A Shift to Quality by Health Plans

Six California health plans are expected to announce Tuesday what they call an “unprecedented” effort to improve patient care and control spiraling health-care costs by rewarding doctors and hospitals for quality, not just efficiency.

Such an agreement between separate health plans, billed as the first of its kind in the nation, would represent a major step in an extremely competitive industry. It also adds another wrinkle to the rapid evolution of the nation’s health-care system, which is struggling to build a new model out of the financial wreckage of managed care.

Analysts say that within a year or two there will be a fundamental shift in the way health care will be assessed, chosen and delivered to consumers. The bottom line for 2002 and beyond: Employers will pass increasing health-care costs directly to employees in the form of higher premiums, higher co-payments, tiered medication costs and higher deductibles, and with them more of the responsibility for making the most effective and efficient choices.

Sources said that the participants, Aetna Inc., Blue Cross of California, Blue Shield of California, Cigna Corp., Health Net Inc. and PacifiCare Health Systems Inc., have agreed on a common set of standards for measuring performance under which doctors and hospitals will be rewarded with bonuses of at least 5% of the billed amounts for providing quality health care and for avoiding medical errors.

The move follows an announcement last July by Blue Cross that it would begin rewarding doctors in its health maintenance organizations for patient satisfaction rather than cost savings.

Meanwhile, beginning later this month, the New York-based employees of some of the nation’s largest companies, including IBM Corp., Xerox Corp., Verizon Communications and PepsiCo Inc., will be able to access a Web site that contains the beginnings of another new approach to health care: information on which of nearly 150 hospitals in the area have the most experience and the best outcomes on a variety of surgical procedures.

“These are issues that have been talked about a lot, but health care is an extraordinarily decentralized industry,” said Gregger Vigen, a senior consultant at William M. Mercer, one of the nation’s largest health-care consulting firms. “Just getting a Web site up with this kind of information represents a big step forward.”

Supporters of the changes say that businesses can no longer afford to shield employees from rising health-care costs and that the best way to control such costs is to give consumers more of the information they need to make cost-effective decisions.

Detractors say that it was employers’ insistence on excessive cost controls that was a big part of the problem and that now they are shoving the costs and the liability onto employees.

Managed care, the cost-control-oriented health insurance system that has dominated since the 1980s, was supposed to have been the engine that would keep health costs low for employers while providing decent medical attention to patients in need. But much went wrong along the way. Patients, physicians and hospitals revolted for different reasons, patients demanding better treatment and physicians and hospitals insisting upon higher compensation to give it. Health costs, expected to rise by 10% to 15% this year, can no longer be contained.

Peter Lee, president and chief executive of the Pacific Business Group on Health, a consortium of major companies that use their collective clout to negotiate with health plans, said, “The archetype for managed care in the ‘90s was a health plan driven by referrals to specialists. It was very controlled, and consumers’ choices were limited. Today, most managed-care plans have few restrictions because of consumer backlash against limitations. Tomorrow, employers will look to consumers to be the drivers of the health-care system by giving them the quality information and the financial incentives they need to make better choices.”

Lee said that these costs have led to the need for a fundamental reorganization of the health-care system, one that places far more pressure on consumers to make the right choices.

Experts now say that within five to 10 years, consumers will choose their primary-care physicians and specialists, their medical facilities and hospitals and their medications based on a set of objective and tested standards.

The California Medical Assn. isn’t so sure that the rewards planned in California will represent any big step forward in rewarding health-care providers, particularly doctors, for the work they do. A spokesman also wondered about where the bonuses in the California plan would come from. Would it really be new money that would get into the hands of health-care providers, the spokesman asked, or would most of the benefit really go to employers and insurers in terms of reduced costs?

Consumer groups also are wary of the idea. Far from offering employees more cost-efficient health-care choices, says one group, the shift of higher costs and direct responsibility onto consumers represents an abdication of responsibilities by both the managed-care industry and employers.

