Employers are the largest purchasers of health care in the nation, a role nearly all continue to embrace despite Obamacare. The plans they sponsor cover 155 million people or about 57% of the population under-65.
Yet, employer attempts to save money, improve outcomes and boost value so far have been about as effective as chasing rainbows, including:
- Surely, there are health savings from keeping people healthy! Not so much, says Rand, which found little if any impact on health care costs from wellness programs.
- Employees shopping for health care can change the world! Not so fast, says the Health Care Cost Institute. Less than 7% of health care spending is “shoppable.”
- Shift costs; give employees some skin in the game! Not so easy, cautions Truven Health Analytics, because many employees avoid needed care, risking costly future problems.
- Private exchanges, defined contributions – let’s copy the Feds! Oops. Aon Hewitt, which runs a private exchange, says exchange/non-exchange premium increases about the same. (See “employees shopping” and “shift costs” above.)
- Catch problems early in a lower cost setting! Not so simple, explain Harvard researchers who found 58% of retail clinic visits did not replace physician appointments, increasing costs.
Have employers found any health care gold at the end of a rainbow? Little, according to Northwestern University researchers in a recent American Journal of Accountable Care article. “Efforts to date have produced few promising strategies,” they concluded.
Does that mean employers should stop chasing rainbows? On the contrary! We need more employers chasing more rainbows. New rainbows. “No one really knows what will or won’t work. And we won’t know until we try some things,” urges Wal-Mart’s benefits leader, Sally Welborn.
More important than chasing rainbows, employers must become better health care buyers. Leveraging nearly $650 billion in annual spending, employers need to negotiate harder for better deals, form alliances to master the supply chain, work locally for greater value, align with government payment reforms wherever possible and contract directly with innovative providers.
Employers Negotiating Better
Given the money they spend on health care and their negotiating prowess as business people, employers should get better health care deals, especially on expensive drugs. They’re not, says Dr. Robert Galvin, formerly of General Electric and now CEO of Equity Healthcare.
“Baffling” is how he describes what he calls employers’ “weak-kneed behavior”. “No other group has a greater stake in buying smarter. But employers have always been reluctant actors in the health care system, as they feel out of their depth,” he explains.
Most employers are not in the health care business. Still, Galvin wants them to bargain more effectively with pharmacy benefit management (PBM) firms and health insurers. These expert intermediaries, he cautions, do not fully align their interests with those of their employer clients. At Equity Healthcare, Galvin negotiates for private-equity-owned employers like Toys R Us, Sea World, La Quinta and J.Crew.
Employers Forming Alliances
Large employers have been at the forefront of attempting to change health care. Still, even the pioneers and expert buyers among them are dissatisfied with their progress. Twenty of them have formed the Health Transformation Alliance, including value based insurance design pioneer Pitney Bowes and Caterpillar, which maintains its own prescription drug formulary.
“We’ve done what we can as individual companies. By joining together, we can do more,” said Marc Reed chief administrative officer of Verizon. The Alliance will serve as part of each company’s health strategy, fostering increased innovation, better data analyses and greater leverage to make the “current multilayered supply chain more efficient.” Their first project, slated for 2017: More affordable prescription medications.
Despite the involvement of companies like Pitney Bowes, Caterpillar, Verizon and other blue chip employers, some observers have given the Alliance a ho hum reception. Noting the already “crowded field” of business health groups, Forbes health correspondent Bruce Japsen observed, “it is just one of a number of similar, overlapping efforts that have so far failed to keep the rate of employer medical cost increases even on par with general inflation.”
Employers Working Locally
Prominent among other efforts are regional business health coalitions, represented nationally by the National Business Coalition on Health (NBCH). Board chair, Karen van Caulil, who also serves as CEO of the Florida Health Care Coalition, responded to the Alliance announcement with a suggestion.
“Our coalitions have been doing this work for years in their respective markets and have the regional intelligence and boots on the ground to make a difference. Many of the companies engaged in this new alliance are not involved in the regional coalitions and we would welcome them to play a more active role to bring about change in the communities where their employees live and work.”
