"Cracking Health Costs" Reviewed

Submitted by jonpearce on Fri, 2013-05-10 16:09

Over the recent weeks, numerous challenges have appeared to the “conventional wisdom” of healthcare reform.  Often touted as the solution to the growth in healthcare spending, accountable care organizations are now experiencing potential defections from the Pioneer ACO program, and less than 15% of physicians participating in ACOs reported receiving any shared savings payments. Frequent health checkups were “not associated with lower rates of mortality or morbidity and medical home training “is not enough to overcome established clinic routines, business roles and local culture”. This comes on the heels of the Oregon Medicaid study that arguably concludes that people covered by that Medicaid program had no measureable difference in several major health status metrics (other than for depression) than others who had no health insurance.

Into this fray come Tom Emerick and Al Lewis with their newly-published book Cracking Health Costs. We know Al from his previous book Why Nobody Believes the Numbers  and from several animated email and LinkedIn conversations with him, and were pleased to be able to review an advance copy of his new co-authoring work.

CHC is targeted to corporate health benefits managers who have been “assisted” by various consultants, benefit managers and others who claim to offer programs that are effective in reducing healthcare costs for company employees.  Like WNBTN, CHC launches into picking apart return on investment results touted by various solution vendors that are unreasonable, not backed by valid metrics, or whose costs exceed their benefits. It begins by attacking a series of “myths” dealing with attempts to manage employee health through health benefit design and wellness programs, health risk assessments, biometric screenings and frequent doctor visits. It also criticizes many disease management programs that target patients with chronic conditions, noting that the costs reported for these patients frequently include those not associated with the disease, that much of that cost is already associated with prevention, and that many of the remaining costs are not preventable. They also dispute the effectiveness of nurse triage phone lines that are designed to reduce ER visits, noting that the nurses staffing those lines will frequently recommend an ER visit to avoid incurring liability for a potentially-untreated condition.

Chapter 2 addresses issues dealing with the brokers or consultants who assist employers with care management programs. This chapter describes the opinions of a group of brokers and consultants who comment on various aspects of these relationships and highlight areas in which employers may be able to improve on the services they receive from these groups.

In chapter 3 CHC evaluates the effectiveness of the wellness programs, picking up on the results reported in WNBTN. The authors point out some of the inherent issues with health risk assessments, including the fact that respondents might – gasp – occasionally be untruthful in their responses. They also cover the HRA performed on Al, which among other things recommended a PSA test, which is no longer considered medically appropriate. Later in the chapter they present their alternative to the vendor-based wellness programs, which is to try to make your organization more attractive to hiring healthier people in the first place. They suggest creating a wellness culture through offering better food in the employee cafeteria and other similar techniques.

Chapter 4 discusses various aspects of pharmacy benefit management programs, and the intricacies in pricing drugs that may indicate that the employer is not obtaining proper value for the pharmacy dollars spent. One intriguing proposal is to classify drugs into four categories:


  • Lifestyle enhancing used primarily to enhance one's ability to perform a lifestyle-related activity, such as Viagra, Chantix or Retin-A
  • Convenience drugs that produce outcomes not directly associated with the preservation of life or normal body functions, such as Nexium and Clarinex
  • Life-preserving drugs that are directly associated with preservation of life or normal body functions such as those in treating infections, pain, and cancer; and
  • Business-preserving drugs that reduce lost work time and long-term disability, such as those that treat hypertension, high cholesterol and diabetes.

Of these groups, the authors suggest that the first and second categories may not even be appropriate for subsidization by employer, while the third and fourth categories should be subsidized by low co-pays to encourage the continued use.

Chapter 5 deals with health care costs that are driven by physicians and by overly zealous diagnosis processes that increase costs but do not create meaningful health improvements. Examples of these are biometric screenings, which may occasionally identify the patient having serious conditions, but are more likely to result in additional testing and costs for patients who do not have the underlying condition. Unlike some of the other chapters, the issues presented in chapter 5 are applicable to most groups of patients, not just those of self-insured employers. This chapter quotes liberally from Overdiagnosed and Overtreated, two fascinating books that dispel some of the "more is better" opinions of modern health practice.

The authors then tackle accountable care organizations (ACOs) and patient centered medical homes (PCMHs). Their advice regarding ACOs (which may also be applicable to providers) is to "take a deep breath, let others go first, and don't automatically believe the results". They describe the conflicting financial incentives present these organizations, which may require physicians and hospitals to act against their own financial interests to achieve goals of the organization. The authors are less generous in their treatment of PCMHs, which they believe "address the increasingly discredited claim that Americans in populated areas lacked sufficient access to primary care". They describe several personal examples of cases in which overactive primary care physicians have recommended costly and unnecessary treatment.

At this point the authors turn to solutions that they believe will be effective in providing proper patient care while managing costs. Their primary example of these is the "company-sponsored center of excellence" (COEs), in which companies contract directly with leading provider organizations to provide specific types of services. They point out examples of patients who have been misdiagnosed by local physicians, and have those diagnoses reversed by physicians in the COE, and provide some recommendations on how to select provider groups to function as COEs.

Chapter 8 focuses on identifying hospitals that provide "safer" care, meaning that patients are less likely to be exposed to conditions that may cause injury, infections, or other negative consequences of a hospital stay. They recommend use of reports from the Leapfrog Group, which evaluate hospitals in these areas. Finally, they discuss "well-being improvement", noting that people having high well-being scores have lower healthcare costs.

Although the book focuses on employer costs which is not our primary area of work, we found many areas of this book to be relevant to creating an overall understanding of the drivers of healthcare costs. The discussions of overtreatment and overdiagnosis, PCMHs, and the details of pharmacy costs were particularly useful. Readers may not agree with all of the authors conclusions, but they will find a lively treatment of many of the major health cost drivers, and some interesting solutions to cracking healthcare costs.