a certain benefit would pay more for the plan that allowed it then once done switch to the cheaper plan. We see behavior like this in dual option dental plans. They will use the cheap DHMO until they need ortho or TMJ coverage then switch to the indemnity plan, get the work then switch back.
    Its very hard to offer people the option of doing the right or wrong thing and not penalize them the full cost. If you penalize them the full cost or close to it your better off just not covering it at all, giving them back the extra premium and let them pay for it outside of insurance.
    We fight the same battle with good and bad providers or treatments. The only effective way I have found is to not allow service at the provider or cover the treatment if it is really bad, or don’t cover the additional cost. The latter was effective until providers had a stroke of genius and just started writing off or covering the difference. You can get coupons from pharama to cover the difference in co-pay when they are moved from one tier to the next. Some chiro and other non core treatment types will accept insurance as payment in full.
    In all leads back to insurance not being insurance any more. We need to redefine insurance to mean what it does in the dictionary and modify our insurance plans accordingly.
    Personally I would like to see the old CA PHO/IPO/staff model competition. Break the providers up like they were MA bell. Then have them compete for business based on quality and cost. As an employee you would get your $x and pick which network you trusted for your care.
    As the administrator/employer I would still want to retain the cost containment, disease management, and other programs at the group level for continuity of care. When someone left one plan or a plan was discontinued I wouldn’t want to lose what had been built so far. My needs as the employer, one paying the bill, aren’t always the same as the plans either.
    One of the hardest selling obstacles yet one of the greatest advantages of self funding is the compartmentalization of the pieces. The ability to take the best service from multiple vendors to create the best plan. It’s that complexity that scares off to many groups though.

  6. Nate,
    “1 & 2 are describing cafteria plans, use to be very common. Employees get $x and choose between multiple medical, dental, vision, FSA, life etc etc. THe problem is adverse selection.”
    Deductibles/copays were not what I had in mind – this is in fact just cost shifting, although there is an extra effect curbing utilization. What I thought of is managing the plans as described in the OP, and also to offer plans that explicitely prevent unnecessary exams/procedures.
    Margalit, “I am not comfortable making assumptions based on anecdotal evidence.
    We all feel that Americans have too many MRIs for plain headaches and we all feel that patients are demanding these things. I would like some scientific data to back up these assertions.”
    The problem of too much scanning, at least for headaches, is at the level of “obvious, openly acknowledged but largely unresearched problem”. I encounter this on a daily basis (as I see very many patients for specialty consultation who already had scans). Just medicare claims data will not prove anything (happy to explain why if you are interested) – what you need is international comparison, maybe even prospectively, and then study the frequency of abnormal findings. But I have read, in medical hournals, editorials and imaging guidelines who start off by stating this obvious problem.

  7. Nate – To protect against lost comments, I prefer to type my comment in Microsoft Word first, save it, then highlight all (CTL A), copy (CTL C) and then past to the comment box (CTL V). Then edit as necessary within the comment box.

  8. I almost forgot to mention that online Canadian drugstores offer fantastic prices. Please look for legitimate sellers of prescription drugs online. Look for someone licensed with a great reputation. This may go without saying but you’d be suprised at how many people overlook the obvious steps to protect them.

  9. True health care in the United States is skyrocketing but why not buy prescriptions from a reputable online pharmacy in Canada. Canadian pharmacies are now enjoying moderate profits by offering drugs at an affordable price. I subcribe to a health care blog myself. Yours is awesome! Thank you for all the great information.

  10. Nate, just copy the text (highlight all -> Ctrl-C)before you submit your comment. That way you still have it and can re-post it after the thingy malfunctions….

