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Health Tracking

FROM THE FIELD

Obstacles To Employers’ Pursuit Of Health Care Quality

Abstract

 
Large employers’ roles in improving health care quality are shifting away from value-based purchasing toward direct efforts to improve health care delivery within local markets. Although most large employers adopted the tools required for value-based purchasing, inadequate information on quality has frustrated employers and limited their ability to make choices based on quality. More recent quality initiatives aimed at directly improving local health delivery systems may be limited to specific markets where the largest employers can exert substantial influence.

However, this competition based on cost and quality has not occurred, for several reasons well documented in the literature. These reasons include insufficient consumer choice, inadequate financial incentives for workers, and overlapping provider networks.³ Moreover, health plans have little incentive to develop high-quality programs that may attract sicker (more costly) enrollees.⁴ Despite the myriad of acronymic efforts to fill the quality information vacuum (for example, HEDIS, CAHPS, NCQA, FACCT JCAHO), the lack of useful information on quality for value-based purchasing is also a key shortcoming.⁵ Additional obstacles include the expense and difficulty of developing and collecting outcome measures, the perceived lack of return on investment, a lack of interest on the part of consumers, and the local nature of health care.⁶

New employer-based quality initiatives have emerged as employers direct quality improvement through specific recommendations, such as computerized physician order entry for medications. These efforts, including those of the Leapfrog Group, were spurred in part by the recent Institute of Medicine (IOM) reports on medical errors and patient safety, which heightened consumers’ and employers’ awareness of current gaps in health care quality.⁷ By "raising the bar" for quality, the largest employers and coalitions in a given market could drive quality-improvement activities that would spill over and benefit the whole community. Unlike the case of value-based purchasing, smaller employers as part of the large employer’s community might benefit without active participation.

This paper examines large employers’ views of the obstacles they face in pursuing quality improvement.⁸ Site visits to twelve communities elicited employers’ perspectives at a time when enthusiasm for managed competition was waning and awareness of patient safety and medical errors was growing. Here we examine large employers’ internal strategies for value-based purchasing and new market-level activities, and we discuss their likely role in future quality-improvement initiatives.

Data And Methods

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This research is based on the Community Tracking Study (CTS), a longitudinal study that conducts site visits to twelve urban communities every two years. In contrast to studies of best practices and cutting-edge markets, these twelve CTS communities were randomly selected to provide a representative perspective on national trends.⁹ During the third round of visits, completed between June 2000 and March 2001, semistructured interviews were conducted with 917 respondents from health plans, hospital systems, physician organizations, employers, and government.

This analysis reflects interviews with sixty-five respondents, including benefit managers of large public and private employers, health benefit consultants, union representatives, and leaders of local purchasing coalitions. Large employers were defined as those with 500 or more employees. We interviewed at least one of the most prominent employers in each market.

We asked large public and private employers about any current or planned quality initiatives with either health plans or providers. We also asked about purchasers’ quality efforts and their general interest in quality; employees’ grievances; planned changes in purchasing strategies; and local efforts to improve patient safety or prevent medical errors, or both.¹⁰

By corroborating views across respondents within markets, we examine how local circumstances affect large employers’ purchasing behavior. We also explore the extent to which the largest employers’ purchasing activities have influenced other community stakeholders. These influences could be seen as either changes in purchasing strategies among smaller employers or an enhanced focus on quality among plans and providers within a market. Given this design, however, we cannot estimate the prevalence of particular behavior or opinions.

Value-Based Purchasing Efforts

Top Data And Methods Value-Based Purchasing Efforts Market-Level Efforts To Improve... Employers' Future Role In... NOTES

 
Value purchasing requires a set of tools or techniques to encourage health plans to compete on more than price alone. Purchasers can use a process of requests for proposals (RFPs) or for information (RFIs) to allow plans to provide information about their networks, coverage, and quality. Plans responding to an RFP understand that their services will be compared with those of competitors and that employers will select one or more competing health plans. Employers may then provide their workers with a choice of plans, financial incentives to make cost-effective choices, and information on quality and satisfaction to help them make their decisions.

