Healthcare Quality – Cost Disconnect

When faced with an opportunity to obtain a lower cost healthcare service, many people rationally question, “…but is it lower quality?”  As I have written in previous blog posts, there is often a major disconnect between cost and quality in healthcare.

  • One study in JAMA found that hospital costs went up as they had more surgical complications.  Click HERE to read that blog post.
  • THE most successful ACO in the country—Thedacare Health Partners—decreased unnecessary readmissions and in doing so lowered costs so much that they LOST MONEY overall in spite of receiving a bonus payment from Medicare (because they lost even more money from their commercially insured patients that they kept out of the hospital and were therefore not paid for).  Click HERE to read that blog

So if a healthcare provider can offer healthcare services like surgery for less cost, it may be because they actually have HIGHER quality.

In my opinion, the root of this Quality – Cost disconnect is the combination of 1) fee-for-service and 2) third-party payment.

In the current fee-for-service model, healthcare providers are paid for ‘Service,’ not quality.  If payment was for quality, then it would be called ‘Fee-for-Quality.’  More service does not equal higher quality.  As in the above cases of surgical complications and readmissions—more service means Lower quality.

With third-party payment, the person receiving the service is not the one paying for it.  It is typically the ‘employee’ who is the patient receiving the service and the ‘employer’ or ‘government’ that is paying for the service.  When someone else is footing the bill, the ‘receiver’ of the service is less prone to seek out ‘Value’ (i.e. price and quality).  Third-party payment creates a ‘Principal-Agent’ problem or ‘Agency dilemma.’  As Wikipedia defines it, the ‘Principal-Agent problem occurs when one person is able to make decisions that impact, or on behalf of, another person or entity.  The dilemma exists because sometimes the agent is motivated to act in his own best interests rather than those of the principal.’

In this case the Agent is the Employee and the Principal is the Employer.

The rest of the Wikipedia entry on ‘Principal-Agent Problem’ is great and can be found here.

However, there is a solution.  Incentives must be properly designed to align the interests of the principal and the agent.  I would assess that consumerism, consumer-directed health plans, health reimbursement arrangements,  and health savings accounts are all efforts to create the proper incentives and correct the ‘Principal-Agent Problem.’

When the incentives are correctly aligned, I think we will see price and quality correlate—as well they should.

But until then, one should question if price really equates to quality in healthcare.

Click below to access the Compass Overview YouTube Video:





Have a Wellness Coordinator? How about a Consumerism Coordinator?

In meeting with some of our 1,700 employer clients, I have found that once the company gets above 800 to 1,000 employees, they often have a wellness coordinator who reports up through HR.  For smaller employers, often their broker/benefit consultant has a wellness coordinator that acts as an external resource for employers.  The wellness coordinators encourage preventive care, exercise, healthy eating habits, smoking cessation—all good things!  Those activities will help keep people ‘out of the healthcare system’ by keeping them healthy.

But, some people will still get sick.  Some people will still develop chronic conditions like diabetes and hypertension.  Some people will gets the aches and pains associated with arthritis and the ‘march of time.’  People will continue to generate claims.

The Compass Blog had reported a JAMA study that showed that the top 4 drivers of healthcare costs were 1) insurance administrative costs, 2) the price of healthcare facility services (i.e. hospitals), 3) the price of drugs and 4) the price of doctor services (i.e. office visits, etc).  Click HERE to read that post.

What is NOT on that list is ‘people getting sicker more frequently.’  So it is NOT the number of people creating claims that is increasing costs, but rather the price per claim that is increasing costs.

So if you have a wellness coordinator, why not a Consumerism Coordinator to help employees be better healthcare consumers and lower that price-per-claim problem?

