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February 24, 2016

Why Healthcare Costs Soar (Part 3)

Summary:

The big question is: Why are more self-insured employers not engaging directly with healthcare providers?

Photo Courtesy of Adrian Clark

In Part 1 and Part 2 of this series, David Toomey and I described a wildly successful collaboration with Virginia Mason Medical Center (VM) and a few Seattle employers.

During the the time of the VM collaboration, we invited major physician groups to meet with the employers. One of the most memorable meetings was with the CEO and chief medical officer (CMO) from a very well-regarded physician group in Seattle that has high fees but low performance.

As you would suspect, the employers were better prepared for this meeting than they had been for the meetings with VM. When the CEO and CMO talked about their strong emphasis on quality, the employers asked about quality monitoring and the process of care. Rather than acknowledging opportunities for further analysis and professing an openness to collaboration, the providers responded with confidence about their model of care.

Afterward, the employers expressed concerns about whether this premier provider could improve care and reduce costs. We posed a couple of questions: Are you saying you don’t want this provider in the network? Are you really ready to tell your leadership that this physician group, which many executives use, is not in the top tier?

The employers were aware of the dynamics with network configuration and the trouble that businesses have when a provider is dropped from the network and even a few employees complain. The employers responded that they wanted to have additional meetings with this group, because of its reputation.

After a couple of follow-up meetings, the employers recognized that this group was not committed to the process of care that they expected. They decided that the group should not be in the performance-based network. Importantly, the employers were now equipped to discuss their rationale with their leadership teams.

The CEO of the provider group felt respected, because of the time the employers spent with him, even though he did not like the outcome. He eventually acknowledged the group had work to do.

Employers make purchasing decisions with suppliers every day. For some reason, the healthcare procurement process involves the carriers and other vendors but often skips the actual suppliers of healthcare (except in a fairly small, but rapidly growing, number of major corporations).

The big question is: Why are more self-insured employers not engaging directly with providers?

In a broad network, there will be a bell curve around performance. Most employers say they want quality providers in their networks, but half the providers in their broad-based networks are below average. While everyone espouses “quality,” the variation in care is significant, and the medical ethics around treatment often drive that differential. Healthcare is big business. It is time to reward employees and channel them to primary care physicians and specialists who are truly committed to medically appropriate care.

A major reason why healthcare costs grow faster than general inflation is because most self-insured employers are simply not dealing with healthcare providers in the way we have described in this series of posts.

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About the Author

Tom Emerick is president of Emerick Consulting and cofounder of EdisonHealth and Thera Advisors.  Emerick’s years with Wal-Mart Stores, Burger King, British Petroleum and American Fidelity Assurance have provided him with an excellent blend of experience and contacts.

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About the Author

David Toomey is a senior healthcare executive with 30 years of extensive healthcare expertise in addressing the fragmentation within the healthcare system. He spent 25 years with two national insurance companies, before he spent close to 5 years in an early stage healthcare company.

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