  11. lost my dang post, eaten by the captch again.
    “6) Some plans to cover generic drugs only, branded drugs are only covered with a favorable independent review and some copay, or per patient self pay.”
    Theraputic reimbursement, was hearing about this at a conference last month. Mimics the NHS and how they handle Rx. For a therapy they allow $x which is roughly the cost of the generic. A brand must either charge the same as the generic or convince people they are supperior and should be paid more out of their pocket. The data I was given says 50-70% savings. What I have been dealing with this month in psioris treatments I would beleive it. I’ll hopefully get some groups to try it before the end of the year.
    1 & 2 are describing cafteria plans, use to be very common. Employees get $x and choose between multiple medical, dental, vision, FSA, life etc etc. THe problem is adverse selection. People eventually learn to buy the plan with the greater economic value. Eventually the cost to buy down from a $500 deductible to a $250 deductible would be $250 plus premium tax and fixed cost. It’s not sustainable.
    Had a long winded comment on HDHPs being good for poor people as well as rich but that will have to be rewritten another day. Higher deductibles are always the efficient answer. Low deductibles and out of pocket are never cost effecitive.

  12. Barry, as I said, I don’t have a problem with making this option available, as long as the voucher covered a decent plan and as long as we ascertain that people are able to carry the risk. I just don’t think it will have a sizable effect on overall costs. As you said, these will be largely healthy folks anyway.

  13. Margalit – First, the upper half of the income distribution starts at about $50K. We’re not talking about just millionaires being eligible for this. Second, there is a broad spectrum of risk tolerance across the population. People with a history of good health or even a well controlled chronic condition like hypertension or asthma might be up for this. I take five prescriptions for heart disease which would cost between $2 and $3K per year if I had to buy them out of pocket. If the premium differential between the low deductible plan and, say, a $10K deductible were high enough, I would consider it because I can afford to take the risk. Bev M.D. has stated in the past that she has a $10K deductible policy now. Maybe you’re very risk averse but a lot of people are more willing to assume financial risk within reason and within their financial means. Also, some people might have high medical costs in one year but low costs in most other years. That’s one of the things savings or rainy day funds are for.

  14. Barry,
    It doesn’t make any sense to me. Why would wealthy people choose to buy down? The savings would not be consequential to them, so why take the risk? I would expect the wealthy to purchase more coverage (for the pianos) on their own, not less.
    I don’t have a problem allowing them to opt out, but I don’t see anyone doing it.

  15. rbar – I do indeed believe that universal health insurance coverage is an important goal.
    If we ever move to a taxpayer funded voucher approach along the lines proposed by Emanuel and Fuchs, I would want those in the upper half of the income distribution to be able to opt for a higher deductible plan than the standard plan calls for and capture the savings if they thought the premium differential was worth taking on the additional out-of-pocket financial risk. I would limit this option to those who could, in effect, demonstrate that they could handle the additional financial risk by proving that their income was above an appropriate minimum threshold. The lower half of the income distribution would get the standard voucher plan with no opportunity to buy down even if they wanted to because they presumably could not handle the risk and would be more likely to forgo necessary care and cost the system more in the long run. What do you think?

  16. Barry,
    I guess you are right about HDHP and their potential to control cost for middle class and up, although I do not know what solution you envision in order to achieve universal coverage (if this is in fact one of your goals at all). What for those who make less? As opposed to a lot of fellow single payor advocates, I do not demand for health care coverage to be equal/egalitarian for everyone … but I would want a decent acceptable minimum for everyone. For instance, not everyone needs private rooms, and if there is a special wing in hospitals with grand pianos, water fountains (some of which amusingly contain legionellae), and better food … fine with me. But reasonably beneficial care, provided by a reasonable selection of reasonably paid HC professionals should be guaranteed.

  17. Peter – In my earlier response to rbar, I stated that HDHP plans are most appropriate for the upper half of the income distribution. I know that low income people generally can’t afford the deductible associated with these plans. However, just because they may not work well or be appropriate for low income people, it doesn’t mean that middle and higher income people shouldn’t have access to them. It’s more than just cost shifting. There are incentives to avoid unnecessary utilization for minor problems, not using the ER for non-emergencies, and asking about more cost-effective providers, treatments and prescription drugs for necessary care. The bottom line is that the more insulated from the cost of care you are, the less you care about cost. When you have more personal financial exposure to costs, you care about them more. I think it’s pretty straightforward.

  18. Barry, as with all things level of income matters.
    And another paper:
    HDHPs are just more proof that health costs are out of control and it’s the insurance industry’s strategy to give premium payors the illusion of a lower cost product, but in fact is just cost shifting. People making the HDHP decision are no more aware of what might happen as those who choose to go uninsured.

