Healthcare “Syntopical”: The Grassroots Health Care Revolution 2 (part 6 of 15)

The Grassroots Health Care Revolution
John Torinus

Unlike the current system that revolves around specialist doctors, hospitals, and insurers, the new model centers on the employee, the consumer. The new delivery model listens first to the voice of the customer. It is patient-centric.


Chapter 1: Go or No-Go Under ObamaCare?

Best-practice employers in the private sector deliver health care for a total cost between $8,000 and $10,000 per employee. … Employers who haven’t applied management disciplines to health care often pay more than $20,000 per year.

Soft Costs: Legal Fees, Turnover and Recruiting

Hard Costs: Suppose an employer currently delivers health care at a total cost of about $8,500 per employee, which is tax deductible to the employer and tax exempt to the employee. If it drops the benefit, it would have to give an employee a taxable raise of more than $14,000 to buy an equivalent policy.

Suppose, instead, that a company wanted to drop coverage but be cost-neutral with its current expense of $8,500 per employee. In that scenario, it would limit the raise it gives to an employee to buy a policy to only $5,700. … Unfortunately, in most cases, that added compensation of $5,700 would not be enough to buy an equivalent policy on the exchange.

ObamaCare is insurance reform, not health care reform.


Chapter 2: Private Payers Forge Disruptive New Business Model

That means:

  • Elevating their employees from passive, entitled recipients to engaged consumers
  • Insisting on transparent prices and quality
  • Creating incentives and disincentives and a culture of smart consumerism
  • Moving business to the highest-value providers
  • Treating health care vendors with respect, but demanding performance
  • Creating a culture of fitness and health at their companies
  • Making workforce health and health costs a strategic priority

Employers and employees are the only health care players with a deep mutual interest in a long-termgame plan. They are in a health care compact for many years.

The Steps Companies Are Taking

Companies with work forces as small as ten people are racing toward self-insurance as a first step, thereby assuming the risks, responsibilities, and rewards of keeping costs in check.

Their second step has been to roll out consumer-driven plans that engage employees in becoming responsible users and buyers of medical services.

That, in turn, requires data sleuths, known as transparency and analytics vendors, who collect and slice and dice the medical charges and outcomes from many health care transactions to shine a light on prices and quality. They offer clear comparisons of costs and quality. It is a new lens that allows consumers to make sound decisions on where to get care.

The payers’ fourth step is to contract for rigorous on-site providers to manage health. Their health teams tackle chronic diseases, believed to cause 80 percent of health costs.


Chapter 3: Three-Year Game Plan Can Flatline Company Health Costs

First, it does little good for a company to adopt innovative practices that save money if it is fully insured. The savings go to the pool of insured companies, of which it is only one member. The pool structure does spread the risks of expensive cases, but the insured company gets only a sliver of its own savings. You’re married to stuck-in-the-mud companies.

Ergo, as Play One, private companies need to wean themselves off indemnity plans and move to self-insurance. … They offset the risk of getting hit with an expensive episode of care by buying stop-loss insurance to protect against catastrophic claims.

Play Two injects incentives and disincentives into the behaviors of employees. … When the deductible is set higher – the median appears to be about $2,500 – employee behaviors change on a dime. A Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) usually offsets the high deductible, so the out-of-pocket expenses by an employee can stay about the same. But it’s the employee’s money in the accounts, and that makes all the difference.

Example: Why would an employee spend $3000 of his own money for an MRI when the same procedure can be purchased for $525? Or go to an emergency room for $600 when he could go to a clinic for $160?

Self-insurance takes some planning time because the company has to pick the best network of providers for its employees. The network can be acquired through a health plan, through a TPA – Third-party administrator – or can be put together through a collaboration of employers. Claims processing can also be bought from multiple sources. … The big deal is choosing a high-value network with lots of choice and the right geographic alignment.

Play Three needs to follow shortly behind the engagement of the employees as smart buyers of health care. It’s the transparency piece. … You can’t ask people to be intelligent consumers without giving them good information.

The next step, Play Four, is to promote Centers of Value. Play Five is to Price in Bundles, and Play Six is to offer On-Site Health Clinics. Even though it hasn’t happened broadly yet, some smaller companies team up in joint clinics.

Play Sevenfollows from Play Six. With an on-site health team offering intimate, holistic care to members, rigorous face-to-face management of chronic diseases can be launched and attained. Ie Manage Employee Health

Finally, … Play Eight is to treat health as an asset – a personal asset, a corporate asset, and a financial asset.



Healthcare “Syntopical”: The Grassroots Health Care Revolution 1 (part 5 of 15)

The Grassroots Health Care Revolution

by: John Torinus
c: 2014

Pigeonhole: Social Science – Public Administration


Introduction (p1-6)

  1. Go or No-Go Under ObamaCare? (p7-20)
  2. Private Payers Forge Disruptive New Business Model (p21-38)
  3. Three-Year Game Plan Can Flatline Company Health Costs (p39-56)
  4. Self-Insurance: Companies Keep Their Health Savings (p57-64)
  5. Consumer-Driven: Companies Engage Employees (p65-80)
  6. Transparency: Entrepreneurs Shine Light on Prices, Quality (p81-98)
  7. Centers of Value: Companies Move Business (p99-114)
  8. Restructured Pricing: Companies Demand Better Models (p115-132)
  9. On-Site Clinics: Companies Take Over Primary Care (p133-154)
  10. Chronic Diseases: Companies Go Where the Money Goes (p155-168)
  11. Health As Asset: Companies Come to New Understanding (p169-180)
  12. Other Payers Join the Marketplace Revolution (p181-192)
  13. Employees, Employers, Nation: Win-Win-Win (p193-206)

Acknowledgements (p207-208)
About Serigraph (p209)

Healthcare “Syntopical”: The Company That Solved Healthcare 3 (part 4 of 15)

Chapter 6: The Missing Link: Top Management as Change Agents

They charge smokers a 10 percent monthly premium

Employees can earn “wellness days” off for pursuing healthy lifestyles

To gain acceptance, they offered this plan as on option in its first year, as well as a traditional low deductible and co-insurance plan.

