Seven Good Ideas for Bending the Health Care Cost Curve

Seven Good Ideas for Bending the Health Care Cost Curve September, 2014 In recent years, employers, government agencies, and non governmental organizations have been developing and implementing innovative programs to control health care costs by introducing programmatic efforts to improve health outcomes and to encourage more efficient health care consumption. Recognizing that the University and employees face many of the same health care cost challenges, leaders in the Harvard Union of Clerical and Technical Workers (HUCTW) have carefully considered a range of options that we believe hold real promise. Helping employees to become and remain healthy is, in our view, the best way to control costs. The examples listed below come from research carried out by HUCTW leaders in 2013 and 2014. i In the course of our research, it has been very helpful to confer with faculty members from the Faculty of Arts and Sciences, the Harvard Medical School, the Harvard School of Public Health, and the Harvard Kennedy School, as well as University administrators with technical expertise. HUCTW leaders believe that all of the programs outlined below have significant potential as efforts that can be undertaken at the single employer level to control health care cost increases ii by improving health outcomes and supporting informed patient decision making, and that all are worthy of further exploration. SHORT TERM IDEAS Increased use of mail order prescriptions: Prescriptions for long term maintenance medications are significantly less expensive when they are filled by mail order with a three month supply, as opposed to one month retail prescriptions. Collaborative union management efforts to educate employees about the advantages of mail order prescriptions for ongoing medication use, along with programs to facilitate quick, easy transitions with minimal hassle, could yield savings for patients and the University. In 2011, 32% of Harvard employee prescriptions were filled by mail order. The University peer average for mail order prescriptions is 43%. If a program facilitating transitions to mail order could close half of that gap by increasing Harvard employee use of mail order prescriptions to 37.5%, the resulting cost savings would be approximately $857,000 per year. iii Potential Savings: $857,000 per year Education about alternatives to the Emergency Room for urgent care: After studying options currently available as alternatives to the ER to be assured that the quality of care is acceptable, a collaborative union management program educating employees about ER alternatives could result in a significant reduction in costly ER visits. (ER alternatives could include urgent care centers, retail health clinics, walk in doctor s offices, and tele health or virtual visits.) HUCTW members and their families made an estimated 1,440 visits to the ER last year. iv Education about alternatives could result in a 10% reduction in ER visits, replacing those episodes with less costly visits to urgent care, walk in, and retail clinics, or virtual visits. With the savings from each non ER visit estimated at $650, v a 10% reduction would result in health care cost savings of $94,000

per year. If an educational effort was directed at the entire Harvard workforce (union and nonunion) with similar effects, the savings could be $329,000. Potential Savings: $329,000 per year MEDIUM TERM IDEAS Disease Management and Wellness: An increased investment in condition management and wellness programming is likely to result in improved outcomes and lower cost. An expanded and energized set of collaboratively designed University offerings should be: o Targeted to those who would benefit most, based on analysis of employee claims data and survey results; o Geared toward our well informed and committed workforce, relying on education, creative persuasion, and lowering barriers more than on financial incentives; and o Customized for the Harvard workforce, making use of ample internal resources (faculty and staff expertise, recreational facilities, etc) rather than off the shelf packages. Research results from the past few years show significant reductions in overall health care costs for program participants, over five or more years after the introduction of a vigorous and coordinated program of disease management and lifestyle management offerings. In particular, data from a large multi employer study carried out by RAND Health and a focused 7 year project at PepsiCo show savings of $157 360 per member per year across all participating employees, with the greatest share of cost reductions coming from condition management participants. vi If one quarter of Harvard s benefits eligible employees took part in an expanded, strategicallycoordinated wellness and condition management program, research data suggest that our health care costs could be reduced by $628,000 to $1.4 million per year. Potential Savings: $628,000 to $1.4 million per year HUGHP cost advantage: In 2011, the University s Per Member Per Month (PMPM) cost in medical claims and fees was 33% higher for employees enrolled in the Harvard Pilgrim Health Care (HPHC) HMO plan as compared with those in the Harvard University Group Health Plan (HUGHP) HMO. HUGHP is an internally managed plan of moderate size (approximately 11,000 members) with salaried doctors, on campus facilities, and carefully coordinated relationships with specialists, diagnostic clinics, and hospitals. Although the degree of HUGHP cost savings and reasons for it are not perfectly understood, it appears that a programmatic effort to encourage higher enrollment in HUGHP could result in significantly reduced costs. The University s Per Member Per Year cost was $1,236 less for HUGHP members than for HPHC enrollees in 2011. vii If 1,000 employees and family members enrolled in HUGHP rather than HCHP, the resulting cost savings for the University would be $1,236,000 per year, assuming that the full HUGHP price advantage was maintained with new plan participants. It might be necessary to provide a nudge or incentive for patients to switch plans. It is also possible that new HUGHP enrollees in such a program would be less healthy than current HUGHP members. If persuading employees to switch plans necessitated a modest financial incentive (for example, $200 in reduced premiums or reimbursed out of pocket costs), that investment would reduce the potential savings. If a $200 incentive were implemented and only half of the HUGHP price

