Healthcare Round Table September 2010

More North Carolina companies want health coverage crafted to give employees incentives to make better choices.

Health-care reform remains confusing, with many of its provisions still unwritten. But one thing is clear. Employers and insurers want the plans that arise out of it to give incentives to the people covered to stay healthier. That was the consensus of a group of health-care experts at a recent round table on the health-care industry and its impact on the economy. Participating were William K. Atkinson, CEO of Raleigh-based WakeMed Health & Hospitals in Raleigh; Greg Griggs, executive vice president of the North Carolina Academy of Family Physicians in Raleigh; Edward H. Stall Jr., principal at Dixon Hughes PLLC accounting firm; Sam Taylor, president of North Carolina Biosciences Organization (NCBIO) in Research Triangle Park; and Brad Wilson, CEO of Chapel Hill-based Blue Cross and Blue Shield of North Carolina. Business North Carolina publisher Ben Kinney moderated the discussion, held at Raleigh-based Capstrat and sponsored by Dixon Hughes and Blue Cross. Following is a transcript, edited for brevity and clarity.


What’s the economic impact of the health-care industry in the state?

Taylor: The life-sciences, manufacturing and service-provider diagnostic-testing companies represented by NCBIO contribute about $45 billion a year in economic output. Total employment is about 57,000. Indirect employment is about 180,000 at more than 500 companies. They contribute about $1.4 billion in annual state and local taxes.

Wilson: Think about it in its broadest terms. We have faculty and staff at universities and community colleges who directly train practitioners. Think about the medical practices that essentially are small businesses. Scale that up to an organization such as the one that Bill Atkinson leads. Then you think about the allied industries. Think about Blue Cross and Blue Shield of North Carolina and our at least 12 competitors in the state. We employ slightly fewer than 4,500 and are a $5 billion company. It’s a pretty big deal to the economy.

Griggs: Every new family physician in North Carolina generates almost $1 million in economic development. We have 2,700 family doctors in the state. The average practice has three or four administrative and nursing staff jobs for every doctor. That’s a lot of jobs.

Atkinson: Just after World War II, the state looked at the growth of health care, especially in the rural areas, and a conscientious effort was made to increase the availability of physicians and hospitals and nurses. In this down economy, the number of persons employed in health care is still growing.

Stall: Health care goes through all sizes and shapes and flavors of our communities, but usually is the number one, two, or three employer. Then you have to add the real estate and the medical office buildings to house that.

Atkinson: Then there’s the research work at Research Triangle Park, Charlotte and across the state. There’s even work at places that you don’t traditionally think about as health care such as the School of Public Health at UNC Chapel Hill.

Taylor: Not only are we generating direct economic impact, we’re improving quality of life. That’s critically important to productivity. If you’re adding another day of productive work to a factory floor or another productive day at a research or government institution, you’re really adding to the economy.

Wilson: All of us who care about North Carolina need to think about medical tourism as an economic-development opportunity. We need to decide that North Carolina wants to be the destination rather than the exporter. We need to figure out how to put our wonderful facilities, highly trained physicians, innovation and research together in a marketing plan and bring people here.

"We want to reduce the cost of health care, and there are ways to do it."

Should the state’s excellence in health care be more of a recruiting tool?

Griggs: Absolutely. I was at a recent meeting with Dr. Paul Grundy of IBM, who is a leader in the patient-centered primary-care collaborative. He spoke about how the company just moved 600 jobs from south Florida to Iowa. Why? Because of health care. So we’ve got to look at this holistically and promote the specialties we have. When Ted Kennedy had a brain tumor, he came to Duke. A lot of people are coming to North Carolina to facilities like WakeMed and Duke and UNC.

Taylor: As we move to personalized medicine, there’s going to be a real premium on proximity to the qualified provider. If you’re figuring out your genetic predisposition to a disease or if you’re figuring out exactly how you are going to get gene therapy, you’ve got to have that health-care provider right there. Different areas of the country will emerge as personalized-care centers of excellence.

Griggs: But we’ve also got to make sure we take care of our primary-care base, because in the long term we’ve got to change the paradigm to keep people from progressing to that point. Well care really is what’s going to bend the cost curve long term. That’s going to be an economic engine, too.

Atkinson: State government is working to coordinate care across the state, with secure information shared in a safe way. If there is an emergency, how do you get that information — not just in our state but around the world? You can do that financially with automated teller machines today. Why can’t you do it with health-care information?

So more technology is the answer?