An additional tool for encouraging quality among health plans is to specify explicit performance standards. Performance standards may be used as the basis for selecting health plans, or they may be part of the contract, with financial penalties applied if the standards are not met. Examples of these standards include requiring hospitals in a network to meet safety standards, achieving targets for preventive care, and screening for chronic disease.

Employers’ value-purchasing practices. Across all twelve markets large employers have adopted many of the tools of value-based purchasing. Almost every large employer interviewed used an RFP process for plan selection and offered a choice of health plan products, either within a single carrier or among several carriers. Providing information to employees beyond a description of benefits was much less common. Although a number of employers shared National Committee for Quality Assurance (NCQA) accreditation and Health Plan Employer Data and Information Set (HEDIS) results with their employees, some benefit managers said that they do not pass this information along because they have not found useful formats for summarizing and presenting it. As described below respondents were skeptical of much of the information they received and were unwilling to pass it on to their employees. More typically, an employer would host an annual health fair and have health plans market their products directly to workers.

With rare exceptions, employers limited their use of performance standards to customer service, satisfaction, claims processing, and administrative services. Examples of the standards used by these large employers include requirements for timely processing of claims, handling customer service inquiries, and resolving complaints in a specified time period. Furthermore, although performance standards were commonly used, they were not viewed as particularly useful. Some employers described them as ineffective and said that some of their health plans routinely paid the financial penalties. Other respondents felt that performance standards were so vague that they were difficult to enforce.

Despite large employers’ use of the basic infrastructure for value-based purchasing, almost all but the very largest employers expressed frustration with the results and administrative hassle of using these purchasing tools. To relieve this administrative burden, benefit consultants were commonly employed to manage the information collected during the plan selection process. The largest employers within a community may use as many as three consulting firms to handle various aspects of their health benefit administration.

Benefit managers commented on the administrative cost and hassle involved with switching health plans. For example, one noted that if the company changed carriers, it would have to initiate the process at least nine months in advance. Moreover, public and private employers with a unionized workforce may switch plans in conjunction with collective bargaining, which occurs only every few years.

Quality information. Few respondents said that medical quality was a key criterion for plan selection; this finding is similar to previous findings in the literature.¹¹ Cost, service quality, network size, and financial solvency were commonly reported as important. Reasons for not selecting health plans based on medical quality fell into two categories. The majority of health benefit managers said that they were interested in quality but have been disappointed by the dearth of useful data. A second, smaller number of managers, often described in the literature, were not interested in quality information and did not see it as their role to collect or process this information.¹²

Among this small latter group of benefit managers, three views were common. First, immediate problems with customer service overwhelmed concerns about clinical quality. Second, a standard of quality should be intrinsic to the health care system and therefore transparent to the decisionmaker. For example, one manager in Miami likened medical quality to buying a car, saying that he leaves it to the auto industry to meet the national safety standards so that he doesn’t have to know what those standards are or make his choices based on those standards. Third, information on quality was unnecessary because of the high standards of the community. For example, in Cleveland and Boston some respondents summarized quality in their markets as "world class." One benefit manager in Lansing said that the company had not scheduled quality initiatives because every survey has shown that quality of care is very high with no room for improvement.

In contrast, the majority of health benefit managers were interested in quality improvement but provided a range of reasons why they were unable to incorporate information on quality into their purchasing decisions. Leading the list were concerns that not much of the available quality information was relevant to their decision making. The information on quality was described as "one of those things you can’t put your arms around." One reason given was that the information on medical quality did not adequately distinguish among plans except to establish a minimum standard. Judith Hibbard and colleagues describe NCQA accreditation as an attractive selection criterion because it integrates and summarizes plan characteristics in a single measure.¹³ So although employers use HEDIS measures and NCQA accreditation, they rarely view it as sufficient for choosing among health plans except to drop out poorer performers. One benefit manager lamented that because there were so few real differences among plans, his job was "to pick the tallest dwarf."

