Why don’t more employers use their purchasing power to buy quality health care?

Gary Kaplan, Virginia Mason CEO

Gary Kaplan, CEO of Virginia Mason Medical Center speaking at the CEO Summit in Seattle about transforming health care.

During a gathering of CEOs and other business leaders in Seattle May 7 and 8, Virginia Mason CEO Gary Kaplan, MD, posed a series of pointed questions for attendees:

  • Do you know what kind of health care you are buying?
  • Are you purchasing high quality efficient care or low quality wasteful care?
  • What are the conditions affecting your workers that constitute the highest aggregate cost?
  • Do you know your direct cost of care plus the cost of work loss?
  • Do you purchase health care services from providers based on price and quality?
  • Do you have clearly defined quality specifications for the care you buy?
  • Do you pay some providers more than others for the same services unrelated to medical outcomes?

We’ve said before that one of the great mysteries in health care today is why companies who pay for care do not demand better quality and efficiency. Sophisticated companies apply rigorous quality standards in purchasing just about every conceivable good or service except health care.

But that has to change; to accelerate reform employers must use their immense leverage to purchase high quality care.

Said Dr. Kaplan: “Employers play a key role in helping drive health care reform.”

“Employers play a key role in helping drive health care reform.”

-Dr. Kaplan

The May 7 and 8 CEO Summit on Health Care – co-hosted by Virginia Mason and the Seattle Chamber – brought together business leaders urgently searching for a better, more effective way to purchase care.

The message from Dr. Kaplan and his VM colleagues: Collaboration between companies and providers is essential to transforming the U.S. health care system. Through Marketplace Collaboratives – partnerships between VM and businesses including Starbucks and Intel, for example – VM has shown that when employers use their purchasing power with providers they get better quality at a lower cost.

The VM team – Drs. Kaplan, Robert Mecklenburg and Catherine Potts – outlined seven steps to affordable care:

  1. Use purchasing power to obtain quality and value
  2. Define health care quality with providers
  3. Prioritize high cost conditions and high cost patients
  4. Choose providers organized with reliable systems
  5. Pay for quality and only for quality
  6. Purchase quality and only quality
  7. Reduce the need for health care services

They also cited a specific definition of quality that has emerged from the Marketplace Collaborative work – a definition that distills what employers want from health care providers:

  1. Same-day access
  2. Rapid return to function
  3. Evidence-based, appropriate care
  4. 100 percent patient satisfaction
  5. Affordable price for employers and providers

So, that begs the question posed at the beginning of this post: Why don’t more employers use their purchasing power to buy quality health care?

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