Why Healthcare Costs Rise Faster Than General Inflation Part 3


By David Toomey and Tom Emerick


In Part 1 and Part 2 of this series, we shared a wildly successful collaboration with Virginia Mason Medical Center (VM) and a few Seattle employers.

In other leading centers of excellence, e.g., Mercy in Springfield, MO, similar collaborations are occurring in real time today.

During the the time of the VM collaboration, we invited other major physician groups to meet with the employers. One of the most memorable was with the CEO and Chief Medical Officer (CMO) from one of the most well-regarded physician groups in Seattle, but one with a high fee schedule yet low performance results.

As you would suspect, the employers were better prepared for this meeting. When the CEO and CMO presented their value story with a strong emphasis on quality, the employers began asking questions around quality monitoring and the process of care. Rather than acknowledging there were opportunities for further analysis and an openness to collaboration, the providers responded with confidence in their model of care.

In the debrief meeting with the employers, they expressed concerns around this premier provider’s ability to impact care and to reduce costs. After the conversation progressed, we posed a question to the group—“so are you saying that you don’t want them in the performance network? Are you really ready to tell to your leadership that XYZ physician group, which many of their executives used, are not in the top tier?”

The employers were now aware of the dynamics with network configuration. They responded that they wanted to have additional meetings with this group due to their market reputation. After a couple of follow-up meetings with the group’s leadership, the employers recognized that this group was not committed to the process of care they expected, and they came to the decision that this premier group should not be in the performance-based network. Importantly, they were now equipped to discuss the rationale with their leadership teams.

After a number of meetings with this group, we had developed an amicable relationship. We relayed that the employers did not see the level of quality measurement processes in place, and the employers were not willing to have this group be part of the performance network.

The CEO of the provider group in question eventually acknowledged that they had work to do in this area. By taking the time to meet with the provider’s leadership and to give them the opportunity to discuss how they can better support the employers, the CEO felt respected even though he did not like the outcome.

Employers make purchasing decisions with suppliers every day. For some reason, the procurement process involves the carriers and other vendors, but it often skips the actual suppliers of healthcare, except in a fairly small but rapidly growing number of major corporations.

The big question is, why are not more self-insured employers engaging directly with providers?

In a broad network, there will be a bell curve around performance. Most employers say they want quality providers in their networks, but half the providers in their broad-based networks are below average. While everyone espouses “quality”, the variation in care is sgnificant, and the medical ethics around treatment often drives that differential. Healthcare is big business. It is time to reward and to channel employees into the right primary care physicians and specialists truly committed to medically appropriate care.

A major reason health why health care costs grow faster than general inflation is that most self insured employers are simply not dealing with with health care providers in the way we have described in this series of posts.

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