Drug Price Debate Could Stall, Unless Consumers Get Engaged

It’s still unclear whether Congress or the Trump administration will try to tackle the prescription drug price/cost issue this year.  Amid ACA repeal and replace, and possible Medicaid and Medicare reform fights, it seems a stretch.   

In recent weeks, Trump has also changed his tune on the subject.  Soaring prescription prices were a populist rallying cry at his campaign stops pre-election and then pre-inauguration. (“They’re getting away with murder,” he bellowed, referring to drug companies.)

But, fitting a post-inauguration pattern, Trump softened his message after a get-together with pharmaceutical executives on Jan. 31.  He mentioned increasing competition and “bidding wars” as a way to bring prices down—whatever that means. 

As for Congress, the issue stirs hand wringing and rhetoric but no concrete proposals from either side of the aisle so far.

So it’s quite possible that the best that can be hoped for in 2017 is to lay the groundwork for action in 2018-19.   

Apart from the usual stakeholders—drug companies, pharmacy benefit managers, drug store chains, insurers, employers, and consumer advocates—three groups are poised to impact this debate.  One has been around for a while.  The other two are new.  All three could help you track this issue and/or get involved, depending on your perspective. 

1.  The Campaign for Sustainable Rx Pricing  is run by the National Coalition on Health Care’s Action Fund.  The campaign launched several years ago.  NCHC is a broad-based coalition of employers, unions, and physician, hospital and insurer groups, including America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association; AARP is also a member.  The 27 partners in the campaign reflect that diversity, but not all of NCHC’s members are part of the campaign.   

The campaign bills itself as non-partisan, with a focus on

“fostering a national dialogue on the issue of drug pricing that strikes a balance between innovation and affordability. We believe in market-based reforms that address the underlying causes of high drug prices in the U.S. through increased transparency, competition, and value.”   

John Rother, NCHC’s CEO, is the guiding light behind the campaign.  John was one of AARP’s lead lobbyists on health care and Medicare for many years, and is widely respected as deeply knowledgeable and influential on the issue. 

The Coalition for Affordable Prescription Drugs  also presents itself as broad-based but it has only 12 participating organizations (and presumably funders).  Several are major players.  Among them: CVS Health, UnitedHealth Group, Pitney Bowes, and John Deere. 

The group’s web site makes it clear, however, that it exists primary to promote the pharmacy benefit management (PBM) industry—the middlemen in the prescription drug price and purchasing chain.   

PBMs were celebrated for many years for creating purchasing leverage  for large and mid-size employers with drug companies—to extract lower negotiated prices from the latter for the former.  But PBMs’ reputation has suffered of late as it’s become increasingly apparent that much of the money they saved employers over the last two decades has been through shifting workers to generic drugs and constructing tiered payment plans that shift costs to workers and their families.   

With the benefit of hindsight and experience—in light of where price increases for brand-name drugs (and even some generics) are now—there’s emerging consensus that the savings extracted from drug companies fall far short of what they might have been had the PBM industry been more aggressive, and in less of a co-dependent relationship with drug companies.   

Moreover, the PBM industry still lacks transparency around drug pricing and is slow walking value based purchasing.

The newest kid on the block is Patients for Affordable Drugs.   It launched Feb. 22, with the mission of bringing the consumer voice into the debate over drug prices.  The force behind “P4AD” is David Mitchell, former head of the public policy advocacy firm GMMB in Washington, DC.  Mitchell’s motivation is both professional and personal.  He was diagnosed six years ago with multiple myeloma, a blood system cancer.  He says the drugs that keep him alive cost $26,000 a month. 

Mitchell has kicked off his campaign and web site with $500,000 from the Laura and John Arnold Foundation and $75,000 of his own money.   

“What’s happening in this corner of health care is no longer acceptable,” Mitchell told me over lunch recently.  “Everyone knows it but I’m convinced we won’t get the reforms we need without patients and citizens in general getting involved and taking action.  That’s what we are about.”   

P4AD’s policy priorities:    

  • Break the monopoly pricing power of the drug corporations
  • Require drug companies to disclose how they set prices and how much they really spend on research and innovation
  • Demand complete transparency from pharmacy benefit managers
  • Change federal law so Medicare can use its purchasing power to negotiate lower drug prices
  • Accelerate the approval of generic drugs
  • Reform the overly generous exclusivity protections for brand name drugs, which currently allow drug companies to game the system
  • Create a market-wide system to set prices for prescription drugs based on the value they provide to patients.

Mitchell says that P4AD will operate on the “fundamental notion that we can have innovation and new drugs at reasonable prices. There’s plenty of money in the system to do both,” he says.   

PhRMA (Pharmaceutical Research and Manufacturers of America)  would not agree and is not about to back down on its long-held position that it needs high profit margins to conduct R&D in the very costly hit or miss business of drug innovation.   In January, it launched its latest industry image campaign, dubbed “Go Boldly.” 

According to the publication Advertising Age, the campaign will include TV, print, digital, radio and other advertising and cost “tens of millions of dollars each year and…. last at least three years.”   

