A Highly Efficient Health Plan: Fantasy or Attainable Goal?

Efficiency. It’s such an overused word in every industry and certainly true in health care, particularly by those who are charged by employers and patients to drive efficiencies – the health plans. Some use “efficiency” to describe the relationship where quality meets cost. Some refer to processes, almost a bureaucratic perspective. And some use it as code for cost reduction and savings. But what does it really mean to have an “efficient” health plan?

There are basic ingredients that make up an efficient health plan, but they often prove elusive for many health plans for a number of reasons; just a few I will highlight below:

  1. Big Data to Drive Pricing & Cost: In high cost areas such as implantable medical devices, many health plans are flying blind with a complete lack of benchmark pricing and utilization. There is enormous variability in pricing, types of implants used, and drivers of outliers from market to market for the exact same implantable device, made worse due to lack of insight and transparency on true cost and concomitant payer spend.
  2. Drive for Timely Results and Accountability: Often times it’s surprising that in the goal to encompass so many different functions and areas of the health plan – all very important – that too  often it is hard to find out exactly who owns the final decision and drive results. Doing so will ensure and even demand accountability from individuals for specific measurable results. This has struck me as much a function of culture and leadership as it is processes, compensation programs and sheer bureaucratic size. It can also be because individuals who are fully capable of leading are not empowered to do so or sometime do not want to be perceived to step on toes. Even more worrisome is that when a decision has been made after full vetting at the corporate level, too many times local markets are able to opt out or diminish the importance of implementing a key initiative. Instead the better solution is simply demand that customization for local market needs be incorporated but then beheld accountable to implement. Of course the consequence is that the value that members and employers are looking for and paying for – the true management of health care spend and utilization – gets delayed or not done at all. Then various levels of government and health plan customers step in with their own solutions, which tend to diminish a health plan’s opportunity and ability to do more. It’s a negative loop that’s hard to escape from.
  3. Network vs. Out-of-Network (OON): The exorbitant costs associated with OON surgeries, as an example, are, in a word, crazy. There should be two different plans that are clear and distinct, including an OON standalone with very high rates passed on to the members and employers and an in-network option at accredited surgical facilities with qualified surgeons who make the choice for employers and members an absolute no-brainer to join. In return, employers and members should be directed to these providers so the providers actually realize a substantive increase in volume. Also these providers — if providing quality care and outcomes — should receive some form of additional outcome payments, which would result in a true partnership with these facilities and providers. I realize there are certain limitations here — some (but not all) are regulatory– but right now all that is occurring is many providers find it a prudent strategy to be fully or in part out of network with a health plan (i.e. the surgeon is in network but the facility is out of network, etc.) with little repercussion and a great way to attain oversized profits.
  4. Corporate vs. Local Markets: In my travels through many different types and sizes of health plans, it’s amazing the disconnect between the corporate mother ship where strategic decisions typically are made, and what’s actually happening in local markets. There are many reasons for this but a big part of it is item #2 above combined with a lack of powerful and simple communications and basic aligned incentives.. Also the way some of the functions are divided under various departments compound the problem.
  5. Bundling: Some health plans seek to bundle in the old fashioned way of letting the hospitals manage and implement the bundle without payer management. There are multiple issues here. Bundling certain procedures like surgeries has the potential to reek havoc on health plans and employers if they are not well executed and actually managed. Bundling only makes sense if the health plan actually manages and captures information on the individual components that make up the overall bundle they are paying for. For example, the surgery and the implant should place the facility or provider at true risk, so outliers and carve-out of certain pieces of the bundle are not allowed. Moreover, it is critical to align surgeons in a surgical bundle; otherwise all one has done is remove the surgeon from the equation to manage quality and cost but placed the hospital at risk of alienating the surgeons by asking them to control costs (e.g. limit the choices of implants) but not offered them any upside in doing so. No alignment means the hospital will be back when the surgeons do not adhere well to the program to ask the payers for more money. Finally bundling without managing the components of the bundle makes it impossible for the health plan to know what rational utilization and spend should be; in effect the data are hidden. It also allows for little oversight of quality and safety and the ability to react to untoward events (e.g. recall of implants or abuse situations).
  6. High Cost Flashpoints: It’s amazing to me that not all health plans manage those high cost flashpoints that are growing exponentially. Those areas might be a smaller slice of a bigger pie, but the absolute dollars and the rate of growth are high and alarming. For instance, take my wheelhouse of implantable devices and their surgical procedures. They are largely unmanaged by most health plans today, yet there is more spend and greater upward trend on a per member per month (PMPM) basis here than for home care, durable medical equipment and behavioral health … combined.

The thoughts I outlined above came to me from multiple meetings with potential health plan clients. And it occurred to me that with the stiff tailwind of health care reform at our backs, the time is ripe for truly lean and efficient health plans to emerge. Actually, not only is the time right but it is more of a certain requirement in order for health plans to survive and prosper or risk becoming labeled a TPA – but one that is much more expensive and less efficient than most TPAs offer their services today. I believe there are too many caring and meaningful health plans and talented people at these companies to allow that to happen and I know they are working hard to figure it out. These elements and areas of concern mentioned above just scratch the surface, but if addressed would lead to a massive improvement in cost and quality and yes efficiency.. There are a lot of deep dives that need to be taken across each of the six steps. Maybe fodder for future blogs!