Guaranteeing Health Care Performance

Brian Klepper

Originally posted 9/28/18 on Valid Points


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

Posted 9/12/18 in Valid Points


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.

High Performance Health Care and the Shift to Higher Value

Brian Klepper

Posted 9/04/18 in Valid Points, and on The Validation Institute’s blog.

“How many businesses do you know that want to cut their revenue in half? That’s why the health care system won’t change the health care system.”

Current Florida Governor and Former Columbia/HCA CEO Rick Scott at a 2012 Investor conference

Health care management expert Fred Goldstein recently related an encounter with health system executives who acknowledged that their interest in improving two of the three Triple Aims – patient experience and health outcomes – did not extend to reducing the cost that drives their earnings. Similarly, several health system colleagues have recently disclosed to me their organizations’ lack of support for their Accountable Care Organizations and value-based contracting programs because, if managed properly, they reduce per patient revenues.

The worry that right-sizing US health care will yield less money for the health care industry is an obvious, powerful barrier to meaningful health care change. We’ve made relatively little policy progress toward that goal, and for all their protests about being on the side of better value, the industry has been absolutely clear that unnecessary care and irrational pricing are acceptable tools if they help them achieve their current financial goals.

The health care industry, Congress’ and legislatures’ most powerful lobby, has captured the regulatory process, so policy change that can force the issue is unlikely. And for all the talk about moving to paying for results and value-based care, fee-for-service still constitutes all but a tiny fraction of reimbursement arrangements.

Within the legacy system, decades of fee-for-service reimbursement have bloated virtually every procedure, rendering our care and cost patterns dramatically different than those in other countries. They, for example, have far lower percentages of specialists and a greater reliance on primary care. Per capita rates of expensive, common procedures, like imaging and coronary stenting, are a fraction of ours. The net results are generally better health outcomes at a per capita cost that is half of what we pay.

We know that in a system that pays for more activity, overtreatment is one of our biggest problems. But estimates of unnecessary and inappropriate care and cost are plagued by methodological challenges, including definitions of what constitutes waste, and have been all over the map. In a 2017 national survey, physicians reported that about 20 percent of all care, including about a quarter of tests, more than a fifth of prescriptions, and more than a 10th of procedures, is all waste. In domains like orthopedics, cardiology and oncology, there’s broad acknowledgment that significant percentages of care provide little or no value.  A 2012 estimate by Berwick and Hackbarth suggested that 18-37 percent of all 2011 US health care spending was waste. A 2008 PwC study, The Price of Excess, came in at a breathtaking 54.5 percent, which is close to the aggregated real world results (and performance guarantees) of high performance health care companies.

The health care industry has shown little interest in approaches that consistently deliver better health outcomes and/or lower cost. The awful subtext here is that egregious unit pricing and unnecessary/inappropriate care are not merely accidental byproducts of the US health system. Instead, health care companies’ business models have come to depend on those excesses. Their stockholders have become accustomed to extraordinary returns and, accordingly, their business strategies and tactics revolve around maintaining current and growing revenue streams. Delivering value around the right care is a dispensable nicety.

This is clear in the stock price growth of the major health plans. Humana and United have each grown about 1,000 percent over the past 37 quarters, which works out to a staggering average quarterly stock price increase of 28.4 percent and 26.0 percent, respectively.

So the US health care industry literally has a financial stranglehold on the American people that can capsize our social safety nets and our global competitiveness, destroying, as Dave Chase has so clearly described, the American dream. Large health care companies have aggressively lobbied Congress and the legislatures for years and own the policy environment. Their stock pricing prohibits intentionally rightsizing utilization and unit pricing.  The prevailing model is toxic and can only lead to cataclysmic disruption, but the fix is in and they’re devoted to keeping it in place as long as possible.

Because, as a rule, health plans make more if health care costs more, they have little stake in approaches that would result in fewer services or lower costs. In that sense, they’re in a box that makes it difficult for them to drive higher value services, especially if that approach translates to reduced revenues and earnings. Upstart organizations and those relatively new to health care, like Amazon and Walmart, are not constrained by past financial performance or the imperative to maintain exorbitant stock prices.

Under these circumstances, coaxing health care organizations to do the right thing isn’t a promising scenario. A better path would be finding the rare scalable health care organization that has figured out how to consistently deliver superior results in high value niches, and that is willing to put its fees at risk with performance guarantees. Driving all the business within a domain – e.g., musculoskeletal care, cardiometabolic care, drug management, imaging management, claims review – to high value performers will erode the business to low- and mid-value performers and they’ll either hold out in hopes of saving the old paradigm or be co-opted. If it’s the latter, they’ll learn how to become practitioners of newer, more accountable, high performance approaches to clinical, financial or administrative health care management.

