Author: Brian Klepper

Brian Klepper is a health care analyst, commentator and a Principal in Worksite Health Advisors.

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

By BRIAN KLEPPER

Posted 2/01/18 on The Health Care Blog

BKlepperTuesday’s announcement about Amazon, Berkshire 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 unit, US 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.

“High Performance” Health Innovators Stand Ready To Serve

BKlepperA particularly pernicious American healthcare myth holds that costs are out of anyone’s control. Health plans and benefits consultants often convince organizational purchasers that costs simply are what they are, and that no better alternatives exist.

Nothing could be further from the truth. In fact, there’s reason to believe that a new crop of “high performance” healthcare innovators could make healthcare more rational. The question is whether employers and unions will embrace the high performers, independent of their health plans. Are they sufficiently frustrated that they’ll step outside the poorer performance conventions placed on them by health organizations invested in the status quo?

Continue reading ““High Performance” Health Innovators Stand Ready To Serve” →

To Promote Health Care Excellence, Let’s Recognize Approaches That Assure Value

BY BRIAN KLEPPER

BKlepper 2017A challenge for health care purchasers is choosing vendors whose performance matches their cost and outcomes claims. A 2015 Mercer survey found that only 41 percent of worksite clinic sponsors think that they’re saving money. As Al Lewis and Tom Emerick have detailed, many wellness and disease management companies simply overstate their results. In many cases employers may not realize that they, not the vendor, take the risk for results.

One important answer is the Care Innovations Validation Institute, founded by Intel, that offers health care vendors and purchasers objective validation of vendors’ claims.  The Institute stands behind its work with a money-back guarantee. In the Wild West of the health care marketplace, the Validation Institute is an invaluable resource for purchasers, allowing them to confidently proceed with vendors, knowing that their promises have been vetted by scientists.

With these dynamics as backdrop, World Health Care Congress has partnered with The Validation Institute and The Health Rosetta Institute, another not-for-profit organization dedicated to accelerating adoption of proven fixes to health care dysfunction. Together, they are sponsoring The 2018 Health Value Awards, showcasing health care organizations and programs that demonstrate measurably better health outcomes, costs and/or safety than conventional care.

These awards will recognize health care vendors, brokers, and purchasers who deliver higher value care. They seek to identify high performance organizations that adhere to principles of compassion, evidence, transparency, competition and efficiency, as examples that can be emulated.

The first competition will be held within 11 categories, eight of them formally validated by the Validation Institute: Validated categories cover programming by health plan sponsors (i.e., employers and unions), health plan administrators, and organizations that provide or manage care.

While the awards program’s larger emphasis is on validated high performance approaches, it will also recognize individuals and companies on the basis of more qualitative information. Non-Validated Categories will recognize individuals and firms that are progressive benefits leaders.

Applicants will describe and provide performance data on innovative health benefits programming that has measurably demonstrated significant improvements in health outcomes, patient safety and/or cost Judges will consider not only programmatic impact, but scalability (i.e., ease of program replication in other sites/employers), stickiness (or the durability of impact over time), and the calculation methodology used to demonstrate efficacy.

Online nominations for the 2018 awards competition will be solicited between July 15, 2017 and January 31, 2018. Anyone, including nominees, may submit nominations. Special attention will be given to candidates who receive multiple external nominations.

A multi-stakeholder panel has developed criteria for initial review of the submissions, and an independent panel of experts will review all submissions. Five finalists within each category will be selected and announced by February 28. Final selections will be made by the independent panel.

Health Value Award entrants should plan to attend the 2018 World Health Care Congress unless there are unusual circumstances. Registration for representatives will be complimentary. Finalists will also participate, at a discounted rate, in a validation process developed and managed by The Validation Institute. Stipends will be available to applicants who need support.  Entry is not a guarantee of validation.

