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March 29, 2011

Purchasing High Performance Archive 2bd620ab-9783-4947-ab6d-2884d7714930 Perspectives on Policy

Newsletter Article


As Health Reform Moves Ahead, Employers Face Tough Questions

By Brian Schilling

The timeline for overhauling the nation's health care system is clear, and spelled out in black and white. (See and The Commonwealth Fund's health reform resource center). However, the drama surrounding reform has created a muddled mess. The failed repeal effort grabbed national headlines for months and legal challenges to reform are surely heading to the nation's top court. But for employers working to comply with the new law, there are more immediate concerns related to new regulations, the forthcoming exchanges, possible penalties, and as-yet-undefined minimum benefit levels. Purchasing High Performance looks at some of these issues, as well as the implications of the current political and legal threats to reform.

Should employers maintain grandfathered status?
Included in the Patient Protection and Affordable Care Act is a provision allowing existing health plans to opt for "grandfathered" status, thus exempting them from some new reform-related requirements and any associated costs. The appeal of maintaining a grandfathered plan rests on the assumption that those associated costs may be significant. There is a long list of reform provisions from which grandfathered plans would be exempt, including:

  • coverage of preventive benefits with no cost-sharing,
  • reforms in the internal and external appeals process;
  • prohibition on employers altering benefits and other eligibility based on salary; and
  • quality of care reporting.

Employers, especially self-insured ones, have an important decision to make: opt for a grandfathered plan or comply with the new law. But the decision isn't as simple as opting for the status quo to neatly avoid transition costs—the financial and other restrictions on grandfathered plans are daunting. For instance, cost-sharing, copays, deductibles, employer contributions, and lifetime caps must all remain essentially unchanged or grandfathered status is revoked. For that reason, some health plans are expected to balk at the complex, expensive prospect of maintaining both "grandfathered" and health reform-compliant plans, which would allow them to continue to recruit new members and employers.

If predictions are right, the issue may be short lived. According to a report by the Obama administration, it is estimated that by 2013, only 55 percent of large employers and 34 percent of small employers will maintain grandfathered plans, with further declines to come.1 Thus, grandfathering may be of short-term significance for some employers, but of limited long-term practicality in the long run.

How will the essential benefit package be determined?
Perhaps the largest remaining unanswered question about health care reform is exactly what will be required under the Affordable Care Act's "essential benefit package." The yet-to-be-defined benefit level will determine what services and types of care must be offered by plans participating in the exchanges and for employers offering health insurance coverage to their workforce. The department of health and human services (HHS) is currently working with the Institute of Medicine (IOM) to devise methods for determining and updating this essential health benefits package.

The broad benefit categories that will be covered have already been defined. Under the Affordable Care Act, health plans participating in the exchanges must cover:

  • inpatient, outpatient, emergency, and maternity care;
  • mental health and substance abuse treatment;
  • oral and vision care;
  • prescription drugs and lab tests; and
  • preventive and rehabilitative care.

What remains to be seen, however, is the extent of coverage in each area as well as related questions about specific treatments (e.g., in vitro fertilization).

For employers, the stakes are high. If the essential benefit level that emerges from the HHS/IOM process is relatively lean, it may actually entice some employers back into the market while at the same time helping to keep premiums steady. At the same time, a lower level of mandated essential benefits might also prompt employers that offer rich plans to scale back.

Employers will have to wait until at least September for more information on the essential minimum benefit package. At that time, the IOM is expected to release its initial report on the subject, which still gives HHS plenty of time to fine-tune the definition before the exchanges are set up in 2014.

Should we pay or play?
Beginning January 1, 2014, employers with at least 50 full-time employees must offer coverage that meets the requirements for essential minimum benefits. If a firm doesn't offer coverage, it will pay a fine of $2,000 per employee.

The fines in question are small relative to the cost of actually providing coverage, so obviously the government is not counting on the fines alone to make a compelling case for covering employees. Most employers won't base their decisions about offering coverage solely on the fines, either. Other relevant considerations include: tax consequences as penalties aren't deductible but premiums are, employee recruitment and retention, investments in workforce health and productivity strategies, and the viability of the state insurance exchanges as an alternative to employer coverage. At least one benefits consultant warns that "the cost impact of terminating employer subsidized coverage will be substantial to your employees and it may be necessary to consider alternate approaches to support an effective retention and recruitment strategy."2 The bottom line? Be careful about opting out.

Some employers are expected to opt out. According to a 2010 survey of 1,400 employers, only a slim majority (52%) expect to continue with their current health plans in 2014, regardless of whether the exchanges offer competitive rates. Many others (33%) are not sure what they will do and 12 percent expect to drop coverage altogether.3

One scenario employers may want to avoid is inadvertently failing the forthcoming benefits "affordability" test, which requires firms to offer coverage that does not exceed 9.5 percent of the employee's total household income. Failing that test may result in a $3,000 penalty and gives employees the option of demanding a "free credit voucher" from their employer to buy coverage from an exchange. Those vouchers must be equal in amount to what the employer would have otherwise spent on coverage through their existing plan.

Using employee salary data, the benefits administration and software firm bswift found that a typical company with 1,000 employees would likely employ about 60 workers with salaries that would be below the affordability test threshold. For that company, the resulting annual fines would amount to $174,000, or 2 percent of the employer's total health care costs.