Chapter 7: Beer, Brats, Butterfat: Health, Lifestyle Can Be Managed

Our dysfunctional non-system pays providers to fix people when they’re broken, not to prevent those same health breakdowns.

They require a yearly mini-physical for each employee and their (covered) spouse.  A volume deal is cut with the provider to keep costs low ($45 pp). You can opt out of the physical, but you have to pay the full premium for health care.

Because it just makes sense to be serious about the health of your employees, we have adopted may best practices for our wellness and prevention program. The components include:

  • An elaborate point system for wellness rewards;
  • No paid sick days are allowed because they can be abused, but wellness days offset that need;
  • A 10 percent higher premium for smokers;
  • Coaching for co-workers who have health issues;
  • A free, on-site dietician, nurse practitioner, and chiropractor, who doubles as our ergonomics expert;
  • A free primary care doctor whose mission includes prevention, wellness, and chronic disease management;
  • Formal programs for chronic diseases;
  • Promotion of a fitness culture;
  • Tracking health metrics of our co-workers;
  • Walking paths around campus;
  • An on-site fitness center;
  • Sponsorship and participation in walking, running, and biking events.

Chapter 8: Primacy of Care Delivers Big Savings

Cost savings are not the only reason that companies are moving toward on-site medical clinics that they own or control. They do it so they can turn the upside-down delivery of healthcare right-side up. … If you manage the front end of the process, you have a fighting chance to put a tourniquet on the hyper-inflation inflicted by the industry on the nation.

Pyramid Example: Specialists over Primary Doctors over Nurses. Upside down because specialists deliver the highest amount of care in dollars, when it should be nurses.

QuadMed is about what works. Here are some of its important building blocks:

  • Doctors on Salary
  • All Electronic Records
  • Prevention Prominent
  • Inexpensive Office Visits
  • Medical Home
    • If employers don’t have enough critical mass to create on-site medical homes, they should insist that their providers do so.
  • Fitness Centers, Employee Assistance Program On-Site

Another huge benefit from having primary doctors dedicated to their patients is their ability and willingness to guide them to the best Centers of Value for other treatments.

Chapter 9: Quality Ratings Elusive, But Essential

Common sense tells us to ferret out which are the best and worst providers. To passively give our healthcare dollars to providers with poor outcomes amounts to dereliction of our duty as leaders of companies. … the important lesson is that you can dig out quality information if you are determined.

Chapter 10: To Reform: Educate, Communicate, Hyper-Communicate

The old plan: $300 deductible and 20 percent co-insurance. The new, high deductible plan nearly eliminated the bi-monthly premium and set up a personal health account.

The company makes second opinions on elective procedures free.

Chapter 11: Silver Bullet for Better Value: Lean Disciplines That Transform

  • Seek out lean providers of health care and send your health care business there whenever possible.
  • Insist on all three components of value: service, quality, and price.
  • Push for changes in the archaic procedure-by-procedure pricing system.

Chapter 12: Generics, Loss Leaders Provide Leverage on Drug Costs

Walmart, Target and Walgreen’s decided to make generic drugs a loss leader; selling dozens of drugs for $1 a week.  … Generics bought from any of these three retailers were reimbursed 100 percent.

Other restrictions: Only one ‘blue pill’ per week. No baldness drugs. Cover drugs for smoking cessation, but only for two attempts at quitting.

But, drug costs, which constitute 10-15 percent of a company’s health care bill, can’t be sufficiently controlled through competitive bidding. Use a three-tier system:

  • Tier 1 – co-workers pay 20 percent of a generic drug price, or a $5 minimum for a monthly regimen
  • Tier 2 – branded drugs for which the PBMs have cut a good deal is 20 percent of price or a $15 minimum
  • Tier 3 – unlisted branded drugs are 30 percent of cost with a $30 monthly minimum plus the cost of the difference between the drug and the effective generic.
  • Drugs with no generic substitute are covered

The secret, then, of keeping drug costs in line is to exploit the savings in the marketplace wherever they exist. At one-tenth of the company’s tab for health care, drugs have to be managed as aggressively as the other nine-tenths of the bill.

Chapter 13: Better Model for Desperate Small Companies

Small companies pool together to spread risk; because of that, the benefits for an individual, well-performing company, are never improved. In addition, one bad incident can increase rates as much as 50 percent.

  • Buy a plan with a high deductible and co-insurance
  • Facilitate the use of flexible spending accounts by employees.
  • Offset the high deductibles and co-insurance with a Health Reimbursement Account (HRA)
  • Hire a Broker
  • Put your business out to bid every couple of years
  • Be serious about prevention, wellness, and chronic disease management for your employees and their families.
  • Pay for an annual mini-physical for your covered adults.
  • Look for an insurance plan that makes prevention tests free
  • Encourage fitness for all employees
  • Look for a well-run primary care clinic to set up a medical home for each family
  • Even if your premiums are set for the year, encourage your people to seek value
  • Encourage your people to look at the transparency web site put out by your insurer to find the best values for price and quality.
  • If you have a drug plan, use a three-tier or four-tier system that encourages the use of less expensive drugs.

Healthcare “Syntopical”: The Company That Solved Healthcare 2 (part 3 of 15)

The Company That Solved Healthcare
John Torinus


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

Consumer Responsibility

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.