"They have skin in the game and are more engaged, which means we need to create tools that promote value-based decision making," he says.
Evidence of the revolution is abundant even now, says Swedish, whose company partnered with CalPERS, the state of California's retiree benefits agency, to establish so-called "reference pricing" for expensive hip and knee replacement procedures. Reference pricing helps employers set the maximum they will pay for a procedure based on aggregation and analysis of prices for specific procedures from hospitals and health systems across the state.
Swedish says the range in price for one common procedure was between $15,000 and $110,000 with no evidence of differentiation of quality. As a result, CalPERS established that it would pay up to $30,000 for the procedure, but that beneficiaries would be responsible for paying any costs over that amount.
CalPERS costs (per related surgical admission) dropped by 20% "overnight," Swedish says.
That's an example of a simple revolution that would have been impossible just a few years ago.
Another innovation that is part of the revolution Swedish says is here is exemplified in WellPoint's partnership with IBM to use its Watson technology in both utilization management and in oncology services to process preauthorization requests.