  19. Margalit – HDHP’s encourage personal responsibility on a couple of levels. One relates to an increased implicit economic incentive to live a healthy life style and the other discourages unnecessary use of limited resources. Think of it this way. Some employers like the auto companies, at least at one time, provided first dollar health insurance coverage. That is, comprehensive benefits with no deductibles or co-pays. If members are totally insulated from the cost of care, at the margin, they are more inclined to want to see a doctor for even minor problems that would likely resolve themselves in a couple of days. They also don’t care what anything costs, so even for necessary care, they don’t have any incentive to inquire whether a doctor, hospital, drug, imaging center, etc. is more or less expensive than an alternative of comparable quality. In terms of lifestyle related behavior, better habits like not smoking, maintaining a normal weight, getting adequate exercise, etc. will likely help to avoid needing as much healthcare in the first place. If more of the cost of such care came out of your own pocket, you have more incentive to avoid needing it. While most people don’t consider it fun to visit the doctor, a lot of expensive healthcare, including imaging and many prescription drugs are not painful, invasive or inconvenient. The bottom line is that skin in the game helps to control utilization even if some people unwisely avoid necessary care as well as unnecessary care and may, as a result, need more expensive care later. At the population level, it works.

  20. rbar – I’m familiar with the argument regarding HDHP plan members forgoing necessary as well as unnecessary care. I would like to see some data proving that this results in higher overall healthcare costs for the entire population of HDHP members. I suspect that even if some people do forgo necessary care ultimately resulting in higher healthcare costs for them, it is probably far outweighed by unnecessary utilization eliminated because members have more “skin in the game.” Secondarily, I think there is a big difference between being able to choose a HDHP plan from a menu of options including higher benefit plans for a higher premium cost and being forced to accept a HDHP because that’s the only choice that an employer offers or it’s the only plan one can afford. For the upper half of the income distribution at least, HDHP’s should be an available option. For this population, it boils down to a matter of personal responsibility vs. the need for a nanny state to protect people from themselves. I believe in the former. Moreover, even Germany allows the wealthy to opt out of the public system. I reject a one size fits all approach, especially the single payer model.

  21. rbar, it should be relatively easy to research how many MRIs are ordered for “no good reason” since all the claim data is there including the specific ICD9 and followup claims. Also all the headache ICD9 without an MRI could be counted.
    I am not comfortable making assumptions based on anecdotal evidence.
    We all feel that Americans have too many MRIs for plain headaches and we all feel that patients are demanding these things. I would like some scientific data to back up these assertions. Just to make sure that we are fixing what is broken, not what we “feel” is broken. Sometimes the big picture is surprisingly different than our own local piece of the puzzle.

  22. Margalit, it is not per se wrong to order MRIs for headaches – it just depends on specifics, and recurrent episodic headaches suggestive of e.g. migraines or tension type headaches in a patient with a normal exam do not require imaging. To figure that out, that’s what doctors are for. The problem is that many patients expect them anyway as “standard of care”. And if you as the treating physician don’t discover the incidental findings (not related to the headache) that you also find in random routine cohorts w/o neurologic complaints, you may be in trouble a little later.
    Barry, I don’t think a high deductible plan is a good thing because it prevents necessary and unnecessary care – I think there is at least one good study proving the same for copays.

  23. “1) have the employee share the cost of health insurance, for instance they get reimbursed for an average plan, but would be paid (or billed) for the difference to a plan that costs less (or more, respectively).”
    rbar – For its own employees, Harvard Pilgrim Healthcare does exactly this. They have three plans – a standard plan, a lower cost high deductible plan, and a more expensive high option or enhanced plan. They make a defined contribution which covers the cost of the standard plan. Employees who opt for the high deductible plan capture the savings while those who want the more expensive enhanced plan buy up with their own money. If I remember correctly, about 60% of covered lives are in the high deductible plan and well satisfied with their choice. For the last 4-5 years, annual medical trend for the HPHC workforce is in the 5% range or several percentage points below average per capita medical cost growth in Massachusetts. I think their approach makes a lot of sense and other employers would be well served if they copied it.

