IBM: Using a Purchaser’s Power to Promote Quality, Cost, and Innovation

“It’s critical for purchasers to recognize their power to shape the health care system by demanding high-quality care for their dollars.”

The LAN spoke with Kyu Rhee, MD, MPP, to learn how IBM is using its role as a health care purchaser to shape access to care for its employees around the world. Dr. Rhee is Chief Health Officer of the Watson Health Unit at IBM, which uses data analytics technology to provide services to clinicians and health administrators. Below are highlights from our conversation.

How Purchasers can be Proactive about Purchasing Decisions

Rhee: Here in the U.S., we spend about 3 trillion dollars on health care for more than 300 million people. In the U.S., that $10,000 worth of spending per capita per year on health care costs is bankrupting our country and impacting our ability to invest in other key areas that we need to be competitive and effective. In a world that is much smaller and flatter than it was 20 years ago, this is more critical than ever before. We have to fix this, and we have to fix it quickly. We spend a lot of money on health care, and purchasers need to spend smarter and demand quality for their dollars.

It’s critical for purchasers to recognize their power to shape the health care system by demanding high-quality care for their dollars. IBM is a major purchaser of care – covering approximately 400,000 employees both domestically and across the globe. When you are a purchaser, you have to make sure you make good purchasing decisions. IBM has three primary goals as a purchaser: quality, cost, and innovation. As a major purchaser of health care, we want to help transform and improve the system – that is a key piece.

To implement change, you have to start with your principles. For instance, one of our principles is to confirm that there are no pre-existing disease exclusions in the coverage. We also believe in the power of affordable primary care, covering annual wellness exams, chronic disease management, appropriate lab procedures, and preventive care. These principles help to frame our priorities and guide our decision-making.

Why Partnering for Change is Important for Purchasers

Rhee: We work with more than 100 health plans across the globe. In the U.S., we partner with a number of payers, including Anthem, Aetna, UnitedHealthcare, Kaiser Permanente, Blue Cross Blue Shield, and MVP Health Care. As a purchaser, you share your principles with your partners and work with them in a personalized way to advance those principles together. Some partners are more comfortable with this approach than others.

The power of purchasers is much greater when you work together. You need courage to take on financial risk and strive for the common good. Sometimes people stop when they are at the stage where they are worried about taking such risks. But you have to push back. Have the courage, share the data, show how it will make a difference. When you do that, you can get a better price, and even the right price, for the coverage. You have to be value-based and principled. I am hopeful that we are getting there.

Levers that Purchasers can use for Innovation

Rhee: A big part of what we are doing as a purchaser is the same as what IBM does as a business, which is using big data to help predict, personalize, and prevent bad care, as well as promote good care. We know that spending more on care now can lead to lower costs later. Covering primary care reduces total health care costs, improves medication adherence, and promotes screenings that detect cancer. You have to put health care costs in context. You also have to have the discipline to track the supporting data to make your case to the payer persuasive.

What’s great about cost is that it’s very transparent. Quality is harder to define. Innovation is another factor that is somewhat abstract. One of the things about innovation is that you will have mixed results. The nature of it is that you’re doing something that has never been done. It’s based on some basic principles and data, but fundamentally it’s doing something that has never been done before. You must be transparent about your results and you need to be able to be agile and make changes. There will be both mistakes and successes.

We also believe that health is much more than clinical care, which is why we have led several initiatives to help improve the health of IBM employees. We instituted a Fitbit program that reached 40,000 employees over the course of two years. Program participants averaged more than twice the number of steps per day than non-participants, and 96 percent of them routinely logged their activity data. More recently, we formed a partnership with Apple to provide IBM employees in our Commit to Health program with free or reduced-cost Apple watches to track their physical activity.

How IBM is Setting a New Standard for Care

Rhee: At IBM, we are purchasers, so we get to decide what gets covered. We believe in the power and importance of primary care, so we told our payer partners that we did not want our employees to pay for primary care out-of-pocket. We did several studies, including one recently published in The Journal of Pediatrics, that showed how eliminating cost-sharing impacted children’s health. The study found that zero out-of-pocket costs for pediatric primary care led to significantly more primary care visits, significantly fewer emergency room and specialist visits, and improved vaccination rates. While employer costs increased for primary care, those were counterbalanced by a decrease in specialist care costs.

Health Care Payment Learning & Action Network