I concur with Mitchell that engaged patients and citizens, and their stories, are essential to countering PhRMA’s message, deep pockets, and PR clout. 

Steven Findlay is an independent journalist, policy analyst, researcher and consumer advocate.   

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DrExit: Costs of A Hospital Monopoly in One Underserved County


There is a growing body of evidence that hospital mergers lead to higher prices for consumers, employers, insurance, and government.  It is imperative to educate patients and lawmakers as to how the consolidation of hospitals and medical practices raise costs, decrease access, eliminate jobs, and ultimately reduce care quality as a result.  Lawmakers should focus on this “first pillar” of cost control as they go back to the drawing board. 

In 2010, there were 66 hospital mergers in this country. Since the Affordable Care Act went into effect the rate of hospital consolidation has increased by 70 percent. By creating incentives for physicians and health providers to coordinate under accountable care organizations (ACOs), the ACA hindered the ability of regulators to block hospital mergers while incentivizing hospital consolidation. 

In addition, there has been a dramatic increase in hospitals gobbling up independent providers and becoming powerful regional monopolies.  According to a 2012 study by the Robert Wood Johnson Foundation, “the magnitude of price increases when hospitals merge in concentrated markets is typically quite large, most exceeding 20 percent.” Forbes’ Avvik Roy, gave an excellent presentation on this particular subject in 2012.  “You have to get at the errors in public policies which drive the hospitals to merge.” He concluded that government must do more to fight consolidation among hospitals.  He is right.   

For years, the concern that mergers drove up prices was largely anecdotal.  A recent paper authored by Northwestern’s Leemore Dafny, Columbia’s Kate Ho, and Harvard’s Robin Lee provides some definitive proof that when hospitals consolidate, prices increase substantially.  The effect is actually worsened directly in proportion to proximity of the merging hospitals.  “If you are doing it because you think in the long run it will serve your community well, you should think twice,” Dafny said.  As of right now, cross-market mergers aren’t scrutinized at the state or federal level.  This must change.  A statement issued by the American Hospital Association (AHA) in response to Dafny’s paper said mergers provide patients with access to care and they are not a meaningful predictor of price change.

A study published by the National Bureau of Economic Research, conducted by Zack Cooper of Yale University, Stuart Craig of the University of Pennsylvania, Martin Gaynor of Carnegie Mellon, and John Van Reenen of the London School of Economics, sheds light on the real cost of reduced competition among hospitals: hospital prices are 15.3 percent higher when a hospital had no competition compared in markets with four or more hospitals, amounting to a cost difference of up to $2000 per admission. Hospital prices are 6.4 percent higher in markets with two hospitals and those with three are 4.8 percent more expensive when compared to markets with four hospitals.

The case for hospital consolidation has been supported by the American Hospital Association, the leading industry trade group, which spent $15 million on lobbying in 2015 (a decrease from $20 million in 2014).  Consolidation allows hospital conglomerates to control vast market shares, which has translated into political clout while allowing more leverage in negotiations with private insurers. “What’s been so interesting for me is to see how aggressive the American Hospital Association has been in coming after me,” says Cooper, who claims the American Hospital Association has funded a couple of critical reports about his paper. 

“I have never seen the evidence that consolidation improves quality in the health care space. I have never seen a study that comes out and says that consolidation makes things better,” says Cooper. Neither have I; consolidation does not improve quality.  Cooper, like Mr. Roy, suggests rigorous antitrust legislation and increasing competition among hospitals as possible solutions.

Harrison Medical Center is the hospital in which I was born and had expanded into two campuses before being “acquired” by CHI Franciscan Health two years ago.  CHI purchased numerous small medical practices, the last independent orthopedic group, and most recently, merged with the largest multispecialty physician group in the county, the Doctors Clinic. 

Prior to these mergers, 65% of physicians in Kitsap County were independent.  That number has plummeted to a dismal 27%.  Both hospitals are currently owned and operated by CHI Franciscan and now they want to merge into one structure for an “ultra” monopoly.  Every cardiologist, oncologist, pulmonologist, urologist, and vascular and orthopedic surgeon in my county are employed or under contract with CHI Franciscan Health. 

In the last two years, Kitsap County has lost consumer choice, employer choice, physician choice, insurance choice and access for healthcare services. Physician groups merging with CHI Franciscan are forbidden from using the local ambulatory surgery center (ASC) for outpatient procedures.  The hospital insists on exclusive use of their Hospital Outpatient Department (HOPDs) instead.  It is a well-known fact costs at HOPDs are substantially higher when compared to identical procedures done at ASCs.  According to FAIR health, the cost difference (zip code specific) between the two locations is striking:


ASC – $1250 ($500 out of pocket)
HOPD: $4250 ($1000 out of pocket)


ASC $500 ($200 out of pocket)
HOPD: $4250 ($1250 out of pocket)

Arthroscopy of Knee: 

ASC – $3600 ($1070 out of pocket)
HOPD: $13,000 ($3900 out of pocket)

Hernia Repair: 

ASC – $2500 ($750 out of pocket)
HOPD: $19,000 ($5700 out of pocket)

The above estimates do not include the physician bill or charges for equipment. 

