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.

24 replies »

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  11. 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?

  12. Leah,
    Outstanding article-already Tweeted. As a practicing doctor, instructor, and and 18 year health care administrator I have always been surprised that business tolerates this unsustainable circumstance in American healthcare.
    We have the most efficient marketplace in virtually every other sector except healthcare. It is the middlemen foxes guarding the hen-house where big government, big hospital and big insurer obscure any chance of making this a real marketplace and they keep our money for themselves. If you cannot buy on price, you cannot buy on quality. All Americans and American businesses see is increased costs and unflattering performance: for example, according to the WHO, we are #1 in costs per capita yet #38 in rankings vs. other countries.
    This circumstance is making us physically and fiscally noncompetitive. Instead of more-of-the-same middleman 3rd-party healthcare, America would do well creating a model for our healthcare that engages the individual and incentivizes healthy, cost-saving measures.
    It is no coincidence that the #1 and #2 most competitive economies in the world, Switzerland and Singapore, have such a model:


    Since our government cannot get this done, maybe business should.

  13. MarkH,

    Well said!

    As a legendary (and perhaps apocryphal) comment on a paper at my college said:

    “There are things in this paper that are original and things that are interesting. However the things that are original aren’t interesting and the things that are interesting aren’t original. Grade C”

  14. A surgical site infection is always an error from the point of view of the patient, whether the surgeon thinks it was preventable or not. So when 5% of surgeries result in surgical site infections, that’s an error rate of 5%.

    Many hospitals like Virginia Mason and others have successfully applied principles from manufacturing to improve their safety and quality records, and yes, get their error rates down.

  15. I don’t disagree, Mark. But great strides are made when expectations change – at least that’s been my experience. I remember when central line infections were a huge problem and I don’t think that is the case anymore. Outcomes can change dramatically when new technologies and treatments are introduced that change people’s perspective. What I noticed, however, is that often greatly increases the number of patients that are considered “candidates” – taking on riskier and riskier cases. Surgeons and physicians make a huge difference in helping patients and families make a decision. I hope you see that we approach that process differently than they do in other countries, and we may want to consider the ramifications of the approach we use here. Yes – we may have to change incentives so physicians don’t have to worry about litigation as they do now. Just a few thoughts – I don’t claim to have the answers.

  16. I can’t think of many instances in which I do surgery that there is a big choice about whether or not the patient gets it. In general, if surgery can be avoided, that would always be my choice and recommendation. Surgery is serious business, and we do weigh in such risk factors into the decision. But an increased risk of infection is never going to be an absolute contraindication for most surgeries, and the most common infections – wound infections, don’t even need antibiotics, just drainage and dressing changes. To say we should refuse surgery over the potential for minor complications is just not realistic, and that is what the majority of these infections the author cites are going to be – wound infections.

    It’s wrong to say every surgeon just needs to select out the problem patients. Most surgery, even most elective surgery, really is needed and not undertaken lightly. Wound infections should be avoided however possible, but it is unrealistic to suggest they are preventable, or that patients should be turned away because of the potential risk.

  17. Among the reasons corporate wellness programs don’t often work is that the programs focus on the incorrect determinants of health outcomes- not the least of which, ironically, are job loss , fear of job loss, quality of worklife and work environments as well as job satification.

    I refer the readers of this blog again to http://www.unnaturalcauses.org

    Dr. Rick Lippin
    Southampton, Pa

  18. Perhaps there is a point here – if very high risk patients (the ones you mentioned) were more carefully vetted or told more fully of their risks, perhaps the surgeries wouldn’t take place in the first place. That’s why there are better outcomes for many procedures/treatments in other countries – they carefully select who are the best candidates. That may seem unamerican to some, but spend time in an ICU where those patients who are septic with their surgical infections are and see if that seems like something you’d want to have happen to your family member. And I think that is also where we get an awful lot of our drug resistance – when antibiotics are given to very immunocompromised patients. “Superbugs” proliferate in hospitals.

    When visiting a clinic in the UK, I asked a GP about “rationing” dialysis. He said they didn’t do that. I asked why they had such a low utilization of dialysis compared to the US. He said, “If you’re asking if we allow patients to die of renal failure, the answer is ‘yes’. But every patient who needs dialysis gets it.” I think that’s something that deserves more consideration here in the US.

  19. 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.

    Well, you’re going to have to bring it up with evolution then, because doctors are not the manufacturer. What a terrible analogy.

    The other mistaken assumption is that 100% of surgical infections are preventable. This is simply not the case. Even a perfectly done surgery with no breach of sterility carries with it a risk of wound infection of around 2-3%. This risk is doubled when the patient is obese, or has diabetes, and almost triples when they have all three. When sterility is breached, and the case is considered contaminated, the risk of wound infection is between 10-20% depending on the type of case and breach.

    Before you make this astoundingly incorrect assertion that this is uniformly due to “error”, or is an error rate 100 times more than should be tolerated, please demonstrate, using the literature, how such a low rate may be achieved. Is there an example of routine elective surgery with rates of infection 100 times less? Even the studies the authors cite such as this one can only show marginal reductions in infection rates with introduction of checklists, which many have pointed out, are studies subject to Hawthorne effects.

    This is the problem with these damn quality improvement schemes. For one, they rest on a false assumption that something that is “preventable” is 100% preventable, as your language suggests. The second problem is, once the target is lowering the rates of these complication, especially with incentive schemes, the end result will tend to punish sick people and the doctors that treat them.

    The classic example comes from the British NHS which implemented an incentive scheme which proved perverse. When physicians were rewarded monetarily for metrics such as better control of patient blood pressure, diabetes, etc., it worked great, you could show excellent improvement in these metrics when incentives were applied (according to the authors anyway). However, when you actually look at the data, the physicians that were rewarded were those treating fewer, younger, healthier, richer patients (and doctors that defrauded the system with exception reports). Those that did not make incentive goals treated older, poorer, and more patients.

    I can’t wait until the business people try to then crack down with their usual blunt methods on these complication rates because I know what the end result will be. Physicians that can and do select their patients (private hospitals) will achieve better rates by selecting, younger, healthier, richer, thinner, patients, and the rest will be referred to public and university hospitals who don’t refuse patients based on shoddy economic schemes. We’ll take your sick and unhealthy, and be good doctors to them, and when we get the higher readmissions, and poorer outcomes, medicare will penalize us more for taking care of the patients no one else wants, we’ll be less able to take care of the poor, the uninsured and underinsured, and our social safety net will continue to break. It will be a wonderful downward spiral of good intentions, incentives, and “business savvy”.