Although interested in quality information, other benefit managers did not trust the information they received. These respondents either considered the information unreliable because it came from the plans themselves or complained that it was not specific to their own employees and dependents. For example, one benefit manager was skeptical about quality measures—concerns included the precise population surveyed, the type of information collected, and the vendor that performed the survey.

When asked what information would be useful, benefit managers said that they would prefer provider-level outcome measures to plan-level information, given the substantial overlap among plans’ provider networks. Other managers mentioned that they would like to see physicians’ ratings of health plans. In addition, large employers contracting with fully insured health plans thought that having information about their own workers’ health care needs would be helpful. In contrast, self-insured employers with access to claims information recognized that inadequate sample size limited the use of outcome measures based on only their own employees and saw the value in a community-based data source.

Market-Level Efforts To Improve Quality

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In the past, employers in some markets have formed coalitions to improve the quality of care provided within their community as well as to improve purchasing leverage. Although efforts by coalitions were waning across the twelve markets, some of the largest employers were initiating patient-safety efforts to reduce medical errors.

Coalitions. Employers have worked together in coalitions for more than fifteen years.¹⁴ At one time, coalitions’ efforts to monitor quality and improve providers’ quality assurance programs were employers’ primary vehicle for quality improvement.¹⁵ Coalitions are now operating in six of the twelve CTS sites. Within each of the twelve markets a coalition had formed at one time, or employers had attempted to form one. In fact, large-employer respondents’ knowledge of previous efforts in coalition building tempered their enthusiasm for any new coalition efforts.

Coalitions observed during 2000 and 2001 were struggling to reshape their identity and set goals. For example, observers thought that members of the coalition in Indianapolis appeared torn between engaging in a purchasing program to achieve price reductions and reporting on quality. Similarly, in 1998, benefit managers and consultants noted that coalitions in several sites were unable to build interest in their quality initiatives.¹⁶

Leverage exerted by consolidated health systems has stymied some recent coalitionled quality initiatives in their markets. As health systems gained additional clout, they were better able to manage purchasers’ efforts to organize around quality initiatives. For example, the Cleveland Clinic Health System, controlling roughly one in three hospitals in its market, withdrew from the quality initiatives sponsored by the Cleveland Health Quality Choice program.¹⁷ Lansing and Indianapolis also are markets with coalitions and consolidated hospital systems. The Capital Area Health Alliance, a local coalition in Lansing, was pursuing some market-level quality efforts, including public reporting of hospital cost and outcomes data. But previous efforts by this coalition have been met with resistance from providers, so future efforts to use this coalition to engage in quality initiatives may be constrained.

Respondents for the largest employers were often reluctant to join or form coalitions because they thought they had little to gain. The largest employers in a market may achieve a little additional purchasing leverage, but they fear losing their flexibility in designing their health benefits.¹⁸ Hence, it may be easier for these employers to organize around public reporting of quality information than around purchasing efforts.

Patient-safety and medical error initiatives. The extent to which large employers knew about and were pursuing patient-safety initiatives varied greatly across markets. The most prominent patient-safety effort being promoted by employers is the Leapfrog Group. This effort, sponsored by the Business Roundtable, has selected several regions and communities in which to begin reducing medical errors. Leapfrog uses purchasing principles aimed toward encouraging large employers to recognize and reward health plans and hospitals for quality improvements. The Leapfrog Group was gaining recognition during the 2000–2001 CTS site visits, and employers in Seattle, northern New Jersey, and Boston were considering Leapfrog initiatives. Within these markets respondents’ views of the potential success of these efforts were mixed.

Employers in the largest CTS sites were the most savvy about patient-safety issues. The Boston market has a history of purchaser interest in quality because health care organizations are the largest employers in that community. However, employers’ perceptions of Boston’s high quality of care may reduce enthusiasm for initiating quality-improvement efforts. One respondent commented that the potential payoff from reducing medical errors in Boston might be low because the plans and providers already have high standards.

