How the Future of Healthcare Will Actually Work: Nuts and Bolts

They are coming in fast under the radar, out of peripheral vision, in the magician’s other hand—and they will change everything. New ideas, surprising networks, stealth business models that may change health care profoundly, are bubbling up in pilot programs, experiments and full-on corporate transformations. There is something here that does not yet have a name, that no one is yet calling a movement, that no one is yet seeing as revolutionary.

While we have been mesmerized by federal health care reform, government intervention on behalf of the uninsured and government attempts to “bend the cost curve” to shave a few percentage points off medical inflation, things have been happening in the private sector for people who are already insured that result in outright medical deflation, drops in costs of 20 percent or more, all while giving people more care, not less.

Help me out here. This picture is just forming, the Ouija board is still in motion, but I think what we may have here is some truly big news about the future.

The Difference Is Integration

First, consider the huge regional differences in health care costs. Think about what it means that it costs twice as much for patients in the last six months of life to be involved with Cedars-Sinai in Los Angeles, UCLA Medical Center or New York University Medical Center than it does for them to be involved with Mayo Clinic in Minnesota or the Cleveland Clinic; or that Medicare spends half as much per patient per year in Temple, Texas, as in McAllen or Harlingen or Brownsville, Texas; or why Medicare spending per patient per year in the top and bottom quintiles of hospital catchment areas differ by 60 percent.

These are vast differences—and the more expensive areas show no better outcomes than the less expensive ones; in fact, for some conditions they show worse outcomes.

I’ll tell you what I think I see: The areas that spend more do not differ from the areas that spend less in any pattern of urban vs. rural, or rich vs. poor, or by education level, or by state. That’s not the pattern. Here’s the pattern: They vary with the way the health care delivery market is organized. The more expensive areas are highly competitive provider markets, with lots of competing services, higher numbers of specialists, more hospitals and hospital-based services per capita, and more investor-owned (mostly physician-owned) hospitals, clinics and labs.

The less expensive areas tend to be dominated or heavily influenced by health systems that in one way or another operate in a more integrated fashion: Mayo, the Cleveland Clinic, the Bozeman Clinic, Group Health of Puget Sound, Virginia Mason in Seattle, Intermountain Health Care in Salt Lake, Geisinger in northeastern Pennsylvania.

At the gross level, it appears that getting better health care for less has something to do with the right kind of integration.

Next, consider this: By different estimates, some 70 to 75 percent of all health care costs derive from chronic conditions. And the great majority of the costs of those conditions are in one way or another avoidable. The conditions are based at least in part on behavior, which can be influenced. And proper treatment can control the conditions far more cheaply than treatment of the acute phase. Consider the success of Kaiser of Northern California, for instance, in dropping heart attacks by 24 percent in the past decade through an aggressive cardiovascular health program.

Now look at these three different models, coming at the problem from three somewhat different angles:

The Boeing Experiment

Recently Boeing released the results of a 30-month test of what it called the Boeing Intensive Outpatient Care Program. Boeing’s health plan is self-funded, so any stray dollar saved in medical costs goes straight to the bottom line. Boeing has an aging population of highly trained and highly paid engineers. Not only are medical costs important to Boeing, so are absenteeism, productivity, turnover and disability retirement. Employee health means a lot to the company’s profitability and survival.

Boeing and Regence Blue Cross Blue Shield, which administers the self-funded plan, asked some 1,500 Boeing employees with multiple health problems (such as asthma, diabetes or high blood pressure) whether they would like to participate in a special program. About half said “no,” and they were considered a control group for comparison. Half said “yes,” and for them Boeing put a crew on it.

Teams of clinicians from local multispecialty groups gave the employees health risk assessments; helped them form goals; and gave them new prescriptions, health improvement plans, coaching, classes—whatever it would take to lose the weight, bring the blood pressure under control, deal with the back pain, whatever the problems were. After 30 months, this “medical home” team model and intensive focus showed results: The experimental group not only showed marked improvement in health metrics, but even counting the cost of all the extra work and attention, its medical costs were 20 percent lower than those of the control group. Twenty percent savings on your “frequent fliers”—that’s a big number.

CIGNA Choice Fund

Every year end for several years now, CIGNA has released the results of participation in its Choice Fund consumer-directed health plan (CDHP). In January of this year, for instance, CIGNA reported that employees enrolled in the CIGNA Choice Fund, compared with those enrolled in their more traditional plans, incurred 14 percent lower medical costs. People with specific chronic conditions did even better—15 percent lower for diabetes patients, 21 percent lower for people with joint and back pain and 27 percent lower for people with high blood pressure.

And this is key: The employees did not save money by skipping medical care. People on both types of plans were equally compliant with treatment regimens. The difference in cost seems to spring from better management of the chronic conditions and more careful use of preference-sensitive services.

The business press regularly reports the results as proof that CDHPs lower health care costs and improve employees’ health—but that’s getting the story wrong. The CDHP alone is not what works. What works is using the employees’ “skin in the game” as the basis for a comprehensive program of incentives and massive clinical and information support aimed at behavior change, education, preventive measures and control of chronic syndromes. The programs vary from market to market, even from one employer to another, and often involve contracts with specific health care providers to deal with specific types of problems. Employers pay a small amount extra per year for the extra support, expecting that they will be able to recoup the extra payment in lower costs over time.

The rough shape of the CIGNA program is not all that different from the Boeing experiment: a malleable, intensive, ad-hoc partnership between providers, employers and a health plan, aimed at driving down the costs of health care for specific employee populations.