Will the delivery system and payment system reforms make a difference?
One of the central ideas behind health care reform was that by improving health care quality, we could reduce waste, bend the cost curve, and save enough money to pay for covering more Americans. Employers waiting for those improvements in quality to materialize don't have much longer to wait. The Affordable Care Act includes more than a dozen significant delivery system or payment reform provisions that hold real promise to improve care quality and system efficiency.

Notably, these reforms include establishing a Center for Medicare and Medicaid Innovation that is charged with developing, testing, and implementing new payment approaches to streamline the adoption of models like the medical home. In addition, the Center will use efforts to revise Medicare's payment practices as models for commercial insurers. The Center has been appropriated $10 billion to support innovation activities through 2019; several demonstration project grants have already been awarded.

Employers have taken note. In October 2010, seven large employer–purchasers, including one state, joined together to launch Catalyst for Payment Reform, an organization that seeks to coordinate with the Center on payment reform to make sure its approaches are applicable to the private sector.

Other notable—but still pending reforms—include:

  • Establishing a Medicare Shared Savings Program that will allow "accountable" groups of providers that successfully meet certain quality thresholds to share in the cost savings they achieve for the Medicare program.
  • Implementing a Hospital Value-Based Purchasing Program that will increase the information available about hospitals in public report cards, as well as reward hospitals for meeting certain performance standards.
  • A Hospital Readmissions Reduction Program in which Medicare will reduce payments to hospitals that have "excess readmissions."
  • An Independence at Home demonstration program that will shift some care for high-need patients away from expensive, in-patient settings.

These and more than a dozen other provisions in the law hold real promise to help replace the prevailing pay-for-volume approach to provider compensation with a more enlightened process that drives quality and reduces waste.

What do the political and legal challenges to reform really mean?
The recent House effort to repeal health care reform may have been purely symbolic, but it was by no means the final assault on the law. Just days after the Senate struck down the bill, House of Representatives Republican vice chair Cathy McMorris Rodgers (R–Wash.) introduced a bill that would stop the Internal Revenue Service from enforcing penalties associated with the individual mandate. Other piecemeal assaults will inevitably follow, but with a Democratic majority in the Senate, these efforts are unlikely to represent a real threat to the law.

The legal challenges are another matter. At the heart of the various court cases challenging the constitutionality of health care reform—there were at least 24 at last count—is the argument that, in requiring Americans to buy health insurance, Congress exceeded its authority to regulate interstate commerce.4 The government's counterargument is that choosing not to buy insurance now represents a choice to try to pay for needed health care later, which isn't realistic and undermines the system. Four federal courts have already ruled on the issue: two courts have said the reform's mandate is constitutional and two have said it's not. This inconsistency virtually guarantees that the Supreme Court will weigh in on the matter decisively and probably soon.

A word about public opinion
It is probably inevitable that any 2000+ page law will be misunderstood, and the Patient Protection and Affordable Care Act is no exception. As recently as November, a poll showed that 48 percent of Americans supported repealing the law, but when asked about the key elements, they overwhelmingly approved its contents.5 Even the least popular elements—the individual mandate, raising taxes on the rich, reducing the deficit—were viewed favorably by about 60 percent of Americans. Between 70 percent and 80 percent support other key elements like closing the Medicare Part D coverage gap (also known as the "doughnut hole"), the health exchanges, and subsidies for low-income citizens.6

But public opinion does not make or unmake law. For now, health care reform is the law of the land and it will remain so for the foreseeable future. That makes the rational course of action for employers simple: consider your options, make decisions, and prepare, prepare, prepare.

1 U.S. Department of Health and Human Services, "Keeping the Health Plan You Have: The Affordable Care Act and 'Grandfathered' Health Plans," Fact Sheet, June 14, 2010,

2 E. Patterson and M. Colarusso, "Health Care Reform: Should You Pay or Play in 2014?" Charon Planning,

3 J. Goedert, " Health Data Management, "Will Employers Adopt State Insurance Exchanges?" Health Data Management Breaking News, Nov. 10, 2010,

4 L. Lambert and J. Pelofsky, "Factbox: Lawsuits Challenging U.S. Healthcare Reform," Reuters, Jan. 31, 2011,

5 E. Klein, "Is Health-Care Reform Popular?" The Washington Post, Feb. 23, 2010,

6 Ibid.

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Case Study

Newsletter Article


Boeing’s Nurse Case Managers Cut Per Capita Costs by 20 Percent

By Brian Schilling

Doug McLaren has been an engineer and business analyst in Boeing's commercial aircraft division for the past 31 years. It's a job he enjoys and is good at, but for the past 20 years, he's also taken on an unwanted second job: managing a chronic pulmonary disease. The illness, he says, is well-controlled, but a constant burden and worry just the same.

"It's tough to stay on top of all the various things I'm supposed to being doing to stay well," McLaren said. "It's hard on me, but also on my wife, who hadn't really planned on having to comanage my condition on a day-to-day basis, along with raising our children and growing her own career."

Three years ago, McLaren's wife got a welcome reprieve. In 2007, McLaren enrolled in a Boeing pilot program called the Intensive Outpatient Care Program (IOCP), which was the aircraft manufacturer's unique variant of the much-talked-about patient-centered medical home (PCMH). The central idea of the medical home is to match each patient with a single doctor and nurse who are responsible for engaging the patient in his or her care, improving access to primary care, tracking patient progress on a mutually agreed-upon care plan, and coordinating care among various practitioners.

