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John Butler Addresses World Health Congress

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John Butler Executive Vice President administration and chief human resources officer

The following remarks were delivered by John D. Butler, Executive Vice President administration and chief human resources officer at Textron Inc., at The 3rd Annual World Health Care Congress in Washington, D.C. Butler, who is the director of the HR Policy Association and chairs the Health Care Quality Reform Initiative, addressed ongoing efforts to develop a Standard Format for Health Plan Requests for Information (Standard RFI).

Today I’m going to talk about how the association is driving critical reforms in the health care marketplace through concerted CHRO activity but first let me say a word about some of the innovative things we are doing at Textron in the health care area.

Turning to the HR Policy Association’s reform agenda, let me first set the stage by telling you who we are. As I’m sure everyone in this room is aware, there are myriad organizations working on health care quality reform. What can one more organization bring to the table?

HR Policy Association represents the chief human resource officers of over 260 major corporations doing business in the United States. The members employ over 12 percent of the U.S. private sector workforce or some 19 million Americans.

In most companies, the CHRO is the one who makes or at least influences the ultimate call on where that company is going to go for health care for its employees. When you are talking about making a decision that will involve tens of thousands of health care consumers—sometimes hundreds of thousands—that’s a lot of clout. Think of how much clout is possible, then, if over 200 CHROs, with almost 20 million employees all speak with one voice.

The question, of course, is what do we say?  This slide lays out the components of our reform agenda. Many of these are familiar objectives and will be repeated in various forms throughout this conference. But there is one thing that ties them together for us—a stronger, more effective role for consumers in the health care marketplace. This has two aspects. First, as the primary payer, the company needs to be a more effective consumer in its dealings with the plans and providers. Second, and even more importantly, our employees and their families must begin exercising the same degree of prudence and discernment that they bring to bear in all of their other purchases.

If you consider the various health care strategies of large companies, they are taking a lot of shapes and forms but there seems to be one constant running through all of them. The vast majority of us are shifting more and more responsibility for health care to our employees and not just in a financial sense. Just as we stopped telling our employees a few years ago to “check their brains at the door,” we are now no longer telling them to “check their brains at the reception desk” when they go see a doctor.

But how can we impose these expectations in a system where there is so little information about what it is you are buying?  Furthermore, the value of what they will get for their money is far below that of every other marketplace in which they act. A recent RAND study indicated that only a little over half—54.9 percent—of all patients receive the services that are recommended for their condition. What is even more interesting is that this percentage remained virtually the same regardless of income or other demographics.

 Thus, it is incumbent upon large companies to use our collective clout to drive improvements in the system that can address these deficiencies while helping our employees become just as effective in their health care decisionmaking as they are when they decide what stores to shop at and what products to purchase. Right now, we are a long way away from that.

So having considered our objectives, let’s take a look at our initiatives to further them.

Our reform efforts are divided into those we are pursuing at a national level and those at a regional level. I’m going to be talking mostly today about the national efforts, but let me focus first on our regional efforts because that’s where we started.

We began with a slightly modified version of a familiar activist phrase: “Think globally but act regionally.”  Our objective was to find one or two regions in which we could demonstrate that the engagement of those at the CHRO level could drive reforms and hopefully produce something regionally that could be duplicated or provide lessons for other regions.
 
This was a challenge. We didn’t want to spread ourselves too thin and we certainly didn’t want to disrupt any existing regional efforts. We know that there has been a lot of success at the regional level but we also know there have been a lot of failures.

Very early on, CIGNA approached us about partnering with several of our members with operations in Phoenix in implementing a comprehensive set of performance measures for hospitals and doctors in the area. As events later proved, we had clearly found a fertile location for our efforts. Within a very short time we were able to engage HR Policy members Honeywell, Intel, and IBM as well as other major national carriers Humana, Aetna and UnitedHealthcare.

As a result of our collective efforts, the Phoenix Regional Quality Reform Initiative was recently chosen as one of a select group to be part of a CMS pilot project providing meaningful quality data to consumers on physician practices. This demonstrates the clear value of our efforts to promote expanded quality transparency. Clearly, what we are learning in Phoenix will ultimately benefit employees and retirees throughout the country as we all seek to promote consumer activation in our health care programs.
 
Our other major initiative, in Detroit, is still a work in progress but, given the turmoil that is going on in that region right now, we are very encouraged by the significant strides we have made. In this case, the engagement at the CHRO level has been key, with considerable credit going to Larry Steward of DTE Energy and Joe Laymon of Ford Motor, both members of the HR Policy Board of Directors.
 
The participants in the project recently issued a request for information to the various national and regional plans concerning implementation of standard publicly reported performance measures for doctors and hospitals. The ultimate goal is to link common metrics to incentives in order to drive improvement, promote consumerism, and reward the best providers.
 
There are a lot of distractions in Detroit right now but I think we all recognize that health care costs are among the major causes of the problems facing the automotive industry right now. Any efforts to improve their situation has to address health care and we are pleased to be an active part of that solution.