In 2009, President Obama spoke in Grand Junction, Colorado to highlight a locality where (to quote Tom Brokaw) “health care works”. Their unique model focused on provider-insurer partnerships to reduce Medicare costs and was lauded by policy makers and media outlets as the epitome of efficiency in healthcare but, the devil is always in the details.  The 50,000 residents of Grand Junction are served by a single hospital, much like Kitsap County, Washington soon.  It turns out Grand Junction is one of the most expensive healthcare markets in the country.  The lack of local competition helped drive Medicare costs down—Grand Junction had the third-lowest Medicare spending per beneficiary in 2011. However, the monopolistic conditions drove private prices way up —the city has the ninth-highest inpatient prices in the country.

The more government reduces payments to physicians, the more hospital consolidation is encouraged to decrease cost and leverage market forces.  This drives prices up for patients with private insurance.  Higher prices in less competitive markets amounts to higher premiums passed on to employers and individuals who see bigger bills under their high-deductible health plans.  Cities with higher premiums on the Affordable Care Act’s insurance exchanges tend to be those cities with high priced hospitals. Increased concentration in health care victimizes consumers, as hospitals leverage their market position and drive up prices.

Maybe it is time to borrow a page from the Justice Department playbook and scrutinize hospital consolidations more closely, blocking them if necessary for the “greater good.”  Recently, two federal judges blocked separate health insurance company merger attempts, Aetna-Humana and Cigna-Anthem.  The Justice Department opposed both because “the competition among these insurers that has pushed them to provide lower premiums, higher quality care and better benefits would be eliminated.”  Opposing creation of monopolies in healthcare is something both liberals and conservatives alike should hypothetically oppose.  We have 3.4 trillion reasons to sit up and pay attention. 

Niran Al-Agba is a pediatrician based in Washington State.

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Calling all NYC Startups! Digital Health Marketplace is back!

The fourth iteration of Digital Health Marketplace, sponsored by The New York City Economic Development Corporation, in partnership with Health 2.0, is underway! The Digital Health Marketplace connects health technology Buyers and Sellers through curated matchmaking, assistance to facilitate rapid technology adoption, and competitive commercialization awards to encourage piloting and procurement of new digital health technology in NYC.

The past three classes of Digital Health Marketplace has provided over $2M in commercialization awards to innovative NYC health tech startups and their self-chosen healthcare organization pilot partners. This year, a total of $250,000 is available to fund health tech pilots in NYC.

The program helps established healthcare stakeholders, like hospitals and health systems (health tech “Buyers”), de-risk their investments in new technology by simplifying the search for market-ready solutions. At the same time, the program shortens the sales cycle for startups (health tech “Sellers”) by connecting them with relevant, forward-looking Buyers. Buyers and Sellers will be matched based on self-identified interest areas and business needs or abilities once they apply to “Find a Pilot Partner”. Buyers will receive a curated list of startups to choose to meet one-on-one during the half-day Matchmaking Event on April 6, 2017 at the New York Genome Center.

The Funding program seeks applications from health tech Buyer and Seller pairs who have partnered with each other to carry out a pilot project. A panel of expert judges will review the applications and evaluate the submissions based on publicly established criteria. Selected pilot projects will receive funding from NYCEDC’s pool of $250,000 to implement their technology in a NYC healthcare organization.

The deadline to apply to the Matchmaking Event is March 3, 2017. The Matchmaking Event will be taking place at the New York Genome Center on April 6, 2017 9a-12p. If you have any questions about the matchmaking process, please email alyx@health2con.com.

Alyx Sternlicht is a Senior Program Manager at Catalyst @ Health 2.0.

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A Better Better Way


Reports coming out of Washington suggest that Republicans may have bitten off more than they would like to chew with repealing & replacing the ACA, with a proliferation of proposals and no consensus on which to support, or how to get the 60 Senate votes needed to turn an eventual consensus plan into law.

There is a general consensus in the GOP to proceed with the budget reconciliation process, but if they pass the bill the House passed in 2015, it will immediately defund plan subsidies and the Medicaid expansion, setting up 25 million or more to lose their coverage right around midterm elections in 2018.

Even a less drastic budget reconciliation bill, for example one that gets rid of the individual and employer mandates by deleting the penalties associated with them, would leave us with a, “zombie ACA”, with everything not budget-related still in place, but malfunctioning with unintended consequences.

All this uncertainty is bad—it’s bad for the government, it’s bad for industry, and most importantly, it’s bad for the tens of millions of confused consumers trying to make informed decisions about how and if they can get health coverage.

Taking a step back

As the saying goes, when you have a hammer, every problem looks like a nail. In this case, when you have a legislative majority, every problem looks like it should be solved by changing the law.

But does that have to be the case? What if Congressional Republicans were to take a back seat and let Tom Price and the Department of Health and Human Services (HHS) begin the process of reforming health reform?