In McLaren's case, the nurse was Connie Horton, on staff at Virginia Mason Medical Center in downtown Seattle. For Horton, the work of managing McLaren and about 100 other patients' health was among the most rewarding of her career. "This was a great program," she said. "After a year of intensively managing people through the IOCP program, we started to see many getting healthier, getting more engaged in their care, taking better care of themselves. People's risk factors went way down."

McLaren agrees. "She did a wonderful job," he said. "For two years I didn't have to stress out about my health every day and I still never missed a test or an appointment. She was always there reminding me of what I needed to do. It helped my wife and I become more confident in my treatment program, which made a real difference in my health and peace of mind."

Boeing's Approach
The Boeing pilot, which began in 2007, was the brainchild of Dr. Arnold Milstein, chief physician and consultant for benefits consulting firm Mercer. Milstein had been working with the California Health Care Foundation on a customized medical home model exclusively serving high-cost, high-risk individuals. The group was targeted because, as Milstein noted, "the sickest 20 percent of patients tend to account for about 80 percent of most employer's total health care tab."

Milstein brought the model to Boeing and won immediate support from management for a small-scale pilot program. The program was launched in February 2007 in the Seattle–Puget region, where Boeing has a high concentration of employees. Regence Blue Shield of Washington and three area physician groups (Virginia Mason, the Everett Clinic, and Valley Medical Center) agreed to partner with Boeing to launch the pilot.

Milstein worked with staff at Regence to use predictive modeling software to identify high-risk, high-cost patients who might be right for the effort. But the first real challenge was getting those employees or dependents to enroll.

"The key for us was to make the transition to the IOCP program as seamless as possible for patients," said Theresa Helle, manager of health care quality and efficiency initiatives at Boeing. "We intentionally selected medical groups that already had a high number of Boeing employees to partner with us so that no one had to switch doctors. We wanted to preserve the existing primary care relationship and make it easy for people to say yes."

Ultimately 740 employees and dependents enrolled. Patients were connected to a care team that included a dedicated nurse care manager like Horton. The patient's introduction to the program included a comprehensive intake interview, physical exam, and in some cases, biometric testing to get a clearer picture of each patient's health. "Testing on the front end helps us match patients with programs and services that can help them lead healthier lives," said Milstein. "Knowing what your health challenges are and then acting on them is what makes the whole program work."

Based on the results of the interviews, exams, and testing, care teams developed customized care plans in partnership with each of the enrolled patients. With that foundation in place, the challenge of making the care plans come to life was turned over to the nurse care managers. Nurses were charged with making frequent contact with patients—by e-mail, phone, or in person. The goal was for all patient to be "touched" one or more times a month, depending on their condition, to make sure they were following the agreed-upon care plan, getting needed tests, eating right, sleeping, and exercising. Teams met daily to review patient interactions and modify treatment plans as necessary. Meanwhile, Mercer, Renaissance Health (a consulting firm that supported Mercer), Boeing, Regence, and clinic staff met quarterly to share important observations, refine approaches to engaging patients, and learn from each other.

As a result, Boeing made a number of mid-course adjustments to the program during its two-year run. Most notably, case management teams refocused on the importance of addressing behavioral health issues among enrollees.

"There is an enormous amount of stress associated with having a chronic illness and we found that we needed to address that and other issues in order to really get patients on track to better self management," explained Helle. "You've really got to treat the whole patient to make an effort like this worthwhile."

Helle noted many of the patients enrolled in the program had some sort of behavioral health issue, including stress related to their medical condition.

In a patient-centered medical home:

  • a care team coordinates all of a patient's care;
  • revised payment systems reward primary care and care coordination;
  • patients (and their families) are encouraged to become actively involved in the care process;
  • advanced clinical information systems help reduce errors and expand physicians' access to critical information and guidelines;
  • open scheduling and e-mail access streamline communication between doctor and patient; and
  • care is culturally sensitive.

According to Helle, results of the effort were better than expected. Even after accounting for the additional fees paid to participating clinics, the IOCP program reduced per-patient costs by about 20 percent, primarily due to a reduction in emergency room visits and hospitalizations.

Milstein thinks that broadly adopting a similar approach to high-cost, high risk patients might ultimately reduce U.S. per capita health care spending by more than 30 percent. But, at this point, he's thrilled that the pilot has validated the model and shown a positive return on investment. Helle is also pleased, because avoiding hospitalizations and emergency room visits means that "people have a better quality of life—they're healthier and at work more consistently. Everybody wins."

Other measures of IOCP program participants reinforce Helle's point that the initiative has benefits beyond simply cutting per-patient costs. These results include:

  • participants' physical functioning scores improved 15 percent;
  • mental functioning scores improved 16 percent; and
  • patient-reported missed work days declined by over 56 percent.

Compensation Issues
The IOCP program and others represent more work for participating clinics than the business-as-usual model of care. For starters, care managers like Horton were dedicated full-time to managing enrollees in the IOCP program. Horton managed about 100 such patients, but others managed twice as many. Participating clinics were required to do more reporting on a regular basis and physicians and other staff met regularly to discuss IOCP–enrolled patients, all of which took time and effort.

To compensate practices, Boeing paid each clinic a monthly per-patient fee that varied depending on the severity of illness of the enrolled patients and the number of members in the program. The fee was intended to cover the cost of the nurse case manager.

Going forward, though, Milstein believes that a per-patient per-month fee might not provide sufficient motivation to really engage practices in the model. "A medical home fee is important to get things started, but nationally we're moving toward a shared-savings model that assures savings for payers and consumers," he says.

