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Part 2 in the 2001 Series on Issues in the Health Care Industry
Health Care Industry Needs to Refocus
February 2001
If there is an industry that escapes comprehension, it is the U.S. health care system. With the possible exception of pharmaceutical companies, no one involved in the health care system-whether they are health care providers, employers, patients or suppliers-is happy with the present system. And they are all blaming each other.
Employees' ability to choose among health plans has decreased while their out-of-pocket cost for health care has increased. Employers, faced with costs that are once again rising at near double digits, are increasingly frustrated with their insurers' inability to control health insurance premiums. Insurers are trapped between consumers' desire for broad access to providers and minimal intrusion into the provider/patient relationship and employers' demand for better cost control and less administrative work. Health care providers appear to be winning the battle for less-intrusive medical management, but this victory is balanced against increasing pressure on provider prices.
Why, after 15 years of managed care, are we right back to where we were in the mid-1980s? Premium increases are once again four times the overall rate of inflation. Provider directories for all but the most restrictive HMOs once again resemble the Yellow Pages. Consumers face increasing costs and less choice of health plans. What happened to the promise of managed care?
We are in this mess again because leaders of the health care payer and provider industries have been trying to solve the wrong problem. The problem is not how much we pay, but rather what we are paying for. We have failed to define the ``product'' we want to buy, and because we haven't, all we can do is ask for the process to be done cheaper. Moreover, this failure has caused confusion among the parties involved. Because the participants haven't specifically said what will be delivered, we each have our own interpretation of what that should be-and these interpretations all differ.
To meet our own interpretations, we have developed unique ways of addressing health care. Payers came up with highly effective tools to select risks, micromanage health care providers, audit bills and reduce reimbursement. Providers forced the adoption of new technology and new procedures long before their efficacy was validated, and they used their influence with consumers to fight payers' attempts to ensure that the care that was delivered was appropriate, necessary and cost-effective. All parties to either increase reimbursement or reduce it have spent billions of dollars.
Another area of intense interest has been process measurement. As an industry, we now monitor hospital bed days, types and locations of surgical procedures, per member/per month costs for pharmaceuticals, specialty care and therapies. We analyze patient demographics, evaluate the type of care delivered according to the type of physician reimbursement and study the ability of nurse practitioners vs. physicians. We know more about what we spend for health care and where each dollar goes than we ever have.
Many employers can tell down to the penny what a hospital day costs in each of their locations, what an average prescription costs and how long the average insured is in therapy. What they can't tell is what they get for all their health care dollars. Employers, consultants and regulators have become completely focused on the process and the cost of health care and not the result. Immersed in the detail of the health care system, we have forgotten how to be intelligent buyers.
We have become so caught up in the analyzing, infighting, politicking and name calling that we have neglected to step back and ask the real question: What do we want to get for our investments in health care?
Recently, some employers and regulators decided that we need to be able to measure ``quality'' in health care. The drive for quality promised that managed care organizations would be judged based on the quality of the care they delivered. While many large employers and their buying coalitions demanded that health plans produce data in a standardized form selected by the employers, few have actually used that data to evaluate or select their health plan. In fact, a 1997 KPMG study of 1,502 employers reported that only 10% viewed accreditation of a health plan as important, and only 1% of employers actually gave health plan quality data to employees as part of the enrollment process. So much for quality.
If we are to bring any rationality to health care, we have to first define what we want from the system, then figure out how to measure that result, determine how best to deliver it and finally come up with the best possible means to pay for that result.
I propose that what people and employers all want from their health care system is quite simple. People want to be fully functional and able to perform the tasks that are required of them by their families, employers and avocations. Employers want healthy, fully functional people that are on the job as much as possible, producing as much as they can, for as long as they can. That's it.
The largest single problem facing most of the nation's employers is not how much they pay for health care, but how can they continue to increase output through improved productivity. With the national unemployment rate at a 30-year low and areas of the country experiencing all-time lows in unemployment, employers just cannot find enough qualified candidates. Therefore, they have to maximize the amount of return they get on their investment in the people they have. That investment, in the form of training, salary, benefits and other compensation, must be examined to determine how best to maximize the return, in terms of productivity, from the dollars allocated to each area.
Some larger employers have begun that analysis. A few employers have gone beyond analysis and addressed components of the issue by aggressively managing all disabilities or taking other incremental steps. But even these leaders have yet to make the leap from efforts to reduce absenteeism and increase workforce availability. They now need to understand that the critical element in their health benefit decision-making process must be the impact on workforce productivity of the proposed benefit plan and the providers delivering that plan.
At its core, a health benefit plan should deliver healthy, fully functional people and enable those people who are not healthy to return to and maintain the highest possible level of health and functionality.
Until health plans and providers are made to understand that employers and individuals are willing to pay for results and not process, they will continue to quibble over what process gets covered at what rate for whom in what setting. At that point, payers will be content to let the experts handle the process, as long as they get the result they want. We can look forward to intelligent, constructive discussions over how to get it done, instead of today's rancorous and unproductive screaming match among parties who haven't even thought to ask, "What is it we are trying to deliver?"
If you would like to discuss health care industry needs to refocus in more detail, please let us know by clicking on the link above left, or giving us a call. You can also visit our website at www.HealthStrategyAssoc.com.
Sincerely,
Joseph Paduda
Health Strategy Associates
Copyright 2001 Health Strategy Associates - All Rights Reserved
Duplication or dissemination in any form without the author's express written consent is prohibited.
