Can We Reduce Corporate Healthcare Costs while Improving Benefits?
Across the United States, employers are struggling to provide affordable healthcare for their employees without compromising profitability. Employer-sponsored healthcare premiums are at an all-time high with family healthcare plans costing on average $20,576—a 5% increase from 2018—of which employees pay on average $6,015.1 This represents an annual premium increase of 55% since 2008, twice the rise in employees’ salaries (26%) and three times the rise of inflation (17%).2
To maintain profit margins in the face of these increases, most businesses have shifted a greater percentage of the cost of healthcare onto their employees by increasing their employees’ deductibles. (Since 2008, the average deductible for covered workers has increased by 212%.) This has made healthcare unaffordable for the average American, whose median annual income is $48,672.3 Given that the annual average out-of-pocket healthcare expense for an average American is $6,015,4 and that the typical American family has savings of less than $5,000,5 most Americans are functionally uninsured.
The Root Cause
Spending in the US healthcare system represents nearly 20% of US gross domestic product, amounting to 3.3 trillion dollars. The US spends more on healthcare than the next highest ten countries combined. Yet access to healthcare in the US is poor and healthcare outcomes are no better than in those other countries.6
Healthcare today costs too much money for many reasons, but one main reason is because of healthcare resource overutilization. Too many people go to the emergency room for non-emergent issues that their primary care doctor could have managed. Too many people get referred for tests and to specialists for issues that their primary care doctor could have figured out. Too many people get hospitalized for conditions that should never have been allowed to become serious and require hospitalization had they received proper primary care.
In a study on overtreatment in the US, physicians reported that at least 15-30% of overall medical care was unnecessary,7 including 22% of prescription medications, 24.9% of tests, and 11.1% of procedures. The most common reasons for overtreatment were physician fear of malpractice, patient pressure/request, and physicians’ inability to access medical records.8
The overuse of healthcare resources has caused the consumption of unnecessary healthcare to dramatically increase. Estimates of the cost of unnecessary healthcare utilization range from 10-30% of the nation’s total healthcare bill.9 Moreover, the overuse of medical services provides little clinical benefit and can actually cause harm. For example, the rate of unnecessary knee replacements is thought to be an astonishing 34%.10 Given that an estimated 2-3% of patients undergoing knee replacement surgery are harmed by the procedure, approximately 14,000 patients undergoing knee replacement surgery are harmed unnecessarily every year.11 Too much care is dangerous.
Further, hospitalization and the use of isolation rooms leads to loneliness, stigmatization, anxiety, and depression.12 Several studies have found that isolation is ineffective and doesn’t reduce the risk of inpatients transmitting MRSA infection.13,14 Yet we still do it. Patients in isolation have substantially longer hospitalizations and are six times more likely to experience avoidable adverse events, such as falls and ulcers, than patients who aren’t placed in isolation.15
The fee-for-service model itself (in which physicians are paid by insurance companies or health plans and reimbursement rates for primary care visits are low) is responsible in a large part for the inappropriate overutilization of healthcare resources. Because reimbursement levels in the fee-for-service model for primary care services is so poor, primary care physicians have been forced to add too many patients into their panels. Having too many patients to care for then leads to inadequate access and insufficient visit length. This then leads directly to an increased volume of healthcare encounters with healthcare providers outside of primary care, who don’t know the patients whom they’re seeing and who are often too busy to carefully think through the problems being presented to them. This then leads to over testing and overtreatment. A physician has on average 15.7 minutes to see a patient, which is a wholly inadequate amount of time to practice even basic medicine, which then leads to unnecessary specialist referrals. As a result of this lack of time patients are falling through the cracks in the healthcare system.
How do we improve our flawed healthcare system? How can employers offer better healthcare benefits to their employees while maintaining profitability? By rebuilding the healthcare system itself from the ground up. Given that unnecessary overutilization of medical services occurs mainly because patients lack access to quality primary care, we need to change the way we pay for healthcare at the beginning of the supply chain so that primary care physicians can reduce their patient panel sizes to levels at which they can offer the kind of access and attention their patients need.
