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HHS Secretary Urges Companies to Adopt Cost, Quality Criteria

November 17, 2006
A Bush administration official wants to see 60 percent of U.S. employers incorporate comparable cost and quality criteria into their requests for proposals when they start to shop for health care providers next spring, a number that an HR executive acknowledged is a "high bar."

Speaking to employers in Washington, D.C., on Friday, November 17, Secretary of Health and Human Services Michael Leavitt outlined four "cornerstone" goals for improving quality and lowering costs in the U.S. health care system: putting medical records in a nationwide electronic system, establishing health care quality and cost measures, and providing incentives for companies to select care at the lowest prices.

Leavitt is leading a nationwide outreach by the federal government to encourage employers to sign a statement supporting those goals, which were first outlined in an executive order signed by President Bush this summer.

"There is an imperative for action--an imperative morally and an imperative economically," Leavitt says. He will visit many of the largest 200 companies in the U.S. to make his pitch over the next six months.

The executive order stated that federal agencies, including the departments of Defense and Veterans Affairs, as well as Medicare and the Federal Employees Health Benefit Program, would meet the goals when they purchase health care. These groups represent about 40 percent of the market.

The centerpiece of the Washington conference, titled "Implementing Health Care Transparency: A National Summit for Employers on the President's Executive Order," was a health care "tool kit" that included the statement of intent and a model request for proposal that employers can use when buying health care. (Both can be downloaded here.)

The conference, hastily organized by the Business Roundtable at Leavitt's request, was designed to bring together dozens of companies and business groups to show support for the initiative.

Many corporations are embracing the notion of lowering their health care bills by improving information related to costs and quality, but it's not clear that 60 percent of them will sign on by the spring.

"It's a significant objective, and it will not be easy to achieve," says Jerome Carter, senior vice president for human resources at International Paper Co. "He set the bar pretty high."

After Leavitt's speech, Carter announced that the HR Policy Association is going to send a letter to chief human resource officers at companies throughout the country urging them to adopt the four goals set out in Bush's executive order. The letter was signed by executives at Textron, IBM, General Electric, Ball Corp., Caterpillar, Rolls-Royce North America, Lowe's Companies Inc., McDonald's, Boeing, Honeywell and Northwestern Mutual.

Carter asserts that companies must coalesce around a uniform and consistent approach to cost and quality transparency. For now, they are approaching those goals on their own.

"We can do a little bit of good [individually], but we can't turn the tide," Carter says. "We can do it faster and better if we work together."

Leavitt acknowledged that setting quality and price standards requires collaboration that can be undermined by competing agendas from companies, insurers and health care providers.

Companies, which are feeling extraordinary health care cost pressure, want to start using quality measures immediately, even if they're imperfect. Doctors, on the other hand, want to make sure that the ratings are fair and accurate, a difficult objective given the plethora of ways to make that determination.

"That's a healthy tension," Leavitt says.

Over the next five to 10 years, Leavitt's goal is to change the health care system into one in which "value" is the focus.

"Competition today is based on brand," he says.

Part of the tension is a result of time. Leavitt has two years left to fulfill his goal of reforming the way health care is paid. He says he will spend a good amount of time in 2007 traveling the country to promote the executive order and the need for employers to lead the change.

--Mark Schoeff Jr. and Jeremy Smerd