Our experience over the past several months, and discussions with a variety of progressive employers, unions and benefits managers, strongly suggests that we’re at the leading edge of a tipping point. I’m personally aware of groups representing more than 6 million covered lives that are actively engaged in going around their conventional health plan arrangements to implement high performance programs. A subset of that larger population will actually make the leap, of course, but the value proposition – better health outcomes at much lower cost now and into the future – is very compelling. The prospects are bright.

The message is that we’re not simply stuck with the status quo. There are solutions. Granted, during this early phase, the answers are more easily accessible to larger, self-insured employers than to smaller, fully insured groups, but as they gain traction, the better approaches will be available to everyone. And the possibility is very real that, by using the market, we can bring health care back to rights.

Brian Klepper is a health care analyst.

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.

Continue reading “How Value Can Save Us”

Validating Health Care Performance

Brian Klepper

Posted 8/20/18 in Valid Points, the Newsletter of The Validation Institute

The beginning of wisdom is calling things by their true names. – Confucius

BKlepperFor purchasers, health care is the Wild West. Vendors of all types – disease managers, wellness companies, care navigation firms, ambulatory surgery centers, benefits advisors, worksite clinic firms, and on and on – have a long history of making exuberant claims about their outcomes and savings. Purchasers – self-funded employers and unions – generally have no alternative but to take those promises at face value, assuming they’re grounded in solid data and hard math. They may be more resigned than surprised when the expected results don’t materialize.

The propensity of vendors in the population health management sector to over-promise and under-deliver became so pronounced that Al Lewis, a nationally prominent health care outcomes analyst, wrote an entertaining book about it, called Why Nobody Believes the Numbers. Why Nobody Believes tells how 12 companies cooked their numbers, and how they mostly thrived despite a flow of bogus results. Anyone familiar with corporate health benefit plans over the past couple decades is aware of the immense popularity of wellness and disease management programs despite skinny evidence showing that they’re effective.

In 2010, Sean Slovenski, then CEO of an Intel-GE subsidiary called Care Innovations (and now Walmart’s SVP & President of Health and Wellness) created a new organization, The Validation Institute, to evaluate the calculation methods of health care organizations making claims about their performance. If their data sources and data are credible, if their math makes sense and if the evaluator find that the intervention has produced the promised results elsewhere, then the product/service would be “validated.” If not, the evaluators provide guidance on how to do the calculations properly.

This approach – independent, objective, highly capable third party review and evaluation – was the right solution, providing a fresh, straightforward way for responsible vendors to be accountable.

For purchasers, validation represents a significant advantage. They can be confident that vendors’ performance will approximate what they promised. By reducing this uncertainty, an increasing number of purchasers, Walmart included, now give validated vendors preferred status in the bidding process.

With rapidly growing momentum and increasing influence, the Validation Institute is poised to close a glaring gap in health care purchasing. Accordingly, every purchaser should insist that every health care vendor become validated and build the validation requirement into its Request for Proposal process. Likewise, the validation process should become a critical step in every vendor’s go-to-market plan.

In a health system awash with excess and opacity, an important first step is a rigorous process that gets to transparent outcomes. In health care, that step starts at The Validation Institute.

Brian Klepper is a health care analyst.

A Whiff of Market-Based Health Care Change

Feb 1, 2018


Posted 2/01/18 on The Health Care Blog

BKlepperTuesday’s announcement about AmazonBerkshire Hathaway and JPMorgan (A/BH/JPM) was short on details. The three mega-firms will form an independent company that develops solutions, first, for their own companies’ health plans and then, almost certainly, for the larger health care marketplace. But the news reverberated throughout the health care industry as thoroughly as any in recent memory.

Health care organizations were shaken. Bloomberg Markets reported that:

Pharmacy-benefit manager Express Scripts Holding Co. fell as much as 11 percent, the most intraday since April, at the open of U.S. trading Tuesday, while rival CVS Health Corp. dropped as much as 6.4 percent. Health insurers also fell, with Anthem Inc. losing as much as 6.5 percent and Aetna, which is being bought by CVS, sliding as much as 4.3 percent.

