Highly Effective Business Approach To Reducing Healthcare Costs

“Helping employees improve their health is right for the company’s bottom line and is doing right by our employees.  Healthier employees are happier, demonstrate less absenteeism and presenteesism, and are more productive.  This is a win for everyone involved.”  Quoted from John Torinus, Jr., in The Grassroots Healthcare Revolution; he is retired CEO and current board chair of Serigraph, Inc., a mid-sized Wisconsin company with about 500 employees in the USA.

In my earlier posts in this series I have written primarily from the perspective of what primary care physicians can do to not only improve the health of their patients while reducing total costs of care yet also reclaim their right to practice in a non-frustrating environment with a limited number of patient visits per day. Torinus approaches improving health care from the perspective of a business leader faced with rising health care costs. Here I will quote and paraphrase from Torinus’ book and, since I basically agree with his recommendations, will amplify with some of my own thoughts.

He argues that company CEOs must make health care a strategic priority since it is one of the top three costs for any company. Healthcare costs can make the company noncompetitive if not managed aggressively. However, strategic priority to him also means it is essential for the company to attend in a proactive manner to the health and wellness of its employees, not just be the provider of an insurance plan.

CEOs need to think of the long term for their companies and therefore for their employees. The company and the employee together spend about $16,000 per year for a family for insurance today.  An employee who works for a company for 25-40 years represents an insurance expenditure over a lifetime career that could be as much as $400,000 to $640,000 in today’s dollars.  This drives home the point that it obviously only makes sense to have a long term view of employee health beginning with an aggressive approach to maintain wellness, actively reduce risk factors and  manage disease as it occurs.

He observes that the current health care system focuses on specialty care whereas it needs to focus on the care recipient with high quality primary care – the patient/consumer/employee.  But to be effective, the patient/consumer/employee needs to be engaged.  The current healthcare system disengages the patient – it removes responsibility because the patient is not the customer of the doctor.

In his company, expenses were rising to double digits by 2003 but with their new plan in place, it dropped to 2% or less per year.

Torinus’ “prescription” for all companies (and what his company initiated beginning in 2004) follows:  First, every company, including small companies, should self-insure with an added stop-loss catastrophic policy.  Second, employees should be offered only a consumer directed healthcare policy (CDHP), in essence a high deductible plan (often about $2500) with either an associated health savings account (HSA) or a health related account (HRA.)   The company should prefund the account with an amount (often about $1500) that the individual can use for any health care needs with the assumption that since it is now the individual’s money, he or she will spend it more wisely – employee/patient engagement.

Third, the company should insist that each provider have price transparency. Since that’s often difficult to obtain Serigraph uses various companies like Alithias Inc. to provide that for them so that they can compare one provider to another.  For example, they determine the all-inclusive (gastroenterologist, anesthesiologist and facility fee) price along with quality data of colonoscopies at the nearest five centers and then rank them. The employee or family member who needs the colonoscopy is told that, for example, the company sees it as appropriate preventive care and so will cover the cost, in this case up to $1,500.  [His book appeared before the ACA became law so colonoscopy would be covered now by the insurance component but the principle is still valid.] This is an amount that will pay for say, four of the five local centers; but if he or she selects a provider that charges more, they are on the hook for the remainder. 

Fourth, if the company is large enough, it should provide an on-site primary care clinic at no cost to the individual.  At Serigraph, the clinic includes a concierge-type physician (meaning that the physician is salaried, has a low number of patients under care and gives extensive time and energy to each employee/family member patient consistent with some of my previous posts) plus a nurse practitioner, a health coach, a dietician, and a chiropractor.  If the company is too small to justify a full-fledged clinic then the company can pay the retainer for a nearby direct primary care/membership/concierge physician who works with others such as the health coach.  Fifth, the clinic, with special attention by the health coach, gives all employees a health risk assessment annually and then works one-on-one with each employee (and family member) at no cost to maintain wellness and health including the use of behavioral change programs around diet, nutrition, exercise, stress management and smoking cessation.

