Role of the physician executive in consumer-driven care. (Consumer-Driven Health Care).

Much has been written in the last few years about consumer-driven health care.

It's been hailed by its supporters as the way out of the seemingly endless upward spiral of health care costs and damned by consumer advocates as a thinly veiled attempt by employers to off-load their medical costs onto unwitting employees.

In the midst of all this rhetoric, what is noticeably lacking is any mention of the role of the physician executive in helping to define the consumer-driven health care model. This is all the more peculiar when you consider that physician decision-making drives the majority of actual health care costs.

But before we look at the physician executive's role, it's important to define consumer-driven health care. Two influential writers provide a good outline of what it involves:

* J.D. Kleinke, Oxymorons: The Myth of a U.S. Health Care System (1)

* Regina Herzlinger, "Let's Put Consumers in Charge of Health Care" (2)

As Kleinke notes, "The U.S. health care system grew out of a series of historical accidents." Chief among these was the institutionalization of the employer as patron of their employees' health care. This arrangement was supposed to be a temporary solution to a temporary problem-the wage freeze necessitated by the labor shortage of the 1940's wartime economy.

For a variety of reasons, this arrangement eventually came to be seen as, an employee entitlement. At the present time, approximately half of all Americans with health care coverage get that coverage through their employer.

This situation has a number of inherent flaws, among them:

1. The interests of the employer in reducing their health care costs and the employee in receiving the most sophisticated and latest treatments are inherently misaligned.

2. The employee is insulated from the health care cost implications of their behavior and medical decision-making, creating a hostile dependency on the employer that frustrates both sides.

3. Given the tremendous variation in health status among individuals and the even greater range of desires, preferences and tolerance for risk among those who are sick, it is ludicrous to think that the health care benefit choices of an employer-types of plans, deductibles, covered and noncovered procedures and treatments, and formulary structure--could ever approximate the diversity of needs and interests of their employees. In fact, only 50 percent of people with employer-based coverage have any choice of health plans and only one-third can choose from more than two plans. As for small companies (less than 200 employees), a mere 9 percent have a choice of more than one plan. (3)

The basic model

At its most basic level, the theory behind consumer-driven health care is that by giving employees more financial "skin" in the health care game, employees will become more conscious of the costs associated with their health care decisions and behaviors.

In turn, they will make decisions about their health behaviors and health care that are more cost-conscious as well as sensible for them as individuals and reduce their contributions to the rising cost of health care.

As described by Herzlinger, "this new model places control over costs and care directly in the hands of employees by giving them more health-plan choices, greater control over what they spend on coverage, and more information for wiser choices."

Herzlinger goes on to outline a six-point plan for implementing the overall concept:

1. Give employees incentives to shop intelligently. This is the cornerstone for all consumer-driven health plan models: the employee is given a portion or all of the dollars that the employer would otherwise have spent on health benefits.

2. Offer a real choice of insurance plans. Employing the sort of mass customization techniques that have been so successful for companies like Dell Computer, this approach is a key part of any consumer-driven health care strategy. At a minimum, the employee would have a range of choices in the areas of benefit customization, out-of-pocket maximums, term lengths and provider organizations.

3. Charge employees actual prices. Price transparency reduces wasteful spending by letting employees match cost with their individual needs and situation. Currently, employers often attempt to steer employees to choose one of their health plan offerings over another, but without knowing the actual costs involved, many employees still choose more expensive plans than they need.

4. Let providers set their own prices. As Herzlinger points out, "When insurers set prices they pay providers for each discrete care 'episode,' providers aren't motivated to create bundles of integrated services..."

5. Adjust payments for each enrollee based on need. The idea here is to use "risk-adjusted pricing to vary payments according to individual employee's care needs, through a neutral third-party that maintains employee privacy." The expectation is that this will provide an incentive for insurers and providers to create innovative programs for those with the higher premiums, i.e., the sick.

6. Provide relevant information. To help employees select the best care coverage on their behalf, they will need objective information about the quality of care and service provided by their prospective health plan and provider network.

Kleinke's contributions

These six broad initiatives can be seen as comprising the core of a consumer-driven health care model. While forming a necessary foundation, additional considerations are needed to realize the full potential of the consumer-driven model. In his book, Kleinke recommends the following three-point plan to bring about true reform:

1. Enact tax parity. Kleinke argues for giving employees the same tax advantages as employers by using their pretax dollars for medical expenditures, including dollars spent outside the chunk set aside for them by their employer. He also argues for giving employees the lump sum of health care benefit dollars, not just a portion as in Herzlinger's model, so that they can purchase the entire benefit package. Only in this way will employees know the full impact of their actual health care costs. As a result, employees will be able to make rational and personalized decisions about their coordinated health care needs that will truly unleash the full impact of consumer demand in reforming the health care system.

Kleinke envisions a future where the employee uses the chunk of tax-free insurance dollars set aside by the employer to go online to choose from among dozens of health plans, all competing for the consumer s health care dollars. An essential, linked element of Kleinke's model, a uniform benefits package, would greatly simplify this choice and is described below.

As Kleinke says, "...let consumers and health insurers do the heavy lifting of repricing and redistribution . .with (many) insurers competing for.. .premiums, the price-performance ratio that drives real consumer markets will finally be brought to bear on health insurance."

