Value on the Inside

Philip Betbeze, for HealthLeaders Media , July 14, 2010
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Hospitals are as concerned as anyone else with runaway healthcare costs, because they are usually among the largest employers in their area, and because they tend to hold on to employees. So while many policymakers tarnish hospitals as part of the problem with health cost inflation, those same organizations are also looking for solutions concerning the high healthcare costs of their own employees.

Some are trying value-based design, which uses figurative "levers" that address critical risk factors in the hope that keeping people healthier will reduce their exposure to expensive medical care. That means they're targeting such problems as obesity, diabetic precursors, and tobacco use.

Count Steve Johnson as a convert to a certain method of value-based design pioneered by the Seattle-based Group Health Cooperative, a nonprofit health system composed of health plans and a physician group. The levers include a collection of five risk factors that are great predictors of risk of diabetes, cardiac trouble, and cancer, among other maladies.

"They're a valid predictor of risk for catastrophic future events, and they're all reversible," says Johnson, director of compensation and benefits at Genesis Health System, a four-hospital health system in Davenport, IA, that also includes several physician groups.

The idea is that by using data from their own employees, Genesis can not only save money on its own health insurance costs right now, but also design better ways of caring for patients. Group Health and several hospitals across the country that are using the techniques are also selling the lessons and pathways to local companies interested in cutting their expenditures on healthcare, creating another revenue stream.

David Grossman, the medical director of preventive care at Group Health, says improving the overall health of its 10,000-strong workforce will save on health premiums over the long term.

"What's really attractive is that you can build it so employees get good care and as an employer we could drive our costs down over time," says Grossman.

Johnson says the big area of interest for Genesis is metabolic syndrome, a group of risk factors that occur together and increase the risk for coronary artery disease, stroke, and type 2 diabetes.

The program at Genesis combines health risk assessments with personalized health coaching. Johnson was skeptical at first, so "we had our doctors tear apart the concept and they simply told us that if you reduce the risk factors, you'll save money [on health costs]. There were no qualifiers."

So it works. But what's the carrot, or stick, for employee participation? A significant discount in premium costs.

"We give you a discount on your medical premiums," he says. "We got 80% compliance with people in our medical plan, and through the first half of '09, and we showed a 48% reduction of metabolic risk."

Weight loss is not the goal, though it's usually a result. Instead, value-based design is about preventing serious health problems from about 5% of people who will drive 60% of the costs, Johnson says, adding, "we've had diabetics who got to go off insulin."

Genesis has more than 4,100 participating in screenings, and they have to be compliant and have fewer than three risk factors to earn the discount.

"The juicy part of this is that going back to 2007 and tracking costs, our paid claims per covered employee dropped each year since we've started this," he says.

Philip Betbeze is senior leadership editor with HealthLeaders Media.

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