Cracking Health Costs E-Book

Tom Emerick

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 312

Veröffentlichungsjahr: 2013

Beschreibung

Cracking Health Costs reveals the best ways for companies and small businesses to fight back, right now, against rising health care costs. This book proposes multiple, practical steps that you can take to control costs and increase the effectiveness of the health benefit. The book is all about rolling back health care costs to save companies and employees money. Working hand-in-hand with their employees, businesses need to ensure that, whenever feasible, employees with the most expensive diagnoses get optimal treatment at hospitals not practicing "volume-driven" medicine for higher profits. Less than 10% of employees incur 80% of costs. About 20% of patients have been completely misdiagnosed, while many others are simply the victims of surgeons who are either practicing bad medicine or overtreating for profit. For example, some companies, such as Walmart and Lowe's, are turning to the "Centers of Excellence" approach author Tom Emerick helped to pioneer while running benefits for Walmart. By determining which hospitals are adopting the highest standards of care, benefits managers can reduce the number of unnecessary high-cost surgeries and improve employees' overall health. The solution-based approach offered by the book is unique, because it can be implemented by businesses today.

Leseprobe

Contents

Cover

Praise for Cracking Health Costs

Title Page

Copyright

Foreword

Introduction

Part I: Mostly Bad News

Chapter 1: Myths and Facts about Your Health Benefit

I: Myths Covered in Chapter 3: Yes, Even Wellness Can Be Hazardous to Your Health

II: Myths Covered at Length in Other Chapters

III: Myths that End Here

Chapter 2: Does Your Broker or Consultant Have Your Back?

Chapter 3: It's Time for the Wellness Industry to Admit to Doping

Part One: Vendored Wellness Programs Do Not, Will Not, and Never Have Reduced Your Health Spending, Period

Part Two: The Actual Value of Wellness

Chapter 4: This Is Your Health Benefit on Drugs

I: Striking Back at the PBM Empire

II: Specialty Medications: The Bad News and the Bad News . . . and the Bad News and the Bad News

III: Regular Prescription Drugs

Communication and Implementation

The Close

Chapter 5: Your Employees' Health Is Too Important to Be Left to the Doctors

Medicine Is Cheap, at Least at the Point of Service

Summary

Chapter 6: Are New Delivery Models Déjà Vu All Over Again, Again?

Accountable Care Organizations

Patient-Centered Medical Homes

The Difficulty of Measuring Outcomes and Some Advice for Doing That

Action Steps

Part II: Mostly Good News

Chapter 7: The Company-Sponsored Centers of Excellence Model

Chapter 8: Hospital Safety: How to Get Your Employees Back to Work in One Piece

Action Steps

Chapter 9: Real Care Coordination: The Only Other Way to Save Money

How to Select a Coordinated Care Vendor

A Few Closing Words

Chapter 10: Goofus Retains a Wellness Vendor, Gallant Implements Well-Being

What Is Well-Being?

Well-Being Can Be Accurately Measured

Do Differences in Well-Being Equate to Differences in Health-Related Cost?

Well-Being Scores Can Be Improved

Requirements of an Effective Well-Being Improvement Program

Action Steps

Part III: What Should You Do Next?

Chapter 11: Health Insurance Exchanges: Should You Stay or Should You Go?

Exchanges: The Basics

Public Exchanges

Private Exchanges

Future Exchanges

How Does This Affect You?

“Should I Stay or Should I Go?”

Notes

Bibliography

Acknowledgments

About the Authors

Praise for Cracking Health Costs

“In their new book, Cracking Health Costs, Tom Emerick and Al Lewis manage to gore everyone's ox in such a delightful way that you will laugh out loud even while you are cringing at some of the ways you too have fallen into the traps they so vividly describe. They blow up myths about the benefits of wellness, prevention, screening, PBMs, and much more. And they name names and provide links and references to support their suppositions, and, most important, they do the math. Even if you don't agree with everything they posit, you will want to read this book at least a couple of times not only to mine the nuggets, but also to enjoy the humor.”

Patricia Salber, MD, MBA, Host, The Doctor Weighs In and CEO of Health Tech Hatch

“Tom Emerick is one of the nation's most experienced and successful benefits managers. He is offering guideposts to avoiding overpricing and overtreatment in health plans. The need for such guideposts is a reproach to the American healthcare system. Nonetheless, the insights are profound for benefits managers and beneficial for employees.”