  24. I personally favor a single payor system, but the following would work too:
    1) have the employee share the cost of health insurance, for instance they get reimbursed for an average plan, but would be paid (or billed) for the difference to a plan that costs less (or more, respectively).
    2) individuals can choose between various plans, including tightly managed ones
    3) True tort reform; physicians cannot be sued for misjudgment, only for negligence (e.g. not examining a patient, not following up on concerning test results/exam findings, ignoring a progressive complaint over several visits). Allow docs to practice true EBM with consideraton of ressources.
    4) Make sure that there is price and quality competition for services that are standardizable and moveable, esp. for outpatient services: e.g. scans, blood tests, and maybe very few high volume complex surgeries (e.g. knee/hip replacement)
    5) Adjust the fee schedule that docs will be well paid for visits, and for procedures similarly, with an adjustment for complexity, expertise and risk.
    6) Some plans to cover generic drugs only, branded drugs are only covered with a favorable independent review and some copay, or per patient self pay.
    7) Insured in tightly managed plans will probably need to be educated about: A ) not every symptom requires immediate work up or medication B) that all invasive therapies carries the risk of iatrogenic complications C) the most beneficial lifestyle adjustments they should consider, and about offers of premium rebates for objective change for the better such as weight loss, increased exercise tolerance
    8) People will slowly, but surely move towards the better managed plans, while there will be some who will still be willing to pay high insurance rates to cover MRIs for migraines, surgery for back pain or nondisabling radiculopathy etc.
    It may sound harsh and I don’t enjoy writing that, but the US is doomed with the current coupling of unhealthy lifestyles with a dysfunctional, overpriced HC system. We can probably forget about most infectious diseases incl. HIV and influenza – type II diabetes is the unsexy threat to society.

  25. as percentage of spending about 14% down to 12%
    What is interesting is how we compare to the rest of the world
    Peter your math ain’t all that good, a $1.20 in your pocket is still a savings even if you turn around and spend $1 in deductible. 1.20 – 1 equals .20

  26. “If you can assume $1 in high deductible but save $1.20 in premium you have a net savings,”
    Only if you don’t need to use the high deductible. People are burdened with premiums so any smoke and mirrors about HD and they think “I won’t get sick but need the insurance” so it look goods. But that is a shift in costs. I doubt Nate’s clients are keeping their health costs flat since 2004 by shopping at Walmart.

  27. “Since 2003 when they hired us their healthcare cost has been flat, 0% inflation.”
    OK…let’s put this another way: What was the average out of pocket per employee in 2003 and what was it in 2009?

  28. ya what Barry said! You also need to keep in mind when you shift cost that doesn’t always mean a net increase to the person it was shifted to. If you raise a co-pay $5 for brand and that motivates the person to buy a generic whose co-pay is $10 less the $5 cost shift actually reduced their cost $10 instead of the supposed $5 increase.
    When a group sets up a primary care clinic they have shifted a million dollars in cost to themselves but have hopefully saved 1.2 million.
    These analysis are extremly complex and seldom as simple as people think, this is what leads to their frequent abuse in the media and by politicians. One seldome discussed fact is while insurance premiums have skyrocketed member out of pocket plummeted. We are now seeing some common sense kick in and people exchanging out of pocket liability for reduced premium. If you can assume $1 in high deductible but save $1.20 in premium you have a net savings, certain people like to portray the first half as a burden forced upon an individual. Its a burden but one with a 20% return, more commonly know as an opportunity

  29. “Costs were shifted to somebody, probably the employee or the employer in high deductible plan.”
    Peter – I think what Nate tried to say in his last comment is that large savings can be achieved by reducing or eliminating unnecessary utilization and purchasing necessary utilization from lower cost or more cost-effective providers such as Wal-Mart instead of the independent drug store for prescription drugs or the independent stand alone imaging center for the MRI instead of the local community or teaching hospital. Better value and less waste saves money for the insured, the employer, if any, and the insurance company. It’s not shifted to anyone. Rather, revenue is removed from high utilizing and high cost providers.

