Medical facilities are replacing factories as healthcare begins to fuel local economies across the country, but there are downsides to healthcare's ever-increasing role. A community that relies on health jobs can end up with a weaker economy because it is overly dependent on government programs like Medicare and Medicaid. Greater inequality is a risk in healthcare, too--there tends to be a wider income gap between what the highest- and lowest-paid workers earn than there is in manufacturing.
WellPoint Inc. is collaborating with the Food and Drug Administration to launch one of the first real-time drug-surveillance systems. Starting in 2009, Wellpoint will systematically scan the medical information of more than half of its 35 million members to look for hidden patterns or jumps in medical problems that might be linked to certain medication or combination of drugs. The drug-safety monitoring system currently used by the FDA has been criticized for spotty, slow and passive.
The Centers for Medicare and Medicaid Services has proposed adding dangerous blood clots in the leg and eight other conditions to the list of complications that Medicare won’t pay to treat if they were acquired at the hospital. The proposed rule would add nine conditions to the eight already outlined, and would apply to more than 3,500 acute care hospitals. The government estimates the proposed rule will save Medicare an estimated $50 million annually during each of the next three years.
An Institute of Medicine committee has released a report on the healthcare outlook for the 78 million baby boomers about to begin turning 65. The report said there aren't enough specialists in geriatric medicine, insufficient training is available, the specialists that do exist are underpaid, and Medicare fails to provide for team care that many elderly patients need. Medicare may even hinder seniors from getting the best care because of its low reimbursement rates, a focus on treating short-term health problems, and lack of coverage for preventive services, according to the report.
In greater Boston, house calls are coming back, but with a 21st century twist, writes Elizabeth Kass, MD, in this opinion piece for the Boston Globe. Each month, 500 elderly, disabled, and chronically ill persons who are enrolled in a special primary care program receive visits from clinicians, usually a nurse practitioner. The clinicians carry laptop computers that connect the clinician to physicians, hospitals, and an array of support services for these patients.
In November 2004, Paul Farmer, MD, agreed to bring his world-renowned Partners in Health model to Rwanda. With the help of the Rwandan Ministry of Health and the Clinton Foundation, Farmer went into Rwinkwavu with American and Rwandan workers and rebuilt a "hospital" that consisted of derelict buildings. This is just one example of how Farmer and the organization has helped rebuild communities by treating poverty as well as disease. Now 20 years old, Partners in Health has expanded to nine countries.
Using public and private money--in addition to donated time from medical specialists--Project Access has helped thousands of patients in North Carolina counties get better medical care. Now advocacy groups, elected officials and healthcare providers are pushing for a similar program in Durham, NC, where as many as 40,000 residents are uninsured. Project Access expects to get up to $400,000 from the Durham County commissioners, as well as grant money from other sources for the startup. The goal for the first year is to serve 2,400 patients.
Sacramento-based Sutter Health has reported a 4% increase in operating income, but volatility in the investment markets left bottom-line profits flat. The system earned $623 million in 2007, the same as 2006, while revenue increased 7% to $7.65 billion. Sutter CFO Robert Reed told the Sacramento Bee that the results show that Sutter's "business is pretty stable."
(EDITOR’S NOTE: This is part one of a two-part essay.)
The number of hospitals and integrated systems that are investing in employee health management is increasing all the time. Their investments may be limited to their own employees, in order to control costs and optimize workforce performance, or be focused on EHM as a revenue- or “public relations-” generating service line for other employers. They may be limited to modest amounts and scope, or be a major strategic element. But whatever the application, estimating the size of the EHM “problem” and “potential” is a critical element in planning and managing, as well as evaluating the investments to be made.
The size of the problem
There are two size dimensions to be estimated relative to the problem:
1) The extent of the negative effects of employee health issues
2) The size of particular health problems that create such effects
The first is a relatively simple, though not easy, task, while the second is both complex and difficult. Both tasks vary widely in terms of the numbers of particular problems and the number of dimensions of impact considered.
Healthcare organizations may choose to focus on a relatively few or many categories of health problems, depending on which problems they are trying to solve. If their sole concern is in reducing medical/hospital, workers compensation, or short- and long-term disability expenses, they are likely to focus on the acute and chronic diseases and injuries that are responsible for most such expenses. If they are also concerned about absenteeism and presenteeism--health-related impacts on worker productivity and performance--they are likely to focus on a lot of health behaviors and conditions that go well beyond traditional diseases or injuries.