While we are very proud and encouraged by our regional initiatives we also recognize that, when all is said and done, it is our national health care system that is dysfunctional. As I mentioned before, what is driving all of HR Policy’s health care initiatives is the concept that over 200 large companies acting together can effectuate significant reforms.

Moreover, we don’t necessarily need to form a purchasing coalition to do this. If, in our contracting for health care, we all simply act from the same script and give the same marching orders to our vendors—the plans and providers—we can achieve tremendous improvements in cost, efficiency and quality. A central precept of these principles is that employers can drive change through the health care contracting process. So we have developed a number of contracting principles that I will discuss in a moment. I will then describe the first major initiative to implement these principles—a standard health plan request for information instrument.

To accomplish our objectives, it was clear very early on that we needed to form a brain trust of benefits executives from a cross-section of HR Policy member companies. Thus, we formed a Task Force on Contracting for the Future of Health Care, composed of the individuals you see on this slide. I suspect that most, if not all, of these names will be familiar to you. Certainly, their companies have distinguished themselves as innovative leaders in employee benefit programs at a time at a time of great turmoil and uncertainty in this area.

All of these are companies that are deeply committed to using the contracting process to promote improvements in health care cost and quality. One of the things that we have learned is that far too many employers in the past have simply renewed their existing contracts with their plans without doing any comparison-shopping. Nor have they imposed any new expectations on those plans. I would submit that taking the path of least resistance is at the root of many of our problems in the health care system and employers are no less to blame than anyone else.

Thus, we asked our Task Force to develop a series of principles that, if embraced by enough large companies, could create the needed critical mass for reform. These principles are available on the HRPolicy.org website but allow me to summarize some of the key points:

• Underscoring what I just said, contracts should be bid on a regular basis. Absent this action, there will be no competition for your company’s business and we all know how our own companies would likely respond if we thought our customer relationships were never at risk.

• Financial performance guarantees should be included in all contracts to reinforce plan and vendor contract commitments with financial consequences for failing to meet such things as trend guarantees on premiums and performance guarantees on administration or clinical quality.

• The importance of transparency of plan and provider performance cannot be overstated and the contracting process should establish reporting requirements in this area. Of course we know that the state of the art in this area is far from adequate. Nevertheless, we should insist on state of the art, at a minimum, in our contracts and continue to keep the pressure on the plans and the providers to upgrade this area until we achieve full transparency. Clearly, this is an area where one employer acting alone will have limited effectiveness. If we all speak with the same voice, however, we can make great strides.

• Pay for performance is critical to solving the problems of our health care system. If we are ever going to fix the quality and efficiency problems, we must drive volume to those who demonstrate the highest quality and the lowest cost. Among the ways contracts can address this are through consumer-directed designs, tiered networks and physician incentive programs.

• Communication with beneficiaries about the importance of consumerism is obviously critical to the success of all of this. It is easy for us to talk about promoting consumerism but changing behaviors that have been nurtured by a paternalistic system for more than half a century is no easy task.

• Promoting health lifestyles goes without saying. At the end of the day, the best way to save money in our health care system is to not have to use it in the first place.

• Finally, supporting public policy actions that advance these principles is key. HR Policy has a very active public policy agenda that is supporting bipartisan initiatives in Congress advancing health care IT, implementing Medicare pay-for-performance, and expanding health savings accounts, among other things.

These are just the highlights of our common purchasing principles. Now let’s turn to a major initiative to help employers implement these.

As I have said, at the core of our principles is the notion that employers must become actively engaged in the contracting process to drive quality and cost improvements in their own programs. That alone would be a major accomplishment. Yet, we can take that to a whole other level if we all agree on what many of those expectations are.

One of the most effective ways to do this is at the very beginning of the process, through a standard Request for Information that communicates to the plans a general consensus among employers as to what their needs and expectations are. HR Policy Association has recently joined with some of the leading consulting firms in launching a two-year process to try to develop a uniform core RFI.  

We are only at the beginning of the process here, and although the final product and timeline is still being defined, we are making great progress with some very influential and committed partners.

I want to emphasize at the outset that we are not trying to completely reinvent the wheel here. Nor are we trying to impose a one-size-fits-all for all companies. The plan is to draw from existing models, such as those currently being used by leading consulting firms as well as the eValu8 instrument that many companies are currently using. Meanwhile, I emphasize that this will be a “core” instrument that will be amenable to customization to meet the individual needs of companies. That flexibility is essential, but we are also assuming that the vast majority of its components will represent common interests among the companies who use it.

Let me now discuss what we see as 1) the benefits to a standard RFI, 2) who the players are in developing it and 3) what its basic structure will look like.

The reason we believe that this will be a successful initiative is that there will be many winners who will share its benefits. Not just employers and their employees, but the plans themselves.

