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Chief Executive Magazine


America's Health Care Revolution

March 04, 2007

By David Gratzer

Get your flu shot just past aisle four?

Take a strep test while you shop?

Across America, walk-in clinics are appearing in stores like Wal-Mart, offering no-frills health care as an alternative to time-intensive doctors' offices and ever-expensive ERs. These clinics are the latest example of a common trend that may transform American health care: companies rising to the challenge of making health care more consumer-friendly.

Consumer-driven health care is in. Corporate America embraces the concept; health insurance companies have rolled out a line of products; Washington buzzes with enthusiasm from the White House to K Street.

Consumer-driven health care is seen as a way of taming spiraling health costs while improving quality. The basic concept is simple enough: people, armed with health dollars, will increasingly shop around for health care, promoting competition, and thus innovation and greater efficiency.

Unfortunately, health care is the most confusing and consumer-unfriendly service industry in America. Understanding even the most basic information on quality, drug prices and insurance options can seem nearly impossible. While some government initiatives—such as the New York State report card on cardiac surgery—have sought to remedy this, these remain few and far between. But companies are rushing to fill the void.

RediClinics, found at stores like Wal-Mart and Walgreens, are a case in point. Staffed by nurse practitioners, the retail clinics provide basic services at low prices: a flu shot for $30, for example. Prices are listed and appointments aren't required. Shoppers can literally walk in and out in minutes, armed with a prescription.

Steve Case, the former AOL chairman, is the driving force behind the chain. He says that the idea for the no-frills clinic came to him a few years ago when he took his daughter to an ER for an ear infection and waited around for hours. His company, Revolution Health Care, plans to have more than 100 clinics running by year's end, and 500 within three years.

Other companies striving to transform health care as we know it include:

Definity Health. The company has just a dozen clients. But don't let that deceive you—they include Fortune 500 corporations like Medtronic, Siemens and Definity Health helps clients and their employees get more involved in health decisions by providing them with medical pricing information, a medical library, hospital quality ratings and a health-coaching program. It's a potent cocktail, and Definity Health has an impressive record, holding health-spending growth to 3 percent a year. Others have taken note—in 2004, UnitedHealthcare bought the company, though Definity Health continues to run under its own name.

The Leapfrog Group. There can't be much consumerism unless patients are armed with good information. For prospective patients, finding quality data on hospitals is difficult at best, and often impossible. The Leapfrog Group hopes to take the guesswork out of choosing surgical facilities by collecting data on high-risk surgeries in order to make comparisons (and, perhaps one day, comparison shopping) possible.

eHealthInsurance. More and more Americans are finding themselves without employer-funded health coverage and faced with finding a policy for themselves and their families. Enter eHealthInsurance. "We find the right health insurance to meet people's needs," explains CEO Gary Lauer. The company offers an easy-to-use Web site that allows anyone to enter his or her zip code and demographical information to get dozens of insurance options, with pricing and details. More than 150 insurance companies are participating.

Destiny Health. Based on a successful business model, Destiny Health's parent company in South Africa markets the most popular type of private health insurance, health savings accounts. Destiny Health offers more than a standard HSA/HRA. To promote wellness, the company has a point-based system to encourage intelligent choices—like getting routine physical exams and other types of preventive care, or joining a gym.

Members who accrue enough points can cash out for rewards. These companies may not be household names, but they represent a new generation within Corporate America. And more established corporations are also noting the changing environment.

This fall, Wal-Mart started a program offering a month's supply of more than 100 commonly prescribed generic drugs for just $4; the program is now available at stores in 27 states. The health insurance giant, Aetna, began posting prices for some physician and diagnostic services.

These developments are significant because consumer-driven health care seems like the right prescription for an ailing system. American health care, after all, is so expensive because it's so cheap. With people paying just 14 cents directly for every health care dollar spent in the U.S., Americans have historically failed to demand better quality at lower prices. Thus, while the prices of home computers dropped in recent years—despite vast improvements in technology—health insurance premiums doubled since 2000, with little change in health outcomes.

Of course, this begs a simple question: what can governments do to promote the trend? After all, consumer-driven health care is pinned on the idea of people doing some comparison shopping—a challenge when even basic hospital pricing often isn't available.

Some suggest legislation that mandates pricing transparency. Thus, hospitals would be required to disclose prices on, say, their most commonly performed procedures. Harvard Professor Regina Herzlinger, a senior fellow at the Manhattan Institute, goes a step further, proposing a new federal agency to oversee the industry modeled after the Securities and Exchange Commission.

Neither idea has much political support. A transparency bill proposed in the House of Representatives, for instance, didn't even make it out of committee. It's also not clear that either idea is necessarily critical to the success of building a better health care market. After all, pricing transparency exists in other sectors of the economy—not by government fiat but as a natural consequence of consumer demand. What's needed, then, is the enrollment of millions in consumer-driven plans.

Governments—particularly state governments—can play an important role here. Best of all, they can do that without spending a penny from their already strained treasuries. How? Allow government employees to enroll in the plans.

Today, only fives states—Arkansas, Colorado, Florida, Oklahoma and South Carolina—offer health savings accounts to be combined with a highdeductible insurance plan in their state employee plans. Imagine the boost to enrollment if Governors Eliot Spitzer and Arnold Schwarzenegger allowed government workers the option. Imagine the consequences: flu shots available in every Wal-Mart.

With the growing American appetite for medical consumerism, get ready for change in health care. In some ways, it was inevitable. In every other sector of the economy, we look to choice and competition. Health care has been the exception. Until now.

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