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Why Healthcare Must Be Transparent

The economics of American healthcare is undergoing a profound shift. Employers, policymakers and other purchasers are increasingly paying healthcare providers based on the benefit to the patient. For instance, the Centers for Medicare and Medicaid Services, (CMS) the agency that runs Medicare, adjusts payments to hospitals based on how well they perform on measures of patient experience, readmissions and patient safety. Private payers, too, are increasingly negotiating contracts tied to quality and safety performance.

Understandably, the changes to payment heighten sensitivity among hospitals and doctors about how their performance is measured. Even measures that have been exhaustively tested and validated face new levels of scrutiny when money is on the table. Many providers even call for delaying the changes in payment until measures can be perfected even more.

But employers and other purchasers of healthcare are determined to move forward with new payment standards without delay and will not await measurement perfection. After decades of enormous investment in healthcare with little or no accountability for quality, purchasers place a high value on understanding quality and don’t intend to reverse course and continue simply paying for everything. Employers and purchasers do not intend to return to the days when consumers had no information to make an all-important decision about which hospital to use, and purchasers paid the bill regardless of the quality of the patient experience. Purchasers want numbers, figures and rates on safety, quality and cost, calculated with vigilance, responsibility and respect for science. After decades of hard work and research, this is finally available to them.

See also: Not Your Mama’s Recipe for Healthcare  

Transparency has been the key to change. According to a multi-stakeholder roundtable convened by the Lucian Leape Institute of the National Patient Safety Foundation in 2015, “During the course of healthcare’s patient safety and quality movements, the impact of transparency – the free, uninhibited flow of information that is open to the scrutiny of others – has been far more positive than many had anticipated, and the harms of transparency have been far fewer than many had feared.” The effect is so dramatic, the report concluded, that “if transparency were a medication, it would be a blockbuster.”

The report cited my organization Leapfrog’s first-ever reporting of a measure of maternity care, early elective deliveries. These are deliveries scheduled early without a medical reason, and they pose risks to the mother and the baby, and frequently result in babies unnecessarily starting life in the neonatal intensive care unit. There had been many efforts in the past to curtail these unsafe deliveries, but it wasn’t until Leapfrog publicly reported rates by hospital that significant progress was made. In just five years, the national mean dropped from 17% to 2.8%.

Transparency has also accelerated reductions in errors and accidents that kill or harm patients in hospitals. The 2014 estimates from the federal Agency for Healthcare Research and Quality’s Medicare Patient Safety Monitoring System, which reports patient safety indicators, show progress in reducing hospital-acquired conditions, including a drop from 28,000 inpatient venous thromboembolisms in 2010 to 16,000 in 2014. This means 12,000 fewer patients in 2014 developing potentially fatal blood clots. It is very unlikely that we would have achieved a reduction of this magnitude without transparency.

Measurement and transparency do not have to be perfect to achieve remarkable progress in quality improvement. We see this in more transparent industries outside of healthcare every day. For instance, researchers studied the recent initiative in Los Angeles to issue safety grades rating the hygiene of restaurants and found it associated with a nearly 20% decline in hospitalizations from foodborne illness in the program’s first year. The composite grade used in LA was fairly rudimentary by the standards of measurement scientists in the healthcare industry, but the grade was nonetheless effective in educating consumers and galvanizing improvement.

Providers and health care executives sometimes point to flaws in their medical record and billing systems as problems that should delay the use of certain measures. However, public reporting is often necessary to break logjams in data collection. For instance, New York state’s public release of surgical mortality data for coronary artery bypass grafting procedures jump-started the movement to define and more carefully collect the procedure outcome data. Providers will get better at data collection when the data is used.

See also: Is Transparency the Answer in Healthcare?  

Current healthcare performance measures may not be perfect, but good people are working hard to steadily improve their validity – and that work should be done in the sunlight of transparency. Employers will gladly work collaboratively toward that end, as long as the work continues without delay. We have all waited too long for transparency and sensible payment, and the cost in human lives and suffering is already too high.

