3. Making consumerism really work

In many industries, the key driver of innovation—competition to serve informed consumers—helps ensure the delivery of greater value over time. Participants noted that the healthcare industry currently falls well short of having truly informed consumers and must take steps to address that problem.

A. Sharing responsibility for a complex problem:

The current lack of consumerism in healthcare is a complex problem for which every sector of the industry shares responsibility. Read more

B. Putting patients first:

Providers must organize themselves around the needs of consumers rather than caregivers. Read more

C. Turning patients into active consumers:

Consumers must be transformed from passive to active participants in managing their own health. Read more

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A. Sharing responsibility for a complex problem

The current lack of consumerism in healthcare is a complex problem for which every sector of the industry shares responsibility.

As many economists have noted, the fragmented healthcare system in the United States has stymied the usual market forces that might otherwise lead to greater efficacy and efficiency. Yet, enthusiasm for greater “consumerism” in healthcare has been dampened by generally slow progress. What practical components are necessary to move consumer empowerment from an ideal to a reality?

The answers are rooted in responsibility: who has it and how it is exercised. Regina E. Herzlinger, the Nancy R. McPherson Professor of Business Administration at Harvard Business School, forestalled the temptation to point fingers by drawing an analogy to Agatha Christie’s mystery, Murder on the Orient Express. Herzlinger said, “Somebody on the Orient Express gets killed, and the question is, who killed him? The answer is, everybody on the train killed him. And the answer about who killed healthcare is: the status quo.” Everyone owns a share of the responsibility.

Every nation, too, suffers a share of the fiscal consequences. “No matter what the country, no matter what the public policy,” Herzlinger said, the rate of healthcare expense growth relative to the growth of the GDP “is very, very high.” What will happen, according to Herzlinger, is that healthcare, like other industries, will have to conform to market forces and by doing so will become more “consumerized”: Patients must assume greater responsibility for their care and must have greater power to exercise that responsibility. She cautioned, however, that when it comes to policies and technologies intended to give consumers more control, “we’ve got a lot of hallucinations rather than visions.”

Her skepticism was echoed by the survey results. “Consumer incentives to encourage healthy behavior” ranked last among eleven possible innovations in terms of their ability to increase value, with 44.6 percent of respondents indicating that it would have only a minimal or slight impact on improving quality and 43.9 percent noting its minimal or slight potential for controlling cost.

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B. Putting patients first

Providers must organize themselves around the needs of consumers rather than caregivers.

Delos M. Cosgrove, MD, President and CEO of Cleveland Clinic, articulated the need to reconceive the way care delivery is organized if it is to be truly consumer oriented. For Cosgrove and the Cleveland Clinic, “the patient is the most important person at an institution, and it’s our job to satisfy them,” a philosophy that has made a “patients first” mantra the guiding principle for the Clinic’s reorganization. “Most organizations are organized around physicians,” he noted. “We took a different step. We said we’re going to organize around patients’ problems and around organ systems such as neurologic disease or disease systems such as cancer.” The Clinic integrated community hospitals, family health centers, and other care delivery sites into one system that connects 6 million patients through one electronic medical record (EMR) system. Further, Cosgrove said, the Clinic measured clinical outcomes. “This was important for us because it caused us tolook at our results in a very transparent way. Every time we did this, we found issues, and we began to deal with them.”

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C. Turning patients into active consumers

Consumers must be transformed from passive to active participants in managing their own health.

If the Cleveland Clinic represents the provider’s perspective on consumerism, Safeway—the second-largest grocery chain in the United States—shows what it can look like from an employer’s point of view. Operating with very thin profit margins, Safeway has an enormous incentive to reduce healthcare costs. “For us, innovation in healthcare is a matter of necessity,” said panelist Brad Wolfsen, President of Safeway Health. “With healthcare costs increasing at 8 percent a year and being such a significant portion of our cost structure, we would suffer a significant dent in our profitability if we were to allow our healthcare costs to increase at that rate.” Safeway has responded with a two-pronged approach to reining in costs through employee incentives, the first by allowing employees to shop for care options with capped benefit amounts, and the second by rewarding better lifestyle choices. Regarding the former, Wolfsen said Safeway Health created a plan modeled on the grocery shopping experience itself. “We basically set the maximum benefit that our plan will pay for a set of therapeutic outcomes.” Noting the extraordinary variation in costs for the same procedures—as much as 8:1 for a colonoscopy or 16:1 for an abdominal computerized tomography (CT) scan— Wolfsen said the plan encourages employees to shop for the best value.

“When presented with that type of plan design,” said Wolfsen, “members can be very effective at shopping, and it can yield extraordinary savings.” He noted a 15-to-20 percent decline in pharmaceutical costs, and similar savings in imaging and lab tests. The key, Wolfsen insisted, is obtaining clear data on prices. “The real challenge in deploying a system like this more widely is opening up more categories to this type of solution where there is transparency in price,” he said. When prices are available, “members make cost-effective decisions. In our experience, members look at that information when they are provided the rules and the incentives to shop, and they make good decisions.”

The second component of the Safeway Health plan encourages employees to be healthier by providing financial incentives for hitting defined targets in categories such as blood pressure, cholesterol, and overall body mass index (BMI). “We have demonstrated the results of our health improvement program, that we can deliver positive employee motivation to improve their health. That can be seen in our overall financial results over the past six years: Safeway’s [healthcare] cost trend has been 2.2 percent, not the 8 percent that is common nationally.”

In his keynote address, Alan M. Garber, MD, Provost, Harvard University, cited the importance of Safeway’s efforts to increase consumer engagement in managing healthcare utilization. Garber noted, “The data on the role healthcare costs play in the U.S. economy are quite clear. It’s also clear that we need new approaches to dealing with cost containment—approaches like narrow networks, tiering, and reference pricing. Safeway’s early experience with reference pricing for a colonoscopy, for example, gives us hope that this method of letting consumers play a larger role in purchasing healthcare services may help control costs while not reducing quality.”

Kenneth L. Sperling, National Health Exchange Strategy Leader, Aon Hewitt, a leading human resources consulting firm, discussed an alternative approach to building consumerism in healthcare. Instead of imposing one plan, Aon Hewitt offers a private exchange that allows employees to be active decision makers in their care, thereby sharing responsibility for its cost.

Through the Aon Hewitt exchange, participating employees are presented with five standardized levels of care (ranked from “bronze” to “platinum”) to which they can apply their employer’s healthcare benefit contribution. “This is not an enrollment experience anymore,” Sperling said. “It is a shopping experience.” As of January 1, 2013, 100,000 employees from Aon Hewitt, Sears, and Darden participate in the exchange. “The more employees we have, the more carriers we will bring,” said Sperling. “The more competition we drive, the lower the costs will be.”

The open discussion regarding consumerism was among the most vigorous of the conference. Consensus did emerge around three key requirements for achieving shared responsibility with consumers at the core. First, all participants will need better data, not just on the cost of a given procedure with a particular provider, but on overall outcomes. Second, consumers will need some mechanism for guiding their choices: Without a clear understanding of their medical issues, how can patients make informed decisions about treatment or therapy options? Finally, the alignment of consumer lifestyle choices with behaviors conducive to well-being will be critical, just as discouraging substance abuse will be conducive to good health. The consensus was that quality information and incentives would be crucial to realizing the transformative potential of consumerism in healthcare.

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