Brian Klepper and Richard Sutton
Posted 12/28/16 in Employee Benefit News
Benefits managers who rely on their health plans to keep costs down are bound to be disappointed. Despite health plans’ protests to the contrary, realizing a percentage of total expenditures is an incentive to make healthcare cost more, not less. The largest insurance companies have been among the market’s most profitable performers, with almost 500% average health plan stock price growth since 2009. Until health plans are at financial risk for better health outcomes at lower cost, reducing total spend will continue to translate to reductions in net earnings, a result clearly at odds with their business interests.
So for now, benefits managers interested in driving greater efficiencies are on their own. Their most promising opportunities are programs that deliver strong returns in health outcomes, productivity and savings. They can use their core plan for the basics. But then they can go around many of its programs, directly engaging instead with proven high-performance solutions compared to conventional health plan management.
The challenge is determining which risk management approaches will yield the greatest value. Should you invest in targeted high impact solutions (like drug management, musculoskeletal management, imaging management or reference-based reimbursement), or should you pursue the broader management inherent in a worksite primary care clinic?
Generally, it depends on whether you have a short- or long-term horizon.
For quick wins, many modular solutions have low-cost entry requirements and provide an immediate, powerful return on investment. For example, using an independent drug management firm in addition to your pharmacy benefit management arrangement can drop total healthcare spend by 7%. Musculoskeletal disorder management can save 5%-10% off total costs with better health outcomes than conventional orthopedic care. Imaging management can reduce total spend by 5%-8%. Reference-based reimbursement for hospital care can drop costs by 13% or more.
Other services — claims audits, surgical management, cancer care management, large case management, large claims resolution, dialysis management, cardiometabolic care management — can deliver similarly strong savings and/or health outcomes improvements right away. And often, the vendors are willing to financially guarantee results. Of course, prioritizing the solutions to pursue is a delicate process, and should be informed by your population’s experience, health characteristics and the sponsor’s tolerance for plan disruption.
Plan sponsors with a longer view may want to consider a worksite clinic. Typically you’ll need to fund startup fees, the costs of establishing the physical plant and operational costs that are about 8%-12% of current health plan costs. If you’ve chosen a capable vendor, the clinic may begin to save more money than it costs in the first 18-24 months. That said, be aware that Mercer survey data suggest that fewer than half (41%) of clinic sponsors can demonstrate savings, and the actual number may be lower than that. Identifying an effective vendor is critical, and the evidence is clear that most clinic sponsors and their consultants fail at that.
But let’s say that you have chosen your vendor wisely, and that your clinic performs as hoped. (Some do!) This puts a comprehensive primary care practice in place at the front end of the system, conveying more control of patients and the care they receive throughout the continuum.
A clinic then becomes a platform that you can build on with a robust array of clinical and financial risk management tactics. These can include how co-pays are structured, managing referrals with high performance narrow networks, or dispensing generic and therapeutic equivalent drugs directly into patients’ hands. It can mean handling many important, costly tasks more efficiently onsite, from imaging to managing diabetes or pain management. Seemingly small thoughtful clinic design elements can have tremendous impacts on patient health and total cost.
High-performance modular solutions, like those we’ve described above, can also be integrated into a clinic to get much greater traction over high-value problems. Healthcare’s problems are tremendously complex, and many highly tailored solutions are necessary to hold excess in check. What’s more, just as it’s challenging to identify them and bring them together, it is equally difficult to coordinate and manage their implementation. Having a dedicated platform that begins with healthcare’s front end is a logical and powerful way to bring these solutions together and deploy them effectively.
The real goal of a fully capable clinic with a full array of management tactics, is to change conventional care and cost patterns, driving appropriate care and, just as importantly, disrupting inappropriate care. Within two years post implementation, we have seen good clinics dramatically improve the health of both individual patients and the patient population, and reduce total health spend by more than 20%. Combining a good clinic with high value niche solutions can produce even higher impacts.
Healthcare has become defined by rampant excess, so effective benefit managers will, of necessity, seek unconventional solutions. Established approaches are available now that will improve care and/or save considerable cost through clinics or high value niches. As is always the case, success depends on being as knowledgeable as possible about the dynamics, choosing carefully, and then holding all the participants accountable.
2 thoughts on “Engaging High Performance Healthcare Solutions”
Thanks Brian – great article! Employers have to come to the understanding (some are already there) that they are in the driver’s seat and have the leverage necessary to truly bend the cost curves in healthcare.
I completely agree! Employers are for sure in the drivers seat regarding this topic.