When Amazon, Berkshire Hathaway and JP Morgan announced plans earlier this month to create a new company that will take charge of healthcare delivery to their more than 1 million combined workers, it created a lot of buzz, both because of the high-profile players and the scant details offered.

But it’s not the first time big companies have been banded together in recent years to take proactive action against the dysfunction and high prices in the American healthcare system.

Two years ago, 20 of America’s largest companies — including American Express, Verizon, Caterpillar and Marriott International — formed the not-for-profit Health Transformation Alliance, with the stated goal to “improve the way healthcare benefits will be purchased for employees in an effort to create better healthcare outcomes and to “break with existing marketplace practices that are costly, wasteful and inefficient, all of which have resulted in employees paying higher premiums, copayments and deductibles every year.”

Today, the groups’ membership has doubled in size, and it has become a formidable force in what HTA CEO Rob Andrews calls the tug of war between the “fee for value and the fee for service” models of healthcare.

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“We believe that the future of American healthcare largely depends on shifting the payment systems to reward people good outcomes,” said Andrews, a former Democratic congressman from New Jersey.

Sally Pipes, president and CEO of the Pacific Research Institute, a San Francisco-based think tank, says, “There are a lot of disruptions going on in the healthcare space right now.”

Cost control?

One of the biggest problem is that America is a wealthy country and Americans are willing to pay for what they want.

“I think there is a big discussion on value-based, but as I said, we do spend a lot,” she said. And as with HMOs, people will be upset if they think their employers are forcing them into ‘value.’”

“They still want the spending, so they can get the very best,” she says.

HTA’s first big act was a partnership launched last year with CVS Health and OptumRx to change how companies provide prescription drug benefits through prescription plan management companies, known as pharmacy benefit managers, rather than having individual companies contract with these PBMs.

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At the heart of that partnership, as well as other initiatives underway, is transparency, which Andrews says has resulted in 15% across-the-board drug savings.

It’s a path-breaking approach for the way companies deliver prescription drug benefits to their workers, he said. In addition, the HTA will work with its PBM partners to create better formularies, which list the prescription drugs commonly agreed to be used by the medical profession and the insurance industry.

Perhaps their strongest weapon, however comes from their IBM Watson-powered database.

Shared data

The members are all large companies that self-insure, using health insurance companies as administrators, rather than underwriters.

Each member agrees to share their health insurance data under the secure platform, which analyzes pricing, so companies can see, for instance, if someone else is paying $45,000 for a knee replacement to their $60,000.

“They are able to see what the others are paying,” Andrews said. When you think about what that does to your market leverage. In many ways, we think that is the most important (of our initiatives.)”

The group also has three tests ongoing in Dallas, Phoenix and Chicago where they are working with medical providers to make payment based on patient outcomes rather than traditional flat rates for services.

Some insurance companies are also experimenting in this area. United Healthcare, for instance, has launched a value-based fee structure for spine and joint surgeries at with 65 companies at 46 participating healthcare facilities

The company says it has helped reduce hospital readmissions by 22% and led to 17% fewer complications for joint replacement surgeries, as compared to nonparticipating facilities. For spine surgeries, hospital readmissions were reduced by 10% and there were 3.4% fewer complications, as compared to nonparticipating facilities.

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Since the program’s introduction, participating employers have realized an average savings of $18,000 per operation when compared with median costs in the same metropolitan area. United Healthcare said. Eligible employees saved more than $3,000 in out-of-pocket costs per procedure when accessing a participating facility rather than another in-network medical facility, with possible incentives including cash, gift cards, additional vacation days for recovery, and health savings account contributions.

Top goals

The HTA’s top three to goals this year, Andrews said, are to grow their network, develop a toolkit with better databases on the many different drugs and which ones are best for individual patients in order to reduce emergency room visits and return doctor visits.

He says studies have shown that about 30% of the money spent in healthcare goes back to issues with drugs that don’t work for some patients or cause problems.

“It’s not fraud. It’s not malpractice. It really flows from a lack of information in front of the physician at the moment,” says Andrews.

Another key goal, he says, is so reduce things like heart attacks and strokes through preventive care and giving doctors better information on which drugs are best for individual patients.

Although few details were released about the Amazon/Berkshire/JPMorgan agreement, Andrews says he hopes they will be on HTA’s side of the tug war, as JP Morgan and Burlington Northern, a Berkshire subsidiary, are already members of HTA.

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