A Blog for Employer and Union Benefits Managers and Their Advisors

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bklepper-111516Welcome!  There are few go-to sites dedicated to the very significant challenges faced by health benefits managers, consultants and other health benefits professionals.

Health care purchasers are under pressure to deliver better quality care at lower cost, but are besieged by lack of knowledge, misinformation, lack of disclosure about conflicts of interest, and intentional obfuscation by brokers, health plans, PPOs, PBMs, wellness programs and other health care interests. There is relatively little evidence-based information about what really works and why, and how you can access those opportunities without disrupting your in-place conventional health plan, especially when it is almost certainly not in that plan’s interests for you to do so.

So Care & Cost will post meaty, useful articles aimed at the health care purchaser community – employers and unions – from benefits managers and advisors who are managing risk and getting measurable results in pragmatic but often unconventional ways.

Take a look and, if you like what you see, pass Care & Cost around to your colleagues. The best way for us to gather the strength that can leverage change is for us first to come to a common understanding of the problem and its solutions.

Getting Noticed As A High Performance Vendor

Brian Klepper

Originally published in the Valid Points newsletter on 11/07/18.

All growing health care organizations struggle for visibility. Within the vast health care universe, thousands of companies strive to be noticed as better and different than others competing in the same spaces. Organizational health care buyers face an overwhelming signal-to-noise challenge, trying to discern whether programs improve quality and cost and, if so, by how much. It’s a market beleaguered by untrustworthy information, and it’s an arrangement that favors vendors’ interests, at purchasers’ expense.

Those delivering higher value – consistently better health outcomes and/or reduced costs – may be surprised to find lukewarm reception from the health plans they thought would be eager to learn of new ways to deliver better results. The cold reality is that most health plans make more if health care costs more. Only organizations that are at financial risk for management of quality and cost – e.g., fully insured health plans, managed Medicaid plans, Medicare Advantage plans – are likely to be eager for approaches that can streamline processes and improve outcomes.

More promising clients are organizations that can directly benefit from higher value health care. Organizational purchasers – employers and unions – fit this profile. So do firms, like clinic and medical management companies, that sell themselves as full continuum risk managers for purchasers. And health plans that see the potential to undercut the market by offering a richer benefit design for less money than is available through conventional approaches.

There are questions that can help purchasers discern whether a vendor is a high performer. For example, can the vendor provide credible enterprise-wide, rather than anecdotal, data showing better health outcomes and/or lower costs than conventional approaches? Can it provide client testimonials (along with contact information, so you can talk independently with its clients) showing that its experience aligns with the vendor’s performance claims? Is it scalable, meaning that it can easily set up operations in new locations that get the same results? Are its impacts enduring (or sticky), meaning that its clinical and financial management processes continue to yield results over time? And is it confident enough in its capabilities that it is willing to put some or all of its fees at risk, against the performance targets it claims it can achieve?

Fastidious purchasers can certainly take responsibility for a vendor due diligence process, which has been the norm in health care purchasing for decades. But as most employer and union benefits managers know, that can be a strenuously onerous and inefficient undertaking, especially when multiple vendors are involved.

An alternative is for vendors to make it as easy as possible for purchasers to have confidence in their performance claims, by subjecting their processes to credible independent, third party assessments. Validation Institute validation does this by systematically reviewing the analytical elements – the data sources, data and calculations – of a vendor’s performance claims, to see whether they align with promised results. Alignment and the vendor receiving validation can, to a reasonable degree, supplant or bolster the purchaser’s due diligence, giving purchaser confidence that actual outcomes will be close to those that were promised.

While the validation process tests the accuracy of performance claims, the evaluation process associated with the Health Value Awards seeks to identify superior performance. It assumes that the vendor has been validated, and then, using independent, third party judges again, asks both objective and subjective questions that give insight into the market viability, importance and elegance of the solution at hand.

In a complex and chaotic market, the goal is to provide an evaluation process that is unconflicted and above reproach, that can project credibility so that purchasers can comfortably turn to it for guidance. Organizations like Good Housekeeping and Consumer Reports have achieved this kind of authority over decades, but have primarily focused on evaluating consumer goods and being a resource to individual, not organizational, purchasers. Health care is a more intricate, involved and emotional buy in a sense, but it is also one that comes down to determinations of quality and cost.

Health care organizations that believe that they deliver better value and that have the data to support that can, for little cost, obtain credible independent third party assurance that their performance claims are true. Organizational purchasers will and should scrutinize the third party’s processes, but once satisfied, will, for the most part, turn over due diligence.