  30. Reminds me of a sign I saw on a cash register at a bar…”We screw the other guy and pass the savings on to you!”
    How you react to reading that sign says a lot about you.
    BTW, I believe it was the emperor that had no clothes.
    Thanks for listening. LD

  31. LOL wow Peter are you sold, no inflation is not inflation, there is no such tangible thing as inflation that exist in absolute. Inflation is a measure of change that occured. If there is no change there is no inflation. There is no law of nature or economies that says there must be inflation. There was no cost to shift as the increase never existed. This is the point of management and where government fails. Congress shift cost, we prevent the cost from ever existing. When Congress “saves” medicare $500 billion they don’t really prevent $500 billion in cost they shift it someplace else. When I prevent $500 in cost the cost never existed. That doesn’t mean the employee paid $500 more or the employer. It never was, the $500 was never paid by anyone.

  32. Costs were shifted to somebody, probably the employee or the employer in high deductible plan. Health inflation is health inflation. But if you’re saying most of the inflation in healthcare is insurance companies then that would imply they’re padding their profits. It’s easy Nate to control costs when you cap what you will pay and let everyone else deal with the inflation.

  33. ? don’t follow, do you mean who got stuck paying the inflation that should have been? not sure how to answer that as my opinion cost shouldn’t increase to start with. It wasn’t like they shifted 80% of inflation onto employees or cut reimbursements to providers 80%.
    Insurnce companies didn’t come out to good, they changed 3 times. One of the great things about being self funded or partially self funded is you know when a carrier is trying to overcharge you.

  34. “Since 2003 when they hired us their healthcare cost has been flat, 0% inflation.”
    So who did it cost and how much did it cost them?

  35. I have a client that went to a conference for their industry group. 10-20 guys that own the same type of business. They have a best practices session where they share things that are working. Since 2003 when they hired us their healthcare cost has been flat, 0% inflation. So he presents their plan and how it has evolved and what it took to achieve these results. 1 guy was interested the rest called him a liar. The one guy that was interested was just implementing what my client had 6 years ago.
    Who’s fault is it the other guys have expensive healthcare? Presented with proven solutions they refuse to believe them, then there is nothing we can do to help them, they should be dirven out of business and replaced by those that can see the obvious.
    The problem Peter isn’t my lack of clothes but the taste in clothing others have, they want designer dress at salvation army pricing. And they want it delivered by a personal shopper.

  36. “I quote self funded or self funded like plans for hundreds of employers every year. Maybe 10% on average take it.”
    Maybe Nate they see the King has no clothes.

  37. bev MD,
    Now you are getting vitriolic without knowing a thing about how I take care of my own patients or what I think about my own patients. You sound upset over your situation. I am sorry. If this bill had any tort reform in it, you may have been given a different recommendation,considering you, a physician, did not seem to think you needed a MRI. If you do not need one, don’t get one, and get a different doctor. If you really need one but don’t want to be sick in the first place, then you are a typical patient with typical fears and concerns. Doctors are not immune from being human.
    But in general, no one can make you sicker quicker than a doctor. Do not casually go to one.

  38. Readers interested in effective health management approaches should note the comment above by Cyndy Nayer. Cyndy leads the Center for Value Health Innovation (www.vbhealth.org), which inventories effective approaches for creating value and driving out inefficiencies in health care processes. You might want to check out a recent white paper by Cyndy and Gregg Kamas, Leveraging the Value of Health, a Matrix for Value-Based Designs (http://www.vbhealth.org/evidence/decision-matrix-for-value-based-designs/attachment/chv_report-11-24web-final).
    Also, EastCoaster. Did not interpret your note as an effort to derail and appreciate both your sentiment and participation. Thanks much for the clarification.

  39. Do away with all the auto adjudication and have people actually look at what is being paid
    Assign groups of beneficiaries to an adjuster so she gets to know them and can help manage the claims
    proactivly manage the liability
    Like Brian said if you don’t know the people and get hands on with them you can’t begin to manage the claims. The centrailzed highly automated claims processing does wonders in saving pennies but cost you dollars in fraud and waste.
    Couple thousand lives per adjuster, throw in a case management nurse for every dozen adjusters, build a relationship with the memebrs and they could save a FORTUNE even after the admin cost increase.

