Employers are frustrated that too many of their workers are failing to change their unhealthy habits and take advantage of health and wellness programs that include financial incentives, according to a survey by Towers Watson and the National Business Group on Health.

As a result, some employers are "accelerating" efforts to find ways to further motivate employees and also tighten their requirements for participation in certain healthcare plans, says Ted Nussbaum, senior consultant for Towers Watson, a global professional services company, and co-author of the survey. The National Business Group on Health is a nonprofit association of large employers.

'As employers continue to be more health-focused, they are beginning to target and reward those workers who demonstrate a real commitment to making positive lifestyle changes,' Nussbaum says.

The survey, Raising the Bar on Health Care – Moving Beyond Incremental Change, states that the effort to change employee behaviors related to health has been a 'major obstacle for many companies.' Still, most companies have no plans to abandon their health promotion programs and will continue their existing strategies, according to Nussbaum. More than 500 employers participated in the survey—the 15th annual NBGH/Towers Watson Employee Survey on Purchasing Value in Health Care—conducted between November 2009 and January 2010.

'Amid heightened cost pressures brought about by the prolonged economic downturn,' the report states, 'companies are assessing their healthcare programs to control costs and build healthier and more productive workforces.'

'Employers are increasingly frustrated by the performance of their plans today, pointing specifically to a lack of employee engagement in programs designed to change health behaviors,' the report adds.

Nussbaum says 5% of companies default members into a health plan for not fulfilling the requirements in a health or disease management program. That number is expected to increase next year, Nussbaum says.

Companies are pursing new strategies to overcome engagement obstacles, but their results vary widely, according to Nussbaum. The most successful companies use a combination of tactics, including appropriate financial incentives, effective communication, and health and productivity initiatives 'to improve quality but hold the line on cost increases while engaging employees to improve their health habits,' he says.

The survey of employers found:

• 58% cite the lack of participation or interest in health or wellness programs as the 'biggest obstacle' to encouraging employees to live healthier lifestyles and take appropriate care of chronic conditions.
• 53% offer financial incentives to workers who enroll in health engagement activities, such as weight management or smoking cessation programs.
• 37% reward employees who meet the company?s requirements for completion of a health engagement activity
• 29% reward workers who participate in multiple activities.

According to the survey, however, 93% of companies have no plans to eliminate their health promotion programs, and 83% will continue with their existing strategies.

Current and former top Medicare officials told an American's Health Insurance Plans conference on Wednesday that new directions for healthcare payment reform could include public and private collaborations, such as Accountable Care Organizations.

"We are going to have to make some real changes to healthcare delivery, and not with short-term fixes," said Mark McClellan, MD, director of the Engelberg Center for Healthcare Reform at the Brookings Institution. McClellan is a former administrator at the Centers for Medicare and Medicaid Services and former commissioner of the Food and Drug Administration.

"We're supporting a learning network of Accountable Care Organizations that in many cases involve public-private collaboration," McClellan said, adding that the goal is "improving quality and lowering cost." McClellan, who has written extensively about ACOs, said the programs have shown promise.

ACOs organize voluntary hospital and physician networks, and reward providers with shared savings in return for better care coordination and other avenues to improve quality while lowering cost, according to the Brookings Institution.

For the past four years, he said ACO programs have shown improvements in quality and many lead to lower costs. While there are some technical issues that must be addressed, he said, "It seems like a promising foundation for future work," McClellan said.

"One of my first experiences at CMS, I started hearing about integrated provider groups and independent practioners trying to do things to improve quality—like having nurse practioners in disease management, and pharmacists [following up] on medication adherence. They showed me the numbers and these things were actually working. Unfortunately they were getting killed on Medicare reimbursement fees." At that point, CMS embarked on ACO pilot programs, he said.

Mark E. Miller, executive director of the Medicare Payment Advisory Commission (MedPAC), also discussed the potential for ACOs.

"Both the private sector and Medicare have to realize there has to be fiscal pressure—restraint on expenditures, payment rates, and utilization—as a move toward redesigning the delivery system," Miller said, adding that ACOs are a "very ripe area for Medicare and the private sector to come together."

Both McClellan and Miller were critical of the existing fee-for-service model. "We think there are some real issues with the traditional fee-for-service programs in terms of the incentive structure—there's very little incentive. You get paid the same whether you have good quality or bad. There's not a lot of focus of coordinating care," Miller said.

"The real problem with fee-for-service isn't the price level, it's the whole pricing structure," McClellan said. "The 21st century is the century of personalized medicine. That's sort of what is exactly the opposite of what the fee-for-service is going to support," he added.

President Obama announced a new effort to crackdown on waste and fraud in Medicare and Medicaid and other programs through expanded use of payment recapture audits.