The Health Value Award is part of a larger movement to bring health care purchasers clear and transparent value data.  This, in turn, will move competition among vendors to objective, measurable results.  By shining bright lights on those that truly perform, the Award program is an important first step in the right direction.

Brian Klepper is an analyst and Principal in Worksite Health Advisors, which connects health care purchasers with high value offerings.

Why most health plans strive to make healthcare cost more

By Brian Klepper

Published July 31 2017, 12:22pm EDT in Employee Benefit News

Health plan representatives are always saying that their plans are doing everything they can to control costs and deliver greater value. But then nothing ever seems to change.

The truth is that group health plans typically earn a percentage of total claims, and it is in their interest for healthcare to cost as much as possible. Employer or union group health plans are frequently associated with a variety of services — e.g., health IT, pharmacy benefit management, case management, reinsurance — each with its own revenue stream. By choosing and incentivizing vendors, plan administrators directly influence their systems’ capabilities to manage risk. Intentionally meek approaches to healthcare risk management result in excessive care and cost, in turn fueling higher expenditures, greater net revenues and elevated stock prices.

This structure has been spectacularly successful for the health insurance industry. Using data pulled from Google Finance, the chart and table below show the 10-year stock price performance of five commercial health plans: Aetna, Anthem, Cigna, Humana and United, as well as the Dow and Standard & Poor’s Index.

Stock prices began to creep upward in November 2008, when a Democratic majority was elected to Congress, foreshadowing the successful passage of the Affordable Care Act. Lobbying by healthcare interests was intense during this period, with Congress accepting an unprecedented $1.2 billion in campaign contributions, presumably in exchange for influence over the shape of the law. In the 8 years between May 2009 and May 2017, the stock prices of these insurers soared between 387 and 748 percent. They vastly outperformed the rest of the market, growing 1.5 to 3.0 times faster than the S&P and 1.2 to 2.4 times faster than the Dow.

 

Grim implications

Growth, driven by an endless rise in expenditures, has profoundly grim implications. Let’s say a clinical risk management firm emerges that, within a high value niche, consistently delivers measurably better health outcomes at half the cost. Reductions in unnecessary surgeries, imaging and drugs would likely yield strong savings. But the resulting drop in health plans’ net revenue would also translate into lower stock prices and market capitalization, and lead to strained relations with network providers, whose utilization and revenues would also suffer. Under these circumstances, concerns about compromised network performance and reduced valuation would deter insurers from investing in the risk management firm’s capacity to deliver better value.

Of course, these dynamics are not unique to health plans. Virtually every healthcare organization —including physician practices, health systems, imaging centers, labs, drug manufacturers, pharmacy benefit management firms — earns a percentage of the spend within its niche. Not surprisingly, each also has developed mechanisms to promote the highest possible unit volumes and pricing.

This may seem like an obvious point, but it is critical to U.S. health policy going forward. For decades, lawmakers have done the bidding of health industry lobbyists and avoided payment methodologies that reward value. This has made American healthcare, at double the cost of other developed countries, unaffordable and inaccessible to large swaths of the American people. The need to continually pay more for healthcare has drained funding away from other critical needs, such as education, transportation and infrastructure. This has played a significant role in crushing the American dream for the middle class and compromising U.S. global competitiveness and economic security.

Alternative approaches like a single payer health plan won’t solve this problem unless how healthcare is purchased also changes. A stable, sustainable health system will remain a pipe dream until people refuse to pay for products and services at ever decreasing value. Instead, healthcare purchasers must tie payment to observably better results. An abundance of market-based evidence shows this is readily achievable.

Brian Klepper PhD is a healthcare analyst and a Principal of Worksite Health Advisors.

 

 

 

 

21 Things to Know About Balance Billing

Brooke Murphy. And with a hat tip to Bill Rusteberg

The following article is entitled “20 Things To Know About Balance Billing.” We added one more. There is only one market strategy that protects consumers against balance billing – Reference Based Pricing (RBP) plans. Traditional managed care plans provide no protection against balance billing – consumers are on their own when they get one. Not so under RBP plans. 

