Re-Establishing Health Care Trust

Brian Klepper

First published 4/26/19 on Valid Points.

brian-9.jpgA couple weeks ago a Journal of the American Medical Association article reported the results of a large (33,000 employees) rigorous study of worksite wellness programs. As explained in The New York Times, the research “found no significant differences in outcomes like lower blood pressure or sugar levels and other health measures. And it found no significant reduction in workers’ health care costs.”

The study’s findings are important because they fly in the face of conventional employee health benefits doctrine over the past couple decades, which has steadfastly maintained, based on spotty evidence, that corporate wellness programs improve health outcomes and reduce cost. The study’s release vindicates health outcomes expert Al Lewis, who has relentlessly waged a single-handed campaign against the slipshod analytical methods the $8 billion wellness industry has marshaled to produce its evidence.

Time and again, Mr. Lewis has poked holes in rosy results, typically by showing the errors in their assumptions and arithmetic. Along with wit and humor, his most formidable weapons, his black and white, cold facts approach to dismantling their claims has been both disarming and effective. He has famously offered a $1 million prize to anyone who could show that his analyses are flawed. Continue reading “Re-Establishing Health Care Trust”

When Health Care Organizations Are Fundamentally Dishonest


Initially published 3/19/2019 on The Health Care Blog

BKlepper 102018A class action legal ruling this month, on a case originally filed in 2014, found that UnitedHealthCare’s (UHC) mental health subsidiary, United Behaviora

Health (UBH), established internal policies that discriminated against patients with behavioral health or substance abuse conditions. While an appeal is expected, patients with legitimate claims were systematically denied coverage, and employer/union purchasers who had paid for coverage for their employees and their family members received diminished or no value for their investments.

Central to the plaintiff’s argument was the fact that UBH developed its own clinical guidelines and ignored generally accepted standards of care. In the 106 page ruling, Judge Joseph C. Spero of the US District Court in Northern California wrote, “In every version of the Guidelines in the class period, and at every level of care that is at issue in this case, there is an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of members’ underlying conditions.” He concluded that the emphasis was “pervasive and result[ed] in a significantly narrower scope of coverage than is consistent with generally accepted standards of care.” Judge Spero found that UBH’s cost-cutting focus “tainted the process, causing UBH to make decisions about Guidelines based as much or more on its own bottom line as on the interests of the plan members, to whom it owes a fiduciary duty.” Continue reading “When Health Care Organizations Are Fundamentally Dishonest”

To Understand Value’s Market Progress, Watch Primary Care

Brian Klepper

BKlepperA year ago, 92 primary care physicians (PCPs) in Charlotte, NC broke away from the region’s largest health system, Atrium Health, forming Tryon Medical Partners, an independent, physician-owned group. Then, a couple weeks ago, another 41 PCPs left the area’s second largest health system, Novant, to join Holston Medical Group, a large multispecialty physician practice with more than 80 PCPs headquartered in nearby Kingsport, TN.

In these and most primary care breakaways from large health systems, the complaints are generally the same. Within a fee-for-service, volume-driven environment, primary care’s role, at least in part, is to capture patients and feed the machine. Health systems pressure PCPs to refer patients internally as often as possible for lucrative diagnostics and procedures. Continue reading “To Understand Value’s Market Progress, Watch Primary Care”

Health Care’s Most Needed Next Step

Brian Klepper

First posted on 1/14/19 on the Validation Institute Blog.

BKlepper 102018It seems inevitable that, in the near future, an innovative health care organization is going to seize the market opportunity, gradually cobble all the pieces together, and demonstrate to organizational purchasers that it consistently delivers better health outcomes at significantly lower cost than has previously been available.

To manage risk and drive performance, it will embrace the best health care management lessons of the past decades: risk identification through data monitoring and analytics, how to drive the right care, quality management, care coordination, patient engagement, shared decision-making, and other mission-critical health care management approaches. It will practice conservative care and be outcomes-accountable.

It will appreciate that, in health care’s complex world, some specialized vendors have developed high subject matter expertise in managing certain kinds of clinical or financial risk. In the interests of optimal performance, they’ll understand that it often makes sense to partner with those experts rather than try to learn to manage that niche equally well. Furthermore, they’ll get that simplicity is a virtue, and that bundling specialized services under one umbrella is far easier for patients to negotiate and health plan sponsors to manage than an array of individual arrangements. Continue reading “Health Care’s Most Needed Next Step”

North Carolina’s Battle for Health Care Value

Brian Klepper

First posted 12/10/18 in The Valid Points Newsletter


Lobbying? We’ve got 9 million taxpayers and 720,000 participants in this plan who understand that they aren’t consuming health care, it’s consuming them.”