Here’s what that would look like:

Tom Price gets on a call with the leadership of Aetna, UnitedHealth, Anthem, Humana, Centene, Molina, and the Big Blues (BlueCross BlueShields). On this call, he tells them:

  • The Administration is committed to reforming the individual health insurance market, and to making sure it is sustainable for all stakeholders including insurers.
  • Health and Human Services will use its broad administrative authority under the ACA to make the public exchanges much more attractive for insurers immediately.
  • Essential Health Benefits (EHBs), the standard benefits that all ACA plans are required to offer, can be relaxed. This is possible because while the EHBs are defined in the ACA, the plan certification process lives with HHS, an artifact of the messy way in which the ACA was passed back in 2010.
  • He asks which EHBs need to be curtailed to bring the cost of plans down.
  • He makes it clear that HHS will look very favorably on innovative plans that cover less and cost less as a result.
  • To close the deal, he assures them that helping stabilize the individual market in the near term will get them a seat at the table for the longer-term redesign of health reform.

If 4 of those 7 stakeholders agree to offer plans on the public exchanges in 2018, you have a functioning individual health insurance market.

With the relaxed EHBs, premiums will go down significantly, and with it, enrollment numbers should go up.

And breathe

A year from now, Republicans could credibly say:

The ACA was in a death spiral a year ago. Since then we’ve lowered premiums and raised enrollment with common-sense policy changes. We’ve done all that we can do without changing the law, and now Congress needs to pass a law to fix the other pieces that are broken.”

The success of this short term “band-aid approach” would make it a lot easier for Republicans a year from now to find the 60 votes they will need in the Senate to pass replacement legislation. And most importantly, the country would be spared an incredibly volatile year in which tens of millions of Americans will risk losing their health coverage.

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The RWJF Choosing Care Challenge Offers PokitDok & Vericred APIs

What do you do when your doctor says something serious, like, “Make an appointment with a Cardiac electrophysiologist stat” or “here is a prescription for some XYZ.” A what? And a whom?! “Oh, and you’ll need to get an MRI too.” Well, that’s overwhelming. It’s no surprise that about 20 percent of first-time prescriptions are never filled, according to a 2010 Harvard Medical School study.

Patients often come to a road block and fail to follow through with doctors’ orders because of perceived financial burdens, or simply because they don’t know where to find what they need. The Robert Wood Johnson Foundation (RWJF) feels that no one should be at a loss for health care services because they don’t know where to go for affordable services. The RWJF Choosing Care Challenge will therefore bring tech-enabled solutions to the forefront of this issue.

RWJF has teamed up with Catalyst @ Health 2.0 to identify and incentivize the creation of tech that will help patients identify and locate health care services that are locally accessible and covered by their insurance plans. The challenge is calling on innovators, developers, entrepreneurs and other bright minds to create tech enabled tools to help patients figure out what specialists to see, what medication, or tests will be covered by their insurance, or simply what services are nearby. Vericred and PokitDok are each offering APIs providing data on pharmacies, drug costs, eligibility and more. Developers may use these APIs to build tools that offer real time coverage checks for local pharmacies and services. Solutions can be for patients to use on their own, or together with their providers, and can address one or more of the services mentioned above.

In Phase I of the challenge innovators will develop and design novel approaches to the issue. The challenge judges, who bring a wide range of expertise to the table, will evaluate the submissions to determine five teams to move onto Phase II. These finalists will be awarded $5,000 each to create a fully functional application or tool to help guide patients to customized health care services. With over $100,000 in total prizes, we encourage innovators to put their best foot forward and create innovative solutions for patients choosing care.

Check out the challenge website to learn more and pre-register to join the RWJF Choosing Care Challenge by March 13th to get involved. Let’s get patients on the road to better customized care.

Let’s make it simple.

Chelsea Polaniecki is a Program Manager at Catalyst @ Health 2.0.

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Wellbeing: The Interdependencies of the Body, Mind & Spirit.


In 1891, Dr. Luther Gulick proposed a red triangle as the YMCA symbol. In his words, the equal sides of the triangle stood for “man’s essential unity– body, mind and spirit– each being a necessary and eternal part of man, being neither one alone but all three.” True then, and equally true today, it highlights what is missing from most traditional approaches to wellness–the mental, emotional, and spiritual components. Hardly surprising given the remarkable resistance mental illness treatments encounter.

The term “mental illness” usually refers to recognized mental illnesses in accordance with the Diagnostic and Statistical Manual (DSM) published by the American Psychiatric Association. These include depression, anxiety, psychotic disorders, and bipolar disorder. While substance abuse and addictions are not so neatly categorized and are sometimes referred to as “behavioral disorders,” an indeed odd phrasing, we will refer to all such afflictions as “mental health or “mental illness.”

Through the Middle Ages, the mentally ill were believed to be possessed or in need of religion. This almost always led to serious religious interventions, barbaric medical treatments, alternative starvings and beatings, or confinement. None seemed to be very effective. In the 1840s, Dorothea Dix lobbied for better living conditions for the mentally ill. It took Dix forty years, but she successfully persuaded the federal government to fund the building of 32 state psychiatric hospitals.

