Can 20 of the largest companies in the US significantly alter the ecosystem in which they purchase health care? It’s too soon to know for sure, but they certainly seem serious.
The Health Transformation Alliance (HTA)—which includes corporate titans such as Amex, Coca-Cola, IBM, and Verizon—is “seeking to break with existing marketplace practices that are costly, wasteful, and inefficient,” according to a statement released by the Alliance. It wants to change a system that has “resulted in employees paying higher premiums, copayments, and deductibles every year.”
First Report Managed Care (FRMC) recently asked a group of managed care experts to interpret HTA’s motivations, analyze the potential impact, and—even though meaningful change is likely years away—offer advice on how to adapt in the face of what on paper appears to be a powerful coalition.
Michael Thompson, the new President and CEO of the National Business Coalition on Health, who is very familiar with HTA and its goals, recently told FRMC that “major employers are getting increasingly concerned that rising health care costs show no signs of abating. They are also not sure that the stakeholders in the industry share their sense of urgency to turn this around.”
Cadillac Tax: the Last Straw
Thompson says the Cadillac Tax—a provision in the Affordable Care Act (ACA) that will apply a 40% excise tax to the cost of certain higher-priced employer-sponsored health plans above a fixed threshold—is actually accelerating this concern by forcing many employers to increase employees’ cost-sharing in the plans. Employers are concerned that this cost burden for a growing number of employees will increasingly make care less affordable and become a financial barrier to people taking care of themselves.
So HTA wants to ensure that the interests of its member companies and their collective 4 million employees and family members are seen to. “The business models of the other stakeholders are not necessarily aligned with the interests of these large employer customers and their employees” says Thompson. “This has become even more exacerbated as insurers try to compete more aggressively in the public exchanges and the public sector. Also, other stakeholders are building shared revenue models that are not necessarily aligned with better value for consumers or the companies that finance these programs.”
He adds that these organizations are used to solving problems, and they view HTA as a way to attack and solve problems together. “They are trying to figure out the best way to step outside the existing environment and design an ecosystem that works for them. In the long run, this can better incent and hold stakeholders accountable to produce higher value in a more transparent and rational environment.”
Thompson also says that joining forces is a response to consolidation occurring across the health care landscape among health insurers and health plans, hospitals and health systems, pharmacy benefit managers (PBMs), and others. “You’re ending up in a world with a few big players in each sector.”
Even the Giants Are Small
In fact, that is one reason Thompson doesn’t buy the argument that these companies are already large enough and really don’t need the added leverage of working together. He argues that even the largest companies get smaller as other stakeholders consolidate.
Even so, in some areas, the aggregation of these companies may still not be enough to effect the transformational change that HTA is seeking. “On the delivery side they are probably not big enough,” explains Thompson. “They represent a small share of patients in a hospital or a physician’s office. In that regard there is going to be a need to align with other purchasers, including in the public sector, to effect the change we need.”
HTA seems to believe that its collective data pool will move the needle in terms of improved outcomes and cost-effective care. Can they succeed? The consensus answer seems to be: It depends.
We asked a well-respected chief medical officer in the managed care and wellness space for his take. He agreed to an interview, but requested anonymity. For starters, he wonders if the right people are asking the right questions. If the group is made up mostly of benefits experts, they’re going to gravitate toward utilization metrics. There will be questions about how many times a person sought care, but not enough questions about quality. For instance, “they’ll worry about the number of colonoscopies performed, but not the adenoma detection rate,” he says. The opposite will occur if the group is weighted toward clinicians. “You need a good balance.”
Anthony Morreale, PharmD, assistant chief consultant for clinical pharmacy services and health services research, Department of Veterans Affairs, agrees that decisions made in a vacuum will not be very effective. “It sounds as if employers are getting together and asking what they can do to decrease medical costs without the others at the table.” But, he adds, if the right people are brought to the table, good strategies can come out of the alliance.
“They’re talking about creating more of a virtual integrated health care system that could share data and potentially have buying power” explains Dr Morreale, who is also a member of the FRMC EAB. But barriers loom, such as the lack of competition between insurance companies within states. The HTA’s ability to take out the middle man as they suggest will be difficult in an environment where everyone is getting bigger. “The middle men in this case are the PBMs, insurance companies, and pharma that have grown to be as big if not bigger than these companies,” he says.
Dr Morreale adds that the Alliance can position the PBMs to compete against each other on price. “But I agree with the skeptics that the savings may be modest.”