Respondents in northern New Jersey, another large CTS market, were also aware of national and local activities to reduce medical errors, yet they were doubtful of those activities’ eventual success. The large, predominantly national and international employers in this market must provide health insurance coverage nationally. As a result, these employers focused most of their quality concerns on national efforts such as HEDIS and NCQA accreditation and were less interested in their local market. Skeptics in this market mentioned the lack of credible data, with one respondent unfavorably comparing the Leapfrog Group with direct contracting.

The presence of a single dominant employer or coalition can also put patient-safety initiatives on purchasers’ radar screens. General Motors, a founding member of the Leapfrog Group, has a dominant presence in both Lansing and Indianapolis. Although neither market was the locus for employer-initiated patient-safety activities, most large employers were aware of Leapfrog’s activities in patient safety. Similarly, respondents in Orange County were aware of general quality initiatives because of two strong statewide organizations, the California Public Employees Retirement System (CalPERS) and the Pacific Business Group on Health (PBGH). Yet none of our purchaser respondents could identify specific patient-safety activities occurring within their market. No PBGH members have their headquarters in Orange County; hence, PBGH employers’ efforts to influence health quality may have been directed elsewhere in the state.

Respondents in small markets or markets without a single dominant employer were less likely to be involved in or know of any local patient-safety initiatives. In markets dominated by small businesses, such as Miami and Phoenix, employers do not have the leverage with hospital systems that would allow them to initiate patient-safety efforts. Meanwhile, employers in small markets such as Greenville and Little Rock may have fewer options for leading patient-safety efforts, given the considerable clout of the local hospital systems.

Employers’ Future Role In Quality Improvement

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As highlighted by our study, employers have adopted many of the tools of value-based purchasing, but they feel that inadequate information has left quality out of their purchasing equation. In addition, coalitions’ efforts to improve quality have often been at odds with local health systems. Furthermore, although patient-safety efforts are making headway in some communities, the structure of some markets may stall efforts in those communities.

Faced with these obstacles, employers appear to be at a crossroads in their efforts to drive quality improvement. As a result of sizable annual premium increases, employers’ primary concern continues to be cost, not quality. Also, as employers witness the erosion of the price differences between health maintenance organization (HMO) and preferred provider organization (PPO) products and as health plans move toward fewer restrictions, employers are looking beyond managed care for ways to control costs.¹⁹

Consumer-driven health plans have recently sparked considerable interest by promising to control costs by raising employees’ awareness of health care costs.²⁰ In these plans employees face higher deductibles but have personal spending accounts. By paying the full bill for health care out of personal accounts, consumers are expected to assess more carefully their need for care and participate more fully in that care.

To help decision making, most of the consumer-driven health plans available today incorporate quality information for consumers, although most of these are in the fledgling stages. For example, consumers may access Web sites that have provider-specific information. In addition, some consumer-driven health plans have formed partnerships with nationally renowned medical practices such as the Mayo Clinic and Johns Hopkins to provide consumer education.²¹ Yet because many of these quality efforts are so new, consumer-driven health plans may roll out with untested quality information, as did employers that embraced value-based purchasing but were unable to obtain understandable information about plan and provider performance.

Meanwhile, the largest employers as part of Leapfrog are moving forward with specific quality initiatives designed to reduce medical errors within chosen communities. Within markets where employers are pursuing these efforts, the whole community stands to gain. In some cases, if the cost-effectiveness of some of these approaches is demonstrated, diffusion to other markets may occur through standards established by the medical community, health plans, and public programs. Otherwise, the efforts to reduce medical errors and unnecessary variation in quality across communities may take longer to unfold as providers and policymakers grapple with these issues in piecemeal ways.

Editor's Notes

 
Lee Hargraves and Sally Trude are senior health researchers at the Center for Studying Health System Change in Washington, D.C.

This research was conducted as part of the Center for Studying Health System Change’s Community Tracking Study, which is funded by the Robert Wood Johnson Foundation. The authors gratefully acknowledge the work of their research team: Jon Christianson, Lesley Conwell, Lance Heineccius, Ashley Short, and Carolyn Watts. The authors also thank Conwell, Heineccius, Paul Ginsburg, Cara Lesser, and two anonymous reviewers for their valuable comments.

