Douglas L. Wood, MD, director for strategy and policy at the Mayo Clinic Center for Innovation, addressed members of the Chicagoland Chamber of Commerce on Sept. 30 at the Swissotel in Chicago on employers' role in reforming the nation's current healthcare delivery system.
Dr. Wood began by summarizing the current state of healthcare in the U.S., which can be characterized by growing and disparate healthcare costs under a fee-for-service model that does not ensure high quality. "Providers need to create value and coordinate care, and government needs to find a way to pay for value," he said. While the healthcare reform law passed last year begins to explore new ways of payment based on value, it just begins to introduce changes to traditional models of payment. "We have to start paying for results. Now, the Affordable Care Act [does begin to do this], but we have to accelerate that," he said. "We have to talk about rational care without rationing."
The idea of providing rational care without rationing was one Dr. Wood repeated several times during his presentation, explaining that it means using comparative effectiveness research to identify "what works" and to stop paying for inappropriate or unnecessary care. He warned that because of cost shifting — increasing costs to private payors in order to recoup losses from governmental reimbursement — it will be difficult to reduce the overall cost of healthcare, not to mention private insurance premiums, without reforming Medicare and Medicaid. Current figures suggest cost shifting raises the cost of private insurance by 25 percent, up from 10-12 percent in the 1990s. Thus, employers should use their influence to push for meaningful reforms.
In the meantime, though, employers can begin to reform healthcare delivery for their own employees by working with their health plans, if not self-insured, to develop policies and programs that promote paying for healthcare based on value. "Don't be fooled by unit price discounts," he said. "Start specifying results." That is, hold provider accountable for desired outcomes, such as return to function. "We have generally avoided using measures that would help you know that a healthcare delivery system is in fact delivering health."
Dr. Wood encouraged employers to explore the use of new payment models, such as "mini-capitation" or packaged pricing, which he believes has great potential for bending the healthcare cost curve. These models inherently incentive providers by putting them at risk for keeping patients as healthy as possible. Mini-capitation agreements go beyond payments for episodes of care and typically involved a fixed payment that covers care over the course of a year for a particular condition. "This approach is one you really need to work on quickly," he said.
Employers that have yet to enter into these agreements can reduce costs by implementing programs that have the same general goal of capitated payments: preventing illness and treating patients at the lowest-cost site of care. "Costs rapidly accelerate once you get out of the office and into a hospital," he said. Employer wellness programs can be impactful, and they can reduce health costs by targeting just a small population of employees. According to the Medical Expenditure Panel Survey, just 1 percent of patients account for 30 percent of costs, and 10 percent account for 77 percent of costs.
Dr. Wood also called on employers to teach employees that "more healthcare is not better," adding that in many cases evidence-based guidelines do not favor the most expensive intervention or procedure. Other "immediate" actions employers can take include creating a smoke free workplace, encouraging higher vaccination rates through employer-sponsored vaccination fairs and advocating for smoke free public places and other community-level health initiatives.
He concluded by saying, "Our resources are limited we can't keep going this way…really push legislators to do these things to help us achieve healthy communities and healthy workforces."
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Dr. Wood began by summarizing the current state of healthcare in the U.S., which can be characterized by growing and disparate healthcare costs under a fee-for-service model that does not ensure high quality. "Providers need to create value and coordinate care, and government needs to find a way to pay for value," he said. While the healthcare reform law passed last year begins to explore new ways of payment based on value, it just begins to introduce changes to traditional models of payment. "We have to start paying for results. Now, the Affordable Care Act [does begin to do this], but we have to accelerate that," he said. "We have to talk about rational care without rationing."
The idea of providing rational care without rationing was one Dr. Wood repeated several times during his presentation, explaining that it means using comparative effectiveness research to identify "what works" and to stop paying for inappropriate or unnecessary care. He warned that because of cost shifting — increasing costs to private payors in order to recoup losses from governmental reimbursement — it will be difficult to reduce the overall cost of healthcare, not to mention private insurance premiums, without reforming Medicare and Medicaid. Current figures suggest cost shifting raises the cost of private insurance by 25 percent, up from 10-12 percent in the 1990s. Thus, employers should use their influence to push for meaningful reforms.
In the meantime, though, employers can begin to reform healthcare delivery for their own employees by working with their health plans, if not self-insured, to develop policies and programs that promote paying for healthcare based on value. "Don't be fooled by unit price discounts," he said. "Start specifying results." That is, hold provider accountable for desired outcomes, such as return to function. "We have generally avoided using measures that would help you know that a healthcare delivery system is in fact delivering health."
Dr. Wood encouraged employers to explore the use of new payment models, such as "mini-capitation" or packaged pricing, which he believes has great potential for bending the healthcare cost curve. These models inherently incentive providers by putting them at risk for keeping patients as healthy as possible. Mini-capitation agreements go beyond payments for episodes of care and typically involved a fixed payment that covers care over the course of a year for a particular condition. "This approach is one you really need to work on quickly," he said.
Employers that have yet to enter into these agreements can reduce costs by implementing programs that have the same general goal of capitated payments: preventing illness and treating patients at the lowest-cost site of care. "Costs rapidly accelerate once you get out of the office and into a hospital," he said. Employer wellness programs can be impactful, and they can reduce health costs by targeting just a small population of employees. According to the Medical Expenditure Panel Survey, just 1 percent of patients account for 30 percent of costs, and 10 percent account for 77 percent of costs.
Dr. Wood also called on employers to teach employees that "more healthcare is not better," adding that in many cases evidence-based guidelines do not favor the most expensive intervention or procedure. Other "immediate" actions employers can take include creating a smoke free workplace, encouraging higher vaccination rates through employer-sponsored vaccination fairs and advocating for smoke free public places and other community-level health initiatives.
He concluded by saying, "Our resources are limited we can't keep going this way…really push legislators to do these things to help us achieve healthy communities and healthy workforces."
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