Institutionalization persisted as the treatment of choice until the 1960s when Congress passed the Community Mental Health Centers Act of 1963, which deinstitutionalized all but those individuals “who posed an imminent danger to themselves or someone else.” By 2000, the number of state psychiatric hospital beds per thousand people was less than 10% of what it was in 1955. While “deinstitutionalization” continues to be hotly debated today, it represents an ongoing attempt to assimilate the mentally ill into society, just as we do for our physically ill.

The quest for mental health “parity” followed. Mental health parity proponents fought to remove differences between physical and mental health treatment, benefits, and coverage. While some states enacted partial parity legislation, little overall progress was made until 2008 when Medicare eliminated discriminatory copayments, and Congress enacted the landmark Mental Health Parity and Addiction Equity Act, which eliminated both financial and non-financial (e.g., maximum days; coverage limits) ways that insurers could limit access to addiction and mental health care. [Note: I’m proud to have been the only health insurance to testify in favor of the legislation.]

The inanity of some of these artificial limitations was obvious. Most insurance plans limited the number of mental health office visits (for counseling) to, say, thirty a year. For those truly in need of substantial counseling, when did the coverage run out? Just before the holidays, when they most needed it. People don’t overuse counseling. Just the opposite. And yet, this limit was inserted for God knows what reason. Such limits are outlawed today unless there are similar limits for non mental healthcare coverage.

Since enactment, mental health parity has continued to encounter resistance and difficulties. There is remarkable societal and professional resistance to recognizing and handling mental health issues the same as physical health issues. The stigma of mental illness has not entirely left us. Addiction continues to have overtones of moral reprehensibility and implied lack of will power or moral integrity. This is tragic, because it not only encourages sub par treatment–it also greatly frightens off those who might otherwise seek care or ask for help. And it places mental health advocates in the conflicting position of wanting greater confidentiality protections for mental healthcare than for physical healthcare.

Today we know that most people receiving care for mental health conditions also have related (sometimes called “comorbid”–a really odd descriptive) physical health conditions; and vice versa. We know that many forms of mental illness require physical health treatments in addition to counseling, and we know many forms of physical illnesses have tremendous mental/emotional components.

For example, where does one begin and the other leave off in the case of an obese, pre-diabetic, depressed, bullied, 14 year old girl with severe acne and abusive parents? Just seeing her pediatrician once or twice a year is suboptimal to say the least. Coordinated care amongst a psychologist, psychiatrist, social worker, PCP, and a specialist or two is optimal. Changing the culture of her environment? In a perfect world, yes, because without that, she may never recover full health despite good care. While we can’t always change the world, the parallels to workplace wellbeing seem obvious.

Healthcare delivery today is starting to see the benefits of co-located, integrated physical and mental healthcare, particularly in primary care patient centered medical home models. Some insurers are using innovative and very helpful funding techniques to advance this obviously needed change to how we deliver care.

When one considers the most common prescription drugs taken today, one can immediately see how one or more mental/behavioral components contribute to the underlying condition:

• Statins (cholesterol)
• Blood pressure meds
• Anti-depressants (Prozac, Lexapro, etc.)
• Sleep meds (Lunesta, Ambien, etc.)
• Digestive disorders (Pilosec, Nexium, etc.)

The above categories of drugs should not (with the exception of anti-depressants in some cases) be life sentences. These drugs should be prescribed with the goal of stabilizing physical conditions for a period of time needed to make one or more lifestyle changes to eliminate or lessen the behavior causing the underlying problem. For statins, blood pressure and digestive disorder meds, it usually is proper diet, exercise, AND the medications until a weaning can take place. With sleep meds and anti-depressants, it can be more difficult, but counseling and other activities should be undertaken with an eventual goal to reduce or eliminate the medication over time.

That is not happening in America today. Our delivery system treats the symptom rather than the underlying cause. We band-aid with meds and think we are healthier when our cholesterol and blood pressure readings are lowered to appropriate ranges due to the medications. We are not healthier; we are medicated or sedated.

Accordingly, we can see the powerful influence of the mental, emotional, and spiritual over our abilities to cope with the challenges of becoming healthier. They are all interrelated and interdependent.

An employee whose life is the antithesis of wellbeing stands almost no chance of engaging in long term behavior changes that lead to good physical health much less good mental and emotional health. We must see these truths for what they are and the remarkable opportunity that they represent. Because all analyses along these lines lead to the same conclusion: achieving company business and employee personal goals are interdependent and aligned. One needs the other. One feeds the other. And good employee mental, emotional, and spiritual health are critical ingredients.

Stress cannot be ignored. All employees suffer stress, some greater than others. While stress can be the result of situations outside the workplace (most notably family), they more often result directly from the workplace and its impact on employees. The American Institute of Stress tells us that long hours, lack of control, job insecurity, and perceptions of unfairness create stress that that adversely affects employee health and engagement, and is a barrier to positive lifestyle changes.