I have found that some companies already have ‘Consumerism Coordinators’ but they don’t call them that, of course.  The Consumerism Coordinator is typically found at companies over 1,000 employees that has their own internal benefits hotline/call center and it is that person who manages that hotline that is essentially the ‘Consumerism Coordinator.’  Compass has a national restaurant chain with 6,000 employees on its medical plan that has such a Consumerism Coordinator who heads up the benefits hotline and the hotline staff are trained to help employees be better healthcare consumers (disclaimer—they use Compass Professional Health Services to support them in this role).

It works out great.  The employees have very high benefits satisfaction, their overall health plan costs went down by $4.4M and their average cost per MRI went down by over 30%.

The other key, of course, is that they moved all of their employees to a CDHP with an HRA to create the proper incentives for the employees to be better healthcare consumers and lower the price per claim, which helps them and their employer.

What does this mean for employee benefits professionals and healthcare consumers:

  • Wellness coordinators—great.  Keep keeping people healthy.  That is important.
  • Want an additional way to lower healthcare costs?  Attack the price-per-claim and do that by having a ‘Consumerism Coordinator’ and moving to a CDHP.

Click below to access the Compass Overview YouTube Video:






NY Times Reports: Doctor Societies Include Cost as Part of Guidelines

There is a great article by Andrew Pollack published on April 17, 2014 in the New York Times entitled “Cost of Treatment May Influence Doctors.”

The article describes how medical societies ranging from the American Heart Association (cardiologists) to the American Society for Clinical Oncology (cancer doctors) are starting to incorporate treatment costs in their recommended guidelines.  Doctors are often faced with the dilemma of what is best for the patient in front of them versus society as a whole.

Dr. Martin Samuels from Brigham and Women’s Hospital in Boston is quoted as saying doctors risk losing the trust of patients if they told patients, “I’m not going to do what I think is best for you because I think it’s bad for the healthcare budget of Massachusetts.”

Good point.  However, there are many medical decisions where the lower cost alternative is of equal efficacy or even more effective, so patient care does not need to be compromised and can even be improved for less cost.  In my opinion, that is the ‘low hanging fruit’ that can be addressed first.

For example:

1) The Choose Wisely guidelines have said that H2-blocker medications like generic Zantac should be used before proton-pump inhibitors like Nexium or Prilosec for most heartburn and indigestion.  H2-blocker medication is generally less expensive.

2) Those same Choose Wisely guidelines say physical therapy and mild pain medication should be used before an MRI is performed for low back pain that does not have any ‘warning flag’ symptoms.  Physical therapy and medication is generally less expensive.

3) Blood draws occur daily or multiple times a day in a hospital that are not necessary.  Doctors can lower cost and not compromise care just by ordering fewer blood tests. See Compass Blog: Johns Hopkins Study: Hospital Gives Price-Transparency to Doctors—Costs Go Down

What does this mean to employee benefits professionals and healthcare consumers?

  • There are big ethical issues to address when doctors and patients take cost into account, but one can attack ‘low hanging waste’ by reducing the number of high cost tests and treatments that have equal or better lower-cost alternatives.   My bias is that healthcare consumerism helps eliminate this ‘low hanging waste.”

Click below to access the Compass Overview YouTube Video:





HRA and HSA Funding Statistics

There is a great article from the Nov/Dec 2013 Healthcare Consumerism Solutions by the CEO of United Benefit Advisors. The article is based on an employer health plan survey that United Benefit Advisors performs.

Health Reimbursement Arrangement (HRA) Average Annual Funding by Employers:

  • Single Employee: $1,766
  • Family: $3,506

Health Savings Account (HSA) Average Annual Funding by Employers:

  • Single Employee: $574
  • Family: $958

From this information, you can see that employers are willing to fund HRAs with more dollars than HSAs.  One potential reason for that is the great control the employer has over the HRA dollars.  If the employee leaves, the HRA dollars do not go with them and the employee cannot spend the HRA dollars on non-healthcare expenses.

What does this mean for employee benefits professionals and healthcare consumers?

