How to Avoid Being a Chump For CEOs

A trio of groundbreaking publications on healthcare came out this April. They are my required reading list for CEOs. First is a study published in last week’s Journal of the American Medical Association (JAMA) by Eappen and colleagues (including among them Atul Gawande). The study found infections occurred in 5 percent of all surgeries in an unnamed southern hospital system. For U.S. hospitals, this is not an unusual rate of error — even though it is about 100 times higher than what most manufacturing plants would tolerate. No automaker would stay in business if 5 percent of their cars had a potentially fatal mechanical flaw.

If that’s not bad enough, the second finding is where we enter the realm of the absurd: according to the study, purchasers paid the hospital to make these errors. Medicare paid a bonus of more than $3000 for each one of the infections; Medicaid got a relative “bargain,” paying only $900 per infection. But the real chumps were the commercial purchasers (CEOs, that’s you). Employers and other purchasers paid $39,000 for each infection, twelve times as much as your government paid through Medicare. Most companies could create a good job with $39,000, but instead they paid a hospital for the privilege of infecting an employee. How many good jobs haven’t been created so businesses can pay for this waste?

Most employers are far more hard-nosed about managing their purchase of, say, office supplies than they are in purchasing health care — even though, unlike healthcare, paperclips never killed anyone and no stapler can singlehandedly sap a company’s quarterly profit margin. Yet, according to the Catalyst for Payment Reform, only about 11 percent of dollars purchasers paid to healthcare providers are tied in any way to quality. The results reflect this neglect of fundamental business principles for purchasing: Quality and safety problems remain rampant and unabated in health care, while employer health costs have doubled in a decade. Many employers say they are not aggressive with hospitals because their strategy is to keep employees from needing hospitals in the first place, through worksite wellness, preventive medicine and/or disease management. These same employers spend significant new money on these programs, on top of Obamacare’s unfunded mandate that employers pay for checkups without charging a co-pay. Obamacare also permits employers to use up to 30 percent of their premium dollars to create incentives for employee wellness, and many employers are giving that a shot too. Even the National Business Group on Health, one of the nation’s leading critics of the burdens of spiraling health costs, released a report recommending new ways for its Fortune 1000 members to spend money.

Of course, employers spend additional money on wellness programs because they believe they will lower health costs and improve productivity by keeping employees healthy. Here’s the bad news: the evidence simply does not support this very expensive belief.

That’s according to the second article on my required reading list, Caution: Wellness Programs May Be Hazardous to Your Health. Featured in a highly influential health policy blog, author Al Lewis is the founder of the field of disease management – and now one of its leading critics. He dissects wellness vendor claims about cost savings and finds everything from simple math errors (like studies purporting to show ER visits declining by more than 100 percent, a mathematical impossibility) to flat-out wrong data. Distressingly, he sometimes finds evidence that health costs go up when prevention programs are put in place.

Lewis analyzes Nebraska’s cancer screening program, a widely touted success story that won a national award as the best wellness program in the country. From Lewis’ calculations, at least 6 percent, and as many as 15 percent, of screened participants were found to have signs of metastatic cancer. An epidemiologist would suggest this number is about 100 times too high – meaning thousands of Nebraskans received false-positives in this screening program. “My colleagues and I were concerned enough about this epidemiological arithmetic to telephone the state’s designated wellness program point person…” explains Lewis, “They in return were concerned enough about this statistically certain overdiagnosis on their employees not to call us back.”

If excess screenings, overdiagnosis and medicalization of the daily lives of generally healthy people pose one risk, at least wellness programs should help people eat right, exercise and reduce obesity. Unfortunately, the science on this is not adequate either, according to the third item on my required reading list, from the prestigious peer-reviewed British Medical Journal (BMJ): a disturbing overview of the inadequate and poorly designed studies used to support medical advice about the causes and cures for obesity.

There are some surprises here. For instance, the idea that all calories are the same or that weight is determined by the “calories in-calories out” formula is not well supported by research. The simple notion that getting people to eat less will solve the obesity problem is also not supported in the research. Since so much medical advice is built on all this, we are at risk for worsening the obesity problem without improving the body of research. On the other hand there is some very promising research that manipulating certain physiological and hormonal determinants could offer more hope in the future, but it is at early stages.

Why should employers care about the merits of the various studies on obesity, or the data behind evaluations of wellness programs? Because when they make an investment in prevention or wellness, they should expect a return. These articles suggest that wellness and prevention strategies don’t automatically get the results employers expect. On the contrary, poorly designed programs risk undermining employee health and well-being and increasing health costs.

The time has come for employers to stop making the unproven assumption that they can keep people out of hospitals and start taking a hard look at those hospitals directly. The Altarum Institute took a step in the right direction with a white paper on some employer’s strategies for getting started. No more being played as chumps — it’s time to apply America’s business savvy to the purchase of health care services.

Leah Binder is the CEO of The Leapfrog Group and contributes to Forbes, where this post originally appeared.

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Nice to make a new acquaintance. This post is a year old, but unfortunately still true! Your link doesn’t seem to work, could you send another?

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