“It’s all cost shifting, putting the burden on people least likely able to handle it,” said Foundation for Taxpayer and Consumer Rights Executive Director Jamie Court. “It’s an attempt to escape accountability by the HMO industry’s inability to contain costs. It eviscerates the notion of an insurance risk pool in which you pay when you are well to extract when you are sick. Now those who paid realize they will have to pay thousands more. There should be some public oversight over how these health plans work.”

Others view this shift as benign and desirable, as long as substantial, accurate and easily accessible databases can be created.

“There is an active movement among employers to find ways to provide consumers with better information on which providers do the best job and to use financial carrots to encourage consumers to select them,” said Henry Aaron, a senior fellow at the Brookings Institution. “In the long run, it should cost everyone less money and provide better-quality care.”

According to a December survey of more than 700 large and mid-size companies conducted by Hewitt Associates, a management consulting and outsourcing firm, 61% of those companies were either somewhat or extremely comfortable with employees’ taking more responsibility for evaluating and selecting health plans, coverage levels, providers and health-care services. More than two-thirds said they were interested in consumer choices in creating custom-designed options.

Jack Bruner, national practice leader for Hewitt’s health management practice, said, “We believe that there will be an evolutionary rather than a revolutionary shift of consumer-driven health care. Companies will need to lay the groundwork for consumers and provide consumers with the choice between higher costs and these new emerging options.”

One company moving ahead on this route is Humana/Choice Care, which says it is creating so-called consumer-centric products such as online medication choices that show enrollees brand-name drugs that require a $20 co-payment next to generic equivalents that perform just as well and require only a $10 co-payment, according to a company spokesman. That’s a step beyond a doctor’s writing a brand-name prescription and the pharmacy’s filling it with a generic, the spokesman said, leaving the patient wondering whether it’s cheaper because it isn’t as effective.

Mob Media, an Orange County advertising and marketing firm, expects its employees to do considerable research and offers an almost bewildering array of choices for its 17 employees, according to Mitzi Perry, the company’s director of operations. Those choices include seven types of HMO plans, seven HMO-plus plans, six HMO preferred plans, three point-of-service plans, two options for preferred-provider plans and five dental plans.

“Our employees are active participants,” Perry said.

But even this falls considerably short of access to information on patient outcomes. That’s because the biggest stumbling block to true consumer choice, according to the Brookings Institution’s Aaron, is the creation of the database itself.

“The current technical ability to evaluate providers of health care is very primitive. There are individual doctors who have a small number of patients. There are a variety of factors involved in evaluating a hospital. We must be cautious about labeling doctors and hospitals as poor providers of care.”

PepsiCo, Verizon, Xerox and IBM have solved the initial part of the database problem by using statistics that already were being compiled by the state of New York, said Deborah Bohren, vice president of public affairs for Empire Blue Cross Blue Shield of New York, another company participating in the effort. Empire is part of the network because it has agreed to follow two important standards of the Leapfrog group, a group of Fortune 500 companies seeking to reduce health-care costs in part by improving quality of care and reducing medical errors: having a computerized physician order entry system for prescription medications to minimize mistakes and having intensive-care units staffed only by board-certified or board-eligible intensive-care specialists.

Soon, an insured employee of any of the above companies will be able to go to a Web site on an internal computer network, type in his or her ZIP Code and one of five surgical procedures, and get a listing on the top eight of nearly 150 local hospitals on the Empire network based on two criteria: that they perform the greatest number of those procedures and that their mortality rates are lowest. Later, the participants hope to add a wider range of medical procedures and a more involved set of standards, perhaps including length of stay in the hospitals and rates of complications or unexpected infections.

“We think that 20% to 30% of health-care costs can be reduced by minimizing mistakes and doing the procedure right the first time,” said Bruce Taylor, director of benefits planning for Verizon.

“We are trying to make sure that the health-care system reinvents itself in a digital world and we’re looking for a tipping point,” Taylor added. “If a few can institute this, others will follow.”