  • In our Compass experience, we have seen more HRA utilization by clients over HSA—and the super-successful company Serigraph that kept its healthcare trend flat for the past 10 years and was the subject of the book ‘The Company That Solved Healthcare’ also uses an HRA, not an HSA.  Additionally, Compass has seen more success with employers that fully fund the HRA at the beginning of the year, rather than over time.
  • Finally, these account-based plans are well within the Obamacare requirements of individual out-of-pocket maxes of $6,350 for an individual and $12,700 for a family.

Click below to access the Compass Overview YouTube Video:






Cleveland Clinic Reports: Arthroscopic Knee Surgery Often NOT Needed in Certain Circumstances

There is an excellent article in the April 2014 issue of the Cleveland Clinic Journal of Medicine entitled “The METEOR trial: No rush to repair a torn meniscus.”

The article describes how many arthroscopic knee surgeries are unnecessary.  Below are some great quotes from the article:

  • “Many patients who have osteoarthritis of the knee and a torn meniscus can defer having the meniscus repaired and undergo physical therapy instead.  If a trial of physical therapy does not help, they can opt for surgery later.”
  • “MRI often incidentally reveals meniscal lesions (knee cartilage damage) in middle-aged and older patients who have osteoarthritis and knee pain.”
  • “The use of knee arthroscopy has increased sharply in middle-aged patients in recent years.  Indeed, this demographic group accounts for nearly half of the knee arthroscopic procedures performed for meniscal tears…”
  • “in a later publication… 146 patients with symptoms consistent with degenerative meniscal tear but no knee osteoarthritis were randomized to undergo arthroscopic partial meniscectomy (knee surgery) or a sham procedure (fake sugery where the patient thinks they had surgery, but they really didn’t).  At 12 months, NO differences were noted between the groups…”

What does this mean for employee benefits professionals and healthcare consumers?

  • Orthopedic surgery and musculoskeletal claims are often a top 3 cost category for employers.  Arthroscopic surgery is a very common outpatient orthopedic surgery that can cost anywhere from $3,000 to $16,000 per surgery.  According to the above journal article, many of those surgeries are no more effective than physical therapy.  Not only is physical therapy much less expensive, but there is not the pain of recovery or risk of surgical infection and complication.
  • Consider putting in place a second opinion program or concierge program for employees to have them check with another orthopedic surgeon to see if surgery is really necessary—it many cases it may not.

Click below to access the Compass Overview YouTube Video:





Mayo Clinic Reports: Rx Prescribing Patterns—48% of People Took Prescription within Past Month

There is an excellent article in Mayo Clinic Proceedings from July of 2013 entitled “Age and Sex Patterns of Drug Prescribing in a Defined American Population.”

The article describes an analysis of medication prescriptions in one community in Minnesota, but also contains nationwide stats and many of the findings are relevant to employers and employee populations as well.

Some of the results may surprise you:

  • 48% of people took at least 1 prescription medication in the previous month in 2008, up from 44% in 2000.  So almost half of America is taking prescription medication and that proportion is rising.
  • The most commonly prescribed drug groups were: (1) Antibiotics (17% of prescriptions), (2) antidepressants (13% of prescriptions), (3) narcotic pain medication (11% of prescriptions), (4) high cholesterol medication (11% of medications) and vaccines (11% of medications).
  • Vaccines and antibiotics were the most common medications for children under age 19.
  • Antidepressants and narcotic pain medication were the most common for young and middle age adults.

If pain is not depression related, it is often musculoskeletal related—i.e. from chronic low back pain, arthritis pain, etc.

What does this mean for employee benefits professionals and healthcare consumers:

  • Depression and pain are significant challenges within an employee population, as is often revealed in the drugs that are prescribed.  I don’t have any silver bullets, but innovative scar-tissue release/chiropractic interventions like Airrosti have been shown to be effective in chronic musculoskeletal pain.
  • In general A LOT of people are taking prescription medication and in my opinion, RX management should not be treated as a silo within a health plan, but rather needs to be integrated in an overall plan to improve quality and lower costs.  Increased use of primary care, value-based benefit design, consumer-directed health plans, price-transparency and step-therapy all need to be integrated from the employee’s perspective to achieve results.  That’s what John Torinus did at Serigraph, and he kept his claims-cost trend flat for 10 years!

