Human Capital Briefs

Large Employers Are Key to Reforming Health Care

September 09, 2016

In a thoughtful review of the Affordable Care Act in The Journal of the American Medical Association, President Obama ends with a discussion of “lessons for future policy makers.” He talks about the difficulties in instituting change in the face of “hyperpartisanship” and “special interests” and makes a plea for “pragmatism.” Given the current state of affairs in Washington, this may seem like wishful thinking. But we think all is not hopeless, and that large employers can play a powerful role in building on what the ACA and other initiatives have achieved to date and accelerate the positive transformation of the U.S. health care system.

Here’s how employers can help address each of the challenges President Obama identifies:

1. Change is difficult. The remedy is multi-sector cooperation in establishing quality standards.

Standardization of best practices in delivering care reduces unnecessary treatment, improves safety, and allows buyers and sellers of health care to use the same vocabulary, with the same information about quality and value. Currently, there are many variants of “best practice” espoused by individual practitioners, medical centers, and quality organizations. This is confusing for both employers purchasing health insurance coverage for their employees and their dependents and for individuals seeking care.

In our experience in initiatives to improve the quality, enhance experience, and decrease the cost of health care in the Seattle and Portland, Oregon markets, the best way to reach accord on a single definition of quality is to engage multiple providersand employers in a collaborative effort supported by medical evidence. In most markets, the current community standard for quality consists of “yestercare” models in which quality is opinion-based and providers compete on the basis of subjective reputations, market clout, and politics.

Changing this antiquated approach to defining quality starts with cooperation in the market, not competition. In such a market, creating a clear definition of quality aligns the production and purchase of and payment for care. Virtuous cycles of increasing value are created as purchasers play the lead role in identifying the most efficient and effective providers.

An example of this is the Bree Collaborative, a multi-stakeholder collaborative created by the Washington State legislature in 2011 “to provide a mechanism through which public and private health care stakeholders can work together to improve quality, health outcomes, and cost effectiveness of care.”

The purchasing power of employers and providers’ desire to learn and improve drives providers to participate in such a market. The opportunity to play an active role in improving the quality of care that their employees receive and reducing the cost of that care and the time lost to illness and injury entices employers to participate.

Market-relevant indicators of quality reported directly by provider to purchaser include the provider’s track record in using evidence-based care to treat patients, how rapidly patients returned to their normal daily functions, and how patients viewed their care experiences. This addresses the problem of missing or imperfect information that now plagues the health care market.

2. Special interests impose a continued obstacle to change. The solution is to foster competition among care providers that’s based on their track record in adhering to the quality standards. This approach is based on procurement lessons we learned from Intel and leaves no room for special interests to interfere.

When quality standards for care are set, employers — on behalf of their employees — now have products (i.e., care service lines) to purchase that they understand and can comparatively evaluate. As purchasers, the employers may send a request for proposal (RFP) to care providers to deliver the defined evidence-based product.

This is where competition in the market comes into play: Providers submit proposals that describe their operational models for efficiently delivering services. The employer reviews the proposals, may choose to conduct site visits, and then chooses one or more of the provider groups. The selected providers then report to the employer the data on their patient outcomes that we described above. Because providers know their outcomes will affect how they fare in the next contracting cycle, the level of performance across the market rises.

3. Getting pragmatism to prevail in both the creation of legislation for change and implementation is difficult. The solution is to use purchasing power and quality standards to resolve conflicts.

When a purchaser requires a group of providers to agree on a single purchasing standard based on quality, the providers in a given market or even within a single system must resolve conflicts and achieve alignment among themselves promptly or the purchaser will move on to other suppliers. Solutions become practical and efficient rather than ideology-based. Employers weigh in on clinical details infrequently but do exert their influence in reaching a single standard.

In our experience with this approach, the most avid employer participants in establishing a single standard for quality have been multinational corporations that have major local operations (e.g., Intel) and state and county governments (e.g., Washington State and King County, where Seattle is located) that face stringent budgetary constraints. But other employers then join the effort. For example, companies such as Walmart, JetBlue, McKesson, and Lowes are now sending their employees from distant cities to Seattle to receive the excellent care that this process has produced. The result is the process is helping to create a national quality-based market for health care.

With their access to data and expertise in analytics, health plans can be constructive players in the creation of the kind of market we have described. They can help make sense of the data and help all the players track progress in timely fashion. But sadly, in a number of instances they have declined to join the efforts or have participated half-heartedly. They do so at their own risk: Some small, disruptive companies that act as third-party administrators have started to fill this need.

Through the ACA, many new customers have been able to enter the health care market, but the market remains inefficient. The ACA includes mechanisms for cost reduction that employers can build upon by contributing their purchasing power to create a complementary quality-based market to address the trillion dollars in waste that continues to burden patients, providers, and employers alike.

Businesses as well as public sector entities can play a lead role in mitigating political hyperpartisanship and special interests by working directly with local health care providers to define, secure, and execute to transparent standards. Pragmatism can prevail.

 

 This blog first appeared on Harvard Business Review on 07/26/2016.

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