Greetings! 

It may come as no shock to the readers of this newsletter that we have had reports of a government-sponsored health care cost and quality program that simply does not work.  We file this under the "magic thread" category in our office - no, not an e-mail thread.  I am talking about the magic thread that made those invisible clothes that the emperor wore in the big parade.  Some kid was bold enough to declare, "The emperor has no clothes!" and the secret of the magic thread was out.

In any case, this newsletter is about employers and their programs.  This new information may serve you well if you take it to heart the next time you talk with your broker/consultant/carrier, or whichever tailor fashioned your "quality-oriented" or "value-driven" program.  Chances are if you cannot see the results, there aren't any!  Where is that precocious kid when we need him?

It's no longer a secret.  The only advantage of the Medicare Advantage program is to pay more for the same old care.  The Wall Street Journal (and Reuters and every other health care blogger) is reporting that the newest GAO report shows what many in the field already knew, that this program has not identified any area of quality improvement or cost savings that can be quantified with any statistical certainty.

The take-away from this report is that employers with on-site clinics should consider what program standards they hold their vendors, brokers, intermediaries, providers, and payers accountable to in order to see if the so-called quality metrics are being achieved.  The government and HHS are excused because, well, it's the government.  The people in private industry and managing HR benefit costs expect to be held accountable by those in the C-suite (and others, such as shareholders, employees, etc.).  The vendors should expect as much.  It isn't about where the clinic is located.  It's about results.

Look at your claims history.  Review the capture rate of your program.  Delve into the employee engagement statistics.  Inspect the referral channels.  Challenge the pricing and utilization of services at every level of the health care transaction chain.  If you need help in pricing, read on.  It is coming along (slowly).

This past month seems to have sprouted a number of articles about health care costs and transparency.  The most recent article is on the NYT Health blog. I won't read it to you, but it says that there is a certain lack of transparency in health care pricing and that consumers cannot make good choices with the information they have (except about the costs of diet supplements and Viagra).

This brings us to remind employers and on-site clinic sponsors that a 20-percent co-pay in the hands of the uninformed consumer means that the employer pays 80-percent of the cost of the mistake.  The employer is the one most financially at risk for a mistake and has the most to benefit from additional transparency.  You probably already know this because you are getting the claims data, analyzing them on a regular basis, and can best understand where your health care benefit dollars go.  (You do analyze claims regularly, right?)

We know of a region in which the same cardiac surgery group covers two hospitals about 25 miles apart.  The cost differential to have the same surgery at each institution is a factor of 30-percent, and this means that a mistake in the choice of hospital will cost the employer $15,000 more for the same health care benefit.  (Yes, both hospitals are on the same level when it comes to outcomes and quality grades, but the less costly of the two also has free parking!)  A mistake also costs the beneficiary about three grand or so, depending upon where they are with their deductible.

Some hospitals are also attempting to share information.  The Baptist System has a Health Expense Navigator tool on their corporate Web site that assists a patient in understanding the potential out-of-pocket impact on costs at any of their institutions (mostly Tennessee).  This is very useful if I have a procedure scheduled; it will tell me what the MRI will cost me (out-of-pocket) based on my insurance, and it will also gently remind me to bring a credit card or checkbook to assist in the registration process.

The problem is that they do not tell me if the MRI can also be done in a lower cost environment.  I will be impressed when I can get their competitors' prices from their Web sites or when they offer to match any other price in the community.  For references to this type of pricing, I have to redirect you to Expedia.  If there is a parallel in health care, let me know where to find it.

More helpful is the Web site promoted by the State of New Hampshire. They do just what is needed by helping a patient locate the data that is necessary for an actual consumer decision. Their Web site takes the zip code and a travel area and "costs out" medical care on an institution-by-institution basis.

If we look at a straight-forward vaginal delivery, for example, a mother lives in New Hampton and wishes to stay within a 20-mile radius of her home, and she has a $5,000 deductible and 20-percent co-pay, the family will be out-of-pocket about $6,800.  However, if the radius is expanded to 50 miles, the cost to the family by choosing another institution from the eight options listed drops almost $1,400.  I will not debate the issue of travel time, and especially travel with a woman in labor, but I will point out that the tool lets people in New Hampshire make decisions along pricing lines that are not generally available in other areas.

Isn't this the type of information your employees need?  As a footnote, we did a price comparison in a major Texas city and found huge differences in the choice of hospitals when compared along the lines of cost for a standard C-section.  The most significant, least-cost alternative would have been a good choice (from afar!), but further analysis showed that they only performed about 15 (fifteen!) such procedures in the previous year.  Yes, price counts, but it is not the only thing that counts.

Finally, we point you to another related article on The Forum. 

Sincerely,