The Long Road to Lower Health Care Costs

The Long Road to Lower Health Care Costs

A decade ago, the public officials running King County, Washington were perturbed by their soaring employee benefits expenses. The upward cost trend in 2003 hit 13 percent, and at that rate, the budget of the county encompassing Seattle and its suburbs would be blown apart within a decade.

County Executive Ron Sims convened a task force, and gave it a broad mandate: re-examine how the county buys its health benefits, but don’t stop there. Look also at the structure and dynamic of the delivery of health care in the region. Six months later, the task force produced a report, and shortly after that the county introduced its Healthy Incentives program for its 19,000 employees and their spouses and domestic partners.

Healthy Incentives asks county workers and their families to take better care of themselves and to patronize higher-quality providers. Over the years since it went into effect, the smoking rate has dropped from 12 percent to 5 percent, and the amount of weight lost by county employees is measured in tons. These measures have saved the county taxpayers $46 million in projected costs between 2007 and 2011.

“We haven’t done a lot of cost shifting to employees,” said county administrative officer Caroline Whalen. “Our reduction is in most part from how people are using health care.” Then she shook her head. “Cost control is very difficult.”

The county’s partner in this endeavor has been the Washington Health Alliance, a collaboration of purchasers and other health care stakeholders that grew out of that first county task force. The Alliance’s work “has been so important to us,” said Brooke Bascom, the county’s communications director for Healthy Incentives. “The environment in which employees choose where to get care has a huge impact on our costs.”

The then-Puget Sound Health Alliance was founded in 2004 with funding from King County. In 2007, the Alliance became one of the four original pilot sites selected by the Robert Wood Johnson Foundation as part of its Aligning Forces for Quality initiative, a multi-year effort that grew to include 16 sites focusing on improving health care quality and affordability.

In January 2014 the Alliance expanded to encompass the entire state and changed its name.

Today, the Alliance has 175 members, ranging from the city of Seattle and the Port of Seattle, to multinational businesses including Boeing Co., Starbucks, and Alaska Air Group. It also includes most of the major hospitals and larger medical groups in the area, as well as health insurers, pharmaceutical companies, benefits consultants, labor unions, and community organizations.

If the Alliance reaches its goals, by 2017 doctors, hospitals, and ancillary providers in Western Washington will land in the top 10 percent in national comparisons of quality, evidence-based care, with a reduction in undesirable variation in cost, quality, and utilization.

“Let’s move everybody up to the 90th percentile,” said Larry P. McNutt, administrator of the Carpenters Trusts of Western Washington and a booster of the Alliance. “Raise all boats in the community, and train the population to understand the value metric.”

"[The Washington Health Alliance] has been the nursery that has allowed quality improvement and process improvement to grow."
Peter McGough, MD, Chief Medical Officer, UW Neighborhood Clinics

Today, the organization supports itself mainly through dues paid by its members. Most recently the Washington State Office of Financial Management (OFM) was awarded $3.4 million from the federal government to create a statewide data center that will help make medical pricing more transparent. OFM is partnering with the Washington Health Alliance in this work.

The dues structure “will keep us on a strong foundation” as the Alliance weans itself from the RWJF funding through 2015, said David C. Grossman, MD, Alliance treasurer and a senior medical director at Group Health.


Although it includes members from all sectors of the health care economy, the Washington Health Alliance is at its root a purchaser-led organization, and has focused on identifying value in terms of patient experience, quality, and price. The Alliance has published several comprehensive reports, called “Community Checkups,” that give comparative data on health plans and provider organizations. They show how each medical practice stacks up on a variety of measures, such as diabetes care, prevention, avoidance of unnecessary imaging and use of antibiotics, and patient experience. Hospitals are evaluated on how they perform on care, for conditions including pneumonia and heart failure. Health plans are evaluated on how well they help members stay healthy, manage chronic disease and become good health care consumers, as well as how plans use provider contracting and payment to drive improved quality and value.

Purchasers and consumers are encouraged to consult these resources when planning their care or choosing a provider or insurance company.

These data have been particularly meaningful for King County. With two million people, comprising 30 percent of the state’s population, it’s the 13th most populous in the country.