Which plan would you rather have?

As payers and providers wage war over reimbursement rates for medical services, patients have been increasingly strapped with unanticipated health care bills that can have detrimental financial effects.

The practice of balance billing refers to a physician’s ability to bill the patient for an outstanding balance after the insurance company submits its portion of the bill. Out-of-network physicians, not bound by contractual, in-network rate agreements, have the ability to bill patients for the entire remaining balance.

Balance billing may occur when a patient receives a bill for an episode of care previously believed to be in-network and therefore covered by the insurance company, or when an insurance company contributes less money for a medical service than a patient expected.

Continue reading “21 Things to Know About Balance Billing” →

Tell Us Your Outrageous Health Care Stories

Dave Chase, who has been our most eloquent teller of health care craziness stories in recent years, sent out a request the other day for alarming stories from the broker/consultant sector. He wrote:
Benefit brokers get paid more for doing a bad job (i.e., allowing healthcare costs to go up pays them more since they make a % of costs in many compensation schemes). They can get rewards for driving up spending such as trips or other undisclosed compensation. Tell us some of the most outrageous compensation schemes that help fuel hyperinflation in healthcare.
Bill Rusteberg, a deeply experienced, progressive and entertaining health benefits consultant based in Brownsville, Texas, sent in the following vignettes, and solicits more from other similarly experienced consultants. Read on.
Over 50% of employer groups of 200 employee lives and more currently self fund their health & welfare plans. Many are using independent third party administrators (TPA). Most plan sponsors view their TPA as “general contractor” which they rely upon to provide not only claim administration (record keeping) but many of the ancillary services necessarily needed such as stop loss insurance, PPO access through any number of available networks, audit services, etc. TPA’s have traditionally earned fees / commissions off each service they package along with their record keeping functions. For example, one national TPA earns a 25% commission off a vendor who provides a Reference Based Pricing platform (patient advocacy, claim re-pricing, legal defense and legal indemnification) which can amount to hundreds of thousands of dollars per year for a group of 500 employees. Tell us stories about this and particularly how some plan sponsors are pushing back against fee/commission mining among TPA’s. 

Continue reading “Tell Us Your Outrageous Health Care Stories” →

This Little-Known Legal Risk Could Force Big Changes to our Dysfunctional Health-Care System

Dave Chase and Sean Schantzen

Originally published 5/05/2017 on Marketwatch

Lawyers are preparing lawsuits over waste and fraud in health care — invoking Erisa, a law better know for retirement benefits

How much of health care is wasteful?

ERISA, the Employee Retirement Income Security Act, has been around since the Ford administration. Most people know the law in relation to retirement benefits, but it’s emerging as an unexpected, yet high-potential, opportunity to drive change in the dysfunctional U.S. health-care system.

The law sets fiduciary standards for using funds for self-insured health plans, which is how more than 100 million Americans receive health benefits. Health plans for companies with more than 250 employees are self-funded because they are generally less costly to administer. As a result, just over $1 trillion in annual health-care spending is under Erisa plans or out-of-pocket by Erisa plan participants, and the amount spent on Erisa health plans is roughly double the amount spent on Erisa retirement plans.

This makes Erisa plans an attractive target for operational efficiencies. It’s one of the only buckets of operational expenses that most companies haven’t actively optimized. For those that don’t get on top of this, it could also be a source of potential liability for companies and plan trustees.

Continue reading “This Little-Known Legal Risk Could Force Big Changes to our Dysfunctional Health-Care System” →

How Employers Can Get The Most Out of Worksite Clinics

Brian Klepper

First published 4/28/2017 in Employee Benefit News

The decision to implement a worksite clinic typically reflects an employer’s desire to exert more control over health plan care and cost. Most expect their clinic investment will yield improved health outcomes and a high multiple of health plan savings. In some cases that happens, but more often the savings are elusive. A September 2015 Mercer survey found that only 41 percent of clinic sponsors think their clinics save money. The real number may be far lower, the result of a lack of rigor and standardization in clinic vendor savings calculations. In other words, while good ones offer genuine value, clinics don’t always go as planned the first time around.

