A Tale of Two Cities

Dickens' "best of times/worst of times" quotation comes to mind when considering employers' changing approaches to healthcare.

Tuesday, May 1, 2012
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When thinking about the evolution of the employer community's involvement and engagement in advancing better health and healthcare in the United States, Charles Dickens and A Tale of Two Cities comes to mind: "It was the best of times, it was the worst of times."

As we enter the fifth decade of active employer engagement in employee healthcare, there is much to be proud of, but there is so much more to accomplish.

Over this time span, the employer community has consistently pursued two broad goals: improving the health and productivity of its workforce as a competitive asset and getting the most value for each dollar spent in healthcare.

It is the best of times because the strategies deployed by leading employers and employer-based health coalitions in pursuit of these goals -- namely, population health management and value-based purchasing -- are now broadly accepted among all stakeholders and built into national health legislation (i.e., the Affordable Care Act).

It is the worst of times because these embraced strategies, measured by outcomes, have yet to yield positive results: The United States ranks 37th in the world in health status and we rank first, by a large margin, in per-capita expenditures for healthcare services. A tale of two cities, to be sure!

I've been asked to offer a perspective on what the future holds for employer engagement in health and healthcare. However, as I write this, the Supreme Court is weighing the constitutionality of healthcare reform and a decision won't be made until the end of June. While no one can predict what will happen, to better anticipate where employers are going and how they might react, let's first take a look at where they've been.

Passive Payers to Active Purchasers

1970s: The first signs of active employer engagement in health and healthcare can be traced to the 1970s.

After years of sitting on the sidelines in healthcare-policy debates, confining worksite health programs to safety efforts mandated by the U.S. Occupational Safety and Health Administration, and turning the keys of the car over to health-insurance companies to manage their employee-health-benefit programs, the employer community began to stir from its long slumber.

An initial sign was the formation of the Washington Business Group on Health, now the Washington-based National Business Group on Health, as the first national employer-based association devoted exclusively to health and healthcare issues.

For the first time, the employer community, represented by large corporations, held a seat at the table in national-policy debates. This was the decade of fledgling worksite health-promotion efforts, including employee assistance programs.

Larger employers also turned to self-funding of their employee health benefits and contracted with utilization-review organizations to better contain rising healthcare costs. The curtain had been raised on more active employer engagement in health and healthcare.

1980s: If the 1970s represented the birth and early childhood of employer engagement, the 1980s can be characterized as the teenage years, marked by growing independence and increased experimentation.

The decade saw more employers jumping on the worksite-health-promotion bandwagon, convinced that keeping employees healthy must accompany downstream strategies to manage employer costs when employees get sick.

Employer innovators broadened worksite-wellness initiatives to include disease-management efforts with an understanding that a small percentage of total employees and their dependents consume the lion's share of overall employer expenditures. Self-insurance continued to grow and was expanded to medium-sized employers.

This decade also ushered in the steady rise and expansion of employer-based health coalitions, such as the Pacific Business Group on Health and the Midwest Business Group on Health, as employers joined together in defined markets to exert their collective influence and leverage their combined purchasing power.

Coalitions organized group-purchasing arrangements on behalf of their employer members and established direct-contracting relationships with local physicians and hospitals through the creation of their own unique provider networks.

Cutting-edge employers and coalition leaders described their core strategy as "value-based purchasing" and waved this banner for years to come.

1990s: Like an exuberant young adult with budding confidence and just enough information to be dangerous, employers in the early 1990s had found the solution to rising healthcare costs. The elixir was managed care.

During the '80s, employers had begun to listen to the "managed competition" theories of thought leaders such as Paul Ellwood, Walt McClure and Alan Enthoven.

By early in the next decade, managed care -- with its narrow provider networks, capitated and discounted pricing, and utilization review protocols -- was on the march with an impressive employer army behind it.

Stunning cost-containment victories were won: For four consecutive years (1994 to 1997), healthcare costs were held under the annual inflation rate. In 1994, total healthcare expenditures actually declined from the previous year.

And then the bubble burst with a managed-care backlash propelled by providers, consumer groups, a captive political class and the media. Managed-care strategies were quickly dismantled, followed by some of the steepest increases in healthcare costs in history as providers made up for lost ground.

Employers learned an important lesson: Disruptive change will be fought and needs to be strategically introduced and communicated to all healthcare stakeholders.

2000s: At the dawn of the 21st century, sobered by the managed-care backlash, employers went back to the drawing board, concentrating on the fundamentals and strategies they could best control. A renewed and more disciplined commitment to keeping employees healthy was exhibited, as the C-suite and managers at all levels became more involved in building organizational cultures of health.

Integrated data analytics were deployed to measure both the direct (e.g., healthcare costs) and indirect (e.g., absenteeism and lost productivity) costs associated with the workforce-disease burden and the impact of worksite-health-management strategies.

Value-based-benefit-design models were introduced, such as waiving co-pays for clinical preventive services and chronic-care medications, creating positive incentives for individuals to engage in health-advancing behaviors.

At the same time, employers grew infatuated with consumer-directed health plans, aimed at decreasing an insurance-related "moral hazard" and increasing employees' cost-consciousness in the demand for healthcare services.

In the new century, employers also got back to the pillars of value-based purchasing and the drivers of a value-driven competitive marketplace by emphasizing performance measurement, transparency, and incentives for both providers and consumers.

"Measure, report and reward" became a rallying cry for value-based purchasing. The Leapfrog Group, led by corporate leaders such as General Electric and fueled by the active engagement of business coalitions on the ground, organized a game-changing strategy to measure and publicly report hospital performance.