Atkinson: In the hospital industry, there’s a phrase: It’s about clicks, not bricks. About 40% of capital expenditures by hospital-related organizations are going to be information technology, according to the latest predictions. At WakeMed, we’re already at 38% for the third year in a row. Part of that is around the many opportunities to connect with physicians because the bulk of health-care delivery in the nation is really happening in doctor offices, not in hospitals. And today they are virtually disconnected. We have connections on information for insurance but not so much for patient care.

Stall: Public policy has given us a glimpse that that’s going to be a tremendous growth area. There are subsidies for electronic health records. We’re talking about a transferable electronic health record for a patient that can go from location to location. There are subsidies — if you allow the government to tell you how to do it.

Griggs: About half the primary-care practices already have electronic health records. But that’s probably not half the battle. A lot of the early EHRs don’t talk to one another. They don’t talk to hospital systems. We’re lucky in North Carolina because we do have a lot of infrastructure. But it’s a huge challenge.

Wilson: One of the wonderful results of health-care reform is that it has broadened access to the system. But I think we all agree here that we don’t have enough supply to meet today’s demand. The forecast is that we’ll have about 2 million more North Carolinians that will be insured some way — either through Medicare, Medicaid or private insurance. How will those people get care?

How can it be done?

Wilson: Care is going to have to be delivered in a different way. And while we’ve been focused on technology and the delivery system, we need to change the way we live. I can’t quote the amount of productivity lost because of obesity, but it is staggering. So one of the challenges we have is how to take those small steps that will improve our health so that we can help with the supply/demand equation by not continuing to put more demand on an overtaxed system.

Taylor: We’re going to be challenged during this period of health reform to balance innovation and cost control, because typically innovative therapies are initially more expensive. That penny we save today may save another penny tomorrow and another penny after that, or that penny may cost us some money tomorrow if we stifle innovation.

Stall: Our environment on reform is making policy around how to increase coverage and determine how providers are going to get paid. The screaming gap is: ‘Where is personal responsibility?’ The health system gets the diabetes patient after the diabetes is a problem, and it could have been cared for at home. What seems to be missing is the mandate on the individuals for healthy choices and incentives for that.

Griggs: In every other developed country, the balance between specialty and primary care is about 50/50. Our country is 70/30, heading toward 80/20 and getting worse every day. We can prevent problems upfront if we shift toward patient-centered home care and things such as e-visits and group visits.

"The screaming gap is, ‘Where is personal responsibility?’"

Can you explain?

Griggs: I saw a presentation recently where a physician had been trying to get this diabetic to exercise and couldn’t. But the first time this physician had a group visit for his diabetes patients, another patient said, ‘Well, I walk every Tuesday and Thursday, why don’t you come walk with me?’ That patient started walking. It was something the doctor couldn’t accomplish alone.

Atkinson: Innovation isn’t always technology. It can be in policy, the way we think about things, or it can be going back to a primary-care focus. We built an entire industry around responding after the fact, and we need to figure out how to prevent many of these things.

Wilson: The supply/demand equation is going to force us to have those kinds of conversations. Health-care reform is as dramatic a historical event in our country as the passage of the Social Security Act or the Civil Rights Act. The full impact and implementation of those were not known for a number of years.

What’s happening with reform?

Wilson: What’s encouraging to me is there is a new spirit of cooperation for us to come together and do this in what I call ‘the North Carolina way’ — without acrimony, recognizing that along the way we’re going to bump into each other. We have a choice when that happens. We can decide that we’re going to focus on that conflict and heat it up, or we can work through it. We’ll figure it out in North Carolina. I have no doubt about it.

Atkinson: I’m very much a fan of the general direction we’re going. Trust me, there are political errors on both sides of the spectrum, and there are tens of thousands of decisions that haven’t been made. But I would say this, if you look at the surveys in North Carolina, there’s a pretty universal comment back. It’s about access, cost and quality, in that order.

What are the concerns?

Atkinson: They’re defined differently by consumers and providers. Access is: If I need a doctor, am I going to be able to see one? If my family needs a hospital, are they going to be able to get in? Cost: Is it going to break my bank account? The same for employers: Can they afford to insure their employees? And then quality: Consumers define it as how much time they get with a nurse or a doctor and whether the caregiver listened to them? They want a good outcome.

What about the cost for employers?

Atkinson: All of us here are employers. We want to reduce the cost of health care, and there are ways to do it. That would be innovation. It’s not about technology, it’s about common sense.