In St. Louis, for example, the local coalition negotiates a pharmacy benefit contract, which it makes available to member companies. It also participates with the Institute for Clinical and Economic Review (ICER) on the Midwest Comparative Effectiveness Public Advisory Council (CEPAC).
The St. Louis Business Health Coalition also is the key driver of the Midwest Health Initiative (MHI), a broad-based, collaboration involving providers, payers, citizen groups, labor unions and employers. MHI stewards a data asset on regional on disease prevalence, care quality, and treatment patterns
Employers Aligning Nationally
On a national level, incoming NBCH CEO Michael Thompson believes “longer term reform, frankly, is going to come from the private sector aligning with the public sector,” which must take the lead. There is, he says, “a dire need for public programs like Medicare and Medicaid to get control of the situation.” Business should work at the local level, supporting engagement and driving change in their communities.
Such alignment could ensure health care purchasers – government and private – send clear and consistent signals to providers. However, it only makes sense with well-designed, proven payment models suitable for private sector application.
Most prominent among the Medicare initiatives is a just-implemented, mandatory bundled payment program for joint replacement. In addition, insurers have been implementing their own bundled payment initiatives
However, few employers currently are engaged in the Health Care Payment Learning and Action Network (HCP-LAN) established by CMS for public-private collaboration on value based payment initiatives. Pleading with employers to get involved, Wal-Mart’s Welborn says, “We need to be at the table with our best guess about what might work and then be willing to take a gamble, pilot a few ideas, and share outcomes.”
Employers Contracting Directly
Another HCP-LAN participating employer is Boeing, which is contracting directly with health systems in Seattle, WA, St. Louis, MO and Charleston, SC to offer an accountable care organization (ACO) “Preferred Partnership” option to employees.
“We are highly encouraged by the willingness of our health system partners to engage with us and make investments that will support the changes needed to better deliver care, says Jeff White, Boeing’s director of health care strategy and policy.
Employees still have a choice between a Preferred Partnership and a more traditional plan. However, to encourage participation in the former, Boeing provides employees with incentives such as free primary care visits, lower employee paycheck contributions and higher company contributions to health savings accounts.
Participation has reached 35 percent in the Seattle area, where Boeing first launched the program, and ranges between 15 and 30 percent in the remaining markets. According to White, employee satisfaction is high, averaging 8.5 out of 10.
Intel, another, large, direct-contracting employer, “believes it is time for employers to work more directly to transform the payment and delivery systems for healthcare.” It has engaged directly and deeply in benefit design and delivery with Presbyterian Healthcare Services for its New Mexico employees.
Other large employers, like Lowes, Wal-Mart and McKesson, are participating in an Employer Centers of Excellence initiative through the Pacific Business Group on Health (PBGH) . They send employees directly to nationally recognized institutions like Johns Hopkins and Cleveland Clinic for orthopedic surgery and cardiac care.
Employers need not be large to contract directly – and successfully – with health systems, as employers of all sizes have found in Springfield, MO. There, the city government, local utilities, the public schools and Bass Pro Shops have deals with Mercy Springfield, which has been direct contracting with employers for 20 years. In fact, Mercy’s direct to employer business is its largest contract group.
Four years ago, Mercy began to accept limited risk. “We will give you basically a target and guarantee you less [cost] than where you’d expect to be in the next year,” David Cane, Mercy’s regional vice president of payer relations and contracting, explained to John Morrissey of Health Progress. “And if we don’t reach that, then at the end of the year, we’ll just write you a check for the difference, up to where the target was.” Morrissey reports that Mercy has yet to write a check.
Mercy apparently has a knack for working directly with employers. The Springfield hospital is one of the select few participating in the PBGH Centers of Excellence initiative. Meanwhile, the Mercy system in St. Louis, of which Mercy Springfield is a part, is Boeing’s direct contracting partner in St. Louis.
Perhaps the best way for an employer to become a better buyer is to collaborate with a better provider and together chase rainbows.