Why Employers Must Collaborate On Health Care

Posted by

Brian Klepper

Published in the Columbus, GA Ledger-Enquirer on Sunday, 9/15/13

BK 711I recently was privileged to deliver a keynote at the Greater Columbus Chamber’s Healthcare Symposium. I get invited to meetings like this around the country because I lay out a deeply researched and frightening national problem that can only be remedied by business.

Health care is of course very important. But as has been documented over and over (to no avail), it is out of control, with costs that have become so excessive that they literally represent the greatest threat to our national economic security. At $2.8 trillion per year or about one dollar of every five of gross domestic product, health care has become our largest, wealthiest and most politically influential industry. In turn, this has allowed it to spin every piece of health care legislation to advantage.

It is no accident that, in 2009, the year the Affordable Care Act (ACA) was formulated, the health care industry deployed more than 4,500 lobbyists, eight for every member of Congress, and contributed an unprecedented $1.2 billion in campaign contributions in exchange for influence over the shape of the law. ACA will accomplish some important things, most notably extending health coverage to about 30 million more Americans. But it likely will do little to rein in cost that has grown more than four times as fast as general inflation for more than a decade.

How bad is health care cost? A 2011 RAND study showed that four-fifths of the growth in household income over the past decade had all been absorbed by health care. Virtually all of American workers’ wage growth has gone to health care, leaving income flat. And nearly all growth in the federal budget is due to health care. At the state level, ballooning Medicaid expenditures have crowded out spending on other essentials, like education and infrastructure replacement. Locally, excessive health spending is a tax on everyone else in the community, draining economic vitality and often diminishing a region’s desirability to businesses seeking to expand.

A big part of the problem is inappropriate care and cost, stemming from the fact that health care is so lucrative. A credible 2008 analysis by the consulting firm PwC estimated that 54.5 percent of all health care expenditures provided no value. That would be about $1.5 trillion annually, the equivalent of our 2012 national debt, or 9 percent of the US’ gross domestic product. To put those numbers into perspective, that waste would pay three million teachers’ salaries for nine years.

Excessive care and cost takes many forms, from unnecessary services to egregious unit pricing. There are structural flaws in the system that promote waste and fragmentation in care, and that are barriers to good quality. For example, fee-for-service reimbursement, which pays doctors and hospitals for every product and service they deliver, promotes more care, independent of appropriateness. A lack of performance data – on safety, quality and cost – has made it difficult to identify doctors and hospitals that provide good care and value. The same principle holds for drugs, devices, health plans, and every other part of the health care economy. Without data that can inform purchasers decisions, no market exists, and there is little pressure for professionals and organizations to excel. Poor performance often goes unnoticed and is generally unaccountable.

Only one group is larger and more influential than health care, and that is everyone else. If the four-fifths of employers who are not in health care began to collaborate on activities aimed at identifying best value in health care locally, holding the system more accountable, health outcomes would improve and costs would drop.

The Savannah Business Group on Health is one model worth exploring. That group covers some 50,000 people associated with 23 businesses in greater Savannah, and its employer participants have, over time, realized significantly lower health care costs than non-participants with similar benefit designs. The fledgling Atlanta-based Employers Like Me is headed in the same direction, and is gathering together progressive employers from all over Georgia.

Employer coalitions like these can pool claims data to identify high and low value doctors and hospitals, then use that data, along with their collaborative leverage, to strike more favorable deals than they’ve been getting through health plans. The savings and quality improvements can be remarkable.

But by coming together, they can also serve as a counterweight to the health care industry’s influence over policy, demanding changes in law and regulation that is more in the common interest. If they populate their boards with the community’s business leaders, they can exert significant influence.

Most health care leaders are aware how out of balance health care has become, and understand the need to adapt to a changed environment. The challenge will be to drive reforms that maintain the stability and quality of services.

Columbus’ health care issues are like those of every other medium sized community in the country. But if its businesses become carefully activist, galvanizing and mobilizing on this hugely expensive issue, the community’s financial burden will almost certainly lessen, and its health outcomes will improve. And that will raise the value proposition for the entire region, and be yet another reason why businesses should choose Columbus.

Brian Klepper is a health care analyst and the Chief Development Officer of WeCare TLC Worksite Clinics.

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