North Carolina State Treasurer Dale Folwell


In North Carolina, a storm is brewing that highlights the health care industry’s influence and stranglehold over public dollars. An experienced civic-minded reformer with clout has emerged. Dale Folwell is a Certified Public Accountant who served four terms as a Republican in the NC House of Representatives and was elected Speaker Pro Tempore. Now State Treasurer, he has responsibility for the State Employees’ Health Plan and its 727,000 employees, dependents and retirees (including my wife, a sign language interpreter in the Charlotte-Mecklenburg  school system). The plan spends $3.3 billion annually, making it the largest health care purchaser in the state. “Right now, the State Health Plan and members spend more on health care to employees and retirees than is appropriated for the entire university system or for public safety,” says Folwell. He has made it his mission to bring reason and stability to that program.

Beginning January 1, 2020, Folwell proposes to switch the health plan’s reimbursement method to reference-based pricing. The approach, around a decade and now gaining momentum with employers around the country, would in this case pay 177% of (or nearly double) Medicare reimbursement. The health plan’s program, called the Provider Reimbursement Initiative, would allow providers a reasonable margin, but would cut an estimated $300 million annually from the plan costs and another $60 million from enrollees’ costs in the program’s first year. The health plan’s Board of Trustees unanimously supported the proposal.

In promoting his plan, Folwell has described some of the issues he’s faced. The most important is that, under longstanding arrangements with the state’s providers and the plan’s administrator, Blue Cross of North Carolina, the health plan can’t access pricing information on the services its purchasing. “I know what I’m being charged, but I don’t know what I’m paying,” Folwell explained. “For years, the plan has paid medical claims after the fact without knowing the contracted fee. It is unacceptable, unsustainable and indefensible. We aim to change that.”

“I said [to Blue Cross], I know what you are charging but what am I supposed to pay? There is no transparency,” Folwell said. “Blue Cross would not tell me, and there are laws on the books that say they need to tell us. The health care system has worked long and hard to develop this broken system, and they’ve been completely successful.”

Not surprisingly, the state’s health care lobby is gearing up to protect its turf.  State Rep. Josh Dobson, a McDowell County Republican, is expected to file a bill that would block Folwell from instituting the plan. Steve Lawler, President of the North Carolina Healthcare Association, one of a half dozen health industry associations with powerful lobbies, has claimed that Folwell has resisted discussion. But Lawler does not appear to have publicly addressed the transparency or excessive cost issues that are central to Folwell’s complaint.

While the battle is shaping up to be a high stakes, all-out fight, the health care lobby may not simply get its way this time. Robert Broome, Executive Director of the formidable State Employees Association of North Carolina, favors Folwell’s plan and said, “The state health plan board made a very sound financial and public policy decision that will save money for taxpayers and will save money for plan members, while bringing some common sense to how we pay for health care. It boggles my mind that folks could actually line up and be opposed to this.”

The beauty of Folwell’s strategy is that it is grounded in doing the right thing, and he has made it very visible to the Carolina rank-and-file. When challenged, there is every reason to believe that most politicians and business leaders will openly support the public interest over the health care industry’s interest, especially an industry that has become wealthy by taking advantage whenever possible for decades.

Folwell’s bold initiative takes its cue from a groundbreaking reference-based pricing initiative by the  Montana State Employees Health Plan, with about 30,000 enrollees. That program’s success has since led the Montana Association of Counties to implement a similar program. Here’s an introductory video on how that program works, and another one here explaining how the payment is calculated.

As health care costs have relentlessly risen, much of it due to opaquely excessive care and unjustifiable unit pricing, federal, state and local government workers around the country have seen their benefits slashed and their contributions dramatically increase. The initiatives in North Carolina and Montana may be the leading edge of a drive by purchasers exercising their new found market leverage. There’s every reason to believe they can be replicated throughout the country by governmental and non-governmental purchasers, fundamentally moving our broken health care system in the right direction.