  40. Brian,
    I wasn’t trying to derail your discussion. I only meant to say that I think that medical management is wonderful. I’d love to see the government or community-rated plans do it, but I’m really uncomfortable about it as long as it’s my employer who’s doing the managing.

  41. Brian
    The urban legend in value-based design is that it’s about free drugs (which never caused long-term change) and large, self-insured employers. We’ve been cataloguing and sharing evidence of all sizes of employers, innovative health plans, and communities of health value that are emerging. Barbara’s story, and your analysis, line up directly with the market analysis that we’ve been conducting. She has full-throttled all 3 categories of levers to drive sustainable change: incentives for prevention and wellness, support for chronic care and management, and rewards linking providers with patients to achieve meaningful outcomes. This is a story that needs to be amplified and promoted. My best to both you and Barbara and her amazing fortitude. Driving value is not easy; not driving value is waste, and none of us can afford waste. The real change is in the viral expansion of the value of health.

  42. Thanks, Brian. That’s a very interesting story.
    Nate, what do you mean by “Medicare could save a fortune if it was administered like self funded employer plans.”?

  43. When people claim there is a healthcare cost crisis remember this post from Brian. There are 10s of thousands of employers who’s insurance cost has been flat or low single digits. I quote self funded or self funded like plans for hundreds of employers every year. Maybe 10% on average take it. Just about every time there is high potential savings and there is always the ability to take control of their plan. 90% of employers don’t see their current fully insured cost as bad enough to actually do something about it.
    I hate the fact I can’t still buy all I can eat chicken wings for $0.10 each. I would hardly call it a chicken wing crisis. I can still afford them, I still buy them, but sure I wish they were still $0.10. This is the same with healthcare, employers can still afford it, they still buy it, they just wish it was cheaper.
    All that being said self funding, specially for small employers, those under 200, has become very risky becuase of the government. Medicare secondary payor and other laws made it so risky to be self funded that thousands of employers dropped their self funded plans and went fully insured. In the late 90s early 00s we had an entire block of small group self funded, groups as small as 15 lives and some even smaller. There were great carriers like Vasa Brougher that specialized in this market. It is almost completly gone. It has been making a come back lately becuase cost has gone up and employers want a solution. In some states it is illegal to self fund under a certain size or without a minimum risk level which makes it impossible for small groups to self fund.
    In regards to small group and individual AHPs would have solved this if not blocked. We are doing some capitves for small group pools so 2-50 life groups can get the same advantages and opportunites as 200 life groups.
    It is very sad none of this was discussed or analyized during reform. Medicare could save a fortune if it was administered like self funded employer plans.

  44. Brian,
    Thanks for sharing this great story (ies) related to employer and plan initiatives to manage costs. All health care is local! Or almost local, as we seek places to effectively deliver it that may not be quite so local (medical tourism, et al). I agree that we weakened medical management and never replaced it with a better alterative(s) that used high touch (outreach, concierge) with high tech (web-based capabilities to enhance member, physician management) despite the development of those capabilities.

  45. Peter,
    It’s of course the nub of the issue to point out that many health management professionals are taking actions similar to those of Barbara Barrett and others like her. Most either simply do it poorly or, to a point made recently on this blog by tcoyote, lack any incentive to do so well or at all.
    One of my clinic company partners once told me, “When an employer sits down at the table with all of his health care relationships – the broker, the health plan, the doctor, the hospital, the drug and device companies – everyone in the room wants it to cost more except for him, and they’re all in a position to make that happen.” This is exquisitely, profoundly true, and nothing will change until we create the incentives, as tcoyote said, to facilitate that change. Certainly, industry lobbyists blocked the reform bill from including provisions that would create greater incentives for efficiencies. As things stand, employers are pretty much on their own to take actions that are in their own interests.
    I think it goes without saying that, unless employers are self-insured or positioning to become self-insured, their ability to impact cost is constrained by their fully insured health plan’s design, which typically have meek medical management. Barbara Barrett’s capacity to impact care and cost was amplified by the fact that she created her own administrative arm, which gave her much greater control over both data and programming. Her program is not unique, but it is aggressive and comprehensive.
    The failure of non-health care employers to galvanize and mobilize during this reform process is the greatest tragedy of all, since they represent five-sixths of the economy and have the most power and influence over Congress. There were fits and starts but nothing came of it, and as a result there were little or no counterweights to the pressures exerted by the immensely powerful health care sector. So we were left with no real ability to moderate the excesses that have become institutionalized within the industry. Sad but true.