Under such an arrangement, a participating practice would be paid some portion of the difference between expected costs and actual costs (assuming quality measures also improve). Such arrangements are attractive to group practices because any resulting payments are 100 percent margin. "Under a shared-savings plan, practices get partially paid for care that was made unnecessary because they did a good job of managing the patient," said Milstein. "So the employer is really paying the practice with money they didn't have to spend elsewhere, the practice is getting paid for care they didn't have to provide, and the patient is healthier. It's a hard model not to like, although not all hospitals and ER physicians might agree."

Lessons for Other Employers
  • Focus first on the dedicated case managers. Give special consideration to the design and implementation of this function, it's a critical element.
  • Work through a coalition or other collaborative effort involving more than one employer. You need critical mass for enrollment.
  • Consider a shared-savings model as part of the compensation for participating practices.
  • Don't underestimate the importance of addressing behavioral health issues for enrolled patients.
  • Focus on the high-cost, high-risk population and consider expanding eligibility later.
  • Ensure strong leadership commitment among participating groups.

Focusing on High-Cost Patients
Dozens of PCMH pilot projects are under way across the country and initial results show fairly consistently that they improve care. But according to Milstein, the jury is still out on whether medical homes not exclusively focused on older or sicker patients will reduce per-capita health spending. It's not hard to see why—for a healthy person, it may not be cost-effective to introduce a more labor-intensive model of care coordination when there's little or no care to coordinate.

High-cost, chronically ill patients are another matter. It is widely understood that when such patients have their conditions poorly managed, they are much more expensive to treat. On the other hand, well-controlled diabetes generally does not lead to amputations or blindness, well-controlled asthma does not land people in the emergency room, and patients with well-managed heart disease are far less likely to have a heart attack.

The Boeing effort focused on the "sickest 15 percent," according to Milstein, but there's no magic number. More experience with medical home programs will determine where they can be most cost effective.

Future Plans
The Boeing IOCP effort ended in July 2009, but the company is working to replicate it on a broader basis in collaboration with other purchasers and health plans. Efforts are underway to assess expansion opportunities in the St. Louis and southern California markets where Boeing has a high concentration of employees. Regence began expanding the effort in Seattle in November 2010.

Expansion of the effort is probably limited to markets where there are willing employers with enough high-cost, high-risk patients to support it. Engaging medical groups is also a real issue, as the medical home care model places high demands on staff time. "It wouldn't really make sense for a practice to participate if they only had a few patients who might enroll," explained Helle. "Ideally, we think you need at least 200 patients supported by a dedicated nurse case manager to make real financial and operational sense."

For patients like Boeing's McLaren, though, the benefits of the program have nothing to do with return on investment. In the months since the program ended, McLaren has tried to maintain the improved treatment that Horton helped him achieve, but has delayed routine check-ups and other appointments. "When you're feeling reasonably good and are really busy with the rest of life, it's easy to let your personal needs slip to a lower priority," he said. "I really liked having someone to help keep me on track. I can't wait for the program to start up again."

To read more about Boeing's Intensive Outpatient Care Program initiative, see NBCH's Value-Based Purchasing Guide. The guide includes additional case studies documenting the impact of value-based strategies on improving care and controlling costs, as well as advice for firms just getting started with value-based purchasing.

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Featured Articles

Newsletter Article


Health Risk Assessments: What You Don't Know Can Cost You

By Brian Schilling

Employers convinced there is no more low-hanging fruit, with respect to keeping employees healthy and controlling health care costs, may just need to think low-tech. Health risk assessments (HRAs) can help people get needed care when it can do the most good—before problems escalate. But just offering an HRA (as 60% of large employers do) isn't a cure-all.1 To really make a difference, employers must ensure that employees fill out the HRA and then follow up appropriately.

A health risk assessment (also known as a health risk appraisal) is an instrument used to collect health information, typically coupled with a process that includes biometric testing to assess an individual's health status, risks, and habits. Alone, an HRA can do little to improve health or cut costs. But, as part of a broader program to engage employees in their health, shape lifestyle choices, and promote prevention, HRAs can be enormously effective.

"The HRA is really an essential first step in getting health costs under control," said Ray Werntz, senior consultant at benefits consulting firm HPN Worldwide. "It gives you information about the kinds of services or support different employees need, so you can avoid bigger problems down the line. Half the battle is diagnosing diseases and matching patients with programs that can help them. For example, a great diabetes management program doesn't do you any good if your diabetic employees aren't in it."

Although savings estimates vary, successful examples of worksite health promotion programs featuring HRAs are not hard to find:2

  • Monongalia Health System in West Virginia adopted a wellness program in 2002 that required employees to fill HRAs and attend training classes on health care decision-making skills. Data drawn from the HRAs were used to identify problematic health behaviors that were then targeted by initiatives in the areas of nutrition, fitness, weight management, heart care, and smoking cessation. For the next two years, Monongalia experienced level health care claims at a time when most employers were experiencing 12 percent to 13 percent increases.
  • Johnson & Johnson reduced employee medical claims by almost $250 per year per employee over four years after it adopted a company-wide program that required employees to fill out HRAs and offered "benefit credit" incentives of up to $500 for employees to take advantage of various wellness programs.
  • Bank of America, Citibank, Proctor & Gamble, NASA, King County (in Washington State), and the State of Arkansas have all reported similar success stories following the adoption of aggressive HRA programs.