Nortin M. Hadler, MD, MACP, MACR, FACOEM, Professor of Medicine and Microbiology/Immunology, University of North Carolina at Chapel Hill

“Cracking Health Costs is a myth-shattering book that opens Pandora's box! While many administrators, patients, and healthcare workers are caught in the cultural web of unnecessary procedures, accidents, waste, and poor quality, Emerick and Lewis empower health benefits managers to call the shots by debunking common myths and illuminating a clear, practical road map for change. Knowledge is power, and power is within these pages. This book will transform healthcare.”

Kathleen Bartholomew, RN, MN, Author and Nurse Leader

“Cracking Health Costs debunks the fads in corporate health benefit management and provides a road map for executives who want their employees to have top-quality care at an affordable price.”

Rosemary Gibson, Author of The Treatment Trap: How the Overuse of Medical Care Is Wrecking Your Health and What You Can Do to Prevent It

“The overuse, underuse, and misuse of healthcare services fueled by decades of blind purchasing has created the single most important threat to the health and wealth of our families. When in a crisis, it is critical to take a hard look at the facts no matter how painful it is. This book is a courageous and inspired work that is a must read for our nation's corporate and healthcare leaders who must get out of the stands and wade into the arena as Tom Emerick has…this is a David and Goliath story. Our fight with the status quo is one our nation can't afford to lose.”

Charles R. Denham, MD, Chairman TMIT, CEO HCC Corporation

“Tom Emerick and co-author Al Lewis have crafted a work that should, and hopefully will, become required reading in America's boardrooms and executive suites, as well as the dysfunctional mess we refer to as Congress. Tom's pedigree alone is worthy of serious national attention. As benefits manager for healthcare for over a million employees he guided Walmart to a Renaissance in approaching the responsibilities of providing quality and safe healthcare versus just writing the checks, and his experiences alone would justify reading this work. But Cracking Health Costs is far more: a very straightforward and readable story of how we can transform ourselves from victims of a collapsing financial model of healthcare into leaders of a revolution in smart choices and careful selection of who gets our dollars.”

John J. Nance, Author of Why Hospitals Should Fly and Charting the Course

“This book is a roadmap for how some private equity companies already spend their money wisely on health benefits in their portfolio companies, rather than chase every fad that, as Emerick and Lewis point out, can and do harm your employees as well as your bottom line.”

Tom Scully, Administrator, Centers for Medicare and Medicaid Services (2001–2003); Senior Counsel, Alston & Bird; Partner, Welsh Carson, Anderson & Stowe

Cover image: © iStockphoto.com/Health Care Costs

Cover design: C. Wallace

Copyright © 2013 by Tom Emerick and Al Lewis. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Emerick, Tom, 1947-

Cracking health costs: how to cut your company's costs and provide employees better care / Tom Emerick and Al Lewis.

pages cm

Includes bibliographical references.

ISBN 978-1-118-63648-0 (cloth); ISBN 978-1-118-71123-1 (ebk); ISBN 978-1-118-71091-3 (ebk)

1. Health insurance—United States–Costs. 2. Health insurance–United States–Cost control. 3. Employees–Medical care–United States–Cost control. I. Lewis, Alfred. II. Title.

HG9396.E44 2013

658.3′254–dc23

2013012719

Foreword

If you run an organization, work in human resources (HR), employ people, or have responsibility for your company's income statement, you are probably more concerned about controlling your organization's health insurance costs than about global warming, government debt, or al Qaeda. After all, health insurance benefits may be either the second or the third most expensive item on your income statement (second after labor costs in service industries, third in manufacturing after labor and cost of goods). In the past, most HR professionals/CEOs/CFOs paid little attention to trying to manage this expense—that was the work of the insurance companies, managed care organizations, providers, vendors, and consultants hired to design, manage, and perform oversight of this area. Well, if you think the carriers, providers, vendors, government, or consultants will (or can) fix your problem, I have a bridge to sell you.

