The Company That Solved Healthcare
For the sake of clarity, I have chosen to group the successful reforms in the private sector under three platforms:
- Consumer Responsibility
- Centers of Value
- Prime Role for Primary Care
Companies that have used what are called consumer-driven health plans have enjoyed savings of 20-40 percent. That’s because their employees have their own skin tin the game. Behaviors change on a dime when companies give their people personal accounts that are tied to high deductibles and co-insurance. They become more personally responsible. … Communication and education must be clear, consistent, and easy to access.
Centers of Value
The second platform for reform helps people find the best providers. That means identifying and promotion what Serigraph calls “Centers of Value,” where value means the best combination of service, quality, and price. … Most Americans have almost no idea whether their doctor or hospital system is good, bad, or average for performance. The information has been nearly impossible to track. In contrast, Serigraph makes available to its co-workers the quality ratings that are available. The performance variation is huge.
Prime Role for Primary Care
The third reform platform is a model that centers on primary care, a little like it was in the good old days when doctors and patients had a personal relationship, both for care and for the economics of care. … A large swath of costs can be cut by re-establishing the role of primary care. Big, complex medical systems have homed in on the higher reimbursements offered by the government and insurance companies for specialty care. They put high-priced specialists at center stage. … As a business strategy, the big corporations have hired or acquired primary care physicians to feed patients upstream to their monstrously expensive specialty units.
Chapter 1: Rampant Health Costs Can Be Controlled
We tried all the obvious tactics to lower health costs. Those included a wellness and fitness program; an annual quoting and bidding process to land a percentage point or two more in discounts from health providers; some rationing (only one Viagra pill per week, for example), and a standard plan that shifted some costs to co-workers with a deductible of $300 and a 20 percent co-insurance. These anemic attempts throughout the 1990s may have mitigated the rate of increase, but at the end of each year, we still showed staggering cost hikes. … Trying to use our buying power against the larger selling power of increasing consolidated providers did not work.
Chapter 2: Get Employees’ Heads in the Game
Classic story: 45 minute procedure would cost $8,900. Employee shopped around and found the same procedure for $1,130. Serigraph shares a 75/25 cost with an employee pool. Premiums have been reduced by $1250 per person.
What we have learned is that the winning formula for moderating health cost inflation comes down to:
- Behavior change by individually responsible users of health care;
- Aggressive and intelligent management by the company;
- Creation of marketplace dynamics to help people find good value; and
- Keeping people out of hospitals.
Health cost savings is not about saving a couple points on the hyper-inflated annual bidding process.
We have learned that keeping costs in check is all about behavior change. That is where the savings lie. Specifically, employees need to be asked to change five behaviors:
- How they utilize medical services;
- How they buy healthcare;
- How they live their lives in terms of personal health;
- How they follow regimens if they have a chronic disease; and
- How they relate to their doctors
Prescription: Go to a consumer-driven high-deductible plan, offset by personal health accounts. Those plans unequivocally have been proven to work. Dump plans with no or low incentives and no disincentives.
Chapter 3: Utilization Drops Sharply with Individual Responsibility
HRA = Health Reimbursement Account.
Company has a pool of money for employees to draw from. Company reimburses pool (pre-tax) when it’s drawn against.
HSA = Health Savings Account.
Each individual has a tax-free savings account that grows as monthly (pre-tax) deposits are made by the company. Funds are tax-free to remove if used for medical purposes.
Example: Standard state employee coverage = $19,000 per year vs. $1,500 deductible and a $3000 HAS = $12,000 per year
Most co-workers come to think of the health plan as their plan. They own it, at least part of it. And they start to view their health as a personal asset.
Chapter 4: Piercing the Fog of Medical Pricing and Promoting Transparency
Use transparency sites to understand and compare the true cost of a procedure.
- Doctor fees are included with hospital and clinic charges
- Other line items that were unbundled before, such as anesthesiology, are included
- Prices are shown for whole episodes of care, from beginning of treatment to the end, including physical therapy after surgery
- Information on quality is added to identify what we call high-value providers. Some call them centers of excellence; we call them “Centers of Value.” We steer our co-workers to those winners.
Another part of the pricing opacity is overbilling. It is systemic.
Anthem now publicly lists almost fifty procedures with bundled prices, including doctors charges. Humana has a similar site for one of its networks.
Chapter 5: Motivate Employees to Seek Centers of Value
Most health plans, including high-deductible plans like ours, have a large flaw when it comes to major procedures. It’s the out-of-pocket maximum for co-workers. Once a person hits $6,000 in out-of-pocket costs, Serigraph steps in to cover 100 percent of the remaining charges. It’s back to free lunch and no consumer discipline.
We decided to use the carrot approach: cash rewards if co-workers would go to the three or four providers we had selected as offering good quality, excellent service, and low prices.
Example: “MedSave Program” company splits the difference of the money saved for an elective knee surgery. $4000 saved by shopping around; $2000 for company, $2000 for employee.
One of the major hurdles for moving business is that patients are used to following doctors’ orders. That makes some sense on purely medical issues, because the doctor is an expert. But doctors don’t usually place business for best price or value. They almost always assign patients to the systems that employ them, regardless of price.
Consumers have the right to buy their healthcare where they choose. And the prices for health care have gotten so high and so financially painful that many of them have to move their business to save money.