  46. “To me, this is the real benefit of having passed a(ny) health care bill”
    Odd comment bev, since this reform in a way made self funding, the very thing that made this possible, impossible for employers not already self funded. Since 1974 self funding has proven extremely effective in controlling cost but government makes it harder and harder to do each year.
    The real work has been going on, until government passed any willing provider, UR limits, COBRA poorly written, etc etc etc. I can only imagine the postive things you would have to say about the repeal of ERISA which would toitally eliminate self funding. Seems to be a serious detachment between what your saying and what you think your saying.

  47. Brian:
    I wonder how many of the employers who have been successful in managing their costs are self-insured as opposed to fully insured? Self-insured employers are generally free of state mandates and rating rules, can design their own benefits, manage their own utilization, create incentives, etc. This group of employers was strangely quiet during the health reform debate, which concentrated on nongroup and small group, both heavily government regulated sectors. I explore issues like this one at healthreformmusings.blogspot.com.

  48. Brian, so how do we duplicate this for everyone, small, medium and large firms/employees as well as the individual market?

  49. Tom and Chris,
    Thanks much for your kind comments. To my mind, this is exactly the kind of response I was looking for. In much of my work, I find that many employers have been demoralized by their inability to positively impact outrageous costs. Barbara’s story and yours are shining examples that there’s another, much better way that results in better health, lower costs and higher productivity.
    If you wouldn’t mind, please re-broadcast this to your employer pals. It’s essential to get this kind of message around.

  50. Brian,
    My company has been using software and BI tools to identify risk and manage this risk proactively. Healthcare Performance Management has been very effective here when creating plan designs that properly balance risk by involving the employees in incentive based education and services that have reduced our costs by 20% on the pharmacy side and 6.5% on the medical side in less than two years.
    With the unrestricted flow of data in real time we are addressing issues, prior to them being catastrophic, and increasing productivity at the same time.

  51. Brian,
    This article really hit home with me, as the company I work for falls into your description of mid-sized companies (overcharged and under-served). About a year and a half ago our CFO informed the entire management team of a “significant change” we would be making in order to better understand and control our healthcare costs – he spoke of many of the same initiatives you mentioned in this article. The TPA we use calls their solution “Healthcare Performance Management”, a title which hits the nail directly on the head.
    The people directly involved in the healthcare decision-making process (CEO, CFO, HR) have access to a HIPAA compliant software portal which predictively models our data and presents it in a way which clearly shows the cost drivers within our plan. The next step is to engage those high risk employees through a variety of member marketing campaigns that encourage behavior change.
    In addition, everyone in the organization (as well as other members on the plan) has their own login name and password to an employee-focused software piece. A cross between Facebook and your online banking portal, users can manage all aspects of their healthcare plans, while being able to chat with registered nurses who field questions (and can even contact my doctor if need be!).
    From what I have seen so far, this is the direction all employers should be moving toward and is clearly the future of healthcare.

  52. Readers interested in knowing more about Jerry Reeves’s approach to medical management should definitely read Dr. Reece’s excellent interview at https://thehealthcareblog.com/the_health_care_blog/2009/06/datadriven-health-care-an-interview-with-jerry-reeves-md.html.
    EastCoaster, I really didn’t mean this post to be interpreted as supportive of employer-sponsored coverage, but rather an appreciation of thoughtful, disciplined medical management. Employer-sponsored coverage is simply the prevailing paradigm in the US at present. There’s much about it to like and to dislike. That’s a different discussion than the one I hoped for here.