Fixing healthcare costs should be one of the top priorities for every employer, for not only competitiveness but, for many, survival. As a healthcare consultant, I meet daily with C-suites telling me their margins can't absorb double-digit benefit costs increases and survive. Most have pushed cost shifting to employees to the limit—so now they have fretfully grasped at population health management (PHM) as the next silver bullet. Seventy-five percent have wellness programs, 15 percent of large employers mandate health risk assessments and biometrics for insurance eligibility, and 30 percent are considering on-site clinics—but do these things really work? Few employers have a three- to five-year strategic plan for health risk mitigation or understand the strategies that do work. Fewer still know how to measure their PHM strategies' success or failure.

As someone who heads a department responsible for the data analytics and population health enhancement strategies for our clients, I readily admit I've made many of the mistakes pointed out in Cracking Health Costs. We learn from our mistakes. As a benefit consultant, a physician, and an ex–managed care insurance executive, I've sat on just about every side of the PHM fence. Today it is no longer about wellness programs, health reimbursement accounts (HRAs), biometrics, or paying people to engage. Sure, those have their place, but don't rely on them as your strategy. I couldn't get my patients to lose weight, stop abusing alcohol and tobacco, or exercise when I was a practicing physician. Why did I think, as a benefit consultant, I could influence employee health any better? People abuse substances, are couch potatoes, or are overnutritionalized (that's HR-speak for “fat”) because they hate their jobs, live in a grocery desert, have a failed marriage, have kids who are on drugs, are poor, or have bad genes, or they just don't care. Only 1 percent of the U.S. population exercises 150 minutes a week, sleeps seven to eight hours a night, eats five to nine fruits and vegetables a day, and doesn't abuse alcohol or use tobacco products. I give employers the same message I used to give my patients: “Well-being is the opposite of dis-ease. A well-lived life is like a four-legged stool. The legs are physical, mental, socioeconomic, and spiritual well-being. All four legs must be present and in balance for a person to be at-ease, not dis-eased.” If your HR department is ready to undertake the root causes of what is really driving your plan costs (that includes spouses and dependents, who represent 50 to 60 percent of your direct medical costs), then you will start focusing on their well-being, not just their biometrics. This is not easy stuff; this is hard work. You need to learn from others' mistakes and conserve your resources, focusing on what works.

In Cracking Health Costs, Tom Emerick and Al Lewis break down many of the myths around population health management. There is no silver bullet. Well-being means focusing on the work environment, making the workplace somewhere people want to go every morning. What if every employee woke up each Monday morning like Sam Walton did and said, “Thank God, it's Monday!”? Nobody had to pay Sam an incentive to go to work.

As a physician and a benefit consultant, I know that too much healthcare can kill you. Maybe you didn't read the 1999 Institute of Medicine's report, To Err Is Human, telling us that as many as 98,000 people die each year in hospitals due to medical errors, but you should know what your procedural complication events per thousand rate is—a category in most medical claim reviews that can be accessed by your carrier or healthcare adviser. Who are the providers with high complication rates? Is your pharmacy benefit management (PBM) drug mix maximizing your actual savings or just your PBM rebates? Do you understand why executive physicals, prostate-specific antigen (PSA) testing, yearly paps and mammograms, and annual physicals are a waste of money? Are you still trying to bribe your plan members into living a healthier lifestyle with cash incentives? Did that work with your kids? If so, for how long? Incentives might drive engagement, but not commitment.

Cracking Health Costs addresses all of these issues and is a must-read for any corporate executive who believes that having healthier, happier, more productive employees should be a business strategy, as opposed to a button that can be pushed with vendors, bribes, and surveys. Tom Emerick faced these same challenges at Burger King, British Petroleum, and lastly with Walmart as Vice President, Global Benefit Design. Al Lewis is the preeminent population health management measurement guru and return on investment (ROI) myth buster. Tom and Al have written a fascinating book outlining many of the wasteful strategies currently being adopted by corporate America, and suggesting better ways to attack this problem.

—David A. Rearick, DO, MBA, CPE, Chief Medical Officer,Marsh & McLennan Agency Mid-Atlantic Region

Introduction

Warning: Healthcare can be hazardous to your company's physical and financial health.

This book is about fixing both those hazards, through less and smarter utilization of your healthcare benefit. Specifically, we will propose that you reduce your company's healthcare spending by spending less money on your company's healthcare. I know it sounds like a Yogi Berra quote, and you may be wondering why you just paid for a book that states something that obvious, but the fact is, just about every solution that you are pitched by your carriers, vendors, and consultants urges you to spend money now for the promise of a return on investment later.

