HEALTH CARE BUSINESS & ECONOMIC STRATEGIES FOR EMPLOYERS AND PROVIDERS |
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The business of health care delivery has become intensely complex and competitive. Prudent business practice mandates that health care strategic planners become intimately familiar with a network of social and economic forces that seek to influence the way the marketplace functions, so as to secure special stakeholder interest. They present a unique set of challenges, over and beyond the obstacles businesses in other industries typically must overcome, as they compete in the ultimate business challenge - the race to transform potential consumers, into loyal customers/clients. Victory Consulting's research and market analysis programs can assist providers in determining what steps they should take to:
An Overview of Current Health Care Market Research and Analysis It demands considerably more than an understanding of the clinical needs of patients for a provider to increase market share and improve its ability to retain customers/clients, because, as health care consumers, most patients only represent one arm of a complex entity that exist on the demand side of the market. The varying and often conflicting interest of this stakeholder entity must be understood and addressed in order for providers to increase market share and improve patient retention. With considerable financial risk at stake, employers are incessant in their drive to influence how the market functions. Most health care transactions therefore require providers to appreciate patients/clients, or their insured dependents, as employees, and must be equally knowledgeable about specific business objectives employers strive to achieve, in connection with their organization's expenditures on health care consumption. Many
employers are in fact depending on the influence of umbrella entities
such as The Leapfrog Group - an employer organization representing the
interest of approximately 80 companies, including some of the nation’s
largest employers, that is positioned to wield its collective purchasing
power to influence how 24 million employees fare as health care
consumers - to be effective in advancing their drive for quality
products at reasonable cost. Unfortunately,
to date, for some the results from the efforts of The Leapfrog Group and
a host of more regionally-based employer groups with a similar focus,
e.g., Pacific Business Group On Health (PBGH), Washington Business Group
On Health (WBGH), have been insufficient. Their efforts have failed to
prevent many employers who previously sponsored/financed health care
benefits from making the difficult decision of discontinuing those
programs. In general, providers should assume that employers whose employees populate their patient bases indeed have reason to be concerned about double digit health care cost increases that are driving total compensation and defying their will to devise solutions to the problem. It presents a dilemma that threatens the competitive ability, and in some instances, the survivability of many employers. Benefit programs provided by employers in the private sector bear the brunt of the total US spending on health care, accounting for $913 billion of nearly $1.7 trillion spent in 2003. A recently updated forecast by actuaries at the Centers for Medicare and Medicaid Services (CMS), indicates total US spending on health care will more than double, totaling $3.6 trillion by 2014. The potential for such a drastic rate of increase alarms CEOs, CFOs and Human Resource Executives, and leaves them pondering: How can business continue to do what's right for employees when total compensation, driven primarily by health care related costs, continues to soar? Consequently, employers are aggressively taking steps to instill more disciplined consumption habits among employees, and there is a high probability that most will do so in conjunction with programs that structure the health care benefits they offer in favor of defined contribution (DC) programs that fund health reimbursement accounts (HRAs) and health savings account HSAs, two versions of the increasingly popular consumer driven health plans (CDHPs). It should be noted that such strategies are very much in line with predictions made in "The Victory Principle: An Essential Strategic Guide For Health Care Providers In Search Of Competitive Advantage And Increased Market Share” M. L. Wavecrest Publishing 2000, since, numerous research studies now show, many employers are limiting their risk exposure by offering employees the option of these medical savings accounts (MSAs) spin-offs. Providers should be aware that predictions, such as an early estimate by Forrester Research Inc. that CDHPs will account for 24% of the health benefits market by 2010 are being eclipsed with the growing state of employer desperation. In October 2004, Employee Benefit News, reported that 54% of employers surveyed have indicated that they were still somewhat likely to offer a CDHC plan to employees by 2006, despite appeals for restraint by The Society for Human Resource Management, and others, to prevent the exploitation of HSAs as personal savings or vehicles for funding employee retirement. A 2004 survey by Mercer, the human resources consulting arm of insurance conglomerate Marsh & McLennan, indicates that the number of employers likely to add HSAs to their benefit mix in 2006 would rise even higher, to 73 percent. Only time will tell how employers in the market sector(s) your organization target(s) will actually respond to the seemingly inevitable market transition to CDHP domination, because their decisions could result in undesired consequences. For example, along with the concern over the rising cost of health care, employers are alerted to the fact that the issue of substandard quality raised several years ago by the Institute of Medicine (IOM) remains a problem. However, employers are also aware that the Journal of Health Affairs reported in 2004 that the first comprehensive study undertaken to determine which illnesses are driving the unprecedented rise in health care expenditures, determined that: "Much of the data suggest that some medical procedures and prescription drugs have resulted not only in better health but also in long-term savings, which justifies their relatively higher cost." Additionally, the research, conducted by Emory University health economist Kenneth E. Thorpe, et al., effectively dramatized the point that a mere 15 of 370 conditions tracked accounted for 56 percent of the $200 billion increase in health spending, between 1987 and 2000. Moreover, they are conscious that minimizing the incidence of such preventable