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An Economic Dilemma – Healthcare Jobs vs. Costs

There’s a growing paradox in our healthcare world: Since the Great Recession hit in 2007, 35 percent of the nation’s job growth has come from the healthcare sector. In the year 2000, healthcare employed 1-in-12 Americans, but now employs 1-in-9, thanks partly to the 2010 Affordable Care Act (ACA). Jobs are critical for any thriving economy, but it appears the U.S. economy has become increasingly dependent on one sector that has proven to be both highly inefficient and dysfunctional.

The dilemma? Maintaining affordable healthcare is not compatible with the health service sector’s job growth strategy.

A recent article in Health Affairs, “What’s Behind 2.5 Million New Health Jobs?” reported that from 2007 through 2016, there was about a 19 percent growth in new healthcare jobs. From this, hospital jobs grew by 11 percent, nursing and residential care by 12 percent, and ambulatory care by 30 percent.

More than half of the $3.4 trillion we spend on healthcare in this country is spent on labor, much of it on those who provide care. However, a growing segment of healthcare jobs come from our increasingly complex ‘system’ that can be described as an administrative nightmare. Data-entry clerks, revenue-cycle analysts and medical billing coders provide busy backroom work to a multitude of payers concerning the procedures that were performed on behalf of patients. Put another way, for every U.S. physician, there are 16 other healthcare workers. Half of those 16 are in administrative and other nonclinical positions. This is becoming a monster of a problem.

According to a report by Organization for Economic Cooperation and Development, administrative costs in the U.S. healthcare ‘system’ are the highest in the industrialized world. While the average global administration cost average is 3 percent, it is almost three times this amount in the U.S. (8 percent).

In Iowa, the Iowa Hospital Association (IHA) serves the advocacy role for 118 hospitals. From this, IHA conducts a frequent report to validate the economic impact hospitals have within their communities, which is presumably performed to counter public concerns or scrutiny about hospital behaviors and outcomes. We are often reminded that “hospitals are the economic engines that employ thousands of Iowans” and “create an enormous economic impact across the state.” In short, hospitals are a vital ‘jobs program’ that provide an economic “multiplier” effect to our communities.

On the surface, the presence of hospital jobs is extremely beneficial to having healthy and productive communities. After all, it does provide a boost to the local economies. But portraying hospital jobs as the “economic engine” in communities may be somewhat disingenuous – if not grossly misguided.

Salaries and benefits for healthcare jobs are essentially funded by those who pay taxes, higher-health premiums and higher out-of-pocket medical costs – all of which consequently result in stunting the growth of take-home pay from other parts of the economy. Having additional healthcare jobs creates a financial void. It reduces monies Americans have available to pay for groceries, mortgages, college tuition and other discretionary items that benefit families – including philanthropic causes. Equally important, local, state and federal governments are hard pressed to find additional money to pay for other critical functions that profoundly affect our communities and the future of our country – namely, our infrastructure and STEM (Science, Technology, Engineering and Math).

The problem with linking healthcare jobs with economic growth is perplexing. If having more healthcare jobs is the end goal because it creates more wealth within our communities, then maybe we should spend more on healthcare and allow the jobs component to flourish. Unfortunately, it’s not that easy. There is an opportunity cost, or trade-off, that will rob other (more efficient) alternative resources within our economy.

Instead of measuring the economic value of healthcare by counting the number of jobs it creates, how about accurately measuring the commensurate value in the outcomes we receive from the jobs we have financed? If we don’t receive greater ‘value’ from the care provided, then why create more jobs – or keep the existing jobs? The arguments made by the healthcare sector, therefore, should not be about job creation and growth, but rather, whether we are using our limited financial resources wisely. If not, we should put those resources to better use. I’m not an economist, but this should spark a basic economic discussion.

Rising employment in healthcare does not correlate with the goal of improving our health and economic well-being. In healthcare, unlike many other sectors of our economy, there are tradeoffs with the amount we can afford. It’s no surprise that the healthcare sector’s lobbying efforts are formidable. According to the Center for Responsive Politics, a nonpartisan research organization, healthcare companies spend millions annually on lobbying efforts to influence government officials and legislators, with the American Hospital Association (AHA) ranking second highest among all healthcare lobbyists (behind the American Medical Association) and fifth highest among all lobbyists since 1998 – a total of $332 million spent by the AHA. In 2016 alone, the AHA spent over $22 million to ‘educate’ public officials. Other health-related organizations, such as Blue Cross and Blue Shield Association, the pharmaceutical industry and the AMA appeared very high on this Top Spenders List.

Despite the U.S. healthcare system being the most expensive in the world, the Commonwealth Fund reports the “U.S. underperforms relative to other countries on most dimensions of performance.” In America, we pay world-class prices for care that cannot be substantiated due largely to lax reporting requirements.

The healthcare sector’s primary purpose is not to be a jobs program, but rather, to safely deliver high-quality care to patients in our communities – and, do so responsibly, efficiently and transparently.

What are your thoughts?

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The Pursuit of Health Information – and Trust

Trusting a Partnership for Health InformationWhen making workplace health-plan decisions, what type of healthcare information is desired by Iowa employers? Do employers know about web-based resources on Iowa hospitals? Who do employers trust to be their primary source for health-related data?