2. Establish a uniform benefits package. While the significant political and procedural challenges that would have to be overcome to implement this proposal are beyond the scope of this article, the logic behind this concept is unassailable: radically simplify the Byzantine profusion of health plan benefit designs to greatly reduce the cost of administering them across all components of the health care system. This would reduce a significant part of about 20 cents of the commercial health care dollar now consumed by complex benefit plan administration. Moreover, this step is critical in allowing the consumer to price shop among health care plans in a way that allows straightforward price comparability.

3. Dramatically simplify the regulatory environment. Kleinke summarizes this approach succinctly: "We must do away with the arbitrary, state-by-state benefit mandates and price regulations that add increasing complexity and costs to the system and that, for all the effort, ultimately do not protect a growing segment of the insured population anyway. Such a reform will greatly reduce the organizational burdens and associated costs of running a national health insurer." Kleinke acknowledges that health insurers will need to make sacrifices to counterbalance the loss of pricing and regulatory constraints, but adds, "The liberation of.. health coverage choices through tax parity and a standardization of the health insurance product will go a long way in normalizing health insurance markets, making regulation of all but the worst price discrimination unnecessary."

Enter the physician executive

The active involvement of physician executives in the evolution of the consumer-driven health care model will be critical to ensuring its soundness and success. Here is a list of areas where their participation is especially critical:

Change leaders

As Herzlinger points out, "The idea of putting consumers in charge of health care rubs many in the health establishment the wrong way." There is no segment of the establishment for whom this is more likely to be true than the practicing physician.

There is no doubt that with a move to consumer-driven health care, the focus of medical decision-making authority will clearly shift towards the patient. Physician executive leadership will be essential in helping to define these and other changes required in the doctor-patient relationship.

Physician executives must also articulate the concerns of physicians in the face of the shift, providing guidance and support during the transition and helping to identify and preserve those aspects of the traditional doctor-patient relationship that are of the most enduring value.

Medical leadership will be required across the breadth of the field, from medical practice managers to health plan medical directors to residency program directors and vice presidents of medical affairs.

Voice for the patient

One of the most critical functions served by the physician executive, particularly in health plan and governmental policy making, is to ensure that decision makers consider the potential impact of their decisions on patient care and health status. In other words, the physician executive helps make sure that these decisions are medically informed.

It is hard to imagine a situation where this need is more compelling than in contemplating and structuring a change as radical as consumer-driven health care. For example, one of the most critical components of Herzlinger's model--the adjustment of payments for each enrollee based on need-requires the use of risk adjustment pricing to vary payments according to individual employee's care needs.

In her model, a host of other cost-saving and quality enhancing initiatives, including chronic disease management programs and "disease focused factories" of providers, hinge on the effective use of such risk adjustment.

Physician executives are in the best position to select and test the models to accomplish this, and, in fact, typically perform that function in health plans currently.

Decision maker for uniform benefits package

The role of the physician executive would be critical in defining such a benefits package as well as establishing a process to keep it up to date. Such a role would be very similar to what HMO medical directors already do as a routine part of their job.

Decision maker in consumer medical information

One of the core features of the consumer-driven health care model is providing Consumer Reports-type information to employees to allow them to make choices on the basis of price and value.

Without this information, the concerns about this model posing risks to the uninformed patient have substantial merit. Moreover, without some objective way of selecting providers on the basis of quality as well as cost, the potential to improve the quality of health care through consumerism will be lost.

Although the complexity of medical care makes this a difficult task, it can be argued that the lack of progress in developing these measures is closely related to the lack of any real economic incentive to do so. In a consumer-driven health care world, these incentives will shift toward creating meaningful clinical and quality measures to help consumers make more informed health care choices.

The development of methodologies and formats for gathering and communicating this information to consumers will require a combination of sophisticated knowledge of evidence-based medicine, the choice of simple yet appropriate ways to measure quality of care and a clear understanding of how to present this information to consumers in ways that are most informative.

The physician executive, with extensive practical experience communicating complicated medical information to patients and knowledge of population-based medicine and the aggregation and analysis of complex clinical data, is in an ideal position to play a major role in formulating consumer-oriented clinical information.

Additionally, sharing this information with consumers will demand close coordination with their medical practitioners to prevent conflicting messages and misunderstandings. This, too, falls well within the province of physician executives.

Tall order, radical change

If properly conceived and executed-and coupled with the reforms required to reduce the unnecessary complexity that drives the huge administrative costs of American commercial health care- a medically informed, consumer driven health care approach holds real potential to reduce the double-digit rate of health care benefit inflation. It also could improve the quality, effectiveness and responsiveness of the health care system.

It's a tall order, not because it. can't be done, but because it will require willingness on the part of diverse stakeholders to acknowledge more than their sectarian interests and consider the ramifications of their actions on the entire system.

And, when all is said and done, that might just be the most radical change of all.

References

(1.) Kleinke, JD. Oxymorons: The Myth of a US. Health Care System San Francisco, Jossey Bass, 2001.

(2.) Herzlinger, RE., "Let's Put consumers in Charge of Health Care." Harvard Business Review on Point, 2002. (www.hbr.com)

(3.) Kaiser Family Foundation (and Health Research and Educational Trust), Employer health benefits 2000 annual survey. Menlo Park, Calif., Henry J. Kaiser Family Foundation, 2000.

Matthew M. Keats, MD, CPE, is medical director of Sentara Mental Health Management, a managed behavioral health care organization based in Virginia Beach, Va. He can be reached by calling [phone] or by e-mail at [e-mail].