A Question of Quality

A CFO would have to be in a deep coma not to notice the skyrocketing cost of health benefits, which are expected to jump another 9.8 percent this year, according to a recent survey by Watson Wyatt Worldwide. Having plucked all the low-hanging cost-cutting opportunities through health maintenance organizations, companies now seem willing to try any approach to fight back--decreasing coverage in a range of ways or shifting costs to employees.

The benefit-slashing mentality only exacerbates today's deterioration in worker satisfaction with employer-sponsored plans, of course-- not a good thing when the new watchwords are employee retention. But perhaps companies believe that's just a necessary price to be paid in the war to control costs.

If indeed there is a willingness to try anything, though, how about adopting a plan that sets health-care quality as its main goal, as a means of controlling costs? Counterintuitive as that may seem, it's the approach Wausau, Wisconsin-based Wausau Benefits Inc. is taking in its health-care self-insurance program for 800 employees. And it is far from alone in the experiment, having joined larger companies, such as Sears and Roebuck Inc., Circuit City Stores Inc., American Express Corp., and-- one of the first companies to try the controversial approach--Merrill Lynch & Co. In fact, some 1 million employees in all are now covered by the plans, which were designed by Active Health Management Inc. (AHM), a New York­based health-care software provider.

The logic behind the approach is that a portion of a company's total health-care bill reflects costs associated with poor preventive screening for disease, redundant or inappropriate treatment, or simple medical mistakes and lack of oversight. Other costs result from patients failing to follow through on such basics as completing their full dosage of medication.

To combat those factors, quality-care management seeks to identify what are potentially the most expensive cases, by analyzing data for such elements. It then attacks the cases early, delivering more- personalized, proactive treatment. And for the 20 percent of patients who generally account for 80 percent of health-plan costs, quality-care proponents figure that such savings largely offset the price plans pay for higher-quality care.

Adding to their argument are two factors with positive implications for cost control: improved technology that lets administrators and insurers aggregate and analyze a patient's medical data in beneficial new ways, and a push to give doctors better access to their patients' entire medical history and records. Such access--one of the original promises of HMO-style care--has been extremely spotty in most cases.

Does quality cost less?
Wausau's so-called CareLink2Health plan has certainly scored points with the company's workforce, 75 percent of which have chosen the new pilot program over more-traditional options. But the jury is still out on whether Wausau and the other companies really can get a handle on costs with the new approach. Despite experiencing some health-cost increases, Merrill Lynch has kept its care expenditure per employee below average. And Wausau hasn't seen its planned benefit budget shoot out of sight, as some would expect.

But Wausau controller Jim Sweeney points out that "it's going to take some time to see how this controls costs, compared with some of the other approaches," even though "we know the others haven't produced the cost-cutting results." The CareLink2Health program should be measured over the long term, he says, because its greatest impact is in reducing the incidence of disease. Still, "when you know the other methodologies aren't working, and you see employers' health-care costs continuing to rise, not to pursue it puts you behind the eight ball."

Skeptics abound, with most arguing that cost-control needs to be the primary focus of health-care management, and others challenging the quality-care model. Some say the time it takes to reduce costs is itself a problem. "With all of these strategies and initiatives to 'improve health,' there are systemwide savings over the lifetime of an individual. From an employer point of view, given that employees change jobs every two years, who's going to see the savings?" asks Cynthia Burghard, research director of health- care advisory services at Gartner Group Inc. She says the focus on improving quality and outcomes is "an idealized view," although she suspects it's "the model we're beginning to move toward."

Wausau CEO Fred Moore says that has certainly been his company's experience as a plan administrator. "In talking with many of our customers, we've identified a big shift. They are now realizing that, in the long term, quality costs less," he says. "The way they would handle health care before was like, '1-800-Deny-Care.' Now, it's '1-800-Right-Care.'" And with the way the new system allows Wausau and other claims administrators to accumulate valuable health-care data, "the confluence of information we have access to can be used to give doctors another means to help their patients." Companies trying the quality-care approach are treading cautiously--aware that costs could surge out of control. Such a possibility always exists in an environment that gives so much attention to ensuring that covered employees receive the most efficacious, efficient, and appropriate type of health care, without at least an equal emphasis on reducing medical expenses under the plan.

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