One of the reasons HRA programs work is because so many people aren't being appropriately screened for various conditions. Hence, diseases are often diagnosed later, which tends to raise treatment costs. The statistics can be chilling: 33 percent of breast cancer is not detected until it is late-stage cancer, which costs significantly more to treat. In a 2006 study, early stage breast cancer treatment costs averaged $16,000, compared with $50,000 for stage 4.3 Many conditions routinely go unnoticed: 50 percent of cervical cancer is detected at a late stage and one-third of diabetics do not know they have the disease.4,5

HRAs could help change this, but few people fill them out. According to NBCH's 2010 eValue8 survey results, only about 4 percent of health plan members fill out an HRA annually even though they are commonly offered by even smaller employers. Biometric screening is even less common.

To some, this will come as no surprise. The forms and tests can be intrusive and there is a fairly strong cultural bias in the U.S. against sharing the details of one's health history with anyone but the most trusted personal physician. To help overcome that bias, more and more firms, unions, and municipalities are putting cash on the table.

Fort Smith, Arkansas
In 2005, the city of Fort Smith, Arkansas began giving employees a $30-per-month premium credit incentive to participate in a wellness effort, complete biometric testing, and fill out an HRA. About 800 of Fort Smith's 900 employees opted in.

For four years prior to the program, the city's human resources director, Richard Jones, had been working aggressively to manage costs. Efforts included switching pharmacy benefits managers and plan administrators to reign in prescription costs and improve claims accuracy in 2002, launching cost containment and utilization management programs in 2003, implementing a wellness program in 2004, and revamping benefits package to promote preventive health care and screenings in 2005.

But Jones was convinced that a piece of the puzzle was still missing. "I read about a company that had good results with an HRA program and I knew that that's what I wanted to do with our employees," he said.

Jones was so convinced that an aggressive program to push HRAs and engage employees in their own health could help curb the trend that he launched it without first asking for permission.

"In some cases it's better to ask for forgiveness than permission," said Jones. "But in this case I didn't have to—our total health care spend today is the same as it was in 2006."

Of course, the city council did not budget for flat health care costs, so by 2010, after several years of budgeting for annual increases, Jones and the human resources department found themselves in an unusual position: they were able to give back about $800,000 to the city coffers. He describes that experience as a professional highlight.

Since 2005, Jones has tinkered with the incentive payment every year, typically increasing it a bit. It's now $67 per month for employees. Today, about 850 employees and dependents participate and, as of late 2010, overall health care costs were on target to decrease, compared with the prior year. The success of the program is not lost on city employees who last year saw a 10 percent reduction in their contributions to health care costs.

For Jones, though, the real value of the program goes beyond saving money. "I used to see 10 to 15 smokers outside the building every day during lunch hour. Today it's three, maybe. We've also detected five pending heart attacks and one serious colon cancer that would have gone undiagnosed in the short term, if it weren't for the program. That kind of thing makes you feel good at the end of the day."

CIGNA Steps Up
Health plans, which have long recognized the value of HRAs, are especially hard-pressed to get members to fill them out. "People are generally much more likely to want to participate in an HRA effort if it's an employer-driven effort rather than a health plan-driven program," said Laurie Gondek, senior director of health advocacy product solutions at CIGNA.

In response, CIGNA recently launched the Better Health Guarantee program, which is designed to help mid-sized employers promote HRAs among their employees. At the core of the effort is a guarantee, by CIGNA, to reduce the overall "health risk level" among participating employers' workforces, commensurate with participation in the HRA program. For example, if 75 percent of an employer's workers participate, CIGNA guarantees that within a year, 30 percent of participating employees will reduce their level of health risk from high to moderate or from moderate to low.

If employee health doesn't improve in 14 months, the employer is compensated with $1,100 (paid to a health promotion fund) for each participating member who does not reduce his or her health risk. The only potential downside is that at-risk employees might not succeed in improving their health.

Gondek dismisses that possibility. "We're confident that given the opportunity and the information to really manage people's health, we can make a big difference," she said. While it's too early for conclusive results, early indications are very promising, Gondek said.

Fifteen employers are enrolled in the trial program, but CIGNA expects to roll the program out to a wider audience over the course of the next year.

For more information about implementing an HRA program, see Health Risk Appraisals at the Worksite: Basics for HRA Decision Making, available at

Aspects of an Effective HRA Program

A Suitable Delivery Mode. There is no wrong way to administer an HRA: on paper, via the Web, using office-based kiosks, via phone interviews, and through various hybrids. Matching the workforce to the method is the key consideration

The Questionnaire. Many different HRA tools exist, some more expansive than others. Topics that should be considered include:

  • chronic diseases—asthma, cancer, diabetes;
  • infectious diseases—sexually transmitted diseases;
  • health conditions—disability or pregnancy;
  • injury/safety—use of alcohol or seat belts;
  • lifestyle—physical activity, diet, tobacco use, sleep;
  • occupation—heavy lifting, ergonomics, chemical exposure;
  • medical history—family medical history;
  • emotional/mental health— stress, depression, anxiety;
  • prevention—use of screenings; and
  • health literacy—knowledge of resources.

Biometric Screening. Ideally, the HRA will be followed by some collection of basic biometric indicators such as blood pressure, body mass, cholesterol level, blood sugar, bone density, and cardiovascular health. Data from these tests can help validate HRA results, identify health issues, and match employees with needed services, screenings, and programs.

