Finding the best medicine: Employers are putting health providers under the microscope to find higher-quality care — and ultimately get a rein on cost increases - Cover Story - Brief Article

HR Magazine, Jan, 2002 by Susan J. Wells

Last October, four major employers took an unusual step designed to slow the pace of health care cost increases: They offered to pay more than they're billed by New York hospitals.

But there's a catch: The hospitals must show they're improving quality of care and patient safety. The companies believe that paying for higher-quality care in the short term will reduce costs in the long run.

The companies--Verizon Communications, IBM, PepsiCo and Xerox--have committed to paying $2 million in bonuses over two years to hospitals that take such quality-improvement steps as computerizing doctors' orders to prevent errors and staffing intensive-care units with critical-care physicians. The four companies relied on quality measurement standards developed by the Washington, D.C.-based Leapfrog Group, a year-old organization advocating health care improvements.

Leapfrog's executive director, Suzanne Delbanco, says the New York arrangement is precedent setting. But in another sense it's merely a dramatic illustration of a fast-growing trend in company-sponsored health care. Increasingly, employers are realizing that in their efforts to reduce health care costs, they also must focus on quality.

"At first the driving force was cost and buying power," says benefits consultant Gary Kushner, president of Kushner & Company Inc., a benefits consulting firm in Kalamazoo, Mich. "Now it's 'How do I really know and find out about who it is I'm buying from and what kind of quality I can expect?'"

Ken Drummer, a San Francisco-based senior health care consultant for Watson Wyatt Worldwide, headquartered in Washington, D.C., puts it this way: "The more focused on cost control [businesses] are, the more concerned about quality they'd better be."

The Debate Goes On

Employers and health industry experts long have grappled with health care choices, efficiency, delivery and quality ratings. However, they haven't always had much success.

"Quality is an elusive, difficult-to-measure commodity in health care," says Drummer. "One person's quality of care is another's excessive treatment."

Susan Pisano, spokeswoman for the American Association of Health Plans, based in Washington, D.C., acknowledges the importance of focusing on quality measures, but notes that it may not always be a company's most important factor when choosing a plan. "There is some frustration for plans that have invested heavily in accreditation, for example, after which they then find that the only thing that matters to the purchaser is price," she says.

Industry analysts cite three reasons for the difficulties in ascertaining health quality:

* The health care market traditionally has focused on price.

* Until recently, providers have not been willing to share information outside the medical community and report data publicly.

* Health care consumers often didn't have access to enough current data to make informed decisions.

But such obstacles are shrinking as employers demand quality improvements and the yardsticks for measuring them. For example:

* Employers appear to be turning an eye to quality. Case in point: Nearly half of the small firms in a recent Watson Wyatt study agreed that quality of care was probably suffering from too much cost-cutting.

And the nonprofit National Committee for Quality Assurance (NCQA), a Washington, D.C.-based organization that evaluates managed care organizations, offers employers a tool that calculates company cost savings in terms of decreased sick days and increased productivity when health care quality improves. The tool is available on the NCQA's web site and is receiving about 800 visits per week.

* Health plans may be less reluctant to share information publicly. Tufts Health Plan--the second-largest managed-care plan in Massachusetts--announced last fall that it would issue publicly available "report cards" on the quality of doctors' care.

Three years ago PacifiCare in California became the first HMO to publish physician report cards. The company now measures physician groups according to more than 40 measurements of clinical and service quality. Employers can use these report cards to choose health plans with higher quality ratings. They also can include the rankings in their educational materials to help employees choose a plan or switch to a better-quality one. And they can encourage doctors with lower ratings to improve--or else lose the employer's business.

There is a growing volume of Internet-based information on health providers, which enables HR practitioners to measure the quality of coverage options. This information is offered by accrediting groups, government agencies, non-profit organizations and even health plans (such as Tufts and PacifiCare). The development of this assessment data is one of the biggest factors enabling the push for increased health care quality assessment.

Types of Tools

The two main types of quality assessments are ratings by patients and measures of clinical performance.

Both are based on "outcomes research," which measures the results of health care practices and treatments. Outcomes research asks questions such as: Is the pain gone? Has the condition been managed appropriately? Can the patient carry out his or her daily activities? Was the care satisfactory?