Unfortunately, for reasons detailed in Cracking Health Costs' prequel, Why Nobody Believes the Numbers, most of those ROIs are rather transparently (and in many cases, hilariously) made up. Don't take my word for it. Look at your own spending patterns. As you can tell by from your own utilization rates for scans, prescriptions, lab tests, and primary care—not to mention your massive spending on wellness and incentives that somehow escape inclusion in your actual healthcare budget—your prevention, control, and early detection spending is rising. But increases in these preventive categories are not being offset by reductions in surgeries, inpatient days, and emergency room visits, that (unless you've raised your ER visit copay to $100 or more, which has nothing to do with these so-called solutions you are being sold) have stayed the same for years except, if you are a small company, for some random bouncing. Ergo, you've accomplished nothing.

It's not just the spending. As the opening paragraph indicates, it's about employee* health, too. Sure, people can die from not getting adequate medical attention, but for the commercially insured population the following is only a slight exaggeration: Too much healthcare can kill you.

Many books, including those listed in the Bibliography, vividly illustrate that point. It's not just too much treatment. It's not just too much diagnosis. It's also too much prevention. That may sound like another Yogi Berra quote—how can you have too much prevention? Well, too much of anything is bad for you. Prevention—in the form of wellness programs and especially health fairs and biometric screens—turns out to be a substantial and largely unappreciated waste of money. More importantly, if you go too far, it's not just wasting your money: at some point you are less likely to help your employees than harm them, as the state of Nebraska example in Chapter 5 illustrates.

Cracking Health Costs describes what you can do to mitigate this epidemic of prevention, diagnosis, and treatment, by spending less profligately but more wisely. When I say “you” in this book and point out ways to spend your money more productively, I am assuming you are the CEO, COO, or CFO and have some control over how your money is spent. (Or, you are a very enlightened and analytically savvy benefits administrator or human resources executive who views the job as a steppingstone to senior management rather than something to do between rounds of golf with your benefits consultant.)

Unfortunately, there are scores of people feeding at your trough, people who benefit only if you do the opposite: spend more profligately but less wisely. Do not expect them to stand idly by while you cut back. I'm* talking not just about your vendors, carriers, and consultants. I'm also talking about the many people whom you never even come into direct contact with, such as pharmaceutical reps calling on doctors, radiologists getting paid by the scan, malpractice lawyers who want all bases covered, drug companies paying researchers to write positive journal articles, and advertising agencies convincing your employees to demand more pills. (As Governor Rick Scott, the former CEO of Columbia/HCA observed: “How many businesses do you know that want to cut their revenue in half? That's why the healthcare system won't change the healthcare system.”)

These folks, directly or indirectly, can be very persuasive. You may think you've held back their tides, but you probably haven't. The simple test below is an easy way to find out. You can answer “yes,” “no,” or “I don't know” to the following questions. If you answer yes to at least 10 of these 15 questions, you don't need Cracking Health Costs.

First, some outcomes questions. Over the past five years, per 1,000 covered people across your entire covered population, not just motivated participants in specific programs:

1. Have your inpatient days fallen?

2. Has the number of imaging tests fallen?

3. Has the number of specialist visits declined?

4. Have your wellness-sensitive medical events declined?

5. Has your number of inpatient surgical procedures declined?

6. Has your number of vendored programs decreased, and are these programs so inherently appealing that you no longer need to bribe people with incentives to participate in them?

7. What is the “spread” per prescription between what your pharmacy benefit manager receives from you and what it spends on drug procurement?

8. Have you actually measured most of these items above?

Next, some process questions:

9. Have your RFPs and reconciliations become clearer, shorter, less expensive—and according to the outcomes measurement gold standard Why Nobody Believes the Numbers—valid?

10. Are your consultants and vendors showing you much lower, more realistic, ROIs for programs than they previously did, and focusing on the validity of those ROIs according to that gold standard?

11. Do you sleep well the night before you need to present your ROIs/outcomes to your boss, knowing that you'll be able to answer any tough question about your calculation?

12. Did your consultant inform you that there is no evidence that spending money on wellness will reduce healthcare spending, and/or did your vendor or consultant tell you that any differential spending reduction by participants, as compared to nonparticipants, is solely the result of self-selection by motivated people wanting to participate?