We asked a series of important questions in our 2013 Study. And, you might be surprised by the results.

As you might imagine, the needs and desires can vary greatly based on employer size. Using a 6-point scale, with 6 being ‘most important,’ Iowa employers responded that ‘Cost’ information was most important to have (4.9 score), with the largest of employers (1000+ employees) scoring this a 5.7. ‘Comparing Physicians’ followed next with an overall score of 4.5, while ‘Health Status/Wellness’ and ‘Comparing Hospitals’ both scored 4.4. Healthcare ‘Use’ finished with an overall score of 4.3.

Importance of Health Information to Iowa Employers

As found in the chart below, Iowa employers are unfamiliar with existing web-based resources on Iowa hospitals. Larger employers appear to be more aware of these web resources, but only a very small number of employers reported being ‘Very Aware’ of this on-line information. In case you are curious, some of this information might be found on the Iowa Hospital Association and Iowa Healthcare Collaborative websites. As mentioned earlier, ‘cost’ information appears to be most desired, followed by comparing physicians and hospitals, presumably on quality-related metrics.

Knowledge of Web-based Data on Iowa Hospitals

When employers responded to how optimistic they are on the effectiveness of ‘Medical Homes’ and ‘Chronic Disease Management Programs,’ employers with over 1000 employees were at least twice as likely to be optimistic (43 percent) than smaller employers with under 250 employees. Overall, only 21 percent felt optimistic about these initiatives being effective to improve workforce health. Another 30 percent were not that optimistic and responded that such initiatives will make ‘No Difference.’ Half of all employers indicated that they would need to have more information on both programs before making judgments as to the effectiveness of health improvement.

Primary Care Initiatives in Iowa

So, if organizations desire critical information to make future decisions on workforce health, it begs the question who they desire to be the primary source of this information. This question elicits some very interesting results.

Overall, 27 percent of Iowa employers desire insurance companies to be the primary source of health information. Yet interestingly, the largest employers with 1000+ employees were less likely to desire insurance carriers to be the primary source – only 18 percent voiced their interest. Only three percent of organizations desired the government to be the primary source of health information, which speaks volumes about their lack of appetite for a single-payer system.

Primary Source of Health Data

The preponderance of organizations (two-thirds) voiced their desire for ‘Health Providers’ (hospitals and physicians) to be the primary source of health information to help manage their costs. More questions will need to be asked of organizations in the future as to ‘why’ they desire health providers to be the primary source, but my initial take is simply they appear to trust this source more than other sources.

The healthcare provider community may take some comfort in knowing that a majority of employers view them as a trusted resource. With this trust, however, comes the responsibility to validate and enhance it by providing a greater array of transparent information on costs and delivering higher-quality outcomes. From our 2014 Study, we know that employers expect to receive reasonable costs, consistent quality of care and safe care that is appropriately delivered to patients.

This type of feedback for insurance companies is most assuredly humbling. Yet, it should also re-awaken the pursuit of new initiatives to make inroads on gaining a trust-related partnership with their clients. The silver lining for both health providers and insurance companies reveals lots of room for improvement – and immense opportunities. But opportunities can only happen if relentlessly – and thoughtfully – pursued.

Trust is the currency of commerce. In our healthcare world, we can always use more of it.

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Employers and Health Data – Who is the Trusted Resource?

Health care data Resources in IowaLast week’s blog discussed a new module of questions we have included within our 2013 Iowa Employer Benefits Study©. Within this new module, employers are being asked to rate hospitals and physicians within their communities. Probing further, we included another battery of questions to gauge how employers feel about another health-related issue – identifying a reliable source to supply specific health care information to employers (and to their employees).

Frankly, these questions boil down to just one word – Trust.

Which resource does the Iowa employer trust when accessing and evaluating health care information for their employees? Would it be insurance companies? Maybe the medical provider community is most trusted, such as hospitals and/or physicians. The federal government is yet another possibility (I’m a bit suspicious, however). Perhaps, none of the above mentioned stakeholders, but instead, a trusted third party that has yet to emerge in this new evolving marketplace. Logic tells me that employers would like to use a combination of the above resources – not just one source. Much of this, I suspect, will also depend on the type of medical data that is desired by employers.

A large portion of the questions found in this particular module come from the Iowa Hospital Association (IHA). Transparency of health costs and effective health outcomes information is becoming a trendy discussion these days, with special thanks to the Affordable Care Act (ACA). The IHA has a great deal of interest in understanding how Iowa employers perceive these critical issues, and in learning more on how such information can be conveyed in a meaningful conduit of media (electronic format being the most likely culprit).

I applaud the IHA for their desire to find new ways to communicate and educate a major stakeholder (the employer) regarding local health care information. The healthcare snow globe in which we live continues to provide new opportunities for those willing to take the plunge to make our current health care ‘system’ a better place for all of us.

This particular survey module will provide us with additional insight on who should be providing this important information to Iowa employers, and what this critical information should convey.

The results of this survey will be published early this Fall by our new, sister organization, Heartland Health Research Institute.

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