The biggest causes of sickness care expense are almost sure to be chronic diseases--usually said to be responsible for three-quarters or so of all such expense, although this estimate may vary with the age and health mix of the workforce. But the biggest causes of productivity and performance impairment--which is normally two to five times as expensive to employers as sickness care, disability, and WC costs--tend to be behaviors and conditions such as sleep deprivation, emotional problems, poor nutrition and fitness, stress, smoking, obesity, and others.
To gauge the size of the overall EHM problem, when sickness care, WC, and disability are the sole focus, analysis of past claims often serves well enough. Information on diagnoses associated with such claims can add to insights, and employee screening tests to identify unknown or developing conditions may augment such insights, as well. But there is also much to be gained from health risk assessment surveys that assess employees’ attitudes, perceptions, and feelings about their health and their motivation plus capability to manage it better.
To assess the size of the productivity/performance impairment problem, some employers may be lucky enough to already have a measurement system in place, tied usually to a pay-for-performance or “piecework” compensation system. Annual performance reviews tend not to be reliable, valid, or even timely enough for this purpose, although they may offer some useful insights and are useful in other HR and management efforts, as well. But in most cases, a validated method for estimating impairment based on an employee survey is the choice.
Calculating an impairment level This survey is usually best embedded in an HRA that also assesses employee health issues. This simplifies and combines the health and impairment measurement effort, and also ensures that the healthcare organization has simultaneous information on the health and impairment status of all individual workers, although individual information may be restricted to outside EHM suppliers or trusted internal sources. Because simultaneous information on both dimensions on as many employees as possible is essential to optimizing EHM investments, employers typically offer significant incentives to all workers who complete the combined assessment.
The HRAs that employees complete will enable the immediate estimation of overall impairment based on the impairment levels that individual employees report, summed across the workforce, and translated from the employees’ self-reported impairment into the most probable actual level based on past validation. Often workers overestimate how impaired they are, so experience with employees whose productivity/performance has been objectively measured will enable the identification and use of a “conversion ratio” that translates their reports into more reliable levels. For example, one study found that call center agents estimated their productivity impairment at an average of 20 percent, while objective data reflected only 8 percent, meaning a conversion ratio of 40 percent would apply.
With an overall impairment level calculated, this level can be translated into dollar terms by multiplying that level times the average employee value for the workforce involved. This value is usually set based on the average annual compensation of the workforce, or of executives if an executive health program is being considered. The most common compensation figure used is $50,000 in general, since employers that invest in EHM tend to have employees paid at least that much. Hospitals would certainly have an average compensation level that high in most cases, as would physician practices and integrated systems.
But this convention may greatly understate the value lost when employees are impaired, or regained when their productivity/performance is improved. For example, many analysts have examined the “multiplier effect” of a given worker’s absence or impairment on the team, unit, or department in which each works. The multiplier for hospital nurses, for example, has been set at 1.25 by one and 1.40 by another analyst. This would mean multiplying the annual compensation figure by 1.25 or 1.40 to yield a more accurate estimate of the costs of impairment and benefits of improvement.
Moreover, it is generally acknowledged that workers are not paid as much as they are truly worth to the organization in terms of contributed value. One study, for example, found that the ratio between just the estimated knowledge value of workers to their annual compensation in pharmaceutical firms ranged from a ratio of 7.28:1 at one firm to only 1.03:1 at another.
Improving accuracy
Once the total health-related impairment cost of the workforce has been calculated from HRA results, the same results can be used to identify which “impairment factors,” also measured in the HRA, are linked to what cost amount of impairment at the workforce level. This is the only currently reliable way of estimating the costs of specific factors, though improvements in predictive modeling may enable better methods in the future.
The problem with this approach is that it can only describe which factors are reported by employees along with their impairment. If their individual impairment costs are counted every time they are listed as impaired by a specific factor, those costs will be counted far more than once, and the total of such factor-specific costs will end up being far greater than the actual costs that can be reduced. In some cases, employees have been asked to identify which of the health problems they cite has been the primary cause of the impairment they report. Dow Chemical Co. used this device to ensure that each problem and its related impairment were counted only once.