Taylor: Innovation usually requires an intersection of desperate perspectives. It’s at the interstitial spaces between areas of expertise that innovation occurs. As North Carolinians, we’re going to come together, and it’s going to be a process of maturing collective thought. That can take place not only in payment regimes and health-care regimes, it can take place in technology.

Griggs: We are on the cutting edge of innovation. Community Care of North Carolina — the Medicaid care-management system ­­— has saved hundreds of millions of dollars by looking at chronic conditions such as asthma and diabetes. But we can’t look at a patient just as a diabetic because most people don’t have just one issue. It’s a diabetic who has congestive heart failure who is depressed. How are we going to deal with that person? We don’t need them landing in your emergency room.

Atkinson: A lot of people start with the discussion about emergency-room overuse. The traditional view is that’s bad. Instead of seeing that as negative, the question is: How do you take the folks who need emergency care and put them through the door and send those that don’t 10 feet down the hallway to a primary-care physician. We asked the federal government for permission to use that model in Wake County. It would provide the same care for about one-fifth of what it cost to come to the emergency department, and the feds said no. Even they are going to have to get more creative because they’re thinking in yesterday’s terms.

Wilson: I recently spoke with the leadership of a free clinic in western North Carolina, and they had done a survey that found about 20% of the people at the ER were there for a dental issue. The North Carolina Dental Society is trying to address that issue.

"We will have to balance innovation and cost control."

Does that impact businesses?

Wilson: An employer in that county said what they see in dental is a progression. The first time the employee is an hour late because he or she is waiting on the Tylenol to kick in because the tooth is aching. The next time it’s half a day. Then when the pain medication doesn’t take care of it, they stay out until it doesn’t hurt anymore. Ultimately they don’t show up until they are able to go to this particular free clinic, which just does extractions and only does them one day a week. Then the employee is out a day or two recovering from the extraction.

Atkinson: WakeMed has a dental service that we operate at a loss simply because you have to address the emergent dental issues for many patients who present with emergent cardiac issues because of the danger of infection. That’s an absurd position to be in.

What else are you hearing from businesses, large and small, about reform?

Stall: There is policy around required coverage that’s pretty easy to follow. It seems 25 is the magic number. If you have fewer than 25 employees, you get tax incentives — 35% of your payment can be rebated as a tax credit, and that goes to 50% in a couple of years. But when you get to 26 employees, there are no incentives. You’re exempt from mandated coverage up to 50 employees, so small businesses aren’t forced to take on costs that otherwise could put them out of business.

What happens for larger companies?

Stall: At the middle level, there are really no incentives. Then at the larger level, there are penalties. If you don’t, you pay a penalty of $2,000 per employee. So each business has a little decision to make.

Wilson: One other thing I’m hearing from employers loud and clear is a move toward a more vested interest in the health of their individual employees: ‘I’m paying most or all of the bill; therefore, I have a right to influence your individual behavior.’ At Blue Cross, we have programs where we make a higher contribution to employees’ health-insurance costs if they do certain things. Employers are asking us and others for programs that give the employer the right to say, ‘I will do this for you, but you’ve got to alter your behavior.’

Atkinson: I like to say Americans want the best health care someone else will pay for. The bottom line is that if somebody else is going to pay for it, then they get to name the tune you’re dancing to.

Stall: We’re going to have different levels of coverage. It’s going to put choice back in the matter — choice and cost back together. When people have to go to a health exchange and pick the bronze or the platinum plan and have to make a decision, it will be different.

Griggs: Companies are looking at more value-based benefit designs. The state employees’ health plan now is going to push you into a different plan if you are a smoker or are extraordinarily obese. You also have employers looking at things like dropping co-pays for primary care so that people will get check-ups. Some employers are even paying now up to $150, $250 for their employees to get a really comprehensive health screen to catch things early.

Wilson: Congressional analysts say that there still will be 18 million people in the country who will not have coverage, even with health-care reform. We need to recognize that there is still going to be a need for the free clinics we have in North Carolina. And we have to understand that we’re going to need to continue to invest in them and make sure that they are part of the health IT highway.

Griggs: A lot of our free clinics and federally qualified health centers got it right before the private sector. I visited a federally qualified health center where one of my board members is medical director, and they had full-time dentists. They had psychiatrists a couple of days a month, but a master’s-level psychologist every day. They had a pharmacy onsite. Patients could take care of all those issues that first visit. There are innovative solutions that are out there, and our state is ahead of the game on a lot of things — the thinking about integrated care, integrating mental health into medical care. We’re not there, but we’re ahead of some other states.

This article originally appeared in the September 2010 issue of Business North Carolina magazine.