Click below to access the Compass Overview YouTube Video:





Legal Liability for ACOs—Who May Get Sued When Employees Go to ACOs

There is an excellent article in the Journal of the American Medical Association (JAMA) from last summer entitled “The Looming Threat of Liability for Accountable Care Organizations and What to Do About It” by H. Benjamin Harvey and I. Glenn Cohen from Massachusetts General Hospital and Harvard.

The article discusses how the competing priorities of an Accountable Care Organization (ACO)—i.e. patient care and cost-containment—may set the ACO up for being sued by patients.  Below is a specific example from the article:

“If a poor outcome occurs in a patient with congestive heart failure (CHF), a plaintiff could challenge an ACO’s more stringent CHF hospital admission criteria, asserting a prioritization of cost savings over patient care.”

The article also discusses an important difference between ACOs and managed care organizations (MCOs), which were in the 1990s and still are today essentially health plans and/or self-funded employers.  The difference is that MCOs are immune from member law suits regarding medical decisions under the Employee Retirement Income Security Act (ERISA) and ACOs are NOT.  Let me repeat, this article is saying that ACOs are not immune from patient law suits, but MCOs are.

Here is a specific quote from the article:

“As agents of cost containment in the 1990s, managed care organizations (MCOs) were subject to a wave of member lawsuits that alleged negligent medical decisions and that were supported by a common assertion that MCOs negligently prioritized their financial success over the health of their members.  However, in 2004, the Supreme Court gave MCOs some immunity against these types of state law tort claims by recognizing federal preemption (i.e. federal law blocked enforcement) of these claims for employer-provided health insurance plans subject to the requirements of ERISA…. Unlike MCOs, however, ACOs will generally not have the benefit of ERISA, which does not cover them; nor are they slated to get comparable federal liability protections.”

What does this mean for employee benefits professionals and healthcare consumers?

  • As ACOs try to financially manage capitated payments, they will have to very carefully navigate the waters of having their patients potentially sue them for possibly withholding care for the sake of cost savings.
  • In my opinion, this Catch-22 for ACOs is all the more reason to promote consumerism vis-à-vis the more ‘social engineering’/capitation approach of ACOs.  Give consumers choice and caveat emptor—buyer beware.  Consumers have to navigate other complex/potentially dangerous situations (buying a home, financial planning, buying fruit from a roadside vendor, going on a safari to Africa, etc.) and there is no centralized entity that is given a capitated dollar amount, which then controls the consumer’s choice.

But that is just my opinion.  I could be completely wrong.

Click below to access the Compass Overview YouTube Video:






McKinsey Reports: 65% of Exchange Networks Either Narrow or ‘Ultra-Narrow’

There is a great article in the March 25th, 2014 issue of Medical Economics entitled “Narrow Networks-Obamacare’s broken promise, and how doctors and patients can fight back”

The article by Keith Griffin describes how insurers have used Obamacare as the excuse to expand narrow networks, which they have been wanting to promote for some time.  Here are some stats from the article:

  • 30% of exchange health insurance plans have narrow networks and 35% have Ultra-narrow networks
  • In October 2013, UHC dropped 2,200 Connecticut doctors from their Medicare Advantage networks—doctors in that state subsequently sued UHC and the case is currently under arbitration
  • The Kaiser Family Foundation found “that patients newly insured by exchange plans are more likely to prefer less costly plans with narrow networks over more expensive networks with broader networks.”

There has always been a tradeoff between choice and cost.  The more choice you want of in-network providers, the more it will cost.  Less choice, less cost.  The pendulum swung in the less choice-less choice direction during managed care in the 1990s.  Then the pendulum swung back to more choice-more cost.  Now the pendulum appears to be swinging back again—not only at the individual level, but at the employer level as well.

