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Using Healthcare Performance Management as a Business Strategy

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Explore how Healthcare Performance Management (HPM), combined with self-insurance, can empower organizations not only to better manage their governance, risk and compliance exposures, but also to deliver bottom-line business value to a company.

By applying the right people, processes and technology to those three focus areas, HPM can empower companies to execute a powerful business strategy that can reduce healthcare costs while also improving employees’ health outcomes.

The first step rests with how companies choose to deliver health benefits to their employees. While every organization’s healthcare plans differ, for example UCLA benefits offers custom packages for each employee, there are two ways coverage can be provided: through fully insured plans, in which they purchase coverage from an insurance company, or through self-insured plans, in which they directly cover employees’ healthcare expenses.

Self-insurance recently has become the option of choice for a majority of the workforce. In 2008, the nonprofit Employee Benefit Research Institute (EBRI) found that 55 percent of workers with health insurance were covered by a self-insured plan. The decision to self-insure has been embraced enthusiastically by large corporations – 89 percent of workers employed in firms with 5,000 or more employees were in self-insured plans in 2008.

By self-insuring, employers can control the costs of providing health benefits to their employees because it allows them to:

  • Obtain more specific information about their actual healthcare expenditures.
  • Control costs, because instead of paying health insurance premiums that typically rise 9 to 10 percent per year, they can pay for routine expenses such as doctor visits, procedures and prescription drugs through a self-insured plan, obtaining lower-cost catastrophic or “stop-loss” policies to cover major medical events.
  • Enable better “human capital management” by recognizing in advance what types of health events are emerging in their covered population in time to help employees avoid a catastrophic event.

An HPM strategy has profound implications for senior management in the three critical areas of governance, risk and compliance. This manifests itself in the following ways:

  • Governance requires the active engagement of business units beyond human resources – strategic planners, financial and operations executives, and the IT group.
  • Self-insured firms must manage their own risk, so access to real-time data that is tied to the plan is imperative.
  • Although corporations have dedicated resources to compliance activities, an HPM system is automated and therefore can deliver those required reports as an ancillary function. This way, organizations can generate the necessary documentation for auditors, regulators and others without devoting valuable resources to that single function.

Governance, Risk, and Compliance Management Strategies for Self-Insured Health Plans: How Senior Executives Can Use Healthcare Performance Management as a Business Strategy explores how HPM, combined with self-insurance, empowers organizations to better manage their governance, risk and compliance exposures, and delivers bottom-line value to the company.

Click here to download a complimentary copy of this Healthcare Performance Management Institute report.

Want to learn more?

Listen to our recent StrategyDriven Editorial Perspective podcast interview with George Pantos, Executive Director of the Healthcare Performance Management Institute during which we discuss how companies can keep their current health plans in light of the recently passed healthcare legislation and under what circumstances they may wish to do so.

Podcast: Play in new window | Download (Duration: 19:57 — 27.4MB)

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Companies Need to Manage Employee Health – Not Just Benefits

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With U.S. healthcare spending set to grow 5 percent – or more than $100 billion – each year through 2013, businesses are scrambling for ways to save money on their health benefits. To do so, they’ll have to invest proactively in their employees’ health – and not just shop around for a good insurance deal, according to a new report from the Healthcare Performance Management (HPM) Institute.

Active management of healthcare delivery and cost control has not typically been seen as an integral part of the mission for human resource (HR) departments. But changing times – and skyrocketing costs – have pushed healthcare performance management (HPM) center stage for companies that want to boost productivity, while investing benefits dollars in better health outcomes for their employees.

This shift away from traditional ways of managing employee health benefits stems from a clear and universal reality: rising healthcare costs increasingly pose a core business challenge. Indeed, U.S. healthcare spending approached $2.25 trillion in 2007 – more than 16 percent of the gross domestic product according to the U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services. Employers increasingly are feeling the bite of those rising costs. A 2008 study conducted by the health policy journal Health Affairs showed that average annual premiums increased 5 percent to $4,704 for single coverage and $12,680 for family coverage. The study’s data was derived from interviews with 1,927 public and private employers.

New research echoes those trends. According to a Dec. 2010 report from RNCOS Industry Research Solutions “U.S. Healthcare Sector Forecast to 2012”, national healthcare spending is expected to grow at a compound annual growth rate of around 5 percent during 2010-2013.