In a related type of business partnership, CIGNA, Geisinger, BCBS of Rhode Island and some other plans have begun hiring and paying the salaries of nurses to work directly in the offices of primary care physicians to track the care of people with chronic problems. It’s a good business proposition for the health plans: Getting a covered patient with diabetes or heart disease to take better care of himself or herself can save millions of dollars in emergency, intensive care and rehab costs down the line. Geisinger goes further, identifying the dollars saved and sharing those dollars 50-50 with the physicians and their office staffs. Their most recent figures show an 18 percent drop in hospital admissions and a 7 percent drop in overall medical costs for patients covered by such practices.


HealthMapsRx, like the other projects, is a partnership with employers to improve the health of employees. But the partners, this time, are networks of community pharmacists trained to be “health coaches” for employees of local businesses with chronic health problems. The pharmacist gives the employee’s physician a report after every visit and refers any problems that need attention to the appropriate clinician.

A year-long test, the Diabetes Ten-City Challenge, concluded in 2009, showed that even simple coaching could save an average of 7 percent of total health care costs (counting the costs of the program). The pharmacists helped the employees track their blood sugar, blood pressure and cholesterol and manage their disease through exercise, nutrition and changes in lifestyle. And it seems to work: The employees improved on every metric from blood sugar scores to body mass index and eye exams.

That’s a lot of success on the cheap. Pharmacists are well-deployed throughout the community and feel a lot more available than doctors and nurses—and the cost is zero to the employee and minimal to the employer.

The HealthMapsRx diabetes program is now expanding nationwide, supported by GlaxoSmithKline and the American Pharmacists Association, which is running similar programs for asthma, cardiovascular disease, high cholesterol and osteoporosis.

A Pattern Emerges

Think about the pattern that emerges from these examples: networked partnerships between employers and health plans, employers and providers, health plans and providers, employers and pharmacists—all different ways of paying professionals to improve the health of employees with chronic conditions. They are not generalized health-promotion programs trying to get all employees to stop smoking or lose weight. All are “population health” programs but targeted and customized to the specific problems of individual employees. And all, in one way or another, put money on the line: They expend actual dollars in hopes of getting a strong return on investment in improved health, lowered hospital admissions and reduced medical costs. And they do it without anything that could be called “rationing.”

For 20 years I have said that there is a strong business opportunity in making people healthier—because poor health is expensive. Any business model that would reap a strong ROI by investing in health would require three things:

1) An entity (like the employer) whose bottom line depends on lowering medical expenses for some class of people.

2) Some “skin in the game” for the individuals covered—which can be turned into fine-grained incentives for them to participate in improving their health.

3) An entity (for instance, a health plan) with a lot of expertise in managing population health, a real incentive to drive down medical costs, and the willingness to “put a crew on it” to find what works and what doesn’t.

It appears that finally, here and there, some employers and some health plans are waking up to the possibilities of what could be the most reliably profitable business proposition available to them: investing in the health of their employees and “covered lives.”

The reform act has some incentives for pilot projects for “accountable care organizations,” loosely defined as “something kind of like whatever it is that Mayo is doing,” organizations in which the professionals feel they are accountable for the health of the people they care for, rather than getting paid solely to do more procedures and tests.

That’s what we’re seeing here. For it to be real in health care, it needs an acronym. How about AHHSMNEHMOKSACOBM? That’s an “ad-hoc hybrid semi-Mayo not-exactly-HMO kinda-sorta accountable care organization business model.”

Too unwieldy? VACO works for me: “virtual accountable care organization”—”virtual” in that the professionals doing the work are not all drawing the same paycheck, and the relationships among the entities are contractual, changeable and subject to rebuilding to get better results.

We’re going to see a lot of this. VACOs will start out as an option for large, self-funded employers (as in the Boeing experiment), then will be replicated and mass-marketed by aggressive health plans to medium and small employers and government agencies. The shift will likely be quicker than we are used to in health care because VACOs now offer a tested model that leads directly to higher profits for private employers over a relatively short term.

VACOs will likely be built into the health plan exchanges as they are deployed in 2014 and after, soon becoming a standard option in all health plans and a major way of competing among health plans. As VACOs show good results in the private market, health plans will find ways of offering them under Medicare. The success and cost differences eventually will be so large that employerswill stop offering other alternatives, and Medicare will offer sharp incentives for participating in a VACO; using every resource at our command to help people be healthy will have become the standard model of health coverage.

Push is absolutely coming to shove over the next few years in health care, most specifically in the fight over burgeoning health care costs. Our whole system is straining already under the pressure. “Adapt or die” is rapidly changing status from buzz slogan to operating mandate for employers and the health care industry. Any business model that reliably can drive down health care costs without depriving people of anything, while making them healthier, will show such rapid growth that it will eventually crowd out all the old usual ways of working.

(“How the Future of Healthcare Will Actually Work: Nuts and Bolts” first appeared in Hospitals and Health Networks.)

With nearly 30 years’ experience, Joe Flower has emerged as a premier observer on the deep forces changing healthcare in the United States and around the world. He has written for a number of healthcare publications including the Healthcare Forum Journal, Physician Executive, and Wired Magazine. You can find more of Joe’s work at his website, imaginewhatif.com, where this post first appeared.

6 replies »

  1. The future of health care that has been slouching toward bethlehem is that it will implode due to its feudal and capitalistic structure- it has become too fare removed from the public good and is draining the public dry financially and in oher ways. Regretfully this booard has lost the true name for things and looks at health care in the most Rockwellesque fashion- such passes the glory of the world.

  2. Finally, businesses are willing to invest in their employees’ health. I advised many to do this a decade ago. They thought I was nuts.