As expected, these firms’ stock prices rebounded the next day. But you could interpret the drops as reflections of the perceived fragility of health care companies’ dominance, and traders’ confidence in the potential power of Amazon’s newly announced entity. Legacy health care firms, with their well-earned reputations for relentlessly opaque arrangements and egregious pricing, are vulnerable, especially to proven disruptors who believe that taming health care’s excesses is achievable. Meanwhile, many Americans have come to believe in Amazon’s ability to deliver.

Those who buy health care for employers and unions probably quietly rejoiced at the announcement. For them, the prospect of a group that might actually transform health care would be a breath of fresh air. In my experience at least, the CFOs and benefits managers at employers and unions are acutely aware that they’re being taken advantage of by every health care industry sector. They’re genuinely weary from it, and they’d welcome a solid alternative.

Their health care intentions notwithstanding, the A/BH/JPM group is formidable, representing immense strength and competence. Amazon is an unstoppably proven serial industry innovator, continuing to consolidate its position in the US and in key markets globally. Berkshire Hathaway harbors significant financial strength and a stop-loss unitUS Medical Stop Loss, fluent in underwriting health care risk, which should be handy. In addition to the fact that JPMorgan is the nation’s largest bank, with assets worth nearly $2.5 trillion in 2016, it has a massive list of prospective buyers in its commercial client base.

This triumvirate knows that, in health care, they have an advantage. There are proven but mostly untapped approaches in the market that effectively manage health care clinical, financial and administrative risk, consistently delivering better health outcomes at significantly lower cost. In the main, legacy health care organizations have ignored these solutions, because efficiencies would compromise their financial positions.

To put this into perspective, consider that, since early 2009, when the Affordable Care Act was passed, the stock prices of the major health plans have grown a spectacular 5.3-9.6 times, 3.7 times the growth of the S&P and 3.2 times the growth of the Dow.

At the end of the day under current fee-for-service arrangements,  health care’s legacy organizations make more and have rising value if health care costs more. If they take advantage of readily available solutions that make health care better and cost less, earnings, stock price and market capitalization will all tumble. They’re in a box.

What little we know about Amazon’s intentions indicates that they are ambitious. Presumably they’ll begin by bringing technology tools to bear. That could cover a lot of territory, but assembling and integrating high value narrow networks by identifying the performance of different health care product/service providers seems like a doable and powerful place to begin. High performance vendors exist in a broad swath of high value niches. Arranging these risk management modules under a single organizational umbrella can easily result in superior outcomes at dramatically less cost than current health care spend.

Amazon has developed a relationship with industry leading Pharmacy Benefits Manager (PBM) Express Scripts, Inc. (ESI), likely to operationalize mail order and facility-based pharmacies. Given ESI’s history of opacity and hall-of-mirrors transactions – approaches that are directly counter to Amazon’s ethos – it’s tempting to imagine that that relationship is a placeholder until Amazon can devise or identify a more value-based model.

Also, a couple weeks ago, Amazon hired Martin Levine, MD, a geriatrician who had run the Seattle clinics for Boston-based Medicare primary care clinic firm Iora Health. This could suggest that Amazon aspires to deliver clinical services, likely through both telehealth and brick- and-mortar facilities.

All this said, we should expect the unexpected. The A/BH/JPM announcement wasn’t rushed, but the result of a carefully thought through, methodical planning exercise. As it has done over and over again – think Prime video; 2 day, free shipping; and the Echo – it is easy to imagine that Amazon could present us with powerful health care innovations that seem perfect intuitive but weren’t previously on anyone’s radar.

What is most fascinating about this announcement is that it appears to pursue the pragmatic urgency of fixing a serious problem that afflicts every business. At the same time, it may represent an effort to subvert and take control health care’s current structure.

So while we may be elated that a candidate health care solution is raising its head, we should be skeptical of stated good intentions. Warren Buffett’s now famous comment that ballooning health care costs are “a hungry tapeworm on the American economy” ring a little hollow when we realize that Berkshire Hathaway owns nearly one-fifth of the dialysis company Da Vita, a model of hungry health industry tapeworms.

Finally, we should not doubt that this project has aspirations far beyond US health care. The corporatization and distortion of health care’s practices is a global problem that will be susceptible to the same solutions of evidence and efficiency everywhere.

All this is promising in the extreme, but there’s also a catch. The US health care industry’s excesses undermine our republic and have become a threat to our national economic security. The solutions that this A/BH/JPM project will leverage could become an antidote to the devils we all know plague our country’s health care system. That said, we should be mindful that, over the long term, our saviors could become equally or more problematic.

Brian Klepper is Principal of Worksite Health Advisors, which connects health care purchasers to high performance health care services.