According to a story in Bloomberg, doctors and hospitals are watching what you eat, buy, wear and more. Why? To better manage your health, of course. If you buy a donut somewhere, whether for yourself or as a treat for a grandchild, a company like Acxiom or LexisNexis may be recording that purchase and selling that information to your insurer -- but only for “marketing.”

The Carolinas HealthCare System for one…”is placing its data, which include purchases a patient has made using a credit card or store loyalty card, into predictive models that give a risk score to patients.”

University of Pittsburgh, which operates more than 20 hospitals in Pennsylvania and a health insurance plan, is using demographic and household information to try to improve patients’ health.” Remember the Penn State wellness scandal? Is there something bad in the water in Pennsylvania?

Okay, let me get this straight. If you buy one of the following, your doctor and your health system really should know about it, and it should become a part of your medical record?

• a dozen donuts
• a cigar for your grandfather
• a pack of condoms
• a burger at McDonald's
• a half pound of deli salami
• a steak dinner
• a milkshake
• a martini after work
• a case of diet soda

How about too many/much:

• pounds of coffee (even if it is for your club)?
• packages of hot dogs (they won’t know you're feeding your kid's entire soccer team)?
• popcorn?

Or not enough:

• fresh fruit?
• veggies (even if you grow your own)?
• skim milk?

How about if your teenage son buys a package of condoms? That needs to be in his medical record for your health system/insurer to peruse?

This is nuts…plain nuts, but, alas, the predictable result of the nation’s and employers’ obsession with collecting your personal heath information. I guess if you want privacy you’d best pay cash. But maybe face-recognition tools will thwart that attempt at privacy, too.

For the record, I can’t think of anything I buy that should be keep secret, but the idea that my health systems can access my purchase is utterly repugnant to me.

BTW: I’m not a privacy nut, but these kinds of data will create an abundance of “false positives” and rabbit trails. I see no real value in this nonsense.

But, by today’s surgery standards, the story should come as a surprise to no one.

The article says, “Judging by the symptoms of people with knee arthritis, one-third of knee replacement surgeries may be inappropriate, according to a new study.” The lead author of that study, Daniel L. Riddle from Virginia Commonwealth University, said, “We found that some patients undergo total knee replacement when they have very low grade symptoms or minor knee arthritis…”

That is the point I’ve been making all along: The ethics around surgery in the U.S. are declining rapidly.

It’s time for HR and benefit managers to wake up. Bad surgeons will get worse and worse until you take their patients away.

Whenever I hear someone make a claim like that, I ask one simple question: If an employer is having productivity gains, then are its wages as a percent of sales declining?

I’ve asked that question dozens and dozens of times. Not one person has ever said he even looked at that most obvious measurement of true productivity gains. Not one. Yet, when discussing productivity gains, the only valid measurement is wages as a percent of sales, and that percentage needs to be dropping if productivity is truly increasing. After all, if employee productivity at a company is up, say, 10%, the employer should need 10% fewer workers if sales stay the same.

Without proof that wages are declining as a percentage of sales, claims of productivity gains don't hold up and should be discounted. 

Starting in the 1990s, companies additionally set up or “rented” websites, both intranet and Internet, where employees could access health information. Problem is: Employees rarely accessed them.

In the 2000s, companies started setting up special Internet sites for employees, ones that included employees’ personal health information. Sounds terrific, right? Just what the doctor ordered, right? The problem was: Few employees used such sites. Some were very expensive, but one in a hundred workers -- or fewer -- ever used them. Even fewer used them more than once.

The truth is that employees have never trusted their employers or its agents or insurers for health information. Where do they want to get health information? From their doctors, of course.

Wellness became popular as a way to drive consumer education and “engagement” (whatever the term “engagement” means). When employers began to realize that was not working, they typically changed wellness vendors. When that failed (predictably), employers tried to provide incentives to employees to become educated and “engaged.” After more failure, employers moved to the latest iteration: coercive wellness and education programs.  

But if all the other iterations of wellness-style employee education worked so well, why coerce employees?

My prediction: The end is near. Big penalties designed to improve employee “engagement”? Gimme a break. Coercion leads to more distrust, lampooning, disloyalty, unionization, etc. Look at the mess Penn State created, or CVS.

What were they thinking?  Perhaps this: The beatings should continue until morale improves. Or, as Al Lewis and Vik Khanna say in Surviving Workplace Wellness, employers are going to make their employees happy whether they like it or not.

Alas, lately I’m seeing a resurgence in 1) the notion of flogging employees until “engagement” improves and 2) a new concentration on more gimmicks to educate consumers/patients.

Using coercion to improve employee engagement?  Have HR executives gone off the deep end? Hmm. Makes you wonder.
 

Historically, the government has had success in transferring these types of liabilities to the private sector. One way was to deliberately underpay doctors and hospitals under Medicare with the full expectation that those shortfalls would be absorbed by private payers. In my career I had discussions with the Centers for Medicare and Medicaid Services about that very thing. One Centers for Medicare and Medicaid Services official admitted that was part of their strategy. He also said that would continue as long as private payers were willing to absorb the Medicare underpayments to providers. That has worked so far.

