Interested in Health(care) Reform? Begin with the Boardroom

By Adam Long of Gordian Health

Tis the season to again consider healthcare reform. Better yet, why not consider health reform as a precursor to healthcare reform?

First, though, how about we redefine what we currently have in America? Our system isn’t really health care, it’s sick care. The economics of our payment system – which, let’s face it, really do drive nearly everything – push everyone, from patients to providers and payers, to sick care rather than health care.

Take the primary care physician (PCP) as an example. She’s being squeezed by her major payers to commit as much of her time as possible attending to billable services. And not just any billable services. Those that pay at higher rates are preferable. Which services pay at higher rates? Why, those for the greatest level and specialized forms of sickness, of course. Committing time to payer paperwork or returning phone calls from case management services are seen as nothing but hindrances (and risk avoidance strategies) since that time is non-billable. Business solvency itself drives her down the path of sick care.

Most of us probably sympathize with this physician until we step back and ask, “Why can’t any of us – payers, providers, purchasers, consumers – flip the paradigm on its head and start talking about health care?” A single-payer system might enable quicker reform, but that’s not likely any time soon and it’s certainly not a silver bullet. Tough decisions and breaking of entrenched habits will be necessary no matter who pays the bills.

It’s going to take innovative payers to break the mold. And, for a fundamentally economic system to improve, innovative purchasers will have to demand better.

Payers such as BlueCross BlueShield of Tennessee (BCBST) already have started the change process. In September 2008, BCBST implemented a Provider Transparency program that allows healthcare consumers to access and compare providers on any number of metrics relevant to best-in-class care. BCBST has also implemented Pay For Performance (P4P) initiatives with providers in its network. Providers achieving better health outcomes for their patients get paid more for the services they provide. Not quite to the level of some Chinese providers who only get paid if their customers stay healthy, but a start nonetheless.

And purchasers, what are they doing to change things? They seem to be trying everything under the sun, although, like the PCP, their primary concern appears to be immediate payoff.

• The industry leaders, the true innovators – they build health reform into their long-term business strategy.

By long-term strategy, we mean that corporations invest in the health of their workforce and that of their families, not the lack thereof. Benefits will (and should) always help employees mitigate risk, so health and life and disability insurance, for example, will continue to be important offerings for corporations to remain competitive in recruiting and retaining talent.

Consider for a moment: How many industry-leading heavy manufacturing companies don’t invest deeply in safety reform? How many venerable financial institutions avoid investing heavily in data security? None, of course, lest they never would have reached their leader statuses.

If companies are only as good as their workforce then, similarly, the best and brightest companies will invest in the health (reform) of their employees and, often, dependents of those employees too. But for those investments to pay off, the organization must have a long-term, strategic and passionate commitment to health promotion.

A 2008 survey of large employers (27% of whom were Fortune 500 companies), representing more than 15 million employees, suggests that over 77% of companies invest in worksite wellness initiatives. If this survey is representative of all large employers in the U.S., why then aren’t we seeing significant improvements in population health? For example, increases in prevalence rates of overweight and obesity in America are astounding – even being declared an epidemic in 2001 by the U.S. Surgeon General – with a 100% increase in just two decades (1980 to 2000). And there doesn’t seem to be much slowing since approximately two-thirds of the nation is now overweight or obese.

By now, every HR executive is familiar with “the 80/20 rule” – roughly 80% of all healthcare costs for most organizations are incurred by approximately 20% of members. As a result, care management (e.g., case/utilization/disease management) has flourished over the past 15 years. A care management vendor’s promise or pitch, of course, is to reduce the demand cost burden of the sickest members, thereby saving large sums of money for companies in the short term.

Despite reviews of care management’s apparent successes, organizations continue to feel squeezed by the ever-increasing healthcare cost burden. Revenues are often not increasing as fast as healthcare costs, so companies are forced to make cuts somewhere if they are to retain profits. Those cuts sometimes come from the healthcare budget itself – for example, cost-shifting to employees, reducing benefits or cutting care management programs.

Has your organization’s care management vendor demonstrated ROI even though your overall healthcare trends continue to increase? Unfortunately, this may be the case – care management can reduce costs for a few very ill people even while the population’s trend seems to rise unabated.

Why might this be? Certainly, the population is aging. We’ve all heard the horror stories about what’s coming to Medicare as a result of Baby Boomers’ migration to retirement. But, because of employee turnover and recruitment strategies, the average age of most companies’ health plan members isn’t rising at anything close to one per year.