“Despite a growing awareness of the disturbing trend of ‘the overwhelmed employee,’ research shows that there is a pervasive failure to act in most organizations. According to the National Business Group on Health and Towers Watson’s 2013/2014 Staying@Work Report, the top wellness challenge identified by leaders is stress. Seventy-eight percent of leaders are reporting that this is their top concern, but only 15 percent of organizations are actually taking measures to address the issue.” Laura Putnam, Workplace Wellness That Works, p. 141.

A workplace that creates excessive stress for its employees is a breeding ground for bad health, excessive claims expense, disengagement, voluntary turnover, and absenteeism. It also can create personal tragedies for employees and their families. The very best antidote for such a situation is replacing such an environment with a culture of wellbeing that actively addresses the causes of excess workplace stress.

Contrary to popular belief, lack of money is not the primary cause of workplace stress. The most prevalent cause of workplace stress is actual or perceived unfairness, usually personified by immediate superiors who show no appreciation for those who report to them (i.e., jerks). There are way too many managerial jerks in organizations, because too many organizations promote employees to front line management levels because they were very good worker bees and producers in their former positions, rather than for demonstrated skills for managing people effectively.

Virgin Pulse’s 2016 Move Over, Wellness: Creating An Engaged Culture Through Wellbeing, tells us:

“Perhaps the most important factor in overall employee wellbeing is the relationships employees have with their immediate manager and co-workers. Research consistently shows that employees are more engaged at work when their leader cares about them as a person. Additionally Gallup research highlights the importance of workplace friendships and supports the idea that people who have high-quality friendships on the job are seven times as likely to be engaged in their work.”

Accordingly, any comprehensive and thoughtful attempt to achieve good employee health, wellness, and wellbeing must place emphasis on the physical, mental, emotional, and spiritual. It is beyond argument that to achieve good physical health, one needs sound mental health and wellbeing as enabling platforms, and vice versa.

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Non-Alternative Facts About the Healthcare System

The economic fundamentals of healthcare in the United States are unique, amazingly complex, multi-layered and opaque. It takes a lot of work and time to understand them, work and time that few of the experts opining about healthcare on television have done. Once you do understand them, it takes serious independence, a big ornery streak, and maybe a bit of a career death wish to speak publicly about how the industry that pays your speaking and consulting fees should, can, and must strive to make half as much money. Well, I turn 67 this year and I’m cranky as hell, so let’s go.

The Wrong Question

We are back again in the cage fight over healthcare in Congress. But in all these fights we are only arguing over one question: Who pays? The government, your employer, you? A different answer to that question will distribute the pain differently, but it won’t cut the pain in half.

There are other questions to ask whose answers could get us there, such as:

  • Who do we pay?
  • How do we pay them?
  • For what, exactly, are we paying?

Because the way we are paying now ineluctably drives us toward paying too much, for not enough, and for things we don’t even need.

A few facts, the old-fashioned non-alternative kind:

  • Cost: Healthcare in the U.S., the whole system, costs us something like $3.4 trillion per year. Yes, that’s “trillion” with a “T”. If U.S. healthcare were a country on its own it would be the fifth largest economy in the world.
  • Waste: About a third of that is wasted on tests and procedures and devices that we really don’t need, that don’t help, that even hurt us. That’s the conservative estimate in a number of expert analyses, and based on the opinions of doctors about their own specialties. Some analyses say more: Some say half. Even that conservative estimate (one third) is a big wow: over $1.2 trillion per year, something like twice the entire U.S. military budget, thrown away on waste.
  • Prices: The prices are nuts. It’s not just pharmaceuticals. Across the board, from devices to procedures, hospital room charges to implants to diagnostic tests, the prices actually paid in the U.S. are three, five, 10 times what they are in other medically advanced countries like France, Germany, and the U.K.

  • Value: Unlike any other business, prices in healthcare bear no relation to value. If you pay $50,000 for a car, chances are very good that you’ll get a nicer car than if you pay $15,000. If you pay $2200 or $4500 for an MRI, there is pretty much no chance that you will get a better MRI than if you paid $730 or $420. (Yes, these are real prices, all from the same local market.)
  • Variation: Unlike any other business, prices in healthcare bear no relation to the producer’s cost. None. How can you tell? I mean, besides the $600 price tag on a 69-cent bottle of sterile water with a teaspoon of salt that’s labeled “saline therapeutics” on the medical bill? (Yes, those are real prices, too.) You can tell because of the insane variation. The price for your pill, procedure or test may well be three, five, even 12 times the price paid in some other city across the country, in some other institution across town, even for the person across the hall. Try that in any other business. Better yet, call me: I have a 10-year-old Ford F-150 to sell you for $75,000.
  • Inefficiency: We do healthcare in the most inefficient way possible, waiting until people show up in the Emergency Department with their diabetes, heart problem, or emphysema completely out of control, where treatment will cost 10 times as much as it would if we had gotten to them first to help them avoid a serious health crisis. (And no, that’s not part of the 1/3 that is waste. That’s on top of it.)

So who’s the chump here? We’re paying ridiculous prices for things we don’t necessarily need delivered in the most inefficient way possible.


Why do they do that to us? Because we pay them to.