How, for example, do we reduce the number of unnecessary visits to a surgeon for back pain? Give the patient adequate access to and time spent with their primary care physician. Primary care physicians deal with musculoskeletal issues all the time but can’t do so well when they only have 15 minutes scheduled for a visit. In direct primary care, the physician has enough time to evaluate and treat a patient’s musculoskeletal issues without referring the patient to an expensive specialist or ordering an MRI.
How do we prevent a senior from being unnecessarily admitted to the hospital through the emergency room? Give that senior access to a quality primary care physician 24 hours a day 7 days a week. A good primary care physician who’s fully engaged with a patient prior to an emergent phone call in the middle of the night can very quickly determine if the symptoms require a visit to an emergency room.
We’ve seen this work first-hand at ImagineMD. Here are two specific examples: A patient complaining of knee pain had been referred to a surgeon for a knee meniscus repair but visited one of our ImagineMD locations instead, where her physician recommended 6-8 weeks of physical therapy. The physician had the time to review the medical literature with the patient that supported physical therapy as an equally effective way to alleviate her knee pain. She opted for the physical therapy over the surgery, avoided an expensive specialist visit, and 6-8 weeks later was completely pain-free.
Another patient struggled repeatedly with bouts of severe abdominal pain and vomiting once a month. Every diagnostic test was negative. She was being admitted to the hospital every thirty days for a week at a time at enormous expense to her health plan. Her direct primary care physician continued to think and read about her problem and eventually found a paper in the medical literature that helped him identify the correct (and rare) diagnosis: abdominal migraines. When he treated her with migraine medication, her symptoms resolved and she no longer needed to be admitted to the hospital.
While fee-for-service doctors often throw up their hands and refer to expensive specialists, direct primary care doctors have the time to continue thinking and doing research about their patients’ problems. This often means the difference between obtaining the correct diagnosis and having patients visit doctor after doctor in search of the answer. The potential savings to the health plan in such cases are obvious.
When an employer adopts direct primary care into its health plan, downstream healthcare utilization decreases, including emergency room visits, urgent care visits, specialty referrals, imaging, surgery, and hospitalizations. This results in better health for employees, cost savings for the health plan, and reduced absenteeism from work. In changing the way primary care is reimbursed from the fee-for-service model—which misaligns incentives and creates an overwhelming workload for doctors, compromising the quality of medical care—to the membership model, primary care is at last allowed to flourish into the care it was always meant to be: comprehensive, personalized, quality care that also happens to be more cost effective than care available in the fee-for-service system. Direct primary care is a win-win-win—for employers, employees, and physicians.
1Kaiser Family Foundation Employer Health Benefits Survey, Sept 2019 (https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/)
2The Bureau of Labor Statistics, November 2018 (https://www.bls.gov/news.release/pdf/empsit.pdf)
3The Bureau of Labor Statistics, October 2019 (https://www.bls.gov/news.release/pdf/wkyeng.pdf)
4Kaiser Family Foundation Employer Health Benefits Survey, Sept 2019 (https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/)
5Magnify Money, August 2018 (https://www.magnifymoney.com/blog/news/average-american-savings/)
6The Los Angeles Times, July 2017 (https://www.latimes.com/nation/la-na-healthcare-comparison-20170715-htmlstory.html)
7The Public Library of Service (PLOS), September 2017 (https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0181970)
8The Public Library of Service (PLOS), September 2017 (https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0181970)
9Lancet, January 2017 (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5708862/)
10Annals of Surgery, December 2011 (https://www.ncbi.nlm.nih.gov/pubmed/21562405)
11Annals of Surgery, December 2011 (https://www.ncbi.nlm.nih.gov/pubmed/21562405)
12Clinical Infectious Diseases, March 2009 (https://academic.oup.com/cid/article/48/6/766/285568)
13Clinical Infectious Diseases, March 2009 (https://academic.oup.com/cid/article/48/6/766/285568)
14The American Journal of Infection Control, April 2014 (https://www.ncbi.nlm.nih.gov/pubmed/24559595)
15Clinical Infectious Diseases, March 2009 (https://academic.oup.com/cid/article/48/6/766/285568)
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