Which makes third party validation and demonstration of superior results the fastest route for a health care vendors to stand out in a sea of competitors.

Brian Klepper is a health care analyst and the Executive Vice President of The Validation Institute.

Could We Be at the Edge of Health Care’s Tipping Point

Brian Klepper

Originally published 10/25/2018 in the Valid Points Newsletter

Health care wonks play a game where they wonder whether health care really is changing in ways that are palpably better for everyone. Everyone, that is, except for the senior executives of the drug and device firms, electronic health record companies, major health plans and health systems that have become so adept at relentlessly squeezing more money out of us and everyone we know. There’s a sort of desperate hopefulness afoot here, the idea that our activities are undermining the stranglehold on policy and the marketplace that keep the current regimes in place and thriving. Then reality kicks in and we remember that, so far, not much has changed. Health care continues, as Dave Chase points out, to steal the American dream.

That said, it is impossible to not notice positive progress in health care market dynamics. While I’ve alluded to many of these observations in previous comments, its worth recounting a few trends.

  • The table above shows that health plans have been spectacularly successful over the past decade, but they’re in an increasingly difficult spot now. Major health plan average stock price growth over a 37 quarter period ranges from almost 16% per quarter for Anthem to 29%/quarter for Humana. Effectively, these health plans’ earn more as health care costs more, which gives them every incentive to tolerate and encourage poor and inappropriate care, as well as egregious unit pricing.
  • The health plans’ breathtaking stock price performance is a mixed blessing. On the down side, US health care costs continue to spiral upward and more businesses and individuals are being priced out of the market, which means that a decreasing pool of insurables is available. Worse, while it may be counter-intuitive, these health plans can’t buy into tactics that would make health care more efficient. Doing so would reduce total spend, in turn reducing health plan earnings, stock price and market capitalization. Relative health care upstarts like Walmart and Amazon, with health care businesses that are a sideline rather than core to their operations, do not have these constraints.
  • There is anecdotal evidence on many fronts that organizational health care purchasers – employers and unions – are losing patience with a health system that is obviously intent on taking every advantage possible. Colleagues in the health care stop loss captive community say that interest in their structures has never been higher and that they’re flooded with interest from self-insured companies of all sizes. This could be understood as an effort by employers and their advisors to access new mechanisms of benefits management efficiency.
  • Purchasers’ and other risk-bearers’ are increasingly receptive to approaches that go around health plans’ standard offerings in high value niches. Many jumbo and large employers have long track records of being willing to try alternative solutions. But many more now appear to be interested in out-of-the-box programs for high value niches – e.g., musculoskeletal, drug management, cardiometabolic, reference-based pricing/bundled payments – as well as innovations in health system arrangements. (See, for example, the direct contracting arrangements between organizations like Intel and Memorialcare in Irvine, CA.) We’re also seeing focused interest by non-conventional purchasing collaboratives – e.g. industry associations – that bring together relatively small employers – <100-2,500 employees – into aggregations of >100,000 lives that have much more substantial purchasing leverage. And we’ve also noticed heightened interest in aggressive health care risk management by third party administration firms, second tier insurers and worksite clinic firms that believe they can rapidly win more market share by significantly reducing health plan cost and/or delivering a substantial return-on-investment in their programming.
  • Decades of fee-for-service reimbursement and policy dominated by industry lobbies have created a health system bloated and dependent on excess. Care and cost patterns for common conditions and procedures are remarkably different than in the health systems of every other industrialized country, and most pronounced in the relative roles of primary vs. specialty care services. Each inefficiency that has become taken for granted throughout US health care is an opportunity for improvement, and every health care niche is brimming over with innovations that exploit these opportunities.
  • The potential impacts are profound. In addition to very significant available improvements in health outcomes, the math associated with high performance health care clinical, financial and administrative risk management modules suggests that more than half of current spending – about $1.75 trillion annually – could, in theory, be recovered. But let’s assume that that number is only for riders on the crazy bus, and that the real number is only half that. We’re still north of potential savings of $850 billion annually.

There’s no doubt that, with its control over policy and much of the marketplace, the most powerful companies in the health care industry have a vice grip on virtually every aspect of how it works. That said, purchasers are hitting a wall and are more willing than at any time in the last several decades to try solutions that are unconventional. Built on deep subject matter expertise in high value niches and lubricated by ubiquitous technologies like analytics, artificial intelligence and blockchain, innovations are mushrooming in every part of health care, offering unprecedented care and management opportunities for a fraction of previous cost and pricing. And health care’s current value proposition is so upside down that investors see massive opportunity in many niches.