We believe the answer is, again, a failure to focus on health rather than sickness. The current medical model only wants to see you if you’ve got a “presenting complaint.” That’s a downstream approach. In other words, care management and practitioners have set up shop at the mouth of the river. Only when individuals drag themselves on shore, or someone else fishes them out of the current, do they get medical attention.

How about investing time and attention upstream, before your members fall in the river in the first place? Without a doubt, it’s a long-term, population-level approach, but it’s also the only reliable way to impact population health and population healthcare cost trends. It also means getting serious about member incentives for engaging in wellness activities and, at times, holding them accountable. It’s about making wellness a business strategy, and tying management evaluations/bonuses to those strategic objectives. It’s about giving real power to wellness committees who set policy for the organization.

You might ask, “What about turnover?” Why invest in wellness only for employees to take those ‘gains’ elsewhere, perhaps even to your competitors? Our response is to, again, see the bigger, longer-term picture. Companies with robust cultures of healthfulness are better at attracting new talent. They are also better at managing and mitigating employee stress (and hence anxiety and depression), which leads to greater worker productivity and work satisfaction and, in the long run, greater retention.

Our own research at Gordian Health Solutions suggests that 50.2% of paid medical and pharmacy claims derive from members at low to moderate health risk. However, 58.6% of productivity losses derive from these same low- to moderate-risk members.

First, this suggests that – although 80% of healthcare costs may indeed come from 20% of members – a significant portion of those costs comes from members you wouldn’t expect to be high cost. That is to say, in order for 50.2% of paid claims to come from members at low to moderate health risk means that many of the 20% of members costing organizations the most money in fact come from low- to moderate-risk groups.

In other words, care management companies cannot predict very well who will be high cost next year – 20% to 30% predictive validity is typical. Hence, intervening with low- to moderate-risk groups before they become high cost or high risk is essential for improving population health and population healthcare cost trends.

Second, although our research shows a strong correlation between health risk and productivity loss, those at low to moderate risk account for even more cumulative productivity loss (58.6%) than high-risk employees (41.4%).

Simply put: Focusing solely on healthcare claims costs misses the more comprehensive benefits of health promotion initiatives.

Lest you think it’s all on your shoulders to implement comprehensive culture of health reforms, you should know that companies like Gordian Health Solutions have been helping large organizations implement these kinds of strategies for over a decade now.

• Without a doubt, industry leaders have embraced healthfulness as a business strategy, driving changes with both top-down and bottom-up initiatives.

Further, leading employers and health plans are developing value-based plan designs to better meet the needs and preferences of employees/members and their families. In some cases, more financial accountability is being imposed on those with unhealthy lifestyles. And as we begin to fully understand the health-wealth connection, we are seeing new funding arrangements that allow those who stay healthy to build wealth and have a solid financial contingency for the future.

If corporate America embraced healthy cultures for their employees, and further pushed those reforms to all covered lives, such changes could begin to impact communities and, eventually, the nation as a whole. For these changes to begin, business strategy must be revised, which will proceed one boardroom at a time.

Now that’s what we call health(care) reform.

References:
Gordian Health Solutions is a wholly owned subsidiary of BCBST.
IncentOne, Capps KH, Harkey JB. Employee health and wellness & disease management programs: the use of incentives. A survey of major U.S. employers. 2008. Executive brief accessed October 10, 2008, at http://www.nam.org/~/media/Files/s_nam/docs/240700/240686.pdf.ashx
U.S. Department of Health and Human Services. The Surgeon General's call to action to prevent and decrease overweight and obesity. 2001. Rockville, MD: U.S. Department of Health & Human Services, Public Health Service, Office of the Surgeon General; 2001.
Flegal KM, Carroll MD, Ogden CL, Johnson CL. Prevalence and trends in obesity among US adults, 1999-2000. JAMA. 2002; vol. 288(14), pp. 1723-1727.
Goetzel RZ, Ozminkowski RJ, Villagra VG, Duffy J. Return on investment in disease management: a review. Health Care Financing Review. 2005; vol. 26, pp. 1-19.
Tanner-Smith E, Long DA. The Stress-Health Connection and its Implications for Employers. Managed Care Outlook. 2008; vol. 21, pp. 8-10.
Benchmarks derived from analysis of 34 large organizations. Risk was defined by the count of persons’ lifestyle health risks (e.g., smoking, lack of exercise) and conditions (e.g., hypertension, hypercholesterolemia). Lower risk is generally considered those with counts between 0 and 2, moderate risk is those with counts of 3 or 4, and high risk is those with counts of 5 or more.