Can United Healthcare’s Data  Fix the System?

Hemsley’s plan to transform health care delivery can be summed up in one word: data. By collecting, analyzing , and sharing it, he believes he can both improve the quality of care and lower costs.

UnitedHealth CEO, Stephen Hemsley, in an interview with Shawn Tully,  Fortune Magazine senior editor, in “Can United Health Fix the Systen? Fortune, May 20, 2013

Two weeks ago,   Shawn Tully, a senior editor at Fortune, called to discuss an article he was writing.   We spoke for a half hour or more.   He said he was astonished at the growth and profitability of United. 

Maybe he wanted to speak to me because I was present at the creation of United in Minneapolis.  When United  went public in 1984, it had $7 million in sales.  At the time, physicians were leery about United’s motives and plans to profit off of their backs, as I indicated in an interview with Richard Burke, United CEO, in my 1988 book And Who Shall Care of the Sick? The Corporate Transformation of Medicine in Minnesota.

Since 1984,  United has been a Wall Street phenomenon. It has delivered annualized returns of 24.7% with a total return of 48,664%.   In 1995, when its sales were $4.8 billion, it ranked 303^rd on the Fortune 500 list.  This year it ranks  17^th, with sales of $110.6 billion, profits of $6 billion, 133, 000 employees, and it covers 70 million Americans.  iI is the nation’s largest and most successful health plan.   Hemsley may be the most single powerful man int the U.S. health  care industrry.

How has United done it?  First, through its traditional insurance function.  Second, through government programs, like Medicare and Medicaid and AARP Medicare supplements.  Third, through Optum, its subsidiary with  revenues of over $30 billion, expected to grow to $45 billion under Obamacare by 2015. Optum  now has medical claims data for over 100 million Americans.  It sells this data to health care providers.

The United CEO, Stephen Hemsley, says his company has data in place to lower costs while increasing quality.  It will do so by, he believes,  by rewarding hospitals and physicians through the use of data through pay-for-performance programs covering large populations, including those 17 million poor on Medicaid and low-currently uninsured coming on board courtesy of Obamacare.

How? First, through the application of electronic health record data to identify those in wellness programs who are at risk for getting ill and by coaching them to improve their life styles.  Second, by rewarding doctors to hold down costs by using data to make sure people don’t get sick.

For its own employees, United has had success with this strategy.  It has offered employees $450 a year to undergo free medical screening to spot conditions leading to illness.  The chief result of this testing has been spotting diabetics and pre-diabetics, who now are 9% and 25% of the U.S, population.  .  Diabetics comprise 40% of claims for United, and as everybody knows, obesity and assoiated diabetes have reached epidemic proportions.

United will sign 3 to 5 year contracts with medical groups to lower costs and raise quality for populations the groups cover.  United will use their computers to track outcomes and costs of these populations.  Doctors will pocket 40% to 70% of the savings, with United  getting the rest.

Will this strategy work? I am doubtful, but who am I to say?  United has an enviable track record of financial success.   My reservations are based on my gut. Once patients leave the office or the hospital,  doctors have little control over their subsequent behavior. Perhaps that will change with medical homes and coordinated care.  So far,  to my knowledge,   pay-for-performance programs have failed to lower costs, elevate quality,  and change patient behavior and outcomes.  Besides, getting patients to come into the office for follow-up visits is no piece of cake, and home visits have yet to be implemented on a significant scale.  

As Stephen Hemsley remarked in his interview with Shawn Tully, “The journey never ends in tryijng to find the right balance between the analytical and the emotional.” He might have added, “Especially in  a personal, private, and confidential business of  health care.”

Tweet:  Stephen Hemsley, UnitedHealth CEO, believes  using data to reward  doctors for lowering costs and raising quality can  fix the system.