NOTES

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1. J.H. Hibbard, "Use of Outcome Data by Purchasers and Consumers: New Strategies and New Dilemmas," International Journal of Quality Health Care 10, no. 6 (1998): 503–508.
2. J. Maxwell, P. Temin, and C. Watts, "Corporate Health Care Purchasing among Fortune 500 Firms," Health Affairs (May/June 2001): 181–188.
3. M.S. Marquis and S.H. Long, "Trends in Managed Care and Managed Competition, 1993–1997," Health Affairs (Nov/Dec 1999): 75–88.
4. S.B. Jones, "Multiple Choice Health Insurance: The Lessons and Challenge to Private Insurers," Inquiry (Summer 1990): 161–166.
5. J.H. Hibbard et al., "Choosing a Health Plan: Do Large Employers Use the Data?" Health Affairs (Nov/Dec 1997): 172–180.
6. E.C. Becher and M.R. Chassin, "Improving the Quality of Health Care: Who Will Lead?" Health Affairs (Sep/Oct 2001): 164–179.
7. L.T. Kohn, J.M. Corrigan, and M.S. Donaldson, eds., To Err Is Human: Building a Safer Health System (Washington: National Academy Press, 1999); and Institute of Medicine, Crossing the Quality Chasm: A New Health System for the Twenty-first Century (Washington: National Academy Press, 2001).
8. For perspectives of providers or health plans, see K.J. Devers, "Quality Improvement by Providers: Market Developments Hinder Progress," and S. Felt-Lisk and G.P. Mays, "Back to the Drawing Board: New Directions in Health Plans’ Care Management Strategies," in this volume of Health Affairs.
9. P. Kemper et al., "The Design of the Community Tracking Study: A Longitudinal Study of Health System Change and Its Effect on People," Inquiry (Summer 1996): 195–206. For detailed community characteristics, see D.A. Draper et al., "The Changing Face of Managed Care," Health Affairs (Jan/Feb 2002): 11–23, Exhibit 1
10. Our interviews began in June 2000, after the release of the IOM report on errors in medicine. Kohn et al., eds., To Err Is Human.
11. See, for example, A.T. Lo Sasso et al., "Beyond Cost: ‘Responsible Purchasing’ of Managed Care by Employers," Health Affairs (Nov/Dec 1999): 212–223; J. Maxwell et al., "Managed Competition in Practice: ‘Value Purchasing’ by Fourteen Employers," Health Affairs (May/June 1998): 216–226; and Agency for Healthcare Research and Quality, Theory and Reality of Value-Based Purchasing: Lessons from the Pioneers, Pub. no. 98-0004 (Rockville, Md.: AHRQ, November 1997).
12. Becher and Chassin, "Improving the Quality of Health Care."
13. Hibbard et al., "Choosing a Health Plan."
14. C.G. McLaughlin, W.K. Zellers, and L.D. Brown, "Health Care Coalitions: Characteristics, Activities, and Prospects," Inquiry (Spring 1989): 72–83.
15. D.J. Lipson and J.M. De Sa, "Impact of Purchasing Strategies on Local Health Care Systems," Health Affairs (Summer 1996): 62–76.
16. J.B. Christianson, "The Role of Employers in Community Health Care Systems," Health Affairs (July/Aug 1998): 158–164.
17. California HealthCare Foundation, Voices of Experience: Case Studies in Measurement and Public Reporting of Health Care Quality (Oakland: CHCF, March 2001), 11–13.
18. Christianson, "The Role of Employers."
19. J.R. Gabel, "Job-Based Health Insurance, 1977–1998: The Accidental System under Scrutiny," Health Affairs (Nov/Dec 1999): 62–74; and Draper et al., "The Changing Face of Managed Care."
20. J.B. Christianson, S.T. Parente, and R. Taylor, "Defined-Contribution Health Insurance Products: Development and Prospects," Health Affairs (Jan/Feb 2002): 49–64.
21. J.A. Meyer and I.A. Tillman, Building Quality Improvement into Defined Contribution Strategies (Washington: New Directions for Policy, 2001).

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