Important Alliance to Fight Health Costs

The Wall Street Journal reported that 20 large U.S. companies joined to fight high healthcare costs, launching the aptly named Health Transformation Alliance. Employers account for one in five dollars spent on healthcare in the U.S., yet they have relatively weak influence in the marketplace. But these influential companies are intent on aggressive action. With this kind of unified leadership, the alliance promises to shake the foundations of our health care economy.

There have been other efforts to harness the power of the business community to improve health care. My organization, the Leapfrog Group, is one such effort, founded by Business Roundtable in 2000 to address quality and patient safety in hospitals. Based on what we’ve learned over the past 16 years, here are three key principles for the alliance to start with:

  1. Lowering costs won’t automatically lower prices.

Whenever the subject of cost reduction comes up, some providers tout the enormous cost savings they have put in place through improved efficiencies, better technology or less invasive procedures. Recently, they have also pointed to the potential of large hospital system mergers to reduce costs through economies of scale. But employers are right to wonder why their own healthcare price tag continues to rise, despite these marvelous advances. Why don’t they see the cost savings?

Simply put, cost savings to the provider are not the same as cost savings to the purchaser. This sounds like such an obvious point. But the obfuscation over whose costs are saved persists and trips up progress year after year, with purchasers left scratching their heads. The alliance members will succeed in cutting their own prices only if they clearly demand that cost-reduction strategies have visible and substantial effects on their own bottom lines.

  1. Lowering prices won’t automatically lower costs.

Even if purchasers do succeed in lowering prices, the cost-reduction job is not done. That’s because the amount of waste in healthcare is profound. The Institute of Medicine estimates that as much as one-third of all costs are associated with unnecessary services, errors, infections and management inefficiencies. Not all providers are the same, and some incur much more waste than others. Whatever the price of a particular procedure, it’s no bargain when there are infections, complications and mismanagement—or if the procedure wasn’t medically necessary in the first place.

This is not chump change, this is game change. A 2013 study in the Journal of the American Medical Associaton (JAMA) reported that, on average, purchasers paid $39,000 extra when a patient contracted a surgical site infection. That excess doesn’t show up on the claim as a line item called “waste.” It is buried in a series of excess fees, tests, treatments and time spent in the hospital. Employers intent on cutting costs must factor wastefulness into the pricing equation.

  1.  Focus on the market incentives.

Our system of costs and pricing creates perverse incentives. The more a provider wastes, the more it can bill the employers. New financing models are slowly emerging, aimed at achieving value—the novel idea that payments align with patient outcomes. One of the most promising models is called “bundled pricing,” in which a health system is paid one total price for a particular procedure, including physician fees, radiology, hospital charges, etc. In this model, a provider is given incentives to actually reduce waste, so it maximizes profit under the bundle.

Some large employers have developed bundled pricing arrangements with a select group of health systems, for a select group of procedures. Walmart is a leader in this, as are employer members of the Pacific Business Group on Health. What have they found? A significant reduction in waste and better care for employees.

Another promising use of bundled pricing is coming from international medical tourism. Health services and pharmaceuticals are often much less expensive overseas than in the U.S. Most international providers offer bundled pricing and concierge hosting services. For example, Health City Cayman Islands offers bundled prices for certain heart and orthopedic surgeries, including all facility and physician fees, along with pre- and post-operative care at a lovely beachfront hotel. Its prices are one-fourth to one-fifth those for comparable services in the U.S.

The problem with medical tourism: determining the quality of international providers. Employer groups, like the Health Transformation Alliance, must address this in their work. Once again, waste and quality need to be factored into the cost equation.

3 Surprising Hazards Of Worksite Wellness

In an entirely entertaining Forbes online article, a truly effective healthcare leader, Leah Binder, lists the following three hazards of worksite wellness programs:

1. Dismaying and Alienating Employees. Who today doesn’t already know that smoking is unhealthy?

2. Bad Programs Don’t Save Money. Too many wellness vendors simply fabricate results.

3. Potential Harm to Employee Health. False positives on wellness-driven testing can lead to employee harm and huge, unwanted spending.

Binder writes “I don’t come to this conclusion lightly.”

Further, “…I believe we must call out poorly designed programs that prey on well-meaning employers and other purchasers.”