Make no mistake, some clinic vendors deliver consistent, powerful improvements in health outcomes and cost, with 20+ percent absolute reductions in total health care spend three years after clinic implementation.

Continue reading “How Employers Can Get The Most Out of Worksite Clinics” →

How A Caribbean Hospital, Born in India, Could Influence US Health Care

Brian Klepper

Published 4/12/17 in The Florida Times Union

bklepper-111516Health City Cayman Islands (HCCI) is a three year old 104-bed Caribbean hospital outpost of the Bangalore, India-based Narayana Health System. Just an hour’s flight from Miami, Americans find its island location comfortably familiar, English-speaking and modern.

Specializing in complicated or severe conditions, HCCI has developed care and business models that are so focused on quality and efficiency that it could radically change the standards by which US hospitals are judged. Most importantly for patients and employers, it provides very high quality – it has been awarded the coveted Joint Commission International (JCI) quality credential – at one-half to one-sixth of US pricing.

HCCI’s performance is the culmination of a deep commitment to access, efficiency and excellence. NH’s Founder, Dr. Devi Shetty – who earlier in his career was Mother Teresa’s personal physician – began with a mission-driven awareness that health care is an essential need and must be affordable to be accessible. He spearheaded an enterprise-wide focus on process optimization to deliver the best care possible at the lowest possible price.

Continue reading “How A Caribbean Hospital, Born in India, Could Influence US Health Care” →

To PPO or Not To PPO: That is the Question

Glenn McLellan

Glenn McLellanIn 25 years of consulting with TPAs of all sizes, locations and challenges, I have developed 13 steps or strategies TPAs should take to build a strong foundation. This is the fifth in a series to review the steps.

Since its inception, the TPA industry has pioneered many of the most forward-thinking risk management and cost control strategies seen in the benefits marketplace. The word “disruptors” is almost too cliché these days as everyone seems to use it, but TPAs committed to innovation and using their experiences from the “front lines” truly represent a positive disruption of the status quo.

Continue reading “To PPO or Not To PPO: That is the Question” →

A Blog for Employer and Union Benefits Managers and Their Advisors

bklepper-111516Welcome!  There are few go-to sites dedicated to the very significant challenges faced by health benefits managers, consultants and other health benefits professionals.

Health care purchasers are under pressure to deliver better quality care at lower cost, but are besieged by lack of knowledge, misinformation, lack of disclosure about conflicts of interest, and intentional obfuscation by brokers, health plans, PPOs, PBMs, wellness programs and other health care interests. There is relatively little evidence-based information about what really works and why, and how you can access those opportunities without disrupting your in-place conventional health plan, especially when it is almost certainly not in that plan’s interests for you to do so.

So Care & Cost will post meaty, useful articles aimed at the health care purchaser community – employers and unions – from benefits managers and advisors who are managing risk and getting measurable results in pragmatic but often unconventional ways.

Take a look and, if you like what you see, pass Care & Cost around to your colleagues. The best way for us to gather the strength that can leverage change is for us first to come to a common understanding of the problem and its solutions.

The Cost of Convenience

By Bill Rusteberg

The cost of convenience is high in health care. This is evidenced through managed care plans offered by most employers today. Preferred Provider Organization (PPO) plans dominate the market, providing consumers with easy, stressless access to most health care givers within their respective communities.

There is a price to be paid for this convenience. The financial transaction to facilitate the premium to be charged is memorialized contractually between the managed care organization (PPO) and medical care givers. This collaborative effort benefits both parties in the form of higher reimbursement rates and fees to be earned off each health care episode.

Continue reading “The Cost of Convenience” →