diseases, which contributes to absenteeism and presenteeism, would significantly reduce the $332.4 billion in workplace productivity loss that occurred in 2004. Together these concerns will influence the decisions of individual employers towards health care initiatives particularly, prevention, fitness, wellness, integrated disease management programs and their disposition towards CDHPs vs managed care. These countervailing elements present a challenge for employers who must strike the right balance with respect to deciding how much control – as well as undefined cost – over the health of employees it’s necessary to maintain, via proactive prevention and HMOs, PPOs or other managed care type initiatives, versus the ability to limit their cost through defined contributions allocated to CDHPs which allow employees to exercise total discretion over when, how or if funds in their accounts are spent on health care needs. It is indicative, however, that as large employers such as Medtronic, Textron, Amazon.com, Sara Lee, and Temple-Inland, Inc. make headlines, as they switched to HSAs, they are also influencing the major health insurance companies to hasten their preparations to enter the CDPH market sector. Further, it is more than likely that the decision of employers to switch to CDHPs is one of the primary the reasons behind the recent realignment of the power structure within the health care benefits industry. For example, UnitedHealth Care Group, which was just relegated to becoming the nation’s second largest health insurance company, was inspired to acquire Golden Rule in 2003 and to announce its intent to buy Definity on Nov. 30, 2004, two insurance companies that helped to pioneer the concept of consumer-driven health care (CDHC). Likewise, the merger between Anthem and Wellpoint which officially dethroned UnitedHealth Care Group and created the nation’s largest health insurance company - will very likely counter strategic moves on the part of United HealthCare Group to dominate the CDHC market sector. The urgency on the part of both Anthem and Wellpoint to close their merger in 2004, after staying on the sidelines while upstarts the likes of Definity, Vivus and Lumenos raced to introduce their innovative CDHC products to employers, suggests they and other major health care benefit companies have now decided to make a furious entry. Anthen - now Wellpoint - whose spectacular move in August 2004 to align itself with JPMorgan Chase Bank, to offer easy and convenient services for members to establish and use an HSA credit/debit cards in conjunction with its CDHC product, Anthem ByDesign HSA, will enhance the company’s competitive line of consumer-centric, high-deductible health plans (HDHP). The restructuring of the health care benefit industry, particularly the innovative affiliations that are being forged with the banking/investment industry is certainly one of the many ways that the decisions employers in the market sector(s) your organization target(s) will significantly impact the health care consumption decisions of employees who are your patients or prospective patients. Less certain is the answer to the question as to whether employers in your market sector would achieve greater long term success this time, than with previous attempts to restructure the health care market. It is an issue that would be influenced by the continuation of a labor market that is now favorable to business, and the assumption that employees, whom they are attempting to educated about the economics of health care consumption, would be more accepting of the new high deductible CDHP benefit concepts still emerging in the post-managed care dominated era. Employer efforts to educate employees into becoming savvy health care
consumers brings into focus their affiliation with entities
supporting the
developing infrastructure of the consumer-driven health care
movement, another area of concern for providers. The consumer-driven
health care movement, a network of formal and informal relationships between
private businesses, public sector entities and non-government
organization is
seen by some experts as trending towards further erosion of the
patient-doctor relationship, a trend initiated with the advent of
managed care. The phenomenon describes a market development that some market experts credit to the growing numbers of active workers and many of their retired counterparts, who have elected to become more knowledgeable about health care and sophisticated with the use of modern technologies, inclusive of: health information web sites; web-based diagnostic tools; best practice guidelines; web-based provider evaluation services, interactive health tutorials; health decision guides and home-use medical devices. A similar concern might extend to VIP/ boutique facilities, health care brokers, specialty centers and supermarket/discount store based health clinics. These emerging health care delivery concepts are also of concern because of the threat they pose to traditional patient-doctor relationships. At the high end consumers with sufficient resources can avail themselves of the exclusive services of a health care broker for consultation, before selecting a VIP/ boutique facility or a specialty center which boasts particular expertise, and actually delivers care - usually at a premium. While, at the other extreme, are supermarket/discount store based health clinics that, initially, are offering limited services with the same degree of convenience as everyday shopping. Providers therefore need to conduct research to determine how their organizations will be impacted, by what many industry experts predict will be the most significant restructuring of the health care marketplace since managed care, by these socioeconomic forces. They are inclined to make the task of increasing market share, by facilitating the efforts of employers based in your target markets with the task of minimizing their exposure to soaring health care cost and workplace loss due to preventable chronic diseases, absenteeism and presenteeism very challenging for health care strategists. Equally challenging will be the task of improving patient/client retention, by facilitating the efforts of employees to maximize the health benefits they and their insured dependents receive. For more information, please refer to these Victory Consulting publications:
Victory Consulting assist clients in evaluating or developing criteria for profiling the socioeconomic characteristics of the communities or market sectors they serve. Our experience allows us to bring a unique perspective to the issues that impact provider organizations.
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