13. Do the hospitals in your network have higher Leapfrog safety scores than other hospitals in your marketplace, or did they get into your network solely on the basis of price or reputation?

14. Does your benefits design favor hospitals in your network that pay specialists salaries in order to discourage them from performing unnecessary procedures that would otherwise generate revenue?

15. Did your consultant or broker give you or recommend to you this book or the prequel? (Obviously your wellness vendor didn't.)

Okay, now tally your score.

The bad news is that you may have missed many of them, but the good news is, you're not alone. Probably a third of you answered “no” or “I don't know” to 10 or more. Well, that's why this book was written.

Cracking Health Costs will show you how to improve both your score, and more importantly, the cost-effectiveness of your health benefit. Most of what I'll be suggesting are easy things to eliminate. We'll explain why eliminating them will not only save you money but improve the health of your employees. In addition, these are primarily items your employees literally put zero value on. In the case of health advocacy, your employees actively want you uninvolved and often privately pay on their own even though you offer the benefit. If you wanted to find a new psychiatrist because you felt like your depression was getting worse, would you want your boss's health advocate company to help?

The good news is that subtracting a ton of worthless, counterproductive, and even harmful spending—offset by a small dollop of valuable spending—might be enough to reveal that rather than being an expensive annoyance, your health benefit is a valuable cost-containment and employee health tool. And just in time, too, because, like those immortal philosophers The Clash, your organization will soon need to answer the question: “Should I stay or should I go?” I can't remember what The Clash was referring to originally, but soon you'll be facing this choice with respect to the insurance exchanges. The exchanges provide an opportunity to trade the annual headache of benefits design for the annual headache of simply deciding how much to subsidize healthcare for your employees, and then sending your employees out on their own to the exchange, check in hand. Or you could pay the statutory penalty and not offer insurance at all. Or you could move people to part-time status and let them go on Medicaid. Even The Clash wasn't faced with this many choices.

Many vendors and consultants will lose a great deal of income if you decide to punt and use the exchange (though licensed broker-of-record fees are protected and not rebatable, so the cost of using one will fall on the carrier, until they raise their rates to cover it). Consequently, expect a full-court press from salespeople telling you how much money you can save, how employee morale is enhanced, how you can improve employee productivity by continuing to self-insure and adding some more prevention programs and so on. No doubt they'll pepper these proposals with the usual clichés, like how the “key takeaway” is that you'll create a “win-win” for “all the stakeholders.”

On the other hand, your CFO will do the math, as CFOs are wont to do (no wonder they never get invited to parties) and may come to the conclusion that it is cheaper to pay the penalty...except that the penalty option is an either-or covering all full-time employees, including the aforementioned CFO. You can't create two classes of healthcare within your organization, a gold-plated one for the suits and foisting the full-time people who actually do the work onto Medicaid. Therefore, unless the Howells want to be cast adrift with Gilligan, you better make sure that you've exhausted all the possibilities for making your own benefit as cost-effective as possible before pursuing that option. And exploring the possibilities is exactly what this book is for. (You can avoid some of this by going to a higher mix of part-timers, but there are obvious limits to that.)

Taken as a whole, my view is, other things equal, there could be many reasons you would prefer to self-insure your employees and administer a health benefit rather than simply subsidize their use of an exchange or pay the penalty. After all, you switched to self-insurance to gain added control over the benefit. Why throw that away? At least try some of what Cracking Health Costs recommends to see if you can impact your health spending. The insurance exchanges will still be here next year, so you can always switch later. Switching now and then changing your mind and switching back is tougher. You lose your institutional knowledge of running a health benefit, just like companies that outsourced their manufacturing have lost their institutional knowledge of how to put things together. So innovation should be done earlier rather than later. (There are some exceptions to this self-insured recommendation that Chapter 11, which talks about exchanges, covers.)

I'm not advocating innovation for innovation's sake, though. Cracking Health Costs concludes that probably 90 percent of what you are getting sold is counterproductive at worst and worthless at best. Or, if not worthless, then not a large enough savings driver to merit the investment of time and money.

And that line provides an excellent segue into the chapter summary, because you'll find that more chapters are much more about what's been oversold and doesn't work than about good ideas to implement, though we have plenty of those, too. Cracking Health Costs is divided into two parts, plus a conclusion. Part I, “Mostly Bad News,” mostly pulls the curtain away from the army of vendors, consultants, and providers lined up to separate you and your employees from their money, offering little in return. Part II, “Mostly Good News,” is much shorter, unfortunately. But there are some best practices out there worth investigating.

