How Value Can Save Us

Brian Klepper

Posted 8/19/2018 on The Doctor Weighs In as “High Value Health Care: Is It the Wave of the Future?”

The most consequential health care question of our time is whether the iron grip on policy and the marketplace exerted by the industry’s dominant players – a grip that continues to favor volume-based care, opaque quality and cost information, widespread information blocking, and little in the way of quality or safety management – can be broken in favor of value-based services. Decades of lobbying on every relevant health care law and rule has facilitated the industry’s capture of regulation, formidably favoring incumbents and putting innovators at an equally formidable disadvantage. The fix is depressingly in.

It is also remarkably comprehensive. Every health care sector – supply chain, care delivery, finance and information technology – has devised mechanisms that allow it to extract about twice as much as it gets in any other developed country. Because US health care has relentlessly pursued the maximized cost promoted by regulatory advantages and fee-for-service unbundling, our care and cost patterns are dramatically different and more inflated than those in other industrialized countries. Our use of high cost specialty care instead of low cost primary care, for example, is far higher.

Every niche within the vast health care ecosystem is excessive. Drug companies accept generous development subsidies or tax advantages, then develop breathtaking pricing unrelated to the costs of development or production, for drugs that may or may not work. Electronic health record companies take government subsidies under the promise that they’ll become interoperable, then conveniently walk away from that commitment. Health plans offer networks that include poor performing providers, and approve payment for unnecessary and inappropriate care. Market-dominant hospitals pursue exorbitant pricing for routine procedures. “Everything is rigged” was how Rolling Stone’s Matt Taibbi put it a few years ago.

So when fresh projects like the Amazon, Berkshire Hathaway, JP Morgan effort come along, some health care prognosticators have responded that their approaches have been tried before and that the innovators may not appreciate the problems’ complexity or the depth of the industry’s influence over the processes. Apparently, as with the Borg, “Resistance is futile.”

Here’s a counterpoint to that view. While the vast majority of health care remains conventional, a growing crop of companies has emerged that is dedicated to delivering and managing care and cost in new, far more efficient ways. These organizations – think of them as high performers in clinical, financial or administrative risk management niches – are data-, evidence- and mission-driven. Many have devised and then refined approaches that allow them to deliver far better health outcomes and/or lower health costs than conventional methods in high value niches. They’re typically so confident in their ability to achieve positive impacts that they’ll put their fees at financial risk, against the performance targets they claim they can achieve.

In musculoskeletal care, for example, a Tallahassee company, Integrated Musculoskeletal Care (IMC) has, over time, developed a conservative, accountable approach to managing musculoskeletal conditions, which are generally about 20 percent of all group health costs and 60 percent of occupational health costs. IMC’s approach successfully intervenes in about 80 percent of all musculoskeletal cases, delivering improvements in pain reduction, Activities of Daily Living and range of motion in half the recovery time and half the cost of conventional orthopedics. The organization is confident enough in its performance that they’ll guarantee a 25% reduction in musculoskeletal spend for the patient population they touch, though their actual savings are generally much higher.

Companies with similar high value stories have emerged in many niches: cardiometabolic care management, cancer care management, drug management, imaging management, medical claims review, large claims resolution, dialysis management, allergy management, second opinion and so on. They haven’t been well received by conventional health plans, which make more if health care costs more, but they’re starting to find strong reception among employer groups fed up with standard health care.

Over the past three years or so, a fledgling but rapidly growing community has emerged dedicated to advocating for and deploying high value approaches. Vendors, benefits advisers and benefits managers for purchasers (i.e., employers and unions) have become convinced that the way forward depends on finding and working with vendors dedicated to high value, and everything that term entails. Employers and union groups of all sizes – from a hundred to 1.5 million covered lives – are actively pursuing these high performance solutions as carve-outs from their conventional health plan.

There are other signs that the health care change game is afoot. While it remains spotty, going around conventional health plan arrangements through direct contracts between purchasers and provider organizations, is a mushrooming, if immature, trend. An arrangement between General Motors and Henry Ford Health System has received a lot of attention recently.

But it’s early. It’s questionable how many employers have the internal skill sets and resources to pursue an effort this ambitious in the near term. The same goes for providers. A Modern Healthcare article recently asked whether most health systems have the “chops” – the analytical expertise – required to manage the clinical and financial risks inherent in direct contracting arrangements. That said, direct contracting would lend health systems more control and the promise of more market share, so they’ll no doubt rally their capabilities and continue to pursue this opportunity.

The bottom line is that there is a growing marketplace of health care purchasers interested in greater health care value and increasingly willing to go around traditional health care arrangements to access them. At the same time, a small, vibrant community of scalable, high performance niche health care providers is being harnessed by these employers and unions around the country. These two vectors have created a new tension for rank-and-file providers who, on the one hand, fear loss of business to new models and, on the other, fear moving to new models that will yield less money that they’re used to, but will likely jump in favor of value to see where it can lead.

In other words, high health care value is available and succeeding to varying degrees in the market, independent of what the power players can do in policy. If that’s not reason for optimism about American health care, I don’t know what is.

Brian Klepper is a health care commentator and analyst who links high performance health care vendors with innovative purchasers.

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