Upfront: Righting the Health-Care Market

Sixteen percent of U.S. GDP was spent on health care in 2004, compared with 6 percent in 1965, according to the U.S. Department of Health and Human Services. Many experts believe that total annual health-care spending is at least 30 percent higher than necessary because of low-quality care and inefficient treatment -- the products of a dysfunctional market that provides few incentives for extracting the highest value from each health-care dollar.

Rising health-care costs are so severely taxing the ability of companies to offer affordable coverage to their employees that more than 50 employers have created a nonprofit corporation that is developing and adopting marketplace tools to transform the employer health-care market, according to Mercer Health & Benefits LLC.

To make the market more transparent, Care Focused Purchasing Inc. (CFP) is filling a massive data warehouse with medical claims information about physicians and hospitals across the United States. CFP will measure the quality and efficiency of these health-care providers against a set of established performance standards. Member companies will then use the information to develop strategies such as provider scorecards to help employees make more informed choices.

The medical claims data now populating CFP's warehouse is generated by 2 million employees of self-insured member companies and by the 18 million participants in the seven major health plans CFP has agreements with: Aetna, CIGNA, FiservHealth Inc., Humana, Preferred Care, Regence BlueShield and WellPoint subsidiary Anthem Blue Cross and Blue Shield.

CFP will deliver the provider data to partnering carriers in early 2007 for inclusion in 2008 plans and services. The corporation expects to see market changes -- improved quality and reduced costs -- within 18 to 24 months, according to Mercer.