text: This is the transcript of my recent interview with Harvard Pilgrim’s CEO Eric Schultz. An audio version is available here.
  This is the transcript of my recent interview with Harvard Pilgrim’s CEO Eric Schultz. An audio version is available here.
  David E. Williams: This is David Williams, President of the Health Business Group and author of the Health Business blog. I’m here today with Eric Schultz, President and CEO of Harvard Pilgrim Health Care.
  Eric, there’s a lot of discussion these days about consumer engagement. What is consumer engagement and what is Harvard Pilgrim doing in that area?
  Eric H. Schultz: I agree, David. Consumer engagement is finally starting to get real traction. It has been a bit of a third rail because so many parts of consumer engagement speak to the individual role and individual responsibility.
  That doesn’t mean that we’re where we are with health care cost and quality because the consumers have failed to do something, not at all. But I think some policymakers, some elected officials might be concerned that the term consumer engagement is putting some sort of blame on consumers. And that’s not it at all.
  The other piece I would mention upfront, just to get the language out of the way is I recognize that some actors in the health care system just don’t like the word consumer.
  And I think what they’re getting to is that health care and wellness is very personal, it’s human. It’s not buying a refrigerator, and we understand that. Calling someone a health care a consumer is not meant to be disrespectful. It’s hard to imagine what more important decisions any one person can make.
  But I would just lay that out and so when I speak about consumers, I mean no disrespect. There is a place for that word. There also is a place for the word patient. Maybe it’s informed patient rather than consumer. But let’s put the language off to the side.
  The good news is that consumer engagement is getting real attention at the front line. Up until this point, we were seeing more attention being placed on the provider contracting strategies, moving away from fee-for-service and more toward payment for value, not for volume. And that’s essential for us in the United States getting our arms around more efficient care, more effective quality of care.
  But that, in and of itself, is absolutely insufficient for the U.S. to get where it needs to be, because in some cases there are providers with great market power, great brand power, and great geographic control. They really don’t have the same reason to reduce their cost or invest in how they deliver care to reduce the cost of care.
  That’s why we need this counter force, which is where the consumer comes in, to reward those providers that are doing a great job on cost and quality and frankly, to threaten those providers that are very costly. They may be high quality but don’t have the pressure yet to invest to become more cost-efficient.
  So it’s a dual kind of strategy and it’s very welcome.
  I’ve always felt that there are two ways for us to get control of cost trend. One is for the government to set rates, which I don’t believe is effective in dealing with trend over the long haul. And the second is for the market to work. And in United States, although some people say the market approach to health care has failed, I say the market has never been tested.
  We all know, in a market, you’ve got supply, you’ve got demand and you’ve got price. Even today the price is largely separated from the demanders. There are oligopolies and monopolies and everything in between where your demanders of service don’t have to know how much things cost. And therefore we don’t have the regular market rules applying. This is a nice way to get that started.
  There are really two major demanders. The first one that comes to mind most readily for most of us is the patient, the consumer. We demand care. The second is less obvious to those of us who are not in the business, clinical or otherwise, and that’s the referring physician.
  There is value in physicians having transparency, especially for primary care physicians and a handful of specialists that have the responsibility and the authority to refer patients to other institutions or clinicians. And yet, even they don’t know how much these services cost nor do they know the quality. They may think they do, but it’s anecdotal, because that’s how we’ve always run this business as physicians. They need the information.
  So it’s nice to see consumer engagement happening and it’s nice to engage the demanders in a way that’s going to really have an impact on the supply and on the price of the supply.
  Williams: Much of the recent discussion about consumer engagement focuses on transparency and specifically, price transparency. What is Harvard Pilgrim doing in that area?
  Schultz: We’re very actively involved in price transparency. I will tell you that it’s been a journey. A worry of mine early on –and I’m past this point now—is that price transparency was occurring before there was quality of care transparency.
  Even with value-based insurance plans that act an important reason or incentive to use information to make decisions, if we, as consumers, know the cost of something and we don’t know the quality of it, the majority of consumers believe that if it costs more, the quality is better. So I think we were creating a tension that insurers wanted members to go to lower quality providers to save money.