Chapter 1 provides a brief overview of the 90 percent of vendor interventions that are worthless, and explains why they are. (A few of the worthless items, because they are so popular, will also merit their own chapters later.) To some degree, Chapter 1 —as well as Chapter 3 on wellness—is a synopsis of my colleague and collaborator Al Lewis' award-winning trade bestseller Why Nobody Believes the Numbers: Distinguishing Fact from Fiction in Population Health Management. Why Nobody Believes is also funnier than Cracking Health Costs, which is intended as a serious volume for benefits administration and has an implementation emphasis. Plus, people undergoing unnecessary major surgeries are not funny, whereas claiming massive savings by bribing employees to eat more spinach is, especially when Al presents it.

Finally, look at the reviews for Why Nobody Believes—Al is simply much funnier than any other healthcare writer, period. Even though Cracking Health Costs is a serious book, a little of his style occasionally sneaks in. You think I came up with that Clash reference on my own? I wouldn't have thought to start a healthcare book with a reference to The Clash, partly because that's not my style and partly because I've never heard of them. (Al came up with that last line, too.)

No doubt you've been sold a lot of vendor interventions because your brokers are making fat commissions off them, and that's the subject of Chapter 2. There's a reason why so many things look good to your brokers. It's because they are good—for your broker. Yes, there are some honest brokers and consultants. We've found a handful and you can use this chapter (as well as that 15-question diagnostic quiz you just took, which a good adviser will score close to 100 percent on) to see if yours fits the bill.

Ask yourself this single health benefit trivia question to see if indeed your consultants actually know enough about health benefits to be consulting you on the topic: Does your consultant being paid to advise you on how to reduce your heart attack rate through cardiac disease management and wellness programs know what your heart attack rate is and whether it has declined faster or slower than average since your program(s) started? I didn't think so. By the end of Chapter 2, you should have developed some healthy skepticism about what you hear from your advisors, as some honest ones offer an inside view of many of their colleagues' business practices.

What Chapter 2 does for brokers and consultants, Chapter 3 does for wellness vendors. It describes what some companies have finally been noticing, which is that wellness almost invariably increases your costs (when all costs are included) and in some cases harms your employees.

Then, Chapter 4 will peel away some of the patina, to the extent that there is any left, from the pharmacy benefits management industry. The chapter shows you that the complexity of their contracts is designed to obfuscate, and judging from the stock performance of that industry, does so quite effectively. It also provides some novel ideas to reduce your drug spend generally and PBM spending in particular.

But wait...there's more. Now how much would you pay? Quite a bit, as in Chapter 5 we venture inside the walls of the doctors' offices and hospitals and learn why your employees' health is too important to be entrusted to providers. You'll see how your employees get sucked into the treatment trap, which can start with a screen or health fair yielding a false positive on a lab test, and end with an unnecessary surgery. In this country, specialist training, culture, and financial incentives favor action over thought, procedures over watchfulness, and technology over judgment. You're frequently an involuntary co-conspirator, too, as local provider organizations salivate over your health fairs and biometric screens, knowing that they will generate a steady stream of customers following up on possible (but, as it turns out, mostly inconsequential) health problems. And you needn't take my word for this. Call a few local hospitals and see how willing they are to sponsor these activities for you.

Fees and procedures feed the beast today, but, we are told, help is on its way in the form of new delivery systems: Patient-Centered Medical Homes and Accountable Care Organizations. Chapter 6 covers them together because they are both delivery models involving different provider organizational methods, electronic medical records, and initials. PCMHs are a waste of money. It's too early to tell with ACOs. If they work, the net savings will be minor, so you can afford to wait.

While you're waiting, we do have some solutions for you, and this brings us to Part II, “Mostly Good News.”

There is a best-practice for inpatient care, and it doesn't involve legislated changes to the delivery system. Chapter 7 describes a Company-Sponsored Centers of Excellence (CSCOE) model, used by a fast-growing number of employers to prevent unnecessary surgeries not by denying, restricting, or complicating access to care, but by enhancing it. It turns out to be worth a lot of money to fly a few of your employees, on your nickel, to one of the handful of the country's hospitals that takes this approach.