The Last Mile: The Role of HPM in Rounding Out the Enterprise Human Resource Management Mission calls on companies to incorporate workforce health into their overall strategy for protecting and developing their human capital resources. This report also explains how HR teams are deploying healthcare performance management (HPM) technology to improve employee health and productivity.

Click here to download a complimentary copy of this Healthcare Performance Management Institute report.

Want to learn more?

Listen to our recent StrategyDriven Editorial Perspective podcast interview with George Pantos, Executive Director of the Healthcare Performance Management Institute during which we discuss how companies can keep their current health plans in light of the recently passed healthcare legislation and under what circumstances they may wish to do so.

Podcast: Play in new window | Download (Duration: 19:57 — 27.4MB)

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Healthcare Mergers: An Emerging Crisis

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Advocates of the president’s health care reform package have expressed alarm over a wave of mergers spurred by the new law.

Johns Hopkins Medicine, for instance, is snapping up hospitals in the Washington, D.C.-area, a move it describes as “driven largely by health care reform, which demands an integrated regional network.”

Johns Hopkins is not alone. Many established actors in the health care industry – including insurers, brokers and providers – are searching for ways to increase their market clout.

That’s bad news for ordinary patients, who will be forced to pay ever more for their care as the level of competition in the health care marketplace dwindles.

It’s easy to see why competition drives down costs. When insurers or health care providers have to battle one another to attract customers, they must differentiate themselves by charging lower prices or providing better service.

But if an insurer dominates a marketplace, it can raise prices and lower service standards with impunity.

Many insurers and providers are already taking steps to limit competition. Consider ‘most favored nation’ (MFN) clauses, which insurers use to prohibit hospitals or doctors from charging competitors less. Insurers claim that these discounts are necessary to help them secure the best possible deal.

Unfortunately, it’s the “best possible deal” for the insurer — not ordinary patients. The ‘low’ prices included in these MFN clauses are often based on artificially high price quotes from the provider. In some cases, insurers have actually agreed to increase what they’ll pay so long as other insurers are forced to pay even more.

Patients, of course, lose. The favored insurer passes along artificial cost increases directly to their customers, while disadvantaged competitors have to charge even higher premiums to continue offering access to offending providers. Many insurers simply exit a market once a rival negotiates an MFN.

Such an exit can be disastrous. According to an American Medical Association study, two or fewer health insurers control more than 70 percent of the market in 24 states. And if a competitor is foolhardy enough to try to work around an MFN, then the dominant insurer can simply force its rival out of the market.

A case in point is TheraMatrix, a small Michigan company. In 2005, TheraMatrix contracted with Ford Motor Co. to provide physical therapy services to its employees. TheraMatrix cut Ford’s costs by nearly half – saving the company millions of dollars. Last year, Ford expanded the program to cover 390,000 employees and retirees nationwide.

Everyone was happy – except Blue Cross Blue Shield of Michigan (BCBSM), which handled the administrative side of Ford’s insurance plan.

As TheraMatrix added other automakers to its customer base, BCBSM dropped the company from its medical provider network, which covers most Michiganians. BCBSM also threatened to revoke its other customers’ hospital discounts if they carved out their physical therapy benefits and contracted with TheraMatrix to provide them.

Blue Cross wrote that TheraMatrix’s operations were “competitive and damaging not only to BCBSM’s financial interests, but also to its business relationships.”

In other words, BCBSM would not allow its customers to shop around for better deals. And it would try to bully TheraMatrix out of business.

Such anti-competitive behavior harms employers and patients alike. Further consolidation of insurers and providers could make things worse.

Over the last 10 years, employer-provided health insurance premiums have more than doubled. Premiums for the most popular employer-provided plans are projected to increase by another 10 percent next year.

If businesses are to stop runaway medical costs, they’ll have to take control of their benefits. They can do so with the help of a new business strategy: ‘Healthcare Performance Management’ (HPM).

HPM uses powerful software to show companies where their health plan dollars are going, and where opportunities for savings exist.

For instance, HPM analysis of employee medical and prescription claims data might show that a company is spending too much on brand-name prescription drugs and that alternatives like generics could help it save millions.