Toward the latter half of the decade, the employer community also led the charge for provider-payment reform and exposed the toxic and perverse incentives of the "fee for service" reimbursement system that rewards volume of services over outcomes and performance.

Like the Leapfrog Group, the Bridges to Excellence organization was led by major corporate representatives and successfully introduced some of the first physician-level pay-for-performance programs to the healthcare landscape.

The Path Forward

Predicting the future of employer engagement in health and healthcare is risky business in our current environment, particularly given the bumpy ride of past decades and now the advent of national healthcare-reform legislation.

In such situations, it might be best to heed the wise old sage Yogi Berra, who advised, "When you come to a fork in the road, take it." Nevertheless, let me still take a stab at identifying the challenges ahead for the employer community and a predicted future direction.

My overall theme for the future of employer engagement in health and healthcare is "stay the course."

By this, I mean that the overarching goals of improved workforce health and getting the most value for healthcare expenditures will not change. Neither will the core strategies necessary to get there: workforce/population health management and value-based purchasing.

This constancy of purpose -- namely, identified aims and a strategic path to get there -- will serve the employer community well in the years ahead.

The primary employer challenge becomes, and the genius lies in, execution. In brief, the employer community needs a combination of bold leadership and disciplined, evidence-based intervention strategies in both population health management and in value-based purchasing to accomplish their bold aims.

In addition, employers must understand that their leadership and actions need to be exerted not only within their own organizations, but also in communities where they do business and where their current and future workforce resides.

No one employer has the leverage and authority to transform the healthcare-delivery system alone, nor can one alone build cultures and environmental conditions for health at a community level.

This is why it is so important for employers to organize or join existing business and health coalitions so they are fully engaged in the larger enterprise and team sport of improving health and healthcare at a community level.

Just as former Speaker of the House Tip O'Neill famously commented that "all politics is local," so too is health and healthcare.

Staying the course in population health management and value-based purchasing also presumes that the employer-based health-insurance system will survive the tremors and shock waves of the Affordable Care Act with its administrative burdens, mandates and future threats of penalties, including a significant excise tax.

While some experts predict that it makes economic sense for employers to "get out of the game" and pay the penalties for not providing health insurance, I anticipate, like many others, including the authors of a recent report by the Congressional Budget Office and Joint Committee on Taxation, that the vast majority of employers will continue their current commitment to providing employee health benefits.

While there might be some predictable erosion of very small employers and employers with a dominant workforce of low-wage workers to state insurance exchanges, where individuals can benefit from government-sponsored subsidies, most employers covering the current pool of 160 million citizens with employer-sponsored health insurance will, as my broad theme suggests, stay the course.

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Favorable tax treatment of employer-sponsored health insurance for both the employer and the employee, the business imperative in most industries to attract and retain a talented workforce, the economic logic of "pooling" and spreading insurance risk across broad and diversified populations of workers and their dependents, and the public's comfort level with benefit coverage through employment -- all these suggest that it is far too early to write the obituary for employer-sponsored health benefits.

And for that I, for one, am thankful, given the employer community's track record of being a force for change in improving health and healthcare.

So, in looking ahead, what does staying the course mean? Time will tell, but here are a few thoughts on the future path forward in employer-led population health management and value-based purchasing strategies.

Population Health Management

* Workforce health and productivity goals and metrics will become more refined over time and be used to measure corporate performance, including contributions to shareholder returns.

* Increasingly, employers will use incentives and value-based benefit designs to motivate employee engagement in health improvements and value-seeking behaviors.

? As the healthcare-delivery system -- particularly in response to ACA implementation -- moves to organizational structures more conducive to population health management (e.g., patient-centered medical homes and accountable-care organizations), employers will begin to migrate and integrate their worksite-prevention and disease-management programs into the more traditional, but increasingly transforming, healthcare-delivery systems.

* Through the leadership of business and health coalitions, employers will become more engaged in community health-improvement initiatives, understanding that community conditions -- such as poor schools, food deserts, a dearth of parks and recreational facilities, and violent streets -- can be key determinants of health for current and future workers.

* Population health rankings and per-capita health expenditures at a community level will become key metrics for determining business-location and investment decisions.

Value-Based Purchasing

* Recognizing that health plans are their key agents/partners for implementing and administering value-based purchasing strategies, such as provider-payment reforms, employers will refocus energies on measuring plan performance. Existing tools such as the National Business Coalition on Health's eValue8 program and HEDIS measures from the National Committee for Quality Assurance can assist in this regard.

* Increasingly, employer-led transparency efforts will focus on integrating quality and price information, particularly as consumer-directed health plans continue to grow and provider consolidation leads to enhanced negotiating leverage and upward pressure on health-service prices.

* Remembering the days of managed care, more employers will renew their appetite for high performance and narrower provider networks -- particularly medical homes and accountable-care organizations -- as strategies to improve quality while controlling costs. Consumers, unlike days past, will be more accepting of limited networks as clearer evidence of provider quality performance are presented and their own share of premiums are reduced as an incentive to select narrower networks.

* As Medicare implements its own value-based purchasing strategies mandated in ACA legislation, particularly pay-for-performance strategies, there will be intensified efforts to better align public- and private-sector purchaser strategies to minimize mixed-market signals to the provider community.

* Through the leadership of business and health coalitions, community-based, value-based purchasing strategies will continue to expand, focused on measuring and reporting provider performance and coordinating payment-reform strategies among all payers and purchasers in a defined market.

In closing, it is imperative that the employer community continues its leadership role if we are to realize the triple aim of better health, better care and lower costs. I am confident employers will!

Andrew Webber is the president and CEO of the Washington-based National Business Coalition on Health.

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