A Three Part Series ” Seeking Better Value Part One: Segmenting the Challenges”

Seeking Better Value Part One: Segmenting the Challenge

“There are no whole truths; all truths are half-truths.  It is trying to treat them as whole-truths that plays the devil.”  Alfred North Whitehead

What mathematician Alfred North Whitehead said about mathematic and philosophic “truths” seems applicable to the perplexing challenge employers face in seeking better health for employees and better value for the healthcare dollar.  When it comes to a health care there are no whole solutions or universals fixes.  Indeed, health care’s very complexity, which we all seem to understand and acknowledge, should make it adequately clear that there cannot possibly be a proverbial silver bullet.  And, yet, we seem to keep searching for one.  From high deductible plans to high performing networks, the allure of simple solutions “plays the devil” when applied unilaterally to the overall system.

All that doesn’t mean, however, that there are no good solutions. There absolutely are. But solutions must be specific to distinct issues.  In health care, those issues can be segmented into three groups.

Segmenting Healthcare Issues.  Segmentation, of course, is the process of subdividing a large, complex, and heterogeneous market, population, or even problem into clearly identifiable, more homogeneous sub-sets or segments with shared characteristics.  Apply this concept to health care allows us to break it into three relatively discrete segments.

  • Chronic Disease.  According to the CDC, chronic diseases and conditions— from heart disease and stroke to type 2 diabetes, asthma, and depression—”are among the most common, costly, and preventable of all health problems.”  Chronic disease – directly and indirectly – represents the single largest liability for employer health plans.  Yet both the prevalence of the diseases as well as the risk factors (from obesity and smoking to high blood sugar or blood pressure levels) that drive them can be identified, quantified, and directly addressed.  Such measurement and management, however, requires a high level of continuity of care.
  • Episodic Interventions.  For our purposes, we’ll define this category as the more routine specialist and hospital services that patients need from time to time – anything from age-specific screenings and minor surgery to “bigger ticket” items such as joint replacements or even amputation.  Other than for pregnancy, which we’d also put in this category, many of these services are the result of unmanaged chronic disease – including, increasingly, obesity.  Unlike chronic care, the need for these interventions cannot be measured or predicted except on a population basis.  Also, unlike chronic care, continuity is rarely, if ever, an issue.  In fact, an enrollee who needs, say, arthroscopy for a knee may actually want to see a different arthropod for a torn rotator cuff – despite the fact that both interventions are orthopedic.  Finally, in any given market, any number of providers are likely to be able to provide these services.
  • Catastrophic Cases.  Catastrophic cases are the most rare, the most unpredictable, and typically the most expensive.  Think cancers, heart surgery, or neonatal care.Identifying Specific Challenges.  Segmenting the issues, then, allows us to define the challenges specific to each.  These can be fairly summarized as follows:
  • Chronic Disease.  The fact that chronic diseases accounts for 45-70% of our commercial spend and yet only 5-7% of the premium dollar goes to preventing or treating these diseases tells us that underspending is a major issue. There are probably two reasons for this.  First, both the literature and our nearly five years experience with PROMETHEUS Analytics© tells us that underutilization is a major issue.  Very few patients with chronic disease receive the majority of services they should.  Second, primary care services are simply not reimbursed at the same level as specialty services.
  • Episodic Interventions.  Whereas under-utilization is a major issue with chronic disease, a library of literature documents an over-utilization of episodic care services – particularly for certain procedures.   For forty years, the Dartmouth Atlas has documented wide variations in use rates that have very little to do with patient need.  According to a 10 year study published in the Mayo Clinic Proceedings, as many as 40% of interventions may either provide no benefit (thus, “ineffective”) or may actually harm patients.  Moreover, whereas underpricing is a significant issue with chronic disease, wildly variant pricing – without any demonstrable relationship to quality – can be observed in virtually any market.  In Denver, according to Healthcare Bluebook, a dozen or so of the most common procedures will vary from 250% to as much as 1100% – even within the same contracted network.
  • Catastrophic Cases.  Unlike episodic care where need may be questioned, some conditions or diagnoses are life-threatening and plainly need intense, perhaps extensive treatments.  Such cases, however, typically require an a-typical level of expertise.  People without medical expertise, particularly when caught in the emotional turmoil associated with life-threatening situations, simply are not in a position technically or emotionally to be “careful consumers” and need extensive support.
  • Summary.  In short, each of above types of issues are different in nature and present fundamentally different challenges.  Clearly, no single solution or approach can address all three issues.  As such, Part Two of our three part blog on segmenting care will look at fundamental strategies for dealing with each health care issue segment.  Finally, to realize the strategies identified in Part Two, Part Three will provide an inventory of tools and resources for implementing the various strategies we recommend.

Bob Smith
CBGH