Assume that several massive, extremely capable players – Walmart, Amazon and Google are the companies that come to mind most immediately and prominently, but the potential for well-funded startups is also there – can harness these vectors. In addition, these organizations could create new administrative efficiencies, identifying, harnessing and scaling high performing organizations within specific high value health care sectors. Assume their approaches allow them to make purchasers offers they can’t refuse – say, 20%-25% lower than current health care spend within specific care niches or across an enterprise. It’s difficult to see how this couldn’t achieve very significant, positive and rapid structural change in the industry, and relief from the terrible circumstances that have evolved in health care over decades.

So there’s reason for optimism, but with a big dose of caution. This kind of scenario might save us from the devils we’ve come to know all too well. What we don’t and can’t know at this point is who the devils we don’t know are.

Brian Klepper is Executive Vice President of The Validation Institute.

Getting High Performance Health Care Services Into the Market as Quickly as Possible

Brian Klepper

Originally published 10/18/2018 in The Valid Points Newsletter.

BKlepper 102018Even though high performing health care services may offer strong value propositions, being unconventional makes them still a hard sell. The fixes of legacy health care organizations are in, and their service networks and methods are solidly entrenched. Innovation capable of displacement is never warmly received by incumbents.

Accordingly, approaches that negatively impact the benefits advisor’s revenue stream or that can be seen as chipping away at a health plan’s control of the case, probably will be opposed as threats. Powerful savings may be weighed against even minor disruptions. And then there’s the issue of whether the new service will require the benefits manager to manage a new, separate contract.

Two principles are relevant here. The first is The Godfather Principle, which advises that to increase the probability of being considered, vendors need to make offers that purchasers can’t refuse. A proposal might go something like, “If you agree to work with us, we’ll financially guarantee that your population’s health outcomes will improve and/or your total health care spend will drop by – pick a big number that you’re sure you can achieve – 20-25 percent.” This figure exudes experience with and confidence in your approach, and is so large that if the benefits manager turns it down out of hand and the company’s CFO hears about it, the benefits manager’s job could be in peril.

Which bring us to the second principle: Administrative Simplicity.Promised savings as large as I’m suggesting also imply that more than one risk management approach (or “module”) is necessary to achieve them. Coordinated collaboration between several high performance risk management companies, can work together on a “platform” that, over time, integrates each module’s key functions – e.g. training, communications, analytics, outreach – into a seamless set of capabilities that can be easily accessed by patients and purchasers.

In other words, organizational health care purchasers are already administratively overwhelmed and don’t want additional administrative management responsibilities. They most certainly don’t want oversight of a slew of narrowly focused services – e.g., diabetes management, large case management, care navigation, allergy services – which may, together, deliver better results at the end of the day but that would create a labor intensive hardship to monitor. So the smart money is for high performing vendors to find each other and come together under a set of unified contractual or organizational terms, making it as easy and productive as possible for purchasers to work with them.

Within the spheres that my colleagues and I inhabit, it’s clear that that organizational purchasers are becoming sufficiently fed up with the legacy health care industry’s predatory practices that they’re increasingly willing to consider exciting, high performing new solutions. Even under the most favorable circumstances, the high performers would be well-served to appreciate the magnitude of the challenge, and to begin to optimize their processes to facilitate as rapid penetration of the market as possible.

Brian Klepper is Executive Vice President of The Validation Institute.

The Box and the Opportunity for Health Care Change

Brian Klepper

Originally published 10/09/2018 in the Valid Points Newsletter

Below are calculations of major health plan stock price growth over a 37 quarter period between May 15, 2009 and September 28, 2018. Note that, during this time, the big plans’ stock price value skyrocketed between 585% and 1,072%, about 2.75x the growth of the Dow Jones Index and 2.25x the growth of the S&P. Humana and United have sustained a breathtaking average per quarter growth of 29.0% and 26.1% respectively.

While stock price is driven by many factors, including historical and expected profitability, these data clearly reflect the truth that health plans earn more if health care costs more. The plans have no reason to remove important element that inflate cost – e.g., low value network providers or unnecessary/inappropriate care. The overarching incentive within the current model is to facilitate more care and more expensive care.

A corollary of these dynamics is that the major plans’ financial performance is undermined by approaches that drive down cost. Restructuring to identify and scale high value services is not an option because total spend would surely drop, dragging earnings, stock price and market capitalization down with it.