Unsurprisingly, insurers don’t want to share this data with businesses. After all, if a company can’t pinpoint exactly how it’s spending its health dollars, it will be less likely to question premium hikes. Nor will it be able to find efficiencies, as Ford did, by cutting the insurer middleman out of the equation.

In many parts of the country, big health insurers have enjoyed virtual monopolies. Unburdened by real competition, they’ve abused their powers while businesses and their employees footed the bill.

HPM empowers businesses to inject competition into the healthcare marketplace and fight back against decades of cost increases. Employers should take advantage.

Additional Information

In addition to the invaluable insights George shares in this StrategyDriven Editorial Perspective article are the resources accessible from his website, www.HPMInstitute.org.   George can be reached at [email protected].

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About the Author

George Pantos is Executive Director of the Healthcare Performance Management Institute, a research and education organization dedicated to promoting the use of business technology and management principles that deliver better and more cost-effective healthcare benefits for employers who provide health insurance coverage for employees and their dependents. To read George’s full biography, click here.

Barriers to Reducing and Controlling Healthcare Costs

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Soaring healthcare costs combined with the economic downturn pose a significant challenge for employer-sponsored health plans that cover medical costs for 61 percent of the U.S. population.

In 2011, health premiums will continue to surge upward with most major surveys projecting increases in the 9 percent to 12 percent range – or over eight-times the rate of inflation. Without change, the Business Roundtable, an association of major U.S. corporate CEOs, predicts employer health costs will increase 166 percent by 2019, resulting in a cost burden of $28,530 per employee – three-times the 2009 employee cost of $10,743.

In this environment, employers – major payors of the $2.6 trillion annual U.S. healthcare bill – are under enormous pressure to find out where their benefit dollars are going. These same employers are focusing on how they and their workforce are able to get the best value for the money spent on healthcare.

Employers seek answers to questions such as:

  • What steps can I take to identify and mitigate my healthcare expense trend?
  • What areas are showing the highest potential for costly future medical risks?
  • What proactive steps can be taken to control costs and improve employee health behavior?

This research report provides an overview of the data and tools needed by employers to interpret relevant plan data, find the problems and determine solutions. It also addresses the basic obstacles and ‘hidden’ barriers to employer healthcare control and the opportunities to overcome these barriers with collaboration between employers and gatekeepers – consultants, brokers and insurers – for improved health plan performance.

Click here to download a complimentary copy of this Healthcare Performance Management Institute report. (Complimentary site registration required.)

Want to learn more?

Listen to our recent StrategyDriven Editorial Perspective podcast interview with George Pantos, Executive Director of the Healthcare Performance Management Institute during which we discuss how companies can keep their current health plans in light of the recently passed healthcare legislation and under what circumstances they may wish to do so.

Podcast: Play in new window | Download (Duration: 19:57 — 27.4MB)

Subscribe: RSS

Breaking Down Health Reform’s Grandfather Clause

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New Rules May Hamstring Employers’ Ability to Innovate Existing Plans…

The grandfather clause is a provision in the Patient Protection and Affordable Care Act that seeks to keep a key promise made by the Obama administration: “If you like your health care plan, you can keep your health care plan.” But interim final rules handed down by the Department of Health and Human Services (HHS) and other federal agencies June 17, 2010, appear likely to frustrate the intent of the law and hamstring employers’ ability to offer the best coverage options in a cost-effective manner. In adopting an overly restrictive interpretation of the grandfather clause, the rules essentially diminish employer flexibility to make plan design changes by tying allowable changes to current plan structures.

A new report by the Healthcare Performance Management Institute examines the grandfather clause, the new HHS rules that will govern its implementation and the likely impact on employer health plans. The report also addresses factors organizations should consider when deciding whether or not the benefit of retaining grandfather status outweighs making certain plan design changes.

Click here to download a complimentary copy of this Healthcare Performance Management Institute report.

Want to learn more?

Listen to our recent StrategyDriven Editorial Perspective podcast interview with George Pantos, Executive Director of the Healthcare Performance Management Institute during which we discuss how companies can keep their current health plans in light of the recently passed healthcare legislation and under what circumstances they may wish to do so.

Podcast: Play in new window | Download (Duration: 19:57 — 27.4MB)

Subscribe: RSS