advantage was maintained (because of selection differences), the cost reduction would be $418,000. Potential Savings: $418,000 to $1.2 million per year LONG TERM IDEAS Primary care practice innovation: A growing number of employers and health care organizations are experimenting with radical transformation of the delivery model for primary care, as a strategy for improving health outcomes and reducing costs, especially among the sickest and most expensive patients. A good example is Iora Health, a fast growing organization based in Cambridge MA, directed by Dr. Rushika Fernandopulle of Harvard Medical School. Iora projects employ a model of salaried doctors, no co payments for patients, new options for patient provider communication, and heavy reliance on health coaches working in teams with doctors, nurses, and social workers. Iora programs have achieved impressive results in cutting costs dramatically among the sickest patients in a population. New Iora practices have been opened in recent years at Dartmouth College, with the New England Region of the Carpenters Union, and for employees of Lahey Health. Iora projects in Atlantic City and Seattle, focused on bringing a transformed primary care model to the sickest and most expensive patients in a large population, achieved health care cost reductions of 12.6% and 20%, respectively, among the patients treated. viii A small number of the sickest patients account for most of the health care cost in any system typically in the US health care system, the sickest 5% are associated with 58% of the cost. If Harvard made an Iora style primary care model available to the most expensive 5% of patients in our community, and if onequarter of those patients agreed to participate, the cost savings would be $2.9 million to $4.6 million per year, if Iora s results from Atlantic City or Seattle could be replicated. Potential Savings: $2.9 million to $4.6 million per year The Partners problem: There are well documented disparities in the cost of hospital care in Massachusetts some of our hospitals charge much higher prices for the same types of care in the same types of patients, without any measurable advantage in quality. Current research suggests that the problem of unnecessarily high cost hospital care is particularly acute for hospitals in the Partners HealthCare system. If a carefully designed program could gently push Harvard patients away from Partners for routine care, without taking away the opportunity to receive appropriate care in areas where Partners hospitals are world leaders, the potential savings are great. This is a complex policy area both for the University (because Partners hospitals are Harvard affiliated teaching hospitals) and for employees (because the quality of care at Partners facilities such as Children s Hospital and Dana Farber is so highly regarded). It would be necessary to strike a balance channeling patients away from Partners unnecessarily high cost services, without limiting access to the best providers for those with serious health conditions.