Wait, this is important. This is the crux of the problem. From doctors to hospitals to labs to device manufacturers to anybody else we want to blame, they don’t overprice things and sell us things we don’t need because they are greedy, evil people. They do it because we tell them to, in the clearest language possible: money. Every inefficiency, every unneeded test, every extra bottle of saline, means more money in the door. And they can decide what’s on the list of what’s needed, as long as it can be argued that it matches the diagnostic code.

That’s called “fee-for-service” medicine: We pay a fee for every service, every drug, every test. There’s a code for everything. There are no standard prices or even price ranges. It’s all negotiated constantly and repeatedly across the system with health plans, employers, even with Medicare and Medicaid.

We pay them to do it and the payment system demands it. Imagine a hospital system that bent every effort to providing health and healthcare in the least expensive, most effective way possible, that charged you $1 for that 69-cent bottle of saline water, that eliminated all unnecessary tests and unhelpful procedures, that put personnel and cash into helping you prevent or manage your diabetes instead of waiting until you show up feet-first in diabetic shock. If it did all this without regard to how it is paid it would soon close its doors, belly up, bankrupt. For-profit or not-for-profit makes little difference to this fact.

If we want them to act differently, we have to pay them differently.

Paying for Healthcare Differently

But wait, isn’t that the only way we can pay? Because, you know, medicine is complicated, every body is different, every disease is unique.

Actually, no. There is no one other ideal way to pay for all of healthcare, but there are lots of other ways to pay. We can pay for outcomes, we can pay for bundles of services, we can pay for subscriptions for all primary care or all diabetes care or special attention for multiple chronic conditions, on and on, the list of alternative ways to pay for healthcare is long and rich.

There are now surgery centers that put their prices up on the wall, just like McDonalds — and they can prove their quality. There are hospital systems that will give you a warranty on your surgery: We will get it right or fixing the problem is free.

Look: You get in an accident and take your crumpled fender to the body shop. Every fender crumples differently, maybe the frame is involved, maybe the chrome strip has to be replaced, all that. So there is no standard “crumpled fender” price. But it is not the first crumpled fender the body shop has ever seen. It’s probably the 10,000th. They are very good at knowing just how to fix it and how much it will cost them to do the work. Do you pay for each can of Bondo, each disk of sandpaper, each minute in the paint booth? No. They write you up an estimate for the whole thing, from diagnosis to rehab. Come back next Thursday and it will be good as new. That’s a bundled outcome. It’s the body shop’s way of doing business, its business model.

There are new business models arising now in healthcare (such as reference prices, medical tourism, centers of excellence, “Blue Choice” and other health plan options) that force hospitals and surgical centers to compete on price and quality for specific bundles, like a new hip or a re-plumbed heart.

Healthcare is a vast market with lots of different kinds of customers in different financial situations, different life stages, different genders, different needs, different resources, yet we have somehow decided that in pretty nearly all of that vast market there should be only one business model: diagnostic-code-driven fee for service. Change that, and the whole equation changes. It’s called business model innovation. If we find ways to pay for what we want and need, not for whatever they pile onto the bill, they will find ways to bring us what we want and need at prices that make sense. That’s called changing the incentives.

Already Happening

Is this pie in the sky? No, it’s already happening, but in ways that are slow and mostly invisible to anyone but policy wonks, analysts, and futurists like me. The industry recognizes it. Everyone in the healthcare industry will recognize the phrase “volume to value,” because it is the motto of the movement that has been building slowly for a decade. It’s shorthand for, “We need to stop making our money based on volume — how many items on the list we can charge for across how many cases — and instead make our money on how much real value, how much real health, we can deliver.”

Self-funded employers, unions, pension plans, and tribes are edging into programs that pay for healthcare differently with reference prices, bundled prices, onsite clinics, medical tourism, direct pay primary care, instant digital docs, team care, special care for those who need it most, all kinds of things. The Affordable Care Act set up an Innovation Center in the Centers for Medicare and Medicaid Services, and the government has been incrementally pushing the whole system more and more into “value” programs.

Are We There Yet?

So why hasn’t it happened yet? Why aren’t we there yet?

Because it’s hard, it’s different, and it hurts. And there is a tipping point, a tipping point that we have not gotten to yet.

It is very hard to loosen your grip on a business model as long as that business model pays the bills. We built this city on fee for service, these gleaming towers, these sprawling complexes, these mind-bending levels of skill and incomprehensible technologies. To shift to a different business model requires that everybody in the healthcare sector change the way they do everything, from clinical pathways to revenue streams to organizational models to physical plants to capital formation, everything all the way down. And it’s all uncharted territory, something the people who run these systems have not yet done and have little experience in. It’s guaranteed to be the end of the line for some institutions, many careers, many companies.

So far, the government “volume-to-value” or “value-based-payment” programs are incremental, baby steps. They typically add bonus payments to the basic system if you do the right thing or cut payments a few percentage points if you don’t. My colleague health futurist Ian Morrison calls these programs “fee for service with tricks.” They do not fundamentally change the business model.