  The other problem I had early on was that when you make prices that we’ve negotiated to pay physicians, hospitals and others available to the public, those providers who are being paid less are going to end pushing for more. And those who are being paid more, they’re not going to volunteer to get paid less.
  So all boats rise, and I was worried that the prices were going to rise. In fact, they did rise after the Attorney General came out with the report, which I’m glad came out. It’s an outstanding report and I wouldn’t have it any other way. I’m glad she did it and it’s been very helpful.
  But there’s been this evolution of thought. Now, I’m much more comfortable with being transparent on price because we’ve started producing better quality data at the provider-specific level or group level. So we’ve got some of that being balanced in.
  And the other thing is that the real thought leaders, whether elected officials, business leaders, or others are being much more open around the role of consumer engagement and we have a lot of studies out there that have shown that just because it costs more doesn’t mean the quality is better.
  So we’re moving forward aggressively in making cost and quality at the provider-specific level available to our customers and even more importantly to have it available with benefit-specific implications, because as you know, high-deductible plans have become very common.
  They’ve grown quite a bit here in Massachusetts and in New Hampshire and Maine where we operate. More and more, our members are at risk for big costs. Now we have information that helps them make decisions that are going to complement their benefit plan designs better.
  But it’s hard to know, with a $2,000 deductible, how much is left. If I have to go for an MRI and one is $1,900 and the other is $850, how much am I going to have to pay out of pocket, given whatever deductible is left? It’s complex.
  So it’s really important to have tools that provide information that is person-specific with the benefits that you have. And that’s exactly what we’re introducing in the marketplace in September called Now iKnow. It’s a tool that we’ve branded that has “Castlight Inside” which is a play on Intel Inside. Castlight has a great software technology that helps us bring it to the market quicker.
  The bottom line is to make more and more information available to complement the value-based insurance plans that we have, to complement tiered networks that we’re offering, and to put the consumers in the driver seat.
  We want them to feel more control than they had back in the ’90s when managed care really took a black eye because there weren’t choices. People didn’t feel like they had the control in so many ways. And that’s really what guides our thinking around transparency: empowering individuals with the information and the tools to make more informed decisions that work for them or their family member.
  There’s another interesting thing around transparency that we’ve identified, what we call aided transparency. One thing we know for sure here at Harvard Pilgrim is that this is definitely a journey that consumers are on. The notion of giving an individual information –even if it’s easy to access—along with value-based insurance plan designs, is a big shift on how people access care and think about paying for it.
  Aided transparency is really a transitional phase where we help individuals use the information. We have nurses that help individuals who use information along with their benefit plan designs. This is in a product called SaveOn.
  The idea behind SaveOn was to focus on those services that are easy to identify and where there is a huge swing in negotiated rates and a negligible difference in quality of care.
  To no surprise, high-end diagnostics like MRIs and CT scans and high-volume diagnostics like colonoscopies are the focus. These services have grown over the last decade because hospitals and large multi-specialty group practices, have pursued very deliberate revenue strategies and they’ve been really successful.
  The number of MRI machines out there in any given marketplace is outrageous. It’s overkill. But there’s never been a connection between demand and price and supply, so it’s worked. What we want to do now is provide an incentive to our members with SaveOn. If they are referred by their physician to get an MRI, we educate them that they can call our nurses.
  If my doctor wants me to have an MRI of the spine, our nurse will look online and offer alternatives that are lower cost within that driving time.
  Now you’d think that okay, that’s fine. But this is where the real value and nuances fall in place. If the members do this and they go get the care at the other place, we’ll pay them up to $75. So this is the first time we are keeping the benefits the same and paying a reward for making this choice.
  The second thing and this is the aided piece, we’ll also say to Mrs. Jones, would you like us to call your physician? Would you like us to call this new facility and set up the appointment for you? Would you like us to call the other and cancel?
  We address those administrative burdens and discomforting conversations you might have with your doctor. So many people don’t want to disagree with their physician; with our help they’re more likely to do it. It’s amazing. All of a sudden you feel their shoulders just dropping when you’re on the telephone with them because these issues have been a real barrier.
  The other thing if a patient calls and it turns out they’re already going to the most cost-effective provider we will say, “Mrs. Jones, thanks so much for calling. You’re at the best provider for cost and quality, but we’ll send you a check for $10 just for calling in.