The plans can make hay while the sun shines and use that largess to buy into other more currently vibrant lines of business. Even so, they know they’re in a box, stuck trying to maintain a volume-based, low value system in a market that is increasingly adamant about searching for and buying high value.

Major health care newcomers, especially those with heavily diversified interests like Walmart and Amazon, are not saddled with the legacy firms’ perverse constraints, which lends them a strong advantage in a market susceptible to alternatives. Unlike incumbents, they don’t depend on doing the wrong things in health care to prop up market value. They can win by driving better value.

All this suggests there’s a way out of our excruciating health care dilemma. The old guard will be hard pressed to maintain in a market that seeks value, especially when powerful new aggregators appear capable of stepping into the breach and an army of capable risk managers delivers superior results in an array of high value niches.

But that approach depends on high performing vendors convincing self-funded health care benefits managers and their advisers to go around the conventional health care management approaches that have led to ever increasing costs over decades. To succeed, vendors will need to make offers that purchasers can’t refuse. We’ll focus on what that might look like in a future column.

Brian Klepper is The Validation Institute’s Executive Analyst and Editor.

Guaranteeing Health Care Performance

Brian Klepper Originally posted 9/28/18 on Valid Points BKlepper In hunting for high performance health care organizations – those that consistently deliver better health outcomes and/or lower costs in high value niches – we can assume that, at a minimum, really excellent vendors have credible long term (>24 months) data that demonstrate their superior performance. Their clients enthusiastically shower them with testimonials. They can scale their operations to generate the same excellent results in new locations or with new populations. Their impacts endure over time, continuously driving improved performance. Perhaps most importantly, though, the leaders of these companies typically have become so comfortable with the dynamics of their management processes that they’re willing to put their fees at risk against the performance targets they claim they can achieve. Continue reading “Guaranteeing Health Care Performance”

Focusing on Health Care Quality

Brian Klepper

Originally posted on 9/20/18 on The Doctor Weighs In

BKlepperAt its core, America’s health care value crisis is really rooted in our system-wide failure to focus on managing quality. Health outcomes for specific conditions and procedures vary wildly across providers, health plans and markets. A highly regarded 2008 PricewaterhouseCoopers study estimated that more than half of US health care spending provides no value.

Our health system optimizes revenues, in part, through excessive care, meaning that many clinicians largely disregard quality, ignoring whether treatment pathways are right or founded in evidence. Compare US care patterns to those in other developed countries or to top performing domestic programs, and over-treatment is obvious. Putting medical errors aside, vast quantities of care are intentionally unnecessary, a problem so pervasive that, compared to other developed nations, we’ve come to consider our inflated procedural statistics normal. Half or more of all orthopedic surgeries are inappropriate. We administer cancer patients chemotherapy regimens that often lack proven efficacy. (Here’s a relevant quote from the linked article in JAMA Internal Medicine: “Our results show that most cancer drug approvals [by the FDA] have not been shown to, or do not, improve clinically relevant end points.”) Even after an abundance of evidence showing that coronary stents provide no significant benefit in stable heart patients, we implant thousands every day. And on and on.

When care does follow evidence, health outcomes and cost improvements can be dramatic. This is clear in the emerging crop of “high performance” health care organizations that consistently deliver better health outcomes and/or lower costs than conventional approaches. Typically, these firms’ founders are data- and evidence-driven, passionate and mission-driven, and they have high subject matter expertise in whatever niche they work. They have deconstructed some problem in that space and devised, then refined, solutions that are, in most cases, different than the conventional approach. They’re typically so confident about their ability to perform that they’re willing to guarantee their results, putting their fees at risk against the performance targets they claim they can achieve.

A striking example is Integrated Musculoskeletal Care (IMC), a Florida company that has generated breathtaking results. Led by two senior clinicians, they began as practitioners of Mechanical Diagnosis and Therapy (MDT), a credible medical  discipline that is especially valued for the precision of its diagnostic approach. MDT has a reliable assessment model that allows clinicians to accurately isolate and identify the source of pain and, in most cases, classify or select the most  appropriate care for musculoskeletal patients.

Academic studies have demonstrated MDT’s efficacy, but like nearly all of modern medicine, little or no quality management infrastructure has been in place to reveal in real time whether each intervention benefited, harmed or had no material impact on the patient.

So the IMC team built one. They adopted validated indices capable of measuring patient’s perceived pain, function and disability as a gold standard metric to measure clinical effectiveness. Every time they intervened with a patient, they recorded and watched the numbers. In most cases, patients responded positively. But when a patterns emerged that showed a less-than-desirable result, they rethought their model, course-corrected the treatment pathway and updated their protocols. And they did this over and over and over again. Over time, with repeated adjustments, their clinical model organically evolved. It was no longer MDT, but a different, fully fleshed out musculoskeletal disorder treatment methodology.