Sixth, there is very intense management of chronic diseases by the clinic staff and coordination of specialist visits when needed.  Seventh, Serigraph uses what Torinus calls Centers of Value for procedures beyond those that are done by the primary care physician. These are doctors/institutions that have outstanding quality records yet a competitive price for, say, a knee replacement. Serigraph gives their employees $2,000 toward the deductible or totally covers the deductible for the surgery when they make use of these Centers of Value.  Seventh, his company gives (and he recommends others do likewise) generic drugs for free and all of the above prevention and wellness programs are supplied free of charge.  Finally, the company makes free counseling available for developing advanced directives and in the event that an individual requires end of life care, hospice is available free of charge.

I notice that his company spends considerably on extensive/comprehensive primary care including wellness maintenance, proactive prevention and chronic care management but it is rewarded in return with lower total costs and healthier workers.

Given that healthcare has become a company strategic priority, then it needs to be managed and that requires data. Hence, he urges all companies to develop health-related management dashboards including both a financial dashboard (how much is the company spending) and a health dashboard (how many individuals in the company have uncontrolled blood pressure, uncontrolled asthma, uncontrolled cholesterol, have not had appropriate mammography or colonoscopy, etc. – all information collected from the clinic in an unidentified manner to protect individual privacy). 

These approaches are based on fundamental principles including individual responsibility; market place discipline – installing consumerism, steering business to the best quality and price (“do good work and you get our business”); proactive care – maintain employees’ health and wellness and give extensive care to those with chronic illnesses; and sound management – putting those who pay, i.e., the employer and the employee, in charge. 

Torinus suggests there are multiple rewards for following this basic approach (I added number 2 since he implied but did not write it.)

1)     The reward for business is a healthier work force and more affordable healthcare expenditures. 

2)     The reward for individuals is more health and wellness, less illness and fewer dollars spent. 

3)     The reward for high value providers is more business.

4)     The reward for entrepreneurs comes if they innovate with better care provided at lower cost

5)     There could be a reward for tax payers - if government (federal, state and local) were to utilize these approaches

Sound advice.  Your thoughts?

The next post will delve into company wellness programs.

Direct Primary Care – A Response To Your Comments

Over the past few months KevinMD has posted a series of articles by me on what I call the “Crisis in Primary Care.”  (BTW, I was not a PCP.) Most recently have been a few posts related to direct primary care. They have generated many comments – some pro and some con. I have greatly appreciated everyone’s interest; it makes it worth the time to write. So thanks.

My fundamental belief, contrary to some comments, is that PCPs are much more than providers of “simple” stuff. They are more correctly specialists that deal with the very complex. Comprehensive primary care includes wellness and health maintenance, prevention and risk management strategies, attending to the episodic events that occur in life, and the care of those with complex chronic illnesses including coordination of care when a specialist is needed. It also includes developing a strong relationship between doctor and patient, building trust along the way and offering true healing. This means that the PCP can competently handle the vast majority of our health needs. 

But all of this takes time and when the current practice business model forces the PCP to see 25 or more patients per day, there is just not enough time. Direct primary care (DPC) is one way to regain that time. It is not the only way. I plan to discuss some other approaches in later posts. 

 

A few themes have arisen repeatedly in comments from these posts about direct primary care. One is that there is a difference among the terms DPC, membership, retainer, and concierge.  But to me, they all mean essentially the same thing - fewer patients per doctor and therefore more time for the patient with the doctor which equates to better care.  There does seem to be a degree of concurrence that DPC and membership are terms most often used for those practices that cost less per month or year and retainer and concierge for those that cost more. (There are a very few that charge a huge fee; I discount these as giving the term “concierge” a negative connotation to many.) 

Among the most common other themes from the perspective of a patient are: DPC is too expensive, especially for those of lesser means. DPC is an added expense if you already have primary care coverage by your insurance (e.g., Medicare or company policy). The PCP “abandons” patients when converting to DPC and does it because he or she is greedy. And the question - Is the care quality really better and are costs really lowered? Some thoughts on each.

First, DPC is certainly not for everyone – patient or doctor. But it is one model and it has proven very effective for some. 