Another example was when the government declared that private group plans would be primary over Medicare for workers over age 65. For those of you too young to remember, that was not always the case.

One possible big transfer of Medicare costs to the private sector would be to declare that companies have to offer COBRA for five years or so for every employee age 65 and up who terminates employment. I guarantee you that type of transfer to private companies will be "on the table."

For those of you benefit managers who are in the first half of your career, you will be facing measures not unlike ones I've described here. Brace yourselves.

This ruling does not surprise me. I predicted in a blog post on January 27, 2012, that The Patient Protection and Affordable Care Act would not be repealed by the Supreme Court. I was correct. I won't spend words here on why I had doubts about repeal of the individual mandate. Click here to read that post.

Let me also refer you to a blog post I made on March 30, 2012. The drift was that no matter whether The Patient Protection and Affordable Care Act is overturned or not, we have a huge spending problem in the United States.

That post gave a link to an article written by Shannon Brownlee and Brian Klepper. They wrote, "Yet whatever the court decides, we will still be stuck with a problem that this contentious law was not likely to solve on its own: an out of control health care industry that threatens the stability of the U.S. economy and the federal government's ability to deal with our long-term debt."

Further, they say, "It is hard to overstate the gravity of the situation. A 2008 study by the consulting firm PricewaterhouseCoopers estimated that more than half of all health care expenditures provide no value — meaning we spend more than double what we should. In today's dollars, that waste represents an extra $1.5 trillion a year."

Let me emphasize this point ... half of health care dollars provide no value. That did not surprise me either as I watched that waste occurring every day for decades as I managed health benefits for large corporations.

Between now and the year 2025, consumer discretionary income will shrink dramatically unless health care costs are reigned in. That will impact nearly all companies' top line. Today, the biggest competitor of companies that produce or sell consumer products and services is rising health care spending. It is significantly impacting companies' sales today, but in a nearly invisible way. This is a huge strategic issue for corporations. Many CEOs are looking at how their own company's health costs are rising but may not be forecasting the impact on sales going forward.

I have been advising corporate executive committees and corporate executives of this impact on top line growth for over ten years. I wish I had been wrong, but my predictions on this are coming true too. This will not fix itself.

In benefit plans today about 6-8% of members, called outliers, spend 80% of plan dollars each year. With so much spending by so few plan members, success in managing health plan costs going forward will require a whole new approach, namely carefully managing the shrinking outlier population.

Certain things are known about the outlier population. Most have complex health problems with multiple co-morbidities and most are seeing multiple specialists who are frequently failing to coordinate diagnoses or treatments. Accordingly, about 10-20% outliers are either completely misdiagnosed or have a flawed diagnoses. This is impacting about 8-16% of total plan spending.

Furthermore, about 40% of outliers have erroneous or, at best, sub-optimal treatment plans. Again, their specialists are failing to coordinate care. This is impacting about 40% of health plan dollars. While primary and secondary care in U.S. hospitals is usually quite standardized, there is huge variation in tertiary care from clinic to clinic in the U.S. The variation is in quality of care, pricing, outcomes, diagnostic capabilities, and ethical standards.

Methods are available to identify the few clinics and hospitals in the U.S. in which the best quality, highest ethical standards, and best pricing all come together and to connect plan members with those facilities in an employee-friendly, yet very cost effective, way.

One outlier solution is to set up employer-specific centers of excellence from among clinics in the U.S., ones that perform in a superior way for tertiary and quaternary care patients. Other solutions involve setting up highly specialized second opinion programs aimed at the outlier population, often involving on-site visits to a high performing clinic. These solutions have proven track records of success in companies such as British Petroleum, Burger King, and Walmart, plus many others.

Adopting these types of solutions will lead to genuine market driven health care informed by price and quality transparency for 80% of benefit plan dollars.

Unfortunately, the Patient Protection and Affordable Care Act does almost nothing to control our skyrocketing health care costs. In that sense the Supreme Court ruling today is a skirmish in a decades long battle to rescue America from the utterly out-of-control waste in health spending in America.

Going forward, health costs are a huge risk to be managed, rather than a traditional human resources construct.

Our 20-year experiment with modern day corporate sponsored health and wellness has not saved money.^* While some people have been helped by it ... no doubt ... in the end it has not been effective in controlling health costs. The facts on this have been known for several years yet many Human Resources managers have clung to the notion that health and wellness will eventually turn their spending trends down if they can just find the right mix of incentives, communications, prizes, games, or whatever.

I've been speaking on this topic for years. Last week I gave a speech in front of an audience of corporate benefit managers and something surprising happened. For the first time much, or even most, of the audience agreed!

This is really good news as it paves the way for getting past trying to implement solutions that don't work and start doing things that DO work. What does work? Micromanaging the outlier population in plans, i.e., the 6-8% of plan members who are spending 80% of plan dollars.