• Let’s start with the number one concern to all of us—costs. When our Task Force met last summer with several of the plans, one common complaint was the amount of resources being consumed by having to respond to myriad Requests for Information that substantially overlapped each other but still required individual attention. One of the plans—CIGNA—specifically endorsed a standard instrument that would add “efficiency to the sales process and allow all health plans to devote resources to more productive pursuits.”  An analogy is the single application that is currently used in applying for college. In addition to savings in administrative costs, a standard RFI will also enable plans to get a better read on what their customers truly desire and they will be able to direct resources accordingly.

• Increasingly, employers are embracing Value-Based Purchasing, and we believe a standard RFI will provide needed support for this trend. Value-based purchasing is all about a rigorous contracting process. A standard RFI will enable employers to benefit from their own collective wisdom as to “best practices” in plan selection.

• I have already addressed the importance of transparency and pay-for-performance to fundamental health care market reform. A Standard RFI can help employers send a clear message on their expectations regarding use of common performance measures for doctors and hospitals along with substantial incentives to drive improvement, reward superior performers, and encourage consumers to use the best plans and doctors.

Finally, the use of a standard RFI would enhance our ability to assess the relative value of plan performance. We plan to develop the RFI content using an evidence-based approach assessing health plan capabilities with direct relevance to overall cost and quality. This is consistent with Humana’s recommendation to our task force that “new and more meaningful health plan performance measures relating to market reform criteria and goals should be jointly developed and put in force.”

On this last point, one of the things we hope to do with the information received through the Standard RFI is to provide annual awards to plans with exceptional performance in certain areas, such as innovations and emerging priorities, utilization of health information technology, and others. This will further incentivize plans to respond to the Standard RFI and seek to achieve exemplary performance.

These are tremendous benefits but it is clear that if we are going to develop something that works, we are going to need help.

HR Policy Association has neither the resources nor the expertise to pull this off by itself. Furthermore, we recognized early on that if we develop the RFI in a vacuum, without the involvement of those we hope to use it, it will be ignored. Thus, we have a number of key players in this effort.

First and foremost are the employer members of HR Policy Association, who will be the ones who ultimately decide whether to actually use what we develop. Dr. Jane Barlow of IBM and Jill Berger of Marriott are very actively engaged in the development process and are putting a great deal of their time into hammering out the broad contours as well as the details. The other members of the Task Force will also be actively engaged on a continuing basis.

I especially want to highlight the role of the major consulting firms that we are working with: Towers Perrin, Watson Wyatt, and Hewitt Consulting. It is worth noting that the development of health plan requests for information is a noteworthy part of these firms’ core business. Yet, they recognize the need to eliminate the Tower of Babel effect in this area so that they can devote needed resources to the unique needs of their clients. They also recognize that most of the value they bring to the table is not so much in asking the questions as it is in assessing the responses and matching those up to the needs of their individual clients. The standard RFI most certainly will not make that function obsolete. If anything, it will enrich it.

Another important participant in the effort—and actually the one who will do most of the work—is the National Business Coalition on Health, which has extensive experience in this area through its eValu8 instrument.

Finally, we will engage the health plans in an advisory capacity. Their role is a very important one as we want to make sure that we are actually reducing, rather than escalating, their administrative burden.

By engaging the employers, the consultants and the plans, we believe we can develop a user-friendly instrument that produces both savings and results, which will benefit all of the stakeholders in our health care system.

As I indicated earlier, there is not a lot I can share with you on content but we can at least take a look at what we see as the basic modules of the instrument.

The very first thing we did with our partners was take a look at all the various RFIs they were using to see if we could come up with a consensus on structure. Based on our early assessment, we see that eight basic modules on the slide as the essential components of a standard RFI:

• We start with a basic profile of the plan, which includes not just names and addresses but also such critical information as utilization of health information technology, innovations and emerging priorities, and account administration.

• How the plan engages and activates consumers will ask about provider quality and price information, coaching, outreach and similar efforts.
  How the plan contracts with providers and develops provider networks, will focus on such things as pay-for-performance, provider credentialing and accreditation, centers of excellence, tiered networks, and so forth.

• Questions concerning measurements and outcome determinations, will focus on administration—which will include claims, customer service, and so forth—but also on clinical outcomes as measured by HEDIS, Leapfrog, Bridges to Excellence, and others.

• Health management involves question regarding wellness and prevention programs, utilization management, and behavior change models.

• The last three modules focus on management of chronic diseases, such as diabetes and asthma, screening and management of behavioral health; and, finally pharmaceutical management.

As I said at the outset, this is a two-year project. Our hope is to complete the first three modules on this slide this year for use in the 2008 contracting cycle, with development of the others to follow next year. Obviously, employment-based health care is in a state of great transformation. Thus, beyond next year there will need to be continuing maintenance and updating of the instrument.

As you can see, there is a lot of work yet to be done but we are very excited about working with our partners to develop something that will better enable employers, consultants and plans to work together to try to improve a system that is in great disrepair. At the end of the day, the answer is consumer power. And whether we like it or not, we the employers, along with the federal government, are the major payers in the system. It’s time we start expecting to get our money’s worth.

Thank you.

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