Reports. The point of an HRA program is to translate the data collected into beneficial actions. Doing so requires timely, accurate, and comprehensible reports. At a minimum, a good HRA vendor should be able to provide personalized, clear reports for employees about their own health risks. Employers may also want to look for reports that include health education tips or referrals to specific services. The vendor should also supply aggregated reports to support planning and evaluation.

1 National Business Coalition on Health, Health Risk Appraisals at the Worksite: Basics for HRA Decision Making, (Wash., D.C.: NBCH, 2008).
2 Ibid.
3 California Breast Cancer Research Program, grant to Wendy Max, The Cost of Breast Cancer in California, University of California, 2006.
4 S. J. Henley, J. B. King, R. R. German et al., Surveillance of Screening-Detected Cancers: Colon and Rectum, Breast, and Cervix, United States, 2004–2006, (Atlanta: Centers for Disease Control and Prevention, Nov. 26, 2010).
5 J. P. Boyle, T. J. Thompson, E. W. Gregg et al., "Projection of the Year 2050 Burden of Diabetes in the US Adult Population: Dynamic Modeling of Incidence, Mortality, and Prediabetes Prevalence," Population Health Metrics, Oct. 22, 2010 8:29.

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Newsletter Article


Lessons from AFSCME on Employee Engagement

By Brian Schilling

In 2006, after several years of health care cost increases averaging in the double digits, the leadership of Illinois-based Council 31 of the American Federation of State, County and Municipal Employees (AFSCME) knew it needed to look at creative approaches to providing affordable health benefits for its 400 staff employees, retirees, and dependents. The unlikely answer? A novel contract with employees that required them to get engaged in their own health care.

"Financial reality was on a collision course with the status quo," said Ray Werntz, senior consultant with population health management consulting firm HPN Worldwide. "Council 31, like nearly every other employer in the country, needed to reign in health care costs," said Werntz, who worked with the labor union to redesign its benefit plan.

Werntz and his firm weren't content to simply abandon the status quo and recommend cost increases to employees or constraints on benefits. Health benefits are hard fought in a union environment and he realized that any attempt to trim benefits would meet with stiff resistance and could compromise the health of plan participants. So Council 31 management sat down with Werntz and decided to do just the opposite.

Werntz' plan for the AFSCME staff was to offer two different benefit options. The first actually was the status quo: the organization's existing benefit package was renamed the Health Improvement Plan (HIP) with no changes except a small contribution hike for dependents. But there was a catch: anyone who enrolled had to sign a formal contract. In it, they had to agree, according to Werntz, to "do whatever we ask in terms of trying to improve their health and their use of effective health care." The staff union president referred to the program to essentially mandate patient engagement as a form of health benefits "shock therapy."

Signing on was not a requirement. Those who didn't agree to the contract were still eligible for the Council's Standard Plan, which was significantly more costly and offered less-generous benefits.

The contract was based on the idea that if employees could be counted on to become more engaged in their health and more judicious in their use of health care, they would become healthier, have better outcomes, and, in the long run, save the Council money. Werntz explained that the contract requires employees to:

  • fill out a health risk assessment;
  • participate in comprehensive care management programs;
  • establish relationships with primary care doctors;
  • undergo regular biometric screenings; and
  • take regular online lessons and become more adept in using health information technology.

The contract is somewhat open ended. "We didn't really know what we would want or expect employees to do in the future as new research and educational tools became available. So we left some wiggle room. We wanted to have the opportunity to follow the latest science and use the best information to engage people in managing their health aggressively. It's our top priority," said Werntz.

Anyone who signed the contract but decided not to participate in the screening, monitoring, or health management required was removed from HIP and entered into the Standard Plan.

No one knew how many employees and adult dependents would choose the more demanding HIP but in the end, more than 90 percent of AFSCME's adult employees and covered dependents chose HIP. The vast majority, said Werntz, really like it. "They appreciate that it's necessary and they've seen the results in aggregate and, in many cases, personally."

Those aggregate results have made many observers look twice. Since 2006, AFSCME's overall average monthly medical costs have actually decreased by about 10 percent. In contrast, health care costs nationally have risen about 40 percent over the same period.1 Perhaps even more important—the overall health of the participant population is steadily improving. Aggregate measures of smoking, blood pressure, and cholesterol are all declining and patient-reported health status has improved. Last year, 100 percent of HIP participants not only completed an HRA, but received all indicated biometric screening.

Werntz is optimistic that aggressive efforts to engage employees in their own health will continue. He expects that such efforts will become the norm in the years ahead.

"The potential upside in terms of realizing savings through better health and health care outcomes is just too large for most employers to ignore for much longer," he said. "There are all sorts of ways to get employees more involved in their health care, whether through incentives or just by changing the culture. No matter how you approach it, when you get employees more involved, everybody wins—most of all, the employee and his or her family."

1   Based on a reported 7 percent increase in health care costs for 2007, as reported by Towers Perrin in the 2007 Health Care Cost Survey and increases in 2008 (9.9%), 2009 (9.2%), and 2010 (9%) as reported by PriceWaterhouseCoopers in Behind the Numbers: Medical Cost Trends 2010.