King County leaders successfully took the research and reports produced by the Alliance and attuned them to their goals. At the county’s request, the Alliance delivered a pre-packaged campaign to raise awareness among county employees of what they could do to improve their health and reduce their expenses. The campaign included a series of posters, some videos, and a web site that all the media outreach drives employees to. Still, the communications challenge has been enormous.

“Our employees, like many, think more care is better care,” Bascom said.

Like many government entities, King County offers generous benefits with low copays. The work force is diverse, ranging from MDs and PhDs to bus drivers. The average age is 52, and people stay in their jobs until they retire. Health benefits have to be negotiated with the county’s 192 employee bargaining units. The county, which is self-insured, pays all insurance premiums; its levers to influence behavior are out-of-pocket expenses at the point of service.

In 2005 the county administration refocused the health benefits around a wellness plan that had three tiers—bronze, silver, and gold—of out-of-pocket expenses. Employees who participated in wellness got the lowest copays and deductibles. The unions agreed to use the neutral third-party data gathered by the Alliance as a point of orientation.

The county’s four basic goals for its working population were: eat smart, move more, quit smoking, and get a flu shot. “We have data to show gains on all these,” Whalen said.

The obesity program helped 284 members achieve significant weight loss in the first year. Over five years, 38 percent lost at least 5 percent of their body weight—“a large improvement,” according to an article published in the Journal of Occupational and Environmental Medicine in 2011. The program was most impactful for women, people older than 60, African Americans, and workers who didn’t graduate from college.

Data gathered by the Alliance allowed county officials to see that their fill rate for generic prescriptions was well below the national average. After introducing lower co-pays for generics, the generic fill rate rose to 75 percent, contributing to a $3.5 million savings over three years.

Participation in the program by county employees has hit 90 percent.

The latest iteration of the program, devised in conjunction with the Alliance, is called “Own Your Health.” All employees receive an email every month reminding them what kinds of questions they should ask their doctors, and informing them what quality care should feel like. The county’s Healthy Incentives program has been so successful that it has received the Innovations in American Government Award from the Kennedy School at Harvard. The state of Washington has now picked up this program for its employees.


A large portion of the county’s savings came from sharing with its employees the value of Group Health, the 615,000-member staff model health maintenance organization (HMO) based in Seattle. King County offers employees the choice of two health plans: a preferred provider organization (PPO) through Regence Blue Shield, or Group Health. The annual savings for employees using Group Health is more than $4,000 a year than those employees choosing the Regence PPO.

“So we want to steer people toward Group Health,” Bascom said. “We do that using the quality data. It’s not enough to say it’s cheaper. It’s not just cheaper, it’s better.” At the beginning, 18 percent of the county’s lives were signed up with Group Health. Now 33 percent are.

This goes to the heart of why a provider/health plan organization like Group Health is such an enthusiastic supporter of the Washington Health Alliance. “We see the Alliance as an opportunity to measure improvement and track performance relative to the market,” Grossman said. “We take the data seriously.” Having a neutral rating body demonstrate the excellence of the Group Health model should move the market, the HMO believes. Indeed, Group Health’s health centers, compared to other groups, has exceeded the regional average for the most clinical quality measures for seven years running.

That’s why it came as a shock when Group Health scored somewhere in the middle of the pack in the survey of “consumer engagement” for the 2012 Community Checkup on health plans; Group Health also performed in an average manner in the Alliance’s two patient experience surveys done in 2011 and 2013. “We expected to do better,” Grossman said.

While not a clinical quality measurement, consumer engagement and patient experience are critical to a patient’s overall trust. Someone who hasn’t felt heard by the doctor or staff might be less likely to adhere to the treatment plan. “It’s about setting up a foundation of trust and reliability,” Grossman said.

The average results were brought to the attention of the HMO’s leadership, who then pushed through a service quality improvement initiative. Doctors and staff are working on their listening skills and follow-through. After demonstrating the potential perils of using homegrown metrics, Group Health is now starting to track patient experience using a more standardized metric that can be easily benchmarked, Grossman said.  

The Long Road to Lower Health Care Costs


The Alliance has made strong progress toward transparency in quality reporting. Yet the expectation that quality improvement alone would lead to lower costs has proven unfounded. Employers are perplexed by this.

