How Healthy is Healthcare Reform?

The stakes in Washington’s epic battle to reform healthcare are high. Trillions of dollars, the re election prospects of dozens [...]

January 20 2010 by ChiefExecutive.net


The stakes in Washington’s epic battle to reform healthcare are high. Trillions of dollars, the re election prospects of dozens of politicians including the president and, last but far from least, the quality of care available in the U.S. all depend upon a successful outcome.

And what, exactly, would constitute “success?” Broadly, success in this case would be defined as achieving two goals: extending medical coverage to uninsured Americans and bringing skyrocketing costs under control. Unfortunately, the two are tough to reconcile, Ralph de laTorre, president and CEO of the community based hospital network Caritas Christi Health Care, told CEOs attending a discussion on healthcare reform.

“If you increase access and you don’t change the underlying methodology by which you provide healthcare, then cost goes up linearly,” notes de la Torre, who is also a physician. “There’s no way around it. And in every reform bill, what’s popular right now is to increase access and then rearrange the deck chairs on the Titanic to hide the costs.”

Where We Are

But even long before reform was a serious possibility, healthcare costs had been rising steadily. In 2007, Americans spent approximately $2.2 trillion on doctors, hospitals, drugs and other health-related care. Over the past decade, the spiraling cost of healthcare has been increasingly cited as a threat to both the global competitiveness of U.S. companies and to the nation’s budget.

Chief among the factors contributing to the nation’s steadily rising healthcare spending rate is a propensity among both American doctors and patients toward overtreatment. “What’s killing healthcare today is utilization,” said de la Torre. “For various reasons we as individuals use too much.

A system designed to treat and manage illness, rather than preserve wellness, contributes to overuse, noted Thomas Harrison, CEO of Omnicom Group’s Diversified Agency Services, who pointed out that people do the bulk of their healthcare consumption at the end of their lives. “The longer we keep people healthy, the less healthcare they will consume,” he says.

The system also encourages medical professionals to be overly proactive. Doctors are often motivated to order unnecessary tests and procedures by the risks of medical malpractice litigation or the need to recover an investment in new equipment. “Medicine somewhere along the line stopped being a vocation and became a business,” said de la Torre. “You’re getting paid for the number of widgets you sell and, by the way, you can sell as many widgets as you want.”

Kent Thiry, CEO of DaVita, a provider of dialysis services, likened decision making under the current system to building a house someone else is paying for. “You don’t really care if the plumber puts in more expensive hardware or spends twice as many hours as he should,” said Thiry. “You and your subcontractors get to make lots of micro decisions but some anonymous insurance company or government program is paying.”

Our culture, too, is a culprit in the cost control crisis. “It’s a fundamental tenet of American society that if it has more bells and whistles and is technologically advanced it’s got to be better,” said de la Torre. “Given a choice between two courses of treatment say, the surgical implantation of a stent or oral medication coupled with diet and exercise Americans will invariably opt for the higher-tech, and therefore more expensive, option.”

What Companies Can Do

At present, panelists agreed, some permutation of healthcare reform that widens access to coverage, and boosts the cost of private health care insurance for companies correspondingly, is likely. But even in the absence of reform, costs are likely to rise between 10 and 15 percent annually. In short, CEOs who don’t want to see double-digit increases in their healthcare spending will need to take action.

Companies can dramatically reduce healthcare costs by shopping around, noted de la Torre. “Don’t offer seven different insurance options you don’t get any leverage doing that,” he urged. “Offer one or, at most, two.”

Some programs can also discourage providers and employees from overspending on healthcare. For example, providers in a full risk capitation model of healthcare agree to render care to a specified number of recipients for an agreed upon per month payment an arrangement that discourages unnecessary testing and procedures. “You have to be careful that you don’t promulgate lack of use or rationing of care,” cautioned de la Torre. “So you add an incentive kicker that makes sure quality is maintained and incents preventive care.” 

Encouraging employees to live healthier lives also helps. Omnicom, reported Harrison, plans a wellness program that offers employees a financial incentive to stop smoking, exercise and watch their diets and help cut healthcare costs in the process. “If you’re overweight and want to lose weight, we’re going to help you,” he said. “That helps diabetes, heart failure, arthritis pretty much everything an aging population experiences.”

Finally, companies need to start agitating for comparative effectiveness research, clinical trials that show that a new therapy or technique is effective. “When you’re essentially designing your own healthcare plans, you can say, ‘Look, if I’m going to pay for it as a business, you’ve got to give me proof that it’s actually as good as, or more effective than, the one it’s replacing,’ ” said de la Torre, who sees the total cost of healthcare rising by $1.2 trillion to $1.4 trillion over the next eight to 10 years.

But corporate healthcare expenditures do not necessarily have to rise in tandem with the country’s. “Get very aggressive around the product design of your healthcare program,” advised de la Torre. “Limit networks, handpick doctors and hospitals, tailor your program to favor preventive care and make sure treatments are driven through comparative research studies. If you do all those things, you can dramatically cut the cost of healthcare in your organization.”