Expensive? It’s relative. The average American family spends $2237 per year for cable TV, internet and phone. A Starbucks a day adds up. A parking space per month in a downtown lot is probably more than the DPC doctor. It is about prioritizing our personal expenditures. I also posted an article using as examples three practices that have been termed “blue collar” in the popular press because the costs per month are relatively low, the service is high and with the added benefit of generic drugs at wholesale prices many patients can save handsomely. Two of them have noted that they have many uninsured patients. These practices are cheaper than urgent care clinics and much cheaper than the ER. One person commented that I cherry picked cheap Midwest practices; DPC in urban areas cost much more. That is likely true if only because rent and staff cost more. Here is a chart from Concierge Medicine Today related to costs across the USA.

Why sign up if you already have insurance that covers primary care? The question to answer for each person is whether it is worth the extra money to get more time with your PCP? A lot more time. My PCP converted about five years ago. I was ticked off that I had to pay an extra $1500 a year since I am on Medicare and primary care is mostly covered. Some of my friends decided to not convert with him. Others decided as I did to pay up. My wife’s PCP converted to a retainer approach a few years ago. Same thoughts. But it has been worth the price – to us. But probably not for everybody. Again, it is a question of your priorities.

What about abandonment? It is another of those questions where the answer depends on your perspective. A group practice I know planned to convert and announced it to their patients. Soon articles appeared in the local paper about “greedy” doctors and patients who would be left without a doctor. But everyone who wanted to find a new PCP did so quickly – often with help of their former PCP who guided them to an appropriate doctor. Of course, in say a rural community where there is just one provider, it would be a different story. An analogy given me by Dr Josh Umbehr might be useful. Consider a 60 watt bulb. Try to push more voltage through it and it will burn out and there is no longer any light at all. Run it as it is supposed to be and it will last a long time. If the doctor is burned out and gets sick or just quits, that is not abandonment. It is actually worse. 

And the greedy doctor issue? When a PCP with a busy practice converts, they often end up with a much lower income, at least at first. Read some of Dr Rob Lamperts posts about what happened to his income including a one about his application for health insurance and for Medicaid. Later their income may rise and sometimes it will be more than before. From that same Concierge Medicine Today article – 73% of concierge or DPC physicians earn less than $200,000 per year. But it is really not about more money; it is about more time for each patient.

Quality up and total costs down? I wrote about this in my last post; here is a summary. It is hard to find other than anecdotal data with individual practices or even group practices. MDVIP [which is not a DPC practice since it still takes insurance in addition to a retainer] is a practice model that lowers the number of patients to doctor to about 500:1. Among the about 700 affiliated doctors there are about 215,000 patient members, enough to do some observational studies. They have found that quality measures like blood pressure control, diabetes control, immunization percentage, screening for cancer, etc. are substantially better than a comparable group of individuals not in their network. Similarly, there is a very substantial reduction in total medical care costs of $2551 per capita as a result of fewer referrals to specialists, fewer prescriptions, fewer hospitalization and fewer trips to the ER. As to satisfaction, perhaps the most important marker is that few individuals leave the practice. 

Similarly, Iora Health, Qliance and AbsoluteCARE, organizations that like DPC practices lower the number of patients per provider, can demonstrate better outcomes with lower total costs. Here again the cost reduction is from fewer specialist visits, fewer hospitalizations and fewer ER visits among other parameters. Qliance, for example, has noted 35% fewer hospitalizations, 65% fewer emergency department visits, 66% fewer specialist visits, and 82% fewer surgeries than simi­lar populations. (And before you tell me, I know that this reduction in costs may not directly accrue to the patient although it could convert into a substantial dollar savings for those with a high deductible policy. My point however is that fewer patients means better care which in turn means lower total costs.) 

What about doctors? Is DPC for every PCP? I doubt it. When a practice is converted a lot fewer patients convert with it than might be expected – maybe 15-20%. Income will probably go down, at least initially. Some patients will feel the doctor is being greedy as noted above. There can be legal issues; the insurance commissioner may say it is essentially an insurance policy for primary care; a doctor is not an insurance company. Some sound advice would be important before embarking.  Doctors are a cautious bunch; this is a big change. My bet is that, until patients actually start demanding more time and agreeing that this is a sensible approach, the total numbers of PCPs who convert will be modest.

Next time will be a different topic; what employers are doing to assure better care yet lower company costs. In many cases it too amounts to getting the PCP more time.