It’s also important to remember that reference-based pricing is just one of several dozen powerful quality- and cost-management arrows in a larger health care performance management quiver. Smart employers and unions around the country are finally beginning to go around their health plans and deploy high performance solutions in drug management, musculoskeletal care, cardiometabolic care, imaging, allergies, claims review and many other opportunity areas for quality improvement and cost containment.

Mr. Folwell may well be the champion we need at the moment, and it’s possible he could achieve something meaningful. If governmental and business leaders follow his lead in North Carolina and around the country, it would be a key first step to dramatically changing our health system for the better.

Brian Klepper is a Charlotte-based health care analyst and EVP of The Validation Institute.

Saying No To The Drug Crisis


First published 11/27/18 on The Health Care Blog

BKlepper 102018In a recent essay, VIVIO Health’s CEO Pramod John guides us through four sensible drug policy changes and supporting rationales that could make drug pricing much fairer. Reading through it, one is struck by the magnitude of the drug manufacturing industry’s influence over policy, profoundly benefiting that sector at the deep expense of American purchasers. As Mr. John points out, the U.S. has the world’s only unregulated market for drug pricing. We have created a safe harbor provision that allows and protects unnecessary intermediaries like pharmacy benefit managers. We have created mechanisms that use taxpayer dollars to fund drug discovery, but then funnel the financial benefit exclusively to commercial interests. And we have tolerated distorted definitions of value – defined in terms that most benefit the drug manufacturers – that now dominate our pricing discussions.

The power of this maneuvering is clear in statistics on health industry revenues and earningsAn Axios analysis of financial documents from 112 publicly traded health care companies during the 3rd quarter of 2018 showed global profits of $50 billion on revenues of $636 billion. Half of that profit was controlled by 10 companies, 9 of which were pharmaceutical firms. Drug companies collected 23% of the total revenues during that quarter, but retained an astounding 63% of the profits, meaning that the drug sector accounts for nearly two-thirds of the entire health care industry’s profitability. Said another way, the drug industry reaps twice the profits of the rest of the industry combined.

Pfizer, the top performing publicly traded company in Q3, generated $4.1 billion in profits on $13.3 billion in revenue, for a 31% quarterly margin and a 45% increase in profitability over Q3 2017. (By comparison, the 2nd and 3rd top performers, Johnson & Johnson and United Health Group, seemed meek, with Q3 2018 margins of 19.3% and 5.6%, respectively.) Convinced that significantly more can be extracted from the market, last week the organization thumbed its nose at the American people and announced another price increase, this time 5-9% on 41 drugs or 10% of its product portfolio, starting January 15, 2019. This action, of course, gave cover to other manufacturers wanting to do the same thing.

The drug industry has, in the main, been too smart to perpetrate this kind of price gouging over the short term. Instead, they’ve preferred to slowly ‘boil the frog,’ with relentless and predictable increases two to three times per year. While complaints abound, nobody has yet refused to pay. These increases have been reliably absorbed by U.S. taxpayers, employers and unions, conveying that there’s probably room for higher pricing still.

These bold business and profit-taking behaviors have been lubricated by a steady stream of pharma lobbying dollars to both parties of Congress – $280 million in 2017 alone, as reported by Open Secrets – which has been directly complicit in creating this economic albatross hung around the necks of the American people. Worse, we’ve come to consider this situation as acceptable and business as usual.

One question now is whether Congress can rise above simply being bought off and take actions for the common good rather than the industry’s financial interests. There’s some reason for optimism, with drug price management proposals from both sides of the aisle. In a Washington Post piece this month, Zeke Emanuel, one of the Obama Administration’s key architects of the Affordable Care Act, wrote:

… the Republican plan demonstrates that even conservatives are feeling pressure to regulate drug prices. The ideological challenge is how to regulate them. It is going to be difficult for Republicans to repudiate their president and stonewall on the issue over the next few years. Perhaps, with more than 90 percent of Democratic and Republican voters supporting regulation, a bipartisan compromise might emerge.

 Let’s hope he’s right, but until our lawmakers stop taking money from pharma, let’s not hold our breath.

One thing is clear. The actions of Pfizer and other powerful drug industry players have repeatedly demonstrated a willingness to test the limits of what captured regulation and a dominated market will bear, as well as a blatant disregard for the larger societal implications of those actions. This is also true for other health industry sectors, but because the numbers are so much higher within pharma, the ramifications are much more serious. Congress’ continued avoidance of meaningful remedies effectively abets an open threat to our national economic security.