Without such a precaution, the same average level of impairment will be counted under every impairment factor every time that factor’s effect is measured. For example, HealthMedia Inc., an EHM supplier in Ann Arbor, MI, has reported impairment levels across seven impairment factors plus seven disease risks or conditions that also impair productivity. If the total impairment levels ascribed to the 14 factors were summed, the sum would reflect multiple times the actual result, since a total of more than 300 percent of workers were labeled as “impaired” in its analysis. This indicates that the amount of impairment due to any one factor was similarly overestimated.
By contrast, the Dow Chemical example would tend to underestimate the effects of some factors while overestimating others. That is because it forced a choice of one primary factor when workers are almost always affected by many factors at the same time. In the HealthMedia data, for example, among the more than 200,000 employees in its database, only 0.20 percent had no impairment factors, and only 2.40 percent had exactly one, while the remaining 97.6 percent had at least two, and 55.53 percent of them had four or more.
Among those with chronic risk or disease conditions, while 55.78% had none and 26.06% had just one, the remaining 18.16% had two or more, up to as many as six. Any attempt to attribute all impairment to one factor, when the average worker has two or more in the majority of cases, will necessarily underestimate the effect of some factors, while overestimating that of others. And without any attempt to assess the impact of a specific factor on each individual, the count of impairment due to specific factors is likely to be greatly exaggerated. Fortunately, there is no need to rely on data reflecting the size of the problem when choosing an investment strategy. The size of the potential improvement makes a far better foundation for such a choice.
(EDITOR’S NOTE: Part 2 of this article will appear in the April 21 issue of HealthLeaders Media Finance.)
Scott MacStravic is a retired healthcare consultant, executive, writer, and professor. He may be reached at scottmacstra@earthlink.net.
Isn’t it odd that an entity like a nonprofit hospital survives financially by keeping people in hospital beds while its stated goal is to keep people out of them?
It’s true. Check the mission statements of any number of nonprofit hospitals and you’ll find various ways to say that the hospital’s goal is to promote wellness and restore health. That’s admirable, and in an ideal world it’s what hospitals should be in the business of doing.
In other words, they should be cutting their own financial throats.
But this is not an ideal world. Far from it. People don’t take care of themselves. People shoot each other, beat each other, and get sick through no fault of their own. Lots of nasty things happen that are decidedly not contributing to the community’s health, and clinicians have to do their best to fix those mistakes. Hospitals exist for many very good reasons, after all.
And despite the fact that hospitals would like to believe that they can eventually decrease the need in their communities for acute- and intensive-care beds, the need in most areas doesn’t seem to be decreasing. And the mission statements, despite the fact that they seem to be working against the prospects for the financial health of the hospital, don’t change.
And they shouldn’t.
I was having a casual conversation recently with a friendly hospital CFO, and after we talked baseball, we talked healthcare.
“We talk too much about national health insurance and not enough about health,” he said.
“But isn’t that bad for business?” I blurted out, thinking of the irony of hospitals’ margins being dependent on sickness while their mission’s stated goal is to help people be healthier.
“Our goal is not to fill beds,” he retorted. A little light went on in my brain, then promptly went out, and I repeated the question. “But isn’t that how you stay in business?”
“Our goal is to have a healthy community,” he said. “It's not our business model and that's not how our top line works. But that is our mission.”
“So your mission and your business model conflict,” I said, getting it.
“We'd be delighted to go out of business for the right reason,” he said, anticipating my next dumb question.
But we both know that’s not likely to happen. There will always be sick people—people who can’t be taken care of in your local ambulatory surgery center or walk-in clinic. But that doesn’t mean hospital leaders can’t work hard to achieve their mission while doing their best to improve their margin.
Smart hospitals are trying to better align these competing values by sponsoring healthy initiatives in their community or diversifying their income stream so that they’re not totally dependent on the super-sick to make it financially. I’m talking about sponsorships of healthy activities and financial support for other local nonprofits aimed at improving health. Further, some hospitals are diversifying their income stream to include less acute service lines, if you will, such as retail clinics, wellness centers and rehab facilities, just to name a few examples. That’s what this CFO is trying to lead his organization to do.
Leaders who make it a priority to embrace such strategies are showing that in a world of gray, despite the fact that the two goals of mission and margin are often at cross purposes, they’re not mutually exclusive.