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Interview: Elizabeth Mitchell, CEO of the Maine Health Management Coalition, Talks About Her State’s Patient-Centered Medical Home Demonstration Project

When the Centers for Medicare and Medicaid Services launched its new Innovation Center in November 2010, it did so with a degree of flair uncharacteristic of most government agencies, concurrently handing out tens of millions of dollars to support worthy innovations. Consistent with the Center's charter, the innovations are projects that seek to upend the status quo and develop better, more efficient ways to deliver and pay for health care. But that doesn't mean starting from scratch: among the Center's first acts was to allocate over $20 million to support a one-year-old patient-centered medical home pilot in Maine. Purchasing High Performance talked to Elizabeth Mitchell, CEO of the Maine Health Management Coalition (a coalition of employers, hospitals, health plans and doctors), about the project.

PHP: How did you get selected for the Innovation Center demonstration project?

IMPORTED: __media_1935528441E34E1F93100E608AADF4A4_w_120_h_120_as_1.png EM: We were already doing what they wanted to fund. Starting in 2009, the Maine Health Management Coalition, Quality Counts (a regional health care collaborative), and the Maine Forum (a group which advocates for high quality care) set up a patient-centered medical home pilot project with the support of area employers and a good cross-section of the health care community. Nobody was expecting federal money at that time because there wasn't any. It was just the right thing to do. Over the first year of our pilot, we saw early positive results in terms of both quality improvement and cost control but it was slated to end in 2012. The Innovation Center funding means we can potentially expand to include more practices, build community health teams, and continue the effort for an additional two years.

PHP: How do you spend $20 million?

EM: Well, let's just be clear that this is not a grant and the money doesn't go to the Maine Health Management Coalition, Quality Counts, or the Maine Quality Forum. Not a penny. We're the conduits through which the money follows 100,000 or so enrolled patients and gets passed on to doctors and practices. All $20 million will ultimately go to participating primary care practices in Maine to compensate for the added work involved in operating as a medical home. There's nothing set aside for administration.

PHP: What happens after the $20 million in federal money runs out?

EM: We think about that question all the time, but the answer is probably pretty simple. We're in the proof-of-concept stage right now and either this works and people get on board and it becomes a part of the new normal, or it doesn't and the whole thing goes away. I'm optimistic that over the course of the roughly three years for which we're now funded, we'll show some real results that will allow us to move beyond the $3 per-member per-month model we have now. That money is nice, but it's not enough to sustain the approach. We need practices and plans that are willing to engage in shared-savings arrangements and employers that see the value in paying for it. I think we'll get there. Employer interest in the medical home model, at least in Maine, is incredibly strong.

PHP: There must be a fair amount of work involved in administering a $20 million demonstration project.

EM: There is! Some thought really does need to be given to funding an "innovation infrastructure." What's happening in Maine only works because the infrastructure was already there, courtesy in large part to employer support. In fact, the Innovation Center made private purchasers support a prerequisite for selection, really emphasizing the need for multistakeholder collaboration for system transformation. Fortunately, Maine has several organizations like the Coalition leading multistakeholder work. But that's not always true in other states and you don't want to limit innovation to places where innovation is already happening.

PHP: What is required of practices that participate in the effort?

EM: The front door to the program is earning recognition under the National Committee for Quality Assurance's (NCQA's) patient-centered medical home program. But earning NCQA recognition does not a medical home make. Practices have to show they have fairly sophisticated registries for tracking patient populations. In addition, they are required to sign agreements on referral patterns. Once a practice is in the program, they participate in quarterly learning sessions, which are great opportunities to share lessons and compare notes on what works in different settings. Reporting is required, as well. We collect and share regular data on care and services consumed and turn that into reports for each practice so they can see how they stack up with their peers.

PHP: What have the challenges been to date?

EM: The biggest one is getting good, timely data. We don't have great systems to distribute timely data in Maine and this is a state with an all-payer database. We pull some utilization and financial data from that, but it's incomplete without integrated clinical data. Providers need data on costs, utilization, and patterns of illness if they are going to accept any significant financial risk when treating patients and managing population health. The Maine Health Management Coalition is stepping in to expedite timely data distribution to sustain the efforts by providers and purchasers to transform care. It's not fair to ask them to do so without it. We have several accountable care organization pilots emerging around our patient-centered medical home pilots, and financial risk will be a growing part of these arrangements.

PHP: Some medical home pilots target only high-needs or high-risk patients. Is that true of the Maine effort?

EM: No. We're just the opposite; we target everyone. I know the jury is still out on whether the medical home model is cost-effective for all populations, but our assumption is that what's good for people who are sick is also good for people who may become sick, which is everyone. I think a lot of people are going to be looking at this question over the next few years.

PHP: How much do participating practices get paid?

EM: Less than you'd probably think. The practices get an approximately $3 per-patient per-month enhanced fee as their only real incentive. For that, they revamp the way they practice medicine. It's really amazing, actually, and it's obviously not the money that's motivating them. We talked about doing a shared-savings model, where practices would also get a bonus based on their ability to keep people healthy and avoid costs over the course of a year, but area health plans weren't willing to do it. They don't have the data systems to support it yet.

PHP: So why do practices participate if the upside is only that modest monthly fee?

EM: Practices are actually excited about participating—not all, but a lot. We've had to turn some interested practices away. We're planning to expand from the original 26 practices to 46 practices and we don't anticipate any difficulty recruiting them. There are a lot of factors driving interest. Some practices want experience with the medical home model, which I think everyone sees as a possible model for the future. Others look at it as a way to improve the quality of care they deliver, while others might be looking ahead to the day when being a leading medical home will mean higher revenues and more income for doctors. Very few people see the current system as sustainable.

PHP: Do practitioners seem to like the medical home model?