Gary Owens, MD, president of Gary Owens Associates, a medical management and pharmaceutical consultancy firm, agrees. “The [PBM] system is so complex that if employer collaboratives try to replace these entities, they will find they need to build essentially the same infrastructure but not necessarily with a better cost structure,” he says. Because they will likely lack the necessary economies of scale that PBMs and national payers have, they may find themselves on the short end at the bargaining table.
If nothing else, offers Mitch DeKoven, MHSA, principal, health economics and outcomes research at IMS Health, HTA will force PBMs “to demonstrate the value they bring to the health care industry.”
“The devil is in the details,” says Dr Owens, an FRMC EAB member. “Generally, claims data does not have enough information to determine outcomes. Even cost of care must be carefully aggregated in order to associate the proper costs.” He adds that the perceived heft of so many covered lives might be a mirage. “While 4 million seems like a large number, once the data gets divided into the multiple conditions, they will be amazed at how small the numbers get for everything but the top few diseases.”
Providers Who Deliver Quality
The bigger opportunity, notes the CMO who requested anonymity, is to use data to determine which providers offer the best quality care. “This is a huge problem. If I am an employer sending a large number of patients for colonoscopies, I want to know how the costs and quality metrics compare by provider.” Right now, he notes, employers are limited to services such as Healthgrades. But by pooling together “they can get better metrics for their members,” he says.
Dr Owens says it’s been tried, but the results are lacking. “They appear to be trying to find low-cost providers who appear to do a good job, but it’s based on imperfect data. Insurers have tried this approach for a long time and often have trouble defining their preferred networks. And when they do, they often get significant negative push back from those left out of the network and even from patients who no longer find their providers in the network.”
Matthew Palmgren, PharmD, president of Int’Ovation, and former director of government business and emerging markets at BlueCross BlueShield of Tennessee, suggests that HTA look back to learn what it will take to succeed. “Cooperatives and buying groups have been around for a long time, some successful and some not. The ones that succeed work with the health plans and integrated delivery systems,” he says. He adds that it is a mistake to think that bargaining power will come easy. “Though cooperatives can become quite large, they still do not have the bargaining power of the national health plans and PBMs.”
Plus, companies need to realize that not all employees will want to participate. “How would [HTA] intervene with an employee who has cancer if that person does not want to disclose their illness?
Challenges of Redirecting Care
Then there’s the challenge of the way health care is delivered, says Dr Owens. He wonders if employers have considered the potential hassle factor to employees and their family members. “Health care is delivered locally, and is often about patient-doctor relationships. It is not easy to re-direct that care, especially if the patient has to leave the comfort of his or her local area. That concept works best for one-time services like joint replacement, but not for ongoing chronic care, which is where the bulk of the cost lies.”
Does an entity such as HTA have the potential to hurt smaller companies? “You would hope that lessons learned through the Alliance would be pulled through to other purchasers, but there is also the risk of cost-shifting to self-insured and smaller company plans,” noted DeKoven. Dr Palmgren agreed that the HTA has the potential to “lower the risk pool and therefore increase price premiums for those smaller entities.”
Our experts generally agree that HTA’s efforts must work in lock-step with wellness programs, as well as a focus on high utilizers. “Of course that will be the best opportunity to impact cost,” offers Dr Palmgren. “Utilization is a multiplier, whereas discounts are simply pluses and minuses.”
Dr Morreale says that most companies already have wellness programs in place, so marrying HTA’s efforts to them in some way makes sense. Thompson concurs that wellness programs can be integral to the culture of many large companies, such that HTA does not need to play a direct role there. He sees the two efforts making strides on parallel tracks.
What Lies Ahead
DeKoven thinks that consolidation is its own form of readiness. “Managed care is already preparing via large-scale mergers, and it is shaping up to be ‘size versus size’ at the negotiation table,” he says.
“I think payers can find a way to work collaboratively [with HTA],” offers Dr Owens. He suggests mimicking efforts that were used to form large drug purchasing collaboratives for pharmacy benefits that have multiple employers. “For the most part they have succeeded in using the aggregated numbers of employees to drive better contracted rates, but not to look at outcomes and cost-effectiveness,” he says.
In the end, Dr Owens admires any effort that aims at quality and cost. “I think such efforts are good because they continue to encourage the industry to look at better ways to provide care and control cost,” he says. But Dr Owens cautions that the system’s complexity likely means that HTA will not accomplish all that it intends.
Thompson says that challenging the status quo is reason enough to try. “Frankly, this is as much about mind share as it is about leverage. They are bringing the best people together to think through how things work today and how the market can be reshaped so that it leads to better value for them as the primary purchasers and a better consumer experience for their employees and their families.”