While we hope that Congress comes through, so far that’s been a pipe dream. The drug industry is playing a game of chicken with America’s taxpayers, but also with its employers and unions, daring them to take the heat that would come from saying no. What we need is for America’s largest firms to collectively come together, refuse to pay exorbitant drug prices, and demand changes to the drug companies’ business models.

Our paralysis, our refusal to respond to the predatory forces within our borders, is the irony. If and when the reckoning comes, pharma can retort that its actions were transparent, and that we did it to ourselves by not saying no.

Brian Klepper is a health care analyst and the EVP of the Validation Institute.

Getting Noticed As A High Performance Vendor

Brian Klepper

Originally published in the Valid Points newsletter on 11/07/18.

All growing health care organizations struggle for visibility. Within the vast health care universe, thousands of companies strive to be noticed as better and different than others competing in the same spaces. Organizational health care buyers face an overwhelming signal-to-noise challenge, trying to discern whether programs improve quality and cost and, if so, by how much. It’s a market beleaguered by untrustworthy information, and it’s an arrangement that favors vendors’ interests, at purchasers’ expense.

Those delivering higher value – consistently better health outcomes and/or reduced costs – may be surprised to find lukewarm reception from the health plans they thought would be eager to learn of new ways to deliver better results. The cold reality is that most health plans make more if health care costs more. Only organizations that are at financial risk for management of quality and cost – e.g., fully insured health plans, managed Medicaid plans, Medicare Advantage plans – are likely to be eager for approaches that can streamline processes and improve outcomes.

More promising clients are organizations that can directly benefit from higher value health care. Organizational purchasers – employers and unions – fit this profile. So do firms, like clinic and medical management companies, that sell themselves as full continuum risk managers for purchasers. And health plans that see the potential to undercut the market by offering a richer benefit design for less money than is available through conventional approaches.

There are questions that can help purchasers discern whether a vendor is a high performer. For example, can the vendor provide credible enterprise-wide, rather than anecdotal, data showing better health outcomes and/or lower costs than conventional approaches? Can it provide client testimonials (along with contact information, so you can talk independently with its clients) showing that its experience aligns with the vendor’s performance claims? Is it scalable, meaning that it can easily set up operations in new locations that get the same results? Are its impacts enduring (or sticky), meaning that its clinical and financial management processes continue to yield results over time? And is it confident enough in its capabilities that it is willing to put some or all of its fees at risk, against the performance targets it claims it can achieve?

Fastidious purchasers can certainly take responsibility for a vendor due diligence process, which has been the norm in health care purchasing for decades. But as most employer and union benefits managers know, that can be a strenuously onerous and inefficient undertaking, especially when multiple vendors are involved.

An alternative is for vendors to make it as easy as possible for purchasers to have confidence in their performance claims, by subjecting their processes to credible independent, third party assessments. Validation Institute validation does this by systematically reviewing the analytical elements – the data sources, data and calculations – of a vendor’s performance claims, to see whether they align with promised results. Alignment and the vendor receiving validation can, to a reasonable degree, supplant or bolster the purchaser’s due diligence, giving purchaser confidence that actual outcomes will be close to those that were promised.

While the validation process tests the accuracy of performance claims, the evaluation process associated with the Health Value Awards seeks to identify superior performance. It assumes that the vendor has been validated, and then, using independent, third party judges again, asks both objective and subjective questions that give insight into the market viability, importance and elegance of the solution at hand.

In a complex and chaotic market, the goal is to provide an evaluation process that is unconflicted and above reproach, that can project credibility so that purchasers can comfortably turn to it for guidance. Organizations like Good Housekeeping and Consumer Reports have achieved this kind of authority over decades, but have primarily focused on evaluating consumer goods and being a resource to individual, not organizational, purchasers. Health care is a more intricate, involved and emotional buy in a sense, but it is also one that comes down to determinations of quality and cost.

Health care organizations that believe that they deliver better value and that have the data to support that can, for little cost, obtain credible independent third party assurance that their performance claims are true. Organizational purchasers will and should scrutinize the third party’s processes, but once satisfied, will, for the most part, turn over due diligence.

Which makes third party validation and demonstration of superior results the fastest route for a health care vendors to stand out in a sea of competitors.

Brian Klepper is a health care analyst and the Executive Vice President of The Validation Institute.