EM: Yes. Doctors and nurses really like to practice in a medical home setting. Across the 26 practices in our original cohort, each one has been somewhere between happy and extremely happy with their experience thus far. In one practice, staff turnover went from 30 percent per year to essentially zero (not counting the staffer who got activated by the National Guard).

PHP: Do you think the pilot has led to real change in the way doctors practice medicine in Maine?

EM: I've talked to doctors about this and the answer is a clear yes. What I hear a lot is that it's changed the conversation from "Who is my next patient?" to "Who do we really need to see this week? Who missed what and how can we get them back on track?" That's a huge difference. It's more proactive and it's better medicine.

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Did You Know?

Unemployment, Incentives Slow Demand for Medical Care
Moody's Investors Services issued a report last month attributing anemic growth in demand for medical care to two factors: lingering high unemployment and aggressive efforts among employers to slow employees' consumption of medical care. Among the specific employer strategies cited as playing a role in the slower-than-expected growth rates: higher deductibles; higher co-pays; growing use of high deductible plans.

Lost Job = Lost Coverage, Usually
A new report by The Commonwealth Fund found that over the last two years 57 percent of adults who lost a job that had health benefits subsequently joined the ranks of the uninsured. But the 52 million working adults who went without coverage for all or part of 2010 have something to look forward to: in 2014 nearly all of them will be covered by the (then operational) health exchanges.

Ohio Employers Offer Advice on Tackling Variation, Collaboratively
An Ohio–based collaborative of employers, physicians, and a local hospital system joined forces beginning in 2005 to encourage physicians to follow best practice guidelines, especially for chronic conditions such as hypertension and diabetes. Learn more about how the effort boosted area mammography rates by 64 percent, cut emergency room visits by 14 percent, tripled the colonoscopy rate among those 50 and older, and even helped patients with diabetes better control their blood sugar.

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Notable Numbers

  • 30%: Percent of post-operative patients who have at least one potentially harmful medication discrepancy1
  • $7,200: Average payment for a preventable re-admission in Medicare. 2
  • 70%: increase in the prevalence of diabetes since 1990 3
  • 46.6% decrease in the prevalence of smoking since 1960 4
  • 34%: Increase in the likelihood that an employee of a small firm will quit smoking if a coworker also quits smoking. (67% = increase in likelihood a person will quit smoking if his/her spouse quits smoking) 5
  • 33%: Percentage of diabetics who don't know that they have diabetes 6
  • 22%: Percentage of employees with access to tax advantaged flexible spending accounts who choose to use them. 7
  • 39%: Percentage of employees who don't contribute enough to their 401(k) plan to receive their employer's full offer of a match (free money) 8
  • 52%: Percent of people extremely or very confident that their employer or union will continue to offer health insurance benefits in 2010 (Percent who were similarly confident in 2000: 68%) 9


1) Pharmacist Medication Assessments in a Surgical Preadmission Clinic, Yvonne Kwan et al. Arch Intern Med, 2007;167:1034–1040.

2) Report to Congress: Promoting Greater Efficiency in Medicare, Medicare Payment Advisory Commission. Published June 2007. Accessed on 12/17/10.

3) Diabetes trends in the US 1990–1998. Diabetes Care 2000: 23(9): 1278-1283.

4) Smoking Prevalence Among U.S. Adults, 1955–2007, U.S. Center for Disease Control and Prevention. Accessed online on 12/12/10.

5) The Collective Dynamics of Smoking in a Large Social Network, Nicholas A. Christakis and James H. Fowler. N Engl J Med 2008: 358: 2249–2258.

6) One-third Of Adults With Diabetes Still Don't Know They Have It, NIH/National Institute of Diabetes and Digestive and Kidney Diseases. ScienceDaily. May 26, 2006. Accessed online on December 12, 2010.

7) Health Care Flexible Spending Accounts, Janemarie Mulvey. Congressional Research Service. May 11, 2010. Accessed online on 12/7/10.

8) Workers Not Saving Enough to Get 401(k) Match, Tara Siegel Bernard. The New York Times. October 6, 2010.

9) 2000–2010 Health Confidence Surveys, Employee Benefit Research Institute and Mathew Greenwald & Associates. Accessed online 12/17/10.

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Editorial Advisory Board and Steering Committee

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Editorial Advisory Board and Steering Committee

Editorial Advisory Board

Lawrence Becker, Director, Strategic Partnerships, Alliances and Analytics, Corporate Human Resources, Xerox Corporation
François de Brantes, M.B.A. , Chief Executive Officer, Bridges to Excellence
Michael Chernew, Ph.D., Professor, Department of Health Care Policy, Harvard Medical School
Paul Fronstin, Ph.D., Director, Health Research & Education Program, Employee Benefit Research Institute
Cheryl Koopman, Vice President, Human Resources, Richards Industries
Laurel Pickering, M.P.H., Executive Director, New York Business Group on Health
Martin Sepulveda, M.D., Vice President for Integrated Health Services, IBM

Steering Committee

Andrew Webber, President and CEO, National Business Coalition on Health
Barry Scholl, Senior Vice President for Communications & Publishing, The Commonwealth Fund
Anthony Shih, M.D., M.P.H., Executive Vice President for Programs, The Commonwealth Fund
Sharron DiMario, Director of Community Initiatives, Employers Health Purchasing Corporation of Ohio
Carly McKeon, Director of Membership & Communications, National Business Coalition on Health
Brian Schilling, Lead Writer
Doug Ward, Web Developer, The Waters Ward Company, LLC

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