When Employers Collaborate To Manage Health Care Costs

Brian Klepper

Published 12/09/12 in the Eau Claire, WI Leader-Telegram

Note from Brian: This piece appeared last weekend in the Eau Claire, WI newspaper, and was written with the encouragement of employers in that community who, rightly, believe they’ve been raked over the coals on their health care costs.

This argument is mainly directed at other employers, as a way of explaining that there are alternatives. That said, the dynamics described here occur in almost every community in the country.

BK 711Even compared to national health care cost growth that has skyrocketed nearly 4 times as fast as general inflation for more than a decade, Wisconsin stands out and northwest Wisconsin stands out more. Eau Claire’s health care cost burden is a whopping 16 percent higher than the national average. This is pricing many individuals and employers out of the coverage market and sapping the region’s economic vitality and competitiveness.

As Robert Kraig meticulously details in Citizen Action’s Wisconsin Health Insurance Cost Rankings 2012, Eau Claire is Wisconsin’s second-highest cost health care market, with 2011 monthly premiums of $750.46, 9.1% higher than the state average of $687.68. (La Crosse is 1st, only a hair higher at $756.70.)

Over the past 12 years, Eau Claire’s health care premium inflation has grown 11.6% faster than premium inflation nationally. Eau Claire’s residents pay a stunning 31 percent (or $2,102.16 annually) more for health coverage than they would in Madison, the state’s lowest cost market.

Data on the national health care quality site Health Insight show that northwest Wisconsin’s health care ranges from fair to good, but this doesn’t explain the region’s higher costs. The quality in other Wisconsin regions is comparable, with markedly lower costs. Data from the highly respected Dartmouth Atlas show that the volume of services delivered to Medicare patients in NW Wisconsin is very low, compared with other regions. Because Medicare payment is relatively uniform from region to region, these low volumes translate to modest Medicare costs.

But low Medicare costs do not necessarily translate to low employer health coverage costs. For working families with coverage, high unit pricing for health care products and services is undoubtedly the culprit here. When local providers charge commercial health plans much more for everything from drugs and dialysis to advanced images – and the health plans comply – it adds up for the purchasers.

There are alternatives. Excessive health care costs exist because the health care industry has effectively blocked market forces for decades. But a few employer collaboratives around the country have found ways to aggressively infuse competition into their markets and hold health care providers accountable, reducing health care expenditures without shrinking coverage or shifting cost to employees.

For example, in Lafayette, IN, when the doctor in Fairfield Manufacturing’s onsite primary care clinic thinks a patient needs an MRI, he refers to a local advanced imaging firm. Fairfield’s clinic vendor shopped the Lafayette market to develop a volume-based arrangement that costs only 25 percent of what Fairfield and other Lafayette employers had been paying through their health plans’ networks for high quality MRIs, including the radiologist’s reading. The same approach works with other high cost products and services, like ambulatory surgeries, specialty drugs, physical therapy and pain management. Health care is a big place, and the opportunities are limitless.

In its first year after its clinic implementation, Fairfield’s group health costs dropped by almost $2 million or more than 15 percent, net of the clinic investment. Other local firms who used the same approaches experienced similar savings.

The cost reductions achieved by the Lafayette employers resulted from a thoughtful, coordinated effort. Lafayette’s employers compared their health care costs with those in other Indiana markets, and found they were exorbitant. The members of the resulting Employers’ Health Forum recognized that, together, they were responsible for a significant portion of that community’s health care expenditures. Collectively, they had leverage. Employers analyzed their own health costs and developed plans to create savings.

Jane Wolfe, Fairfield’s benefits manager, is pleased and resolute. “The obvious story here is employers working together to fundamentally change the way health care works for them. But the deeper story is that the benefit goes beyond the few employers who have had the luxury of implementing a clinic. We have developed an approach that will improve how health care works for everyone in Lafayette.”

It is possible to adopt approaches that emphasize clinical appropriateness and cost effectiveness, managing the process to achieve real savings. An array of underutilized solutions – e.g., advanced primary care medical homes, data collaboratives, patient risk identification, care gap analysis, domestic medical destinations, step therapies for weight management, high performance provider networks, large case management – have been demonstrated to measurably drive down cost while improving quality.

The good news is that these approaches can work for employers anywhere, including in Eau Claire. It only takes a few employers to come together, change the market and get control of health care costs.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s