  53. All of these initiatives are very good, but I’m not totally comfortable having employers be the ones to do it because of privacy concerns–which is part of why I’d like to get business out of the business of providing healthcare benefits.
    It’s pretty easy to figure out who is receiving psychiatric services, and we aren’t yet at a point where the stigma is gone.

  54. Well done, Brian. I like your analysis because it supports my thesis that most savings will come from the bottom-up _locally), not top-down (nationally), The only thing I might add is that health savings accounts with high deductible are effective in saving money because they prompt patients to shop for value to save themselves (and the company) money.
    Richard L. Reece, MD
    PS I interviewed Jerry Reeves for this blog. Readers might want to search the archies to reread it. He demonstates that costs vary all over the landscape, even locally, and can be brought to heel through data analysis and directing traffice to high value, low cost sites.

  55. Barry,
    The Kaiser Family Foundation Employer Health Benefits 2009 Annual Survey (Exhibit 1.14) lists the Year 2000 blended premium for firms with 200+ employees as $6,521, or $1,121 (20.8%) higher than Langdale’s performance at that time. (On the other hand, premiums in the South have generally been slightly lower – about $80 for single coverage and about $200 for family coverage in 2009 – than national norms (Exhibit 1.3).)
    More importantly, though, and as the chart shows, the impact of Barbara’s programming were substantial at the outset, but grew significantly over time as Langdale’s health care premium remained approximately stable while most firms’ costs skyrocketed throughout the country.
    Margalit, here’s an overview of Barbara’s extensive approach to wellness/prevention and disease management. When she took responsibility for Langdale’s benefit program, she incorporated benefits for annual physical exams, company-paid flu shots, smoking cessation programs, annual screening for cancers (breast, prostate and colon), cardiovascular disease and prenatal care. She designed and arranged awareness, education and intervention program benefits to encourage healthier eating habits & better physical activity by participants to combat obesity and other co-morbidity issues. She also built in higher deductibles for not wearing seatbelts or helmets.
    On disease management, Langdale has escalated its programming from a nurse advice phone line to a firm, Doctors Direct Health Care, that was more pro-active and provided solid evidence of ROI. The process begins with predictive modeling analytics of claims and Health Risk Assessment information to identify patients with risks. Langdale also established an incentive program for employees to participate in the company’s Health Risk Assessment – in this case, a $10 Wal-Mart gift card – that increased participation to 85%.
    Programs were implemented to identify and manage high blood pressure, high cholesterol, diabetes, asthma and obesity. Langdale and the community partnership it participates with on these wellness/prevention programs claim an ROI of 4.8:1.
    Langdale also invested in more sophisticated benefits communications tools – presentations that employees access at orientation, during open enrollment or when they have a specific need – that explain their benefits programs and what they’re trying to accomplish.

  56. Brian – This is a very clear example of what sound management and hard work can accomplishment on the medical cost front. My perception, however, is that this company’s per employee costs in 2000 appear extremely high by national standards. I seem to recall seeing some data in Modern Healthcare Magazine from a year or two ago which showed that numerous large employers had per employee costs in the $4K range and even lower for those with comparatively young and healthy workforces like Whole Foods and Starbuck’s. I don’t have the actual data at my fingertips, however. If Langdale’s costs in 2000 were, in fact, at the high end for companies of comparable size, it suggests that there was a significant amount of “low hanging fruit” to be harvested.

  57. You know MD as Hell, I do avoid doctors whenever possible, trust me – I am one,so I know what they can do to you. Much less what they’re thinking about you while they pretend to take care of you, like you.
    But, to get to the point you should have made, the biggest reason I avoid doctors is because I have a 10K deductible. But when I can’t avoid them, and they want an MRI as happened to me this week,and I ask them if they have anything cheaper, they say “Jesus Christ” at my deductible but still want the MRI. So ya know what? I hope you never get sick.

  58. To me, this is the real benefit of having passed a(ny) health care bill – it keeps the conversation and the action going, instead of relapsing back into the unacceptable status quo. And people, don’t bother re-reminding me how bad the bill is and how awful the democrats are – my husband does it for you every day.
    You are missing the point – which is that now the real work of finding ways to contain costs can and will begin, and will save lives in the doing.