Private payers such as employers have only gradually been getting more demanding, unsure of their power and status as drivers of change in this huge and traditionally staid industry. Systems such as Kaiser that have a value-based business model (so that they actually do better financially if they can keep you well) still have to compete in a system where the baseline cost of everything they need, from doctor’s salaries to catheters, is set in the bloated fee-for-service market. So movement is slow, and we are not yet at the tipping point.

Back to Who Pays

This is not a libertarian argument that everyone should just pay for their own healthcare out of their own pocket and let the “free market” decide. The risks are far too high, and we are terrible at estimating that risk, financial or medical. All of us are, even your doctor is, even I am. A cancer can cost millions. Heck, a bad stomach infection that puts you in the hospital for 10 days could easily cost you $600,000. Bill Gates or Warren Buffet can afford that, you and I can’t.

We need insurance to spread that risk not only across individuals but across age groups, across economic levels, and between those who are currently well and those who are sick. For it to work at all, the insurance has to be spread across everyone, even those who think they don’t need it or can’t afford it. You drive a car, you have to have car insurance, even if you are a really safe driver. You buy a house, you must have fire insurance, even though the average house never burns down. You own and operate a human body, same thing, even though at any average time you hardly need medicine at all.

If we are to have insurance for everyone, we need to subsidize it for those who have low incomes — and this has nothing to do with whether they “deserve” help, or even with whether healthcare is a right. It’s about spreading the cost of a universal human risk as universally across the humans as possible. At the same time, such subsidies need to be given in a way that helps people feel that they are spending their own money, that they have a stake in spending it wisely. This is not simple to do, but it can be done.

This is also not necessarily an argument for a single payer system. Single payer, by itself, will not solve the problem. It doesn’t change the incentives at all. It just changes who’s writing the check. What the system needs most is fierce customers, people and entities who are making choices based on using their own money (or what feels like it) to pay for what they really need. This forces competition among healthcare providers that drives the prices down. That means the system needs variety, a lot of different ways of paying for a lot of different customers. If we can figure out how to do that in a single-payer system, well then we’re talking.

Obviously the ultimate customer in healthcare is the individual, since medicine is about treating bodies, and we have exactly one to a customer. But the risk is too high at the individual level, and the leverage is too low.

So employers, pension plans and specialized not-for-profit mutual health plans whose interests really line up with the interests of their employees or members can act as proxies. They can force providers of healthcare (hospital systems, medical groups, labs, clinics) to compete for their business on price and quality. They can refuse to pay for things that the peer-reviewed medical literature shows are unnecessary. They can pay for improvements in your health rather than just fixing your health disasters. They can help their members and employees become fierce customers of healthcare with information and with carefully-titrated incentives.

Here’s one example of an incentive: A payer says to its members, “You need a new knee? Great, fine. Here are all the high-quality places you can get that done in your area. You can choose any that you like. But here’s a list of high-quality places in your area that do it for what we call a “reference price” or even less. Choose one of those places, and we will pay for everything from diagnosis to rehab. You can choose a place with a higher price if you like, but you’ll have to pay the difference yourself.” With reference prices, the employee or member partners with the payer in becoming a fierce, demanding customer, and prices for anything treated this way come crashing down.

Both payers and individuals, by being fierce customers, can force the healthcare providers in turn to become fierce customers of their suppliers, forcing pharmaceutical wholesalers and device manufacturers to bid on getting their business. “This knee implant you are asking us to pay $21,000 for? We see you are selling it in Belgium for $7,000. So we’ll pay $7,000 or we’ll go elsewhere.” The “price signals” generated by fierce customers reverberate through the entire system.

What’s the look and feel?

“Healthcare for half” sounds to most people like a Greyhound bus station with stethoscopes, like flea market surgeries, and drive-through birthing centers. Paradoxically, though, a lean, transparent system catering to fierce customers of all types would feel quite the opposite, offering more care, even what might feel like lavish care, but earlier in the illness or more conveniently. It might mean a clinic right next door to your workplace offering private care on a walk-in basis, no co-pay, even your pharmaceuticals taken care of — or you could choose to go elsewhere to another doctor that you like more, but you have to schedule it and pay a copay for the visit. Why will providers make healthcare so convenient and personal? Because if they are paid to be responsible for your health it’s worth the extra effort and investment to catch a disease process early, before it gets expensive.

It might mean, when your doctor says you need an MRI on that injury, getting on your smart phone to conduct an instant spot auction that allows high-quality local imaging centers to bid for the business if they can do it in the next three hours. It might mean, if you are in frail health or have multiple chronic diseases, being constantly monitored by your nurse case manager through wearables, and visited when necessary or once a week to help keep you on an even keel. It might mean your health system not being so quick to recommend a new knee, and offering instead to try intensive physical therapy, mild exercise and painkillers to see if that can solve the problem first (Pro tip: It often does).

Changing the fundamental business model of most of healthcare will be difficult and painful for the industry. But if we look to other countries and say, “Why do their systems cost so much less than ours? Why can’t we have what we want and need at a price we all can afford?” — this is the answer.

Change the way we pay for healthcare, not just who pays, and we can rebuild the system to be at the same time better and far cheaper.

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