The audits offer specialized private auditors financial incentives to root out improper payments and have been demonstrated to be highly effective through pilot programs, according to the White House.

A presidential memorandum would direct all federal departments and agencies to expand and intensify their use of the payment recapture audits under their current authority.

In 2009, improper payments totaled $98 billion, with $54 billion stemming from Medicare and Medicaid, the White House said.

"The fact is Washington is a place where tax dollars are often treated like Monopoly money, bartered and traded, divvied up among lobbyists and special interests. And it has been a place where waste—even billions of dollars in waste—is accepted as the price of doing business," President Obama said in a statement.

A pilot program run by Medicare in three states—California, New York, and Texas—from 2005 to 2008 recaptured $900 million, according to the White House.

Douglas Arnold, CEO of Medical Professional Services in Middletown, CT, a clinically integrated independent practice association of 400 physicians, and I were talking over the weekend.

He's a Jersey Boy, like me, and he was recounting back in the day when he was a teenage running back for Nutley High, in the shadow of New York, and had helped his team beat nearby powerhouse Montclair High, which had a 30-plus game winning streak at the time. Arnold is still on the offensive–and last week in a talk before the American Medical Association, he talked about the health plan bureaucracy as "daunting" and an "administrative nightmare"—a seeming opposing team. He says payers and providers should be on the "same team" and develop pilot programs, but health plans sometimes get in the way.

Specifically, Arnold discussed a shared savings plan he's working on in Connecticut with his own medical group, another medical group, and a large insurer. He says they have been working on the plan for 18 months and it's been continually dragged out in a corporate bureaucracy, with payers sharing a good part of the blame.

As the Center for Healthcare Quality and Reform describes it, shared savings is fairly simple and benign: if a healthcare system or provider reduces total healthcare spending for its patients below the level that the payer (Medicare or private health insurance plan) would have otherwise expected, the provider is rewarded with a portion of the savings. The idea being that the payer still spends less than it would otherwise, and the provider gets more revenue than it would otherwise, according to the Center for Healthcare Quality and Payment Reform.

In the Connecticut pilot program, a group of physicians are discussing with payers a plan that is focused on avoidable emergency room visits, Arnold says. Besides Arnold's group, the other group involved is the Connecticut Academy of Family Practice, working on behalf of a group of primary care doctors.

"We are trying to create "care teams" of [primary care physicians] in specific markets that would share patient information, keep their practices open late, such as 9 p.m. or on weekends on a rotating basis to provide patients with a viable after-hours alternative to going to the ER for primary care," Arnold says. "The plan is for the payer to pay doctors a per-member per-month member fee as well as management and evaluation fees for care given "after hours" he says.

The plan is to offset avoided emergency visits. The medical groups would share patient data through EHRs (electronic health records) and Web-based IT solutions, according to Arnold. Many emergency room visits, are, as Arnold puts it, "very costly" and often result in unnecessary actions, such as imaging or even hospital admissions.

Like many other pilot programs, the Connecticut project was seen as exciting and innovative. For a year and a half, the physician groups have gotten around the table discussing the plans with a large insurance, which Arnold asked not to identify.

"We want to encourage these physicians to get integrated because a lot of this money gets wasted in an emergency room," Arnold says. "Shared savings is a way to generate savings off most hospital services or diagnostics."

As Arnold puts it, and I agree, the Connecticut discussions have a goal to generate savings—and that is what healthcare reform is all about.

The plans look good, but reality sometimes bites.

"It sounds good in concept, but the administrative hassles of setting it up and getting [payers] to corporate ‘buy in' are daunting," says Arnold.

After 18 months of working, "We are still waiting for the final OK," Arnold says with frustration.

In the meeting with the AMA, Arnold told of "substantial problems with payer legacy IT systems—such as how to code management fee and bonus payments—especially for large, self-funded employers who have existing fee-for-service contracts based on medical clams and a fixed administrative payment to plan."

Because of the need for flexibility in IT and other aspects of making the pilot program work, negotiations also have been flexible—on the local level, Arnold says. However, when the project "has gone up to the executive suites, it's been stalled," he says.

But Arnold has tried to go behind the curtain and see the problems through the payer's vantage point.

"The biggest hangup for the payer has been how to administer and how to pay for it," he says. "How do you bill self-funded employers for a PCP (primary care physician) management fee when their contract is based on claims paid?"

A lot of these new payment methods are really difficult to administer, Arnold says, "It's an academic exercise without significant payer involvement and support."

"It has become an administrative nightmare," he says. The payers, he told the AMA, "seem so risk adverse."

Insurers would have likely been the proverbial fly on the wall during Arnold's talk in DC last week. Arnold spoke from experience and frustrations. Health insurance companies can learn from Arnold and the Connecticut program and understand that they will have to remove these kinds of barriers if the two sides are to work together.