There are growing signs that traditional providers of what has long been mistakenly deemed “health care” – mistakenly because while it may aim to restore health, but it deals almost entirely with sickness – are venturing into the health management market.  Primary physicians are among the most interested, with hundreds already committed to managing their patients’ health, paid for by patients, themselves, through “boutique” practice retainers or fee for services.  Many more offer “executive health” services in that niche market, or special health coaching programs to un- and under-insured patients.

Nurse practitioners are even more involved, as hundreds work as “health” and “disease” management coaches, though in specialized health management supplier organizations, rather than traditional practices.  Some are also providing proactive health services in “retail clinics”, at least the minority of them such as RediClinics, that include “stay well” along with more common “get well” services on a patient-paid basis.  Moreover, hundreds are involved in worksite clinics serving employees in the growing number of onsite clinics employers are investing in.

Hospitals are involved in two ways: 1) as “make” suppliers of employee health management (EHM) programs to their own workforces; and 2) as “buy” suppliers, competing with specialized providers in EHM or in specialized, disease-specific programs for patients.  In both cases, they must compete with specialized suppliers, since buying health management services is always an option for internal applications, as well as for the fellow employers they may seek to serve in revenue-generating service lines.

Credibility Challenges

In competing with specialized suppliers, traditional providers have to overcome some significant credibility issues.  Since the business of healthcare providers has for decades been almost entirely dependent on sickness care utilization and revenue, particularly since that is what third-party payors pay them to do, engaging in health management services that reduce sickness is clearly in conflict with their business interests.

Physicians and nurses can easily specialize in health, as many boutique physicians have, emphasizing and demonstrating significant, often dramatic savings in terms of sickness care utilization and expense among their patients.  The MDVIP organization of 150 or so retainer physicians has done so, reporting hospital inpatient and ER use 30-90% lower than in traditional practices (www.mdvip.com), for example.  Since primary physicians are nowhere near as dependent on expensive sickness care procedures as are narrower surgical and medical specialists, and with many already engaged in occupational and corporate medical clinics that are increasingly focusing on health management, they have less of a credibility handicap.

Hospitals have two credibility handicaps.  First, when then have offered EHM services, it has been primarily if not exclusively in the “executive health” mode, which is at the very high end of the cost spectrum, typically priced from a few to as much as ten thousand dollars or more for a one- or few-days’ luxury stay.  And second, their facilities and equipment capital investments, as well as their entire operations are geared to sickness care and specialist medical staffs, where EHM conflicts with both their own and their medical staff’s financial interests.

There are many examples of consulting firms and marketing experts advising hospitals to create closer working relationships with local employers, in order to increase their share of local businesses’ employees who use the hospital for sickness care.  But if it takes significant sickness care cost savings for those employers to become buddies with hospitals, those savings come out of the hospitals’ revenue.  Financial incentives can easily be aligned between employer, physician and patient, but given hospitals’ “inherent need for (people) to use their services and fill their beds”, there is a built in and unavoidable misalignment with hospitals. [L. Butcher “The Workplace Doctor Is In” HealthLeaders News.  Mar 2007 (www.healthleadersmedia.com)

Moreover, many hospitals have already tried, and given up occupational health ventures as not part of their core business.  Worksite clinics take patients and revenue away from the hospitals’ sickness-focused medical staff, although Wheaton Franciscan Healthcare in Milwaukee, Wisconsin has a joint venture with the QualMed subsidiary of Quad/Graphics for sickness and wellness services for city/county employees in Racine. [D. Borfitz “Corporate Clinics: Grounds for Collaboration”, Strategic Health Care Marketing June 2007 1-5]

Many others have tried disease management, primarily with diabetes.  This is a major cause, both directly and indirectly, of a large share of sickness care utilization and revenue, but is a small cause of workforce absence, presenteeism, productivity impairment, and the other reasons that employers want to improve the health of their workforces.  Moreover, hospitals have as often failed to operate their diabetes management programs profitably to begin with, more often relying on charitable donations to keep them going. [I. Urbina “In the Treatment of Diabetes, Success Often Does Not Pay”, New York Times Jan 11, 2006 (www.nytimes.com)]

Of course, specialized suppliers of disease management often fail to achieve the sickness care cost savings needed to satisfy the federal government in its trial demonstrations, particularly when they charge fees that range from $80 to $444 per month, as was true in recently reported disappointing results. [V. Kuraitis “Mathematical Researchers Summarize Disappointing Results Across $ Medicare DM Demonstrations” e-CareManagement.com June 7, 2007]  But given hospital’s reputations for being very expensive places for sick people, they have a handicap in terms of credibility as affordable-cost providers for health management.

Both the inherent conflicts of interest between what makes revenue sense given their dependence on sickness care revenue and what is needed to succeed in employee health management, and their reputations as high-cost providers represent serious credibility challenges for hospitals in EHM.  The credibility challenge can be overcome, as a number of hospitals have already demonstrated, though it is anything but easy.