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Health Care – Competing at the Right Level

David P. Lind BenchmarkThanks to the health reform law, Iowa and Nebraska just received a new health plan to compete with the other insurance companies doing business in both states.

Owned by its’ members and led by a board they elect, Midwest Members Health Inc. is a nonprofit consumer operated and oriented plan (CO-OP) that will be up and running by January, 2014. This is the same date that Iowa will have either a new state-based insurance exchange or a federal exchange. This new carrier will receive around $112 million in loans over 15 years, giving it enough money to cover claims and maintain financial solvency. A great start for an organization just approved in February.

But will this new competition create lower premiums for consumers and employers?

Hard to say.  

I must admit, I’m a skeptic whenever there is talk about how important it is to have “more competition” between health insurance carriers. Competition is important, but competition at the RIGHT LEVEL is even more important—if not critical. Health premiums are nothing more than a derivative of health costs, so having more carriers compete for our business will not meaningfully change the premiums if we can’t FIRST fix our health delivery system, one of the biggest cost drivers.

True competition must begin at the level where care is delivered—at the provider and patient level.

It is also extremely important to have transparency in cost and medical outcomes measurements. If carriers and providers don’t provide this transparency, I fear we will see more of the same—uncontrolled costs.

Knowing up front what the cost is for a given procedure and the most likely outcome for that cost (by medical provider) is absolutely necessary. This is not currently happening in Iowa or across the country. And it MUST happen if we have any glimmer of hope of containing costs in the future.

Harvard competition guru Michael E. Porter may be on to something when assessing the competitive environment in the health care industry.

Why is competition in health care not focused on value? The most fundamental, unrecognized problem with the U.S. health care system is that competition operates at the wrong level. Competition is both too broad and too narrow. Competition is too broad because much competition now takes place at the level of health plans, networks, hospital groups, physician groups, and clinics. It should occur in addressing particular medical conditions. Competition is too narrow because it now takes place at the level of discrete interventions or services. It should take place for addressing medical conditions over the full cycle of care, including monitoring and prevention, diagnosis, treatment, and the ongoing management of the condition.

Sounds reasonable to me … how about you? I hope this new health plan is a success. But real, meaningful success will only come when we have true competition in the right places.

A New Acronym in Iowa: ACOs

David P. Lind BenchmarkRecently, my interactions with the health care system have been up close and personal. I can tell you that my wife and I have experienced great frustration when seeking coordinated care for our daughter in recent months, both in and out of the hospital.

Having to reconstruct her medical history over and over and over for each new health care provider has been discouraging, annoying, and frankly, unnecessary. If you’ve been there, you know what I mean.

Lack of coordination between different health care providers for the same patient is a major concern in this country. Not only is it incredibly frustrating to the patient and family members, it’s potentially dangerous and very costly due to inefficiencies and duplication of services.

Your insurance premiums, by the way, are adversely affected by this current delivery of care.

What about ACOs

Accountable Care Organizations (ACOs) are the latest trendy model for delivering health care services by doctors and hospitals.

In a nutshell, an ACO is a network of doctors and hospitals who share responsibility for providing care to their patients.

Sounds good to me! However, I recently read that ACOs are being compared to the elusive unicorn: everyone seems to know what it looks like, but no one has actually seen one.

Imbedded in the massive new health law, ACOs were allotted only seven pages of provisions, but they’re causing a tremendous amount of interest with many stakeholders (patients being one!).

The intent of an ACO is to bring together the different aspects of care for the patient— primary care, specialists, hospitals, home care, etc.—and make providers jointly accountable for the health care of their patients.

Through the new health law, financial incentives will be given to providers to cooperate and save money by avoiding unnecessary tests and procedures. To do this, they must seamlessly share a patient’s medical information between themselves. So instead of the patient and family members having to educate each provider on the medical history, the ACO team would have all information at their fingertips.

Personally, I hope that ACOs (or something like them) become the “new normal” in our delivery system. It cannot come soon enough for this parent!

To learn more about the Final Regulations for ACOs, click here.