There is much confusion about who the outliers are. It's not averages that are important but rather distributions. Using averages in population health matters is a fallacy-rich proposition. Actuaries understand that well. Distribution analyses reveals outliers.

Let me explain by an example. Benefit executives tell me they are devoted to managing their diabetes cases because the average diabetic spends about $30k per year.

That $30k figure is kind of correct, but not really.

90% of the diabetics may be spending $7k per year but 10% (outliers) may be spending $240k per year. The average is about $30k, but that does not describe the diabetic cases well, does it?

What do you want to manage? The $7k cases? Or the $240k cases? Hint: A good size proportion of the $240k cases are having tests and surgical procedures which offer no mortality or lifestyle advantage.

Another example: The average age of a group of people may be age 50. But if the group is made up people half of whom are age 10 and half age 90, then saying the average age is 50 is misleading. (By the way, we are not supposed to do averages on bimodal populations like these examples.)

Promising trends:

• Some benefit managers are starting to think like risk managers.
• People are realizing that health and wellness will not save money.
• Some companies are digging deep into their data.
• Companies are starting to look at distributions of spending, not just averages.
• Companies are starting to understand the needs of their outlier populations.
• Some companies are starting to develop special solutions for their outliers.

That is all good news.

^*Having said all this, promoting health and wellness in your company is a good thing. Just don't expect dollar savings.

At one time the view of health benefits was one of satisfying/motivating employees, closely coupled with a notion that health benefits were a great way to attract and retain top talent. Truthfully, that was never really the correct notion of health care reimbursement models.

Early in my benefit career, I was moved into a HR generalist role in a division of British Petroleum. In that job I interviewed candidates for managerial and executive positions. In a short time something became very clear. Triple "A" candidates rarely asked questions about the health plan. They just wanted to know that there was one. Rather, they asked questions to ensure they would be a good fit, also questions about growth opportunities, and so on. When we hired people like that they tended to be successful.

"C" candidates often asked detailed questions about the health plan, time off programs, and disability benefits. The benefit questions were often highly detailed questions about how many chiropractic visits they were allowed each year, minute details about how the deductibles and out-of-pocket limits worked, plus lots of "what if" questions, etc. Once in a while there were good reasons for those questions, but usually not. When we hired such folks, they tended to do poorly in the company and were often the first to go in the next staff reduction.

My first point is if you use health benefits as a "critical" competitive advantage tool in recruiting, you may very well be most appealing to the wrong people.

My second point is that while companies need to offer a well-rounded package of benefits, health costs are a major risk that needs to be managed. Successful benefit executives going forward will understand this critical difference.

• US spending on health care is lapping our peer countries while our life expectancy is declining comparatively. This is a major drain on our economy and is costing us jobs.
• We have a huge amount of unnecessary surgery and testing. It's getting worse, not better. (Read The Treatment Trap by Rosemary Gibson and Janardan Prasad Singh for real life examples.)
• In health plans today, a small number of members are spending most of the money. I've seen very large plans in which 10% of members are spending 80% of plan dollars. These "outliers" are usually in the middle of serious acute health crises and are way beyond wellness, preventive, value-based purchasing, Health Savings Account incentives, consumer driven health care, public/private partnerships, etc. "Outliers" often need specialized tertiary or quaternary care.
• There is huge variation between tertiary and quaternary referral centers in terms of getting the diagnoses right, having the best outcomes, and saving lives. The best referral centers are the most cost effective too.
• Most specialists in the United States don't coordinate care or diagnoses. As a consequence, a large number of "outliers" are misdiagnosed and/or have bad treatment and surgical plans. This is a huge opportunity for benefit plans.
• Alas ... we know that true reform can never and will never come from Washington. Members of Congress will see to it that clinics and hospitals in their districts are protected.
• Health insurers understand this but are often not supported by corporate benefit executives when they delete poor performing doctors and hospitals from their networks.
• Most benefit executives are looking for the deepest discounts when selecting a network, not the lowest net cost, a big difference. Lowest net cost comes from getting diagnoses right, avoiding bad surgery, and coordinating care. Those traits trump deepest discount every time. A small but growing number of large corporations are getting this one right.
• If the system is to be reformed it will be done by corporate benefit executives. Congress can't. Insurers can't.
• Most of the clinicians who over-test and do a poor job of getting diagnoses and treatment plans right aren't going to improve until someone takes their patients away. Period.

The question is, how to take their patients away. There's a way.

If you are a benefit executive:

• Ask your Third Party Administrator, carrier, or Preferred Provider Organization to start figuring out who the "A players" are and load your networks with them. Ask them to identify the "C clinicians" and begin the process of deleting them from your network. The savings potential from this is huge. Plus, you will be protecting your employees and improving the quality of their care.
• Educate your employees about this.
• For your outlier population, implement centers of excellence for their specialized needs.
• If your company has more than 5,000 covered lives or so, you should develop and implement direct contracts with the best of the best centers of excellence, ones like the Mayo Clinic and the Cleveland Clinic. Great companies like Pepsi, Walmart, and Lowes have done just this, plus many others. You can do it too.