“If you can’t look around the room and say, they are getting paid X and they are getting paid Y,” McGough said, how can you begin to calculate what is the best value for purchasers and consumers? The black box in the equation is the price of services.

“We have huge differentials in price, and we don’t have price transparency,” Whalen said. Yet insurers won’t release price data. “I feel it should be available,” she said. “I want to be able to direct my employees to value.”

Each locality participating in Aligning Forces determines its own priority goals; in Washington state the top priority is now reducing the price of health care. “What matters to consumers is price—it’s a big deal,” McGough said in an interview atop the University of Washington’s administrative tower in Seattle. “We have a fantasy we live in a market health care economy. In fact, consumers don’t have any of the information they need for medical shopping.” What people need to see are “actual reimbursable charges—not ‘charges,’ not ‘costs,’ whatever they may be,” he said.

In Western Washington some providers are coming around to the viewpoint that transparency in pricing might not be such a bad thing. The Everett Clinic is seriously considering putting some of its prices for services—for instance, advanced imaging—online. “Our prices are competitive. The Everett Clinic is absolutely supportive of price transparency,” Albert W. Fisk, MD, chief medical officer of the Everett Clinic, said. “Sometimes we look great, and sometimes we don’t look so good.”

The Alliance wants to compile a database of pricing information for the use of its members and consumers. Gov. Jay Inslee, a Democrat, has raised the issue to a legislative priority. In January 2014, he proposed a bill to create an “all-payer claims database” that would collect information on price and quality from hospitals, physicians, and other providers around the state. The concept is supported by the state hospital association, the medical association, the Seattle area chamber of commerce, the National Federation of Independent Business, and all but two of the health plans operating in the state. A version of the bill that mandates data submissions only for some state-purchased health care and contains significant restrictions on the data’s use passed in March 2014.

“We would be the steward of the data,” said Mary McWilliams, the Alliance’s executive director.

Yet resistance to the measure came from the large regional health plans: Regence Blue Shield and Premera Blue Cross, both of them members of the Alliance from the start.

“We’re not convinced that an all-payer claims database is the most effective way to address the questions around transparency,” said Beth Johnson, vice president for network management and contract strategy at Regence Blue Shield, based in Seattle. When individuals are making decisions about care, she said, they can avail themselves of tools provided by their insurance carriers that explain their options and the cost of those options.

Further, Regence doesn’t accept the premise that costs will decline once this data is collected and disseminated. When low-cost providers see that others are being paid better than they are, they are likely to demand higher fees. “There isn’t a mechanism built into this database to preclude that from happening,” Johnson said.

At Premera, “we have not found a strong market interest in sharing that data,” said spokesman Eric Earling. A significant portion of the health insurance marketplace in Washington is comprised of large, self-funded employers. The data belongs to them; Premera only administers the benefits plan. The employers would have to agree to contribute their data.

To Fisk, at the Everett Clinic, the solution is obvious: “The employers want to know, what’s an appendectomy going to cost at X hospital versus Y hospital?” Just give them what they want, and everybody will adapt. He doesn’t believe transparency of pricing data will allow providers to raise their prices.

To McWilliams, though, it does make a certain amount of sense. “Data is a strategic asset,” she said. “And it’s highly proprietary, particularly as it relates to contract terms with providers. It would make the health plans’ provider contracting more difficult.” McWilliams should know. She used to be president of Regence Blue Shield in Washington.

Whichever way the all-payer database conflict plays out in the legislature, the Washington Health Alliance is likely to hold together. The participants have worked through too many issues and overcome too many obstacles to let it fall apart at this late juncture.

“This is the right group to do this,” McNutt said. “These are hard questions. We’re thinking about things that people don’t even know are questions yet.”

About the Author

Journalists on Quality Humboldt - Duncan Moore headshot

J. Duncan Moore Jr. is a nationally recognized health care policy writer whose work has appeared in the Washington Post, the Los Angeles Times, Bloomberg News, and Modern Healthcare. Moore is also the co-founder of the Association for Health Care Journalists.

Upcoming Issues . . .

  • West Michigan
  • Oregon
  • Minnesota
  • Kansas City

Most Requested