She points to a great book by on this topic by my friends and colleagues Vik Khanna and Al Lewis, Surviving Workplace Wellness…: With Your Dignity, Finances and (Major) Organs Intact.

Insurance Needs a New Vocabulary

Lots of industries face criticism because they talk the talk but don’t walk the talk — the computer industry, for instance, long talked about making machines intuitive but required users to work their way through manuals and memorize long series of steps before they could accomplish anything. But the insurance industry doesn’t even talk the talk yet.

Sure, everyone is talking about improving the customer experience, but look at the words we use. Many are opaque — the industry talks to itself, somehow unaware that customers are listening and are turned off by the gobbledygook. Some words are even offensive — we’re saying things to customers that we really don’t want to be saying.

We have to at least get our talk — our vocabulary — straight before we tackle the much deeper issues and figure out to really engage customers and address their evolving needs.

My least-favorite word is one so widely used that few will find it offensive: “adjuster.” My problem: If I’m filing a claim, I don’t want it adjusted. I want it paid.

Yes, I realize that processing claims is complicated and that all sorts of adjustments need to be made. I also realize that no industry simply pays when a claim is made against a company. But if you send me an “adjuster,” you’re telling me right off the bat that you don’t trust me, and that’s a lousy way to start an interaction. It certainly isn’t any way to start a relationship, which is what insurers insist they want with customers these days. Don’t trust me, if you must, but send me a “claims professional” or simply a “customer service representative.” Don’t send me an “adjuster.”

Less offensive but still unnecessarily bad are words like “excess” and “surplus.” The insurance may be categorized as excess and surplus to you, but not to me, the customer. I’ll thank you to treat my needs with the respect they deserve (says the customer).

Some words need to go away because they already have meanings — and they aren’t the meanings assigned to the words by the insurance industry. A binder is a plastic cover with three rings that you buy for your kids at this time of year as they head back to school; it is not temporary evidence of insurance. An endorsement is something you put on the back of a check — or at least used to, before banks simplified deposits. An endorsement is not something that modifies an insurance policy.

Mostly, many terms need to be revisited because they are opaque, and often archaic:

  • “Underwriting”? How about “assessing risk”?
  • “Actuary”? That’s a legitimate word, but I prefer the European form: “mathematician.” (“What do you do at XYZ Insurance Co.?” “I’m the mathematician.”) “Mathematician” just seems friendlier.
  • “Capitation” and “subrogation”? Important functions, but there have to be layman’s terms that can be substituted.
  • If I’m buying life insurance, good luck getting me to grasp intuitively the difference between whole life and universal life; “whole” and “universal” are practically synonyms in this context.
  • “Inland marine”? Please.

While we’re at it, let’s do away with the acronyms. All of them — at least on first reference, and mostly in subsequent references, too.

Changing the language will be hard because so many in the industry subscribe to what I think of as a 19th century sort of approach to business: Let’s make things seem as complicated as possible to justify the existence of lots of experts and intermediaries and to demand nearly blind faith by clients. This is sort of the “don’t try this at home, folks,” approach to business. Leave the complicated terms to us.

The approach has worked for insurers for a very long time. It has worked for doctors and lawyers. If a cynical T.A. in a philosophy class in college way back when is to be believed, it worked for Hegel, too — he supposedly wrote a short, clear version of his big idea (thesis/antithesis/synthesis), and no one took him seriously; he then wrote a 1,000-page, nearly impenetrable version, called it merely the introduction to his ideas and found lasting fame.

But things have changed since Hegel wrote in the early 1800s. Now, if I want to remind myself about Hegel, I turn to Wikipedia and its clear, little summary; I don’t crack open The Phenomenology of Spirit. Change has accelerated in recent years, to the point where even doctors find themselves having to communicate more with patients in plain English.

If doctors can simplify how they communicate about the mind-boggling issues involved in medicine, then the rest of us can figure out how to talk the talk in insurance. We need to begin by taking a hard look at every term we use and revising many of them, from the perspective of a total newbie customer, so we talk to customers the way they expect us to talk to them.

That’s the only way to lay the groundwork for the broad improvements in the customer experience that we all want to deliver and that customers are increasingly demanding.

