Thanks to the revolution in biologic therapy, the annual number of intravenous infusions at the Massachusetts General Hospital (MGH) rheumatology clinic’s small (two-chair) infusion center increased from 1,247 to 1,856 between 2009 and 2014. Related billings skyrocketed from nearly $16 million to more than $40 million. To understand this major shift, one must pause briefly to appreciate the medical history that led to it and then to examine how MGH is redesigning its care processes to bring these novel therapies to patients. Central to the plan is a collaboration with academic partners at the MIT Sloan School of Management.
The Medical Backstory
In 1980, a rheumatoid arthritis (RA) patient at the MGH rheumatology clinic would have received a weekly in-clinic infusion of gold salts and, occasionally, undergone laboratory monitoring.
Most discussions about the state of the U.S. healthcare system start with the problem of unsustainable cost growth. One reason costs have been rising is that we (as a society and as consumers) find enormous value in health improvements and are willing to pay for them. The real question is how to identify value vs. waste in healthcare so we can increase efficiency to bring costs down.
Over the years, we’ve seen many attempts to revamp the healthcare system, but they have been insufficient to be transformative. A good example is the HMO model in the 80s and 90s, which was notorious for restricting access to care. During the healthcare reform debate, voters balked at the U.S. government coming anywhere near restraining spending on healthcare. Read More »
Underfunded/unfunded retiree healthcare is a topic that gets little attention in the finance media. All the attention has been paid to pension funds, but retiree healthcare is in worse shape. For example, if a pension fund is only 70 percent funded, it is considered extremely underfunded. And yet retiree healthcare plans are on average only four percent funded.
MIT Sloan Professor of Management, Emerita Lotte Bailyn
How do today’s Baby Boomers—many of whom are still healthy and active—view their retirement? The traditional image of these so-called Golden Years involves leisure and freedom: mornings on the golf course, afternoons puttering in the garden, perhaps with some globetrotting and grandchildren thrown in for good measure. (Of course this option is only open to those who through pension plans or savings have the means for it.
In recent years, a second image of retirement, known as “aging in work,” has emerged. This model, borne in response to the economic need to protect Social Security and retain experienced workers’ knowledge, keeps retirement-age employees working in part-time or contract positions. It’s sold as win-win: Companies and the country benefit financially, but employees benefit, too, because it keeps their brains active and their social networks strong. The assumption is that continuing to work, though under better, more flexible conditions, is what makes people happy. The mainstream media back the model. Why Working Longer Is Good For Your Health and Get back to work! Working past “retirement age” is beneficial are just a few recent headlines.
Starting in 2016, push comes to shove for small businesses under the Affordable Care Act, better known as Obamacare. As of January 1, small businesses, broadly defined as firms with 50 to 100 full-time employees, must comply with the ACA’s employer mandate and provide qualified health insurance to their workers or face stiff penalties. But this requirement poses a big threat to the financial stability of small employers—and not for the reasons you might think.
Obamacare includes a myriad of regulatory incentives and exemptions that define the parameters of the employer mandate. However, these have inadvertent consequences. Most important, exemptions in the ACA encourage small firms to self-finance their health care plans—that is, pay their workers’ health care bills directly, rather than covering them through a traditional insurance policy. Most large companies in America (above 3,000 employees) engage in self-funding, but that is done now by only about 16% of small companies of between 50 and 100 employees. According to my research, that number is set to rise.
It’s understandable that small companies see self-funding as the superior option. By financing their own health care plans, they stay exempt from the community rating requirements that restrict how much insurers may vary premiums based on factors like age and smoking status; they also stay exempt from the federal and state taxes on most health care premiums that are paid to traditional insurers.