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NASHVILLE, Tenn. -- The U.S. health care system has undergone a revolution in which newly empowered employers must demand medical excellence, a consultant says.

The health care crisis today is not in rising costs but in limited resources, and employers must address the question of "how to get the most value for your money," said Michael Millenson, a health care consultant and author.

In a speech challenging employers and employer coalitions to use their newfound power in the health care system, Mr. Millenson said health care purchasing can no longer be done on the basis of "cheap, cheap, cheap."

Mr. Millenson, a principal in the Chicago office of William M. Mercer Inc., spoke at the third annual conference of the National Business Coalition on Health. The conference was held in Nashville, Tenn., earlier this month.

The recent growth of managed care represents not a reform of the U.S. health care system, but a revolution. Power has shifted from health care providers to purchasers, he said.

Doing nothing with this power, however, is not an option, he said. The government, as the largest health care purchaser, cannot stand still and allow Medicare costs to skyrocket, as the public won't tolerate higher taxes or a return to budget deficits, he said. And businesses cannot allow health care costs to rise, driving them to drop coverage, squeeze their profits or move operations overseas.

"So, we can't give in," he summed up.

Also, employer inaction might allow other groups to jump in and direct the health care system. These could include state and federal governments passing more laws covering health care quality, such as mandates. Lawyers also will step into the void with suits against both health plans and employers, allowing judges and juries to control the system, he cautioned.

"If we don't act, other people will," he said.

Mr. Millenson outlined three ways to control costs for any service: pay less, do less, or do things better. Paying less has been used to date to squeeze health care providers, but that can't continue forever, he said.

Doing less, such as through utilization review, has also been used with some success. But it has limits, as people have objected to reduced services and politicians have responded with mandates. Allocation of resources by managed care companies is more visible than it was in the past under traditional plans, and that has led to the current anger toward managed care, he said.

The only solution, he concludes, is to do things better. "This means making purchasing decisions based on quality and costs," he said.

Riding in to demand quality must be employers, he said. Doctors won't be the ones pushing quality and value, because that is not their tradition. But benefit managers, whom Mr. Millenson calls "bureaucrats as heroes," are trained for this approach. "In God we trust. . .all others bring data," is their motto, he said.

To date, however, most benefit managers have not looked to buy health care based on quality, focusing instead on costs.

Although many purchasers often say they buy based on the quality of health care, in reality, quality too often is defined as customer service and whether the chief executive officer's doctor is in the network.

But in the new health care crisis, this definition no longer works, he said. Benefit managers are "not putting money where your mouth is," he said.

To truly purchase based on quality and value, employers need to reward providers that are "doing the right thing and doing it right," he said. This means rewarding through pay and/or bonuses those providers that successfully use preventive care to maintain people's health and keep them out of the doctor's office. Too often, he pointed out, those providers that accomplish this receive less money because they perform fewer services. But a system that financially rewards health maintenance and prevention will align providers' incentives with patients and buyers.

"Grab doctors by their wallets and their hearts and minds will follow," he explained.

One reason employers have yet to fully apply these ideas and transform the health care system is that senior executives don't see the reason to change their purchasing ways.

Mr. Millenson said benefit managers can do a better job at convincing senior management of the importance of a quality health plan. For example, benefit managers can demonstrate that prevention programs not only reduce illness but lower absenteeism, saving the company money.

A lot can be done to push the medical community toward better treatment, he said. For example, only half of doctors perform the test to detect ulcer-causing bacteria and thereby provide the proper treatment, he noted. And lost work days because of asthma among workers and their children could be reduced through proper treatment. So, an employer should push health plans to adopt preventive programs in these areas, which despite a higher initial cost might save money in the long run by reducing both long-term illness and sick days.

"Private-sector employers can do well by doing good," Mr. Millenson said.