  We want to reward people, we want to help them get rid of some of the barriers. That’s the aided transparency that I’m talking about that we have to be ready to continue with. We don’t want to push the consumers too far too fast so they throw up their hands in frustration and then this strategy falls apart.
  Williams: You mentioned you see two fundamental approaches to cost containment, a government approach or a free-market approach. It seems in Massachusetts we have a hybrid. With recent health care reform laws, the government is taking some steps to require transparency. How does that fit in with what you’re doing? And is what the state government is doing helpful or unhelpful?
  Schultz: In Massachusetts, the state’s role has been largely helpful.
  The role of the government can be to catalyze action, which has been really good. They don’t want to overly prescribe what things should look like. They want to see how the market can produce something because with competition, we’re desirous of having the better tool. And they want to take advantage of that. But they want to know that they’re pushing the industry to move in a direction that makes sense and where we all know it needs to go.
  So Chapter 224 last July had a requirement to have insurers produce a tool to support transparency. So I think that’s been really good.
  Another example of support from the government is to drive the conversation away from fee-for-service toward fee-for-value. That’s made a big difference. Providers, in particular, hospitals have responded. We’re seeing medical trends well below four percent; and it’s really the hard collaborative effort between providers, physicians and insurers responding to the invisible (or not so invisible) hand or of the regulators.
  Those are two good examples, where government is making a big difference.
  The area where I think we need greater movement is in requiring hospitals to produce a standard set of quality measures on a more real-time basis.
  A lot of data is used from Medicare reports and some other standard reports, but it’s not enough. Consumers should have access to that. The hospital level is a start, but we all know we’re moving toward a combination of physician and hospital department information; we have to get there but that’s down the road. So I’d like to see more movement to get better quality data. We’ve got a ways to go.
  Williams: You mentioned two types of demanders, patients, but also referring physicians. You’ve been describing a lot of activities and initiatives that you’re undertaking for the consumers. What about for those referring physicians? Can these same tools be use? Are there other tools that you’re using to help the referrers?
  Schultz: We’re more advanced with our tools for the consumer to begin with. We do provide some information for our physicians about the cost of specialists and the cost of hospitals. We have a long way to go in that arena, though.
  I know that tools, which will be in the hands of the consumers, will automatically have an influence on the referring physicians. My preference would have been –if the technology were there– to give the physicians, especially the referring physicians, the same tool at the same time. That’s where I would want to be if I were the physician.
  The bottom line is the first phase was available for the consumers and I said let’s get that out. Let’s not wait for both or perfection. The good news is that Harvard Pilgrim insures a large number of the physicians in the state. They are members of ours and they’ll have the tool.
  What we’re talking about here is only one slice of the pie, which is how we use the tool for acute services. We’re not talking about health and wellness. But transparency and value-based insurance have a big impact on our choices as consumers to be healthier. That’s probably a different subject than today’s discussion about price and quality transparency.
  But even when in making decisions about health and wellness, we want people to select physicians who have high scores, partly because they’re focused on how they keep their patients well. Do they manage all of their diabetics well? If so the scores would reflect that. So their higher quality scores will be partially a reflection of how they help their patients manage their health.
  Williams: You mentioned that you chose Castlight in order to get to market sooner. But not many health plans are using it. In fact, you may be the first one. Are there any barriers to plans bringing Castlight on and do you see other plans following in your footsteps?
  Schultz: We were the first health plan to select Castlight. I suppose for some payers it was a little bit unsettling because Castlight is going directly to large employers and selling this feature that creates competitive pressure on insurers.
  Our thinking here is first, we wanted speed-to-market. We were moving forward with the strategy before Massachusetts passed the law. So we were going to be fine anyway. We look at a number of products that were already existing and we felt this one was the best one that was out there.
  We are glad we had the opportunity to brand it uniquely to our health plans, so that helped to deal with some of that concern about competitive pressure. Another health plan in the marketplace, Tufts, is using Castlight. I think they’re using it under the Castlight name.
  There’s always a little bit of concern, but the greater value of bringing this to our customers won the day.
  Williams: I’ve been speaking today with Eric Schultz, President and CEO of Harvard Pilgrim. Thank you.
  Schultz: Nice to be here.
  (image: patient engagement / shutterstock)