Federal Health Rule Hits Firms for Millions

America’s Health Insurance Plans (AHIP) gather for their big meeting in Nashville this week, with many significant issues on the agenda, some of them headline news. For instance, industry insiders are watching closely the Supreme Court’s pending decision this month on King v. Burwell—which could remove health insurance subsidies in states that opted out of Obamacare’s Medicaid expansion.

There’s a less well-known but extremely important issue many business leaders want AHIP to tackle this week: “embedded MOOP.” That sounds like perhaps a form of fertilizer that could be used in a garden but actually refers to a, well, variant of fertilizer that Washington is known for producing: Embedded MOOP is a brand new regulation threatening to cost employers and other purchasers hundreds of millions of dollars this year alone.

MOOP stands for “Maximum Out of Pocket,” and it refers to the maximum amount your health plan will require you to pay for your health services in a given year—over and above what you contribute to your premiums. After you’ve paid out your deductible and copays and reached the MOOP, your health plan pays 100% of your subsequent bills for the rest of the year.

“Embedded MOOP” focuses on the out of pocket maximums applied to family plans. Typically, the MOOP for a family plan is two or three times higher than the MOOP for an individual plan. So, say your plan has a MOOP of $6,000 for individuals and $12,000 for families. You have a hospital stay that costs $50,000, for which your plan pays 80%, so you are responsible for the remaining 20%, or $10,000. If you have an individual plan, you won’t have to pay the full $10,000, because you would hit the maximum out of pocket cap at $6,000. But if you are part of a family plan, you would, because you haven’t hit the family plan maximum of $12,000.

That’s how things worked until a couple months ago, according to government directive. But now, for certain kinds of high-deductible health plans, the federal government just issued an ironically named “clarification,” which confusingly reverses those earlier requirements, effective immediately, or maybe effective in 2016–the lawyers watching this say the regulation can be read either way. The “clarification” to federal health rules says that MOOP applies separately to each individual “embedded” in a family plan, so each person covered under a plan has the individual cap.

Back to you in your hospital bed with the $50,000 bill: In this new interpretation of federal health rules, you won’t pay more than the $6,000 individual MOOP regardless of whether you are covered under a family plan or an individual plan.

Admittedly, a $4,000-plus windfall sounds like good news. Who cares if health plans don’t like it? But here’s the problem: The plan doesn’t pay the $4,000; your employer does–and so do you.

AHIP estimates 17.5 million Americans are enrolled in the kind of plans subject to this federal health rule on embedded MOOP. We might reasonably estimate that 3% of them, or about 500,000 people, will encounter a major hospital bill this year. If employers lose thousands of dollars on half of them, or even a quarter of them, there’s not enough room on my calculator for the zeroes in the dollar-figure estimate of loss. The bottom line: Employers will be out hundreds of millions of dollars because federal officials changed the rules mid-game.

Employers have to cover this loss right now, so many are hastily redrafting their HR budgets as you read this. The money will come from employee premiums, lower wage increases, reduced benefits or creating fewer jobs. And even though the new regulation sounds friendly to families on its face, in fact it makes already expensive family coverage even less affordable, because family premiums are likely to skyrocket with this new rule in place.

This is not the first time lawmakers cavalierly forced business to shoulder a major new healthcare cost. In fact, it’s a tradition. Commercially insured patients pay orders of magnitude more for each individual service than taxpayer-funded payers like Medicare and Medicaid do. That amounts to a subsidy to the tune of hundreds of billions of dollars transferred wholesale to the healthcare system from the workers in America’s economy.

Policymakers don’t need to send certificates of appreciation to purchasers for their willingness to pay for the U.S. healthcare system. But, at the very least, government could stop scolding and punishing business for that investment. Alas, in 2018, employers will be hit with the so-called Cadillac tax, an excise tax on purchasers that have the audacity to spend too much on healthcare. And last year, purchasers were admonished by a federal agency for investing in employee wellness programs that they designed explicitly in line with Obamacare. Now, we have the embedded MOOP pummeling of 2015.

In the short term, the administration needs to revisit this regulation pronto, and we hope to see AHIP make the case this week. In the long run, it’s time lawmakers treated purchasers’ role in healthcare with less disregard and more common cause.