What does this mean for employee benefits professionals and healthcare consumers?

  • Health Insurance Exchanges may allow for people to decide on their own how they want to balance choice with cost—rather than having it be decided for them by their employer.
  • Directionally, most people are moving in the less choice-less cost direction.
  • That less choice-less cost direction may mean downward pressure on physician reimbursement and overall provider reimbursement.

Click below to access the Compass Overview YouTube Video:





New York Times Reports: CMS Releases Payment $$$ Paid to Doctors

The New York Times reported in an article on April 9th entitled “Sliver of Medicare Doctors Get Big Share of Payouts” that CMS (Centers for Medicare and Medicaid Services) released their payments to individuals doctors yesterday for the first time.  In other words, data on what Medicare paid doctor-by-doctor in ALL of the US was released for 2012.  The article also contains a link where people can type in individual physician names to see what he or she specifically was paid.

An analysis of the data by the New York Times revealed that a very small fraction of physicians were receiving HUGE payments from Medicare.  To quote the first sentence in the article, “A tiny fraction of the 880,000 doctors and other health care providers who take Medicare accounted for nearly a quarter of the roughly $77 billion paid out to them.”

The article goes on to state that the top 100 doctors were paid a total of $610 million, including one physician who was paid $21 million in 2012 alone.

A follow on article in the April 10th New York Times explains how CMS did not want to release the physician payment data, but only did so after they were sued by the Wall Street Journal and after a judge ruled in the newspaper’s favor.

There is a wealth of data contained in this release by CMS that will give insight into:

  • physician-specific practice patterns
  • hospital and group practice-specific practice patterns
  • geographic practice patterns

Analysis of the data has also revealed that some of the highest paid physicians were also major political contributors.

This CMS release is a real win for transparency.

What does this mean for employee benefits professionals and healthcare consumers?

  • Practice patterns for providers on their Medicare patients is likely similar to their practice pattern for privately insured patients—therefore, this data may be very useful to health plans, employers and healthcare consumers.  It is freely downloadable.

Click below to access the Compass Overview YouTube Video:






CDC Reports: 1 in 25 Patients Contracts Hospital-Acquired Infections During Stay

The Centers for Disease Control (CDC) released results from a study a few weeks ago, which found that 648,000 patients at 183 hospitals that they surveyed had suffered from a hospital-acquired infection. The CDC study is summarized very well in the following Washington Post article by Lenny Bernstein: http://www.washingtonpost.com/news/to-your-health/wp/2014/03/26/one-in-25-patients-has-an-infection-acquired-during-hospital-stay-cdc-says/

The article has a great infographic on how to avoid hospital acquired infections as well

Here are some more stats from the article:

  • Most common hospital-acquired infections are (1) pneumonia (22%), (2) surgical site infections (22%), (3) gastrointestinal infections (17%), (4) urinary tract infections (13%) and (5) blood stream infections (10%).
  • Common germs that cause hospital acquired infections are Clostridium Difficile and Methicillin-Resistant Staph Aureus (MRSA)
  • Blood stream infections have actually decreased by 50% and surgical site infections have decreased by 20% since 2008.

The article has a great infographic on how to avoid hospital acquired infections as well.  Interestingly, the very first recommendation on the infographic is  “Speak Up.”  I have asked healthcare consumers to speak up repeatedly in this blog.  The inertia of substandard care has to–in part–be stopped by healthcare consumers themselves.  Not speaking up, not educating employees to speak up, not educating health plan members to speak up is causing infections and suffering that does not need to happen.

What does this mean for employee benefits professionals?

  • 1 out of every 25 employees that is hospitalized suffers needlessly from an infection that they probably should not have picked up.
  • YOU are paying for an often-times avoidable and unnecessary infection for 1 out of every 25 of your members that is hospitalized.