Focusing on healthcare value

By Michael Thompson, Benjamin Isgur, and Serena Foong

Today, there’s no sure thing when it comes to healthcare—except ever-increasing costs. Employers understand that to confront the problem, they must question every aspect of their benefits strategies. And performance and results are becoming the new criteria by which everything is assessed. Michael Thompson, PwC's health industry leader for employers, and Benjamin Isgur and Serena Foong, research leaders with PwC’s Health Research Institute, discuss the challenges and solutions that proactive companies are pursuing this year and in the future.

The healthcare problem certainly isn’t new. But the recession, ongoing healthcare market changes, and the lingering prospect of healthcare reform have increased the pressure US businesses are feeling. Something’s got to give—and employers realize this means reevaluating everything they are currently doing as well as asking themselves, Are we maximizing the value of our healthcare dollars? Are we having a positive impact on our people’s health and their performance? How do we know?

While federal analysts recently reported that US health spending grew only 4.4 percent in 2008—its slowest rate in nearly 50 years—overall health spending, which reached $2.3 trillion in 2008, or $7,681 per person, still increased faster than the overall economy. Health spending was 16.2 percent of gross domestic product, up from 15.9 percent in the year prior.1 For 2010, PwC forecasts a 9 percent growth in medical costs, which is slower than in previous years but which will still outpace both inflation and workers’ earnings increases.

Image: Employers Employers are considering new approaches and revisiting existing ones.

To help offset those growing costs and help ensure they’re getting returns on their healthcare investment, employers are considering new approaches and revisiting existing ones. Strategies that top their lists include (1) developing a culture of health wherein employees are better engaged in their own health and productivity, (2) realigning incentives to promote and reinforce better health behaviors and more-thoughtful healthcare consumption, (3) reexamining healthcare delivery to reduce gaps in evidence-based care and channel toward higher-value models, and (4) collaborating with their vendors to drive better outcomes and help bend the curve in healthcare costs.

In a recent PwC survey, when employers were asked which strategies they plan to implement over the next two years, improving wellness, along with increasing cost sharing, led all responses,2 yet there was a high degree of skepticism about the effectiveness of these approaches.

Says Jim Greenwood, CEO of healthcare service provider Concentra, Inc., “The past year’s focus on healthcare reform has brought a lot of important issues to the forefront, most importantly the rising cost of care. Employers continue to seek ways to trim their healthcare costs while still being competitive in the market with a fair health benefit offering. Instead of eliminating benefits, more employers are implementing comprehensive health programs that positively impact the health of the workforce and reduce healthcare costs for the company and the individual.”

Image: healtcare

Key drivers of healthcare value

  • A culture of health
  • Realigned incentives
  • Value-based delivery
  • Performance management

1 Micah Hartman, Anne Martin, Olivia Nuccio, Aaron Catlin, and the National Health Expenditure Accounts Team, “Health spending growth at a historic low in 2008,” Health Affairs, January/February 2010.
2 PwC's Health Research Institute, Behind the numbers: Medical cost trends for 2010.