Collaboration with other employers: Harvard could enter into a collaborative with other big private employers in Eastern Massachusetts (for example: MIT, Fidelity) in order to negotiate with insurers and providers for lower prices, or to develop new models of health coverage. Following the example set by Dolores Mitchell as Executive Director of the Massachusetts Group Insurance Commission (for state employee health benefits), a collaborative of large and influential private employers might expect to have more clout and greater success in reaching lower price agreements with hospitals and physician groups. Larger scale and combined resources might also make it possible to apply innovative ideas in plan design. If University and Union leaders pursued all of the ideas above, working energetically and collaboratively with Harvard faculty and other technical experts, a low end estimate of the potential reduction in University health care costs would be $5 6 million per year, ix or more than 3% of Harvard s current health care spending. Employees could also expect to see a corresponding savings in the form of reduced premium contributions. It is also important to note that, in all of the potential initiatives described above, cost savings would be achieved by reducing the total cost of our community s health care, through improved health outcomes and more informed patient decision making. There would certainly be other gains associated with a healthier workforce, such as reduced use of sick time and medical leave, and improved productivity. Harvard Union of Clerical and Technical Workers 617 661 8289 www.huctw.org i Research for this paper was carried out by Andrea Caceres, Bill Jaeger, and Donene Williams of HUCTW. ii HUCTW representatives do not have regular access to data about Harvard employee utilization and claims experience or about trends in the University s health care costs. The cost savings estimates expressed below are based either on research results from studies of regional and national experience, or on cost and utilization numbers offered to HUCTW in Union University negotiations from past years. iii A table presented by the University during health care negotiations in 2012, Medco Summary by Year for Prescription Drugs for ALL Employees including Medex Retirees, makes it clear that, in 2011, prescriptions dispensed as retail were 88% more expensive than prescriptions dispensed by mail directly from Medco, the pharmacy benefit manager. A shift from 31.8% of all prescriptions dispensed by mail to 37.5% (half of the distance to the University peer average of 43.2%) would result in a reduction of overall University prescription drug expense of 3.12%, on total University cost of $27,922,915 in 2011. iv Data provided by Harvard University in 2011 negotiations about health care, in the table Harvard University Possible Benefit Plan Changes and Potential cost savings for January 1, 2012 (HUCTW) indicated that HUCTW members and their families made 1,362 visits to the ER in 2010. The number of employees included in HUCTW has increased by approximately 5.5% between 2010 and 2014, and it is assumed that the number of ER visits has increased correspondingly. v Harvard Pilgrim Health Care reports, in a table published on their website and titled Typical Medical Costs in Massachusetts (outpatient only), that a typical Emergency Room visit, not including hospitalization, costs $396 to $1,055 (https://www.harvardpilgrim.org/portal/page?_pageid=213,198311&_dad=portal&_schema=portal ). A published CVS Minute Clinic price list puts the typical fee for treatment of minor illnesses and injuries such as ear infections and ankle sprains at $89 ( http://www.cvs.com/minuteclinic/services/price lists ). vi A recent study in the Journal Health Affairs measuring results from seven years of programming among nearly 70,000 employees over seven years, found that continuous participation in disease management and/or lifestyle

management programming was associated with an annual reduction of $360 in health care cost on average. John P. Caloyeras, Hangsheng Liu, Ellen Exum, Megan Broderick and Soeren Mattke; Managing Manifest Diseases, But Not Health Risks, Saved PepsiCo Money Over Seven Years; Health Affairs, 33, no.1 (2014):124 131. A separate RAND Corporation study of Wellness programs in US employers published in 2012 finds that participation in a lifestyle and disease management program at work over five years is associated with a trend toward lower health care cost and decreasing health care use. The average annual difference is estimated at $157. Soeren Mattke, Hangsheng Liu, John P. Caloyeras, Christina Y. Huang, Kristin R. Van Busum, Dmitry Khodyakov, and Victoria Shier; Workplace Wellness Programs Study: Final Report; RAND Health, 2013. vii Materials provided by Harvard University in health care negotiations with HUCTW in 2012 showed a Per Member Per Month cost of $416 for enrollees in the Harvard Pilgrim Health Care HMO plan in Fiscal Year 2011, and $313 for Harvard University Group Health Plan HMO plan participants. Those figures have not been risk adjusted, and potential cost savings estimates are adjusted accordingly. viii A Boston Business Journal article from 2012 is one of many that describes the net health care spending results from Atlantic City and Seattle. Kyle Alspach: Seeking to reinvent primary care, Iora Health to open Boston area medical practice; Boston Business Journal; August 28, 2012 (http://www.bizjournals.com/boston/blog/startups/2012/08/iora health boston primary care.html?page=all ). A New Yorker article by Dr. Atul Gawande of Harvard Medical School discusses the reasons why Iora s approach is achieving positive results, especially with the sickest patients. Atul Gawande, The Hot Spotters: Can we lower medical costs by giving the neediest patients better care? The New Yorker; January 24, 2011. ix Low end University health care cost savings projections have been estimated as follows: Mail order prescriptions $857,000 ER alternatives $329,000 Wellness/Disease Management $628,000 HUGHP Cost Advantage $418,000 Primary Care Innovation $2,900,000 TOTAL $5,132,000