Chapter 8 shows how even right in your own very neighborhood, you can find and nudge your employees to safer hospitals than the ones you are using now, according to the highest objective standard, the Leapfrog Group Hospital Safety Score. And in hospitals, safer means better. This chapter reveals the epidemic of medical errors in this country, but shows how you can select hospitals for your local network that actively work at—and succeed in—minimizing them. There are many ways of measuring hospital quality and this chapter strongly advocates for the one—avoiding medical errors—that saves you money and shields your employees from injury.

Even though hospital safety scores and shopping for centers of excellence are important, a lot of you still don't want to give up on keeping people out of hospitals generally, so it is fortunate that a coordinated care model, which concentrates all member-facing services in a single entity, does actually save money. You can expect roughly a 2 to 4 percent reduction in overall trend, mostly from reduced hospitalizations, within a year or so after its implementation. However, the coordinated care model is not like cranberry juice where specific proportions of specific ingredients must be included to earn the label “pure juice” (hence, Ocean Spray labels its offering a “Cranberry Juice Cocktail”). Nope. It's caveat emptor in the coordinated care world—anyone can claim to offer it, and many carriers and vendors do. Chapter 9 describes what constitutes the model and provides the checklist for determining if your carrier (or disease management/wellness vendor) is one of them.

We will step out of character and close Part II with a more positive evolution of/substitution for wellness. Chapter 10 takes the wellness question to the so-what-do-I-do-instead level. It describes how you may be able to improve your company's bottom line with a global well-being emphasis, an approach that you can be assured will work because your consultants and vendors will discourage you from undertaking it, since its focus on internal cultural changes yanks away the corporate trough that they've been feeding at. Well-being does have a catch. The catch is, you can't just pay people incentives, send out health risk assessments, offer coaching, provide nicotine patches, and give people pedometers. You need to actually do something. The well-being model encompasses financial and emotional as well as physical health as catalysts for productivity improvement, and also requires attention to the work environment. And you won't get an immediate health claims payoff—but you should see an improvement in performance, which matters more to your organization. The health claims payoff will come later.

I end with the conclusion and the question on whether to move to the exchanges. You might ask, “Time for the conclusion already? What about mental health, health savings accounts, high-deductible plans, narrow networks, and [fill in your own blank here]?”

Answer: I don't know anything about those topics so I wouldn't be doing you any favors by discussing them. Healthcare is an almost $3 trillion industry. No one can know it all. The good news is that understanding the topics in this book will spur you to ask the right questions when you evaluate those other topics. The critical thinking tools used in Cracking Health Costs can be applied broadly across the other healthcare services you use. And when you do evaluate these other services, you may reach the same conclusion I do regarding the topics covered in this book. That conclusion is [WARNING: SPOILER ALERT]: Keep vendors away from your checkbook, keep consultants away from your conference room, and keep providers away from your workforce.

And then just simply do the things suggested in this book. All told, you have an opportunity for an 8 to 10 percent reduction in claims costs. And to the extent your employees even notice these initiatives, they will thank you for them.

Notes

*. Some companies refer to their employees as “associates,” “people,” “staff,” and so on, instead of “employee,” but for clarity I will be using the word employee through this book. The word is also shorthand for all covered people, included dependents.

*. To prevent confusion, “I” in this book means Tom Emerick. Al Lewis will be referred to by name in the third person.

Part I

Mostly Bad News

Chapter 1

Myths and Facts about Your Health Benefit

One reason that your spending tends to rise so quickly is likely because a lot of what you think you know about controlling health expenses is mistaken. This shouldn't come as much of a surprise, given that few how-to articles and books are actually written by people who manage health benefits for a living. It is easy to say something saves money if you're the vendor selling it or the consultant getting paid to procure, implement, and evaluate it. But actually saving money is quite a bit more challenging. Most money-saving ideas pitched to you have one thing in common: they may or may not save money, but they do cost money. And the funny thing is that while the expense is always in hard dollars, the savings generally require some kind of reconciliation or outcomes report that's laden with assumptions and fallacies.

As one corporate medical director observed, “If all my programs got the return on investment that vendors say they achieved, I'd have negative medical spending.”

Well, here's a news flash: you don't have negative medical spending, and this chapter will explain why. More important, it will explain the facts that will allow you to spend less than you are now while ensuring that your employees are better off.