The results, developed over several hundred thousand patient encounters, have been compelling. Clinicians using IMC’s approach can appropriately intervene in 90 percent of musculoskeletal disorder cases. Compared with conventional treatment, pain drops dramatically, function with daily activities improves, and duration of suffering is reduced by half. Surgeries are reduced by two-thirds, images by half and injections by two-thirds. Recurrent events – the likelihood that a patient will have recurring, intensifying problems every year or so – drop by 60 percent. Cost typically is reduced by half, a result so strong that the company will financially guarantee a 25 percent reduction in musculoskeletal spending on the patients they touch.

Now consider this. This performance occurs in an area that consumes about 20-25 percent of all group health spending, and 60 percent of occupational health. It’s typically the most prevalent problem and the top spending category in any health system. IMC’s approach is essentially a better mousetrap, consistently delivering better health outcomes in about half the time and half the cost.

The fact that IMC has found a better way is overwhelmingly impressive. But the fact that they’ve gotten there, in large measure, by developing an approach that lets them, in real time, watch their own results and course correct as appropriate, is an achievement of staggering proportions.

IMC’s success begs an even bigger question about this perfectly logical but exceedingly rare effort. Why aren’t clinicians within every medical domain – cardiology, ophthalmology, gynecology, endocrinology, urology, neurology – following the same path? Isn’t there every reason to replicate their approach, clinical monitoring and improvement, a combination of Deming and the scientific method. Shouldn’t that accelerate clinical effectiveness? Shouldn’t that make quality the most important vector in medicine? And isn’t it likely that that would make care far more efficient as well?

The quality we all claim to seek in American health care is sitting in pockets right in front of us. We only have to plant it in every medical domain, and watch health care’s beautiful flower bloom.

Brian Klepper is Executive Analyst and Editor at The Validation Institute.

The 20:1-40:5 Campaign

Brian Klepper

Originally published 9/12/2018 in The Valid Points Newsletter.

Several critical value-based programs have come together through the Health Value Institute’s acquisition and revitalization of The Validation Institute (VI).

First is the VI’s original validation process, which evaluates the credibility of a vendor’s performance claims through examination of external literature, data sources, data and performance calculation methods. In that sense, the validation credential should convey to purchasers that actual performance will approximate the vendor’s performance claims, and that validation can shortcut the purchaser’s additional due diligence efforts, saving time and money.

Second is the Health Value Awards (HVA) program, which was developed through the World Congress but has now been reassigned to the VI. The Health Value Awards go a step beyond the validation process by asking whether a vendor’s results (or an employer’s in-house benefits program) is superior when compared to other offerings in the same space.

While VI validation reviews the credibility of the performance calculation methodology, the HVAs ask whether the program is viable in the market. Are clients experienced with it willing to provide testimonials? Is it scalable? Are its impacts enduring or, said another way, does it continue to deliver consistent results over time? Is the vendor confident enough in its capabilities that it will financially guarantee results?

And then, a couple of measures of art. How important is the problem being addressed, in the sense that, say, curing cancer outweighs managing allergies? And how creative or elegant is the solution, as gauged by deeply experienced health care experts?

Obviously, the goals here are to identify, vet and showcase organizations that are truly high performing managers of clinical, financial and administrative health care risk, so that purchasers have an alternative to the typically far lower value services that are offered through the conventional health system.

A community comprised primarily of purchasers (employers and unions), benefits advisers and high performance vendors has developed around the principles of high performance. This newsletter, Valid Points, tries to serve as a unifying principle and source of high quality information in this space, and is aimed at this rapidly growing, increasingly coalesced group.

The larger aspiration supported by this multi-pronged effort is embodied in our belief that self-insured employers and unions, who, over time, shift their health plans to use of validated high performance vendors in high value niches, who incentivize provider transparency and employee value-seeking, can realize profound health outcomes and cost savings. Meaningfully scaling these approaches could precipitate powerfully positive changes in how US health care works. We believe employers and unions that seriously pursue this path can save up to 20 percent in Year 1 and 40 percent by Year 5. We’ve termed this The 20:1-40:5 Campaign,shorthand for our organizations’ missions and the programming that supports them.

Our pledge is to work to facilitate these kinds of health care changes, and to support your efforts to do so as well.

Brian Klepper is Executive Analyst and Editor at The Validation Institute.