How Employers Can Influence the Move to Value-Based Healthcare


Steven Schutzer, M.D., president of the Connecticut Joint Replacement Institute, and Carol Harnett, president of The Council for Disability Awareness, share a discussion on this CDA podcast about value-based healthcare — a healthcare delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes. Under value-based care agreements, providers are rewarded for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives in an evidence-based way.

The discussion covers a wide variety of topics with a focus on helping employers understand the positive impact VBHC can have on employee health and productivity and health plan performance.

Topics discussed include centers of excellence, why this movement is important and relevant to the entire population, challenges and obstacles in using a VBHC approach and how to overcome them, and how employers can measure results. 

You can hear the full podcast or if you’d rather read than listen, we captured the transcript from the conversation below.

Carol Harnett: Hello everyone. This is Carol Harnett. I’m the president of The Council for Disability Awareness, a non-profit whose role it is to educate employers, employees, and financial advisors and consultants about employee benefits in general and specifically about disability and income protection whenever we can.

Our show is called the Financial Health and Income Network, and today I am pleased to host a very special guest Dr. Steve Schutzer. Dr. Schutzer is the president of the Connecticut Joint Replacement Surgeons, the physician executive for the orthopedic service line at Saint Francis Hospital and Medical Center in Hartford, Connecticut, which is where I’m located as well. He’s also the physician director of the Connecticut Joint Replacement Institute at Saint Francis Hospital and Medical Center. I have had the pleasure of knowing Dr. Schutzer for about a year, although I knew of him for many years because he is listed in Connecticut magazine as one of the best physicians in the state, particularly for joint replacement.

Thank you for joining us, Steve. We’re so glad to have you here with us today.

Steve Schutzer, MD: Thank you so much, Carol, for having me. It’s a pleasure to spend the time with you.

CH: Anyone listening to this show can benefit from our conversation, but our targeted audience today is employers. The goal we have for the show is to help employers understand a concept that’s been around for a little while called value-based healthcare.

What is Value Based Healthcare?

Some employers may have heard this phrase within the context of something called “value-based insurance design.” Today we wanted to walk you through some of the basics of what value-based healthcare is, ground you in it, and give you enough information that you can talk about this concept with your employee benefits broker or consultant, or with an insurance carrier.

Steve, the place I want to start is with the basics of value-based healthcare, and why you choose to get involved in this initiative?

SS: So let me start with the second part of that question, Carol. As you mentioned, I’m an orthopedic surgeon with a special interest in arthroplasty — total hip and total knee replacement. And I became dissatisfied, disgruntled and even say, embarrassed at the state of our healthcare system about 12 or 15 years ago and I felt that there was a moral imperative to try to improve it. I read some books about value-based healthcare written by Professor Michael Porter on redefining healthcare and was smitten and overcome with a passion for trying to move our system to value.

Now, what is value-based healthcare? Fundamentally it is very simple. It’s a delivery model in which we as providers to hospitals and physicians are paid based on our outcomes. I mean, it’s not unlike any other sector of our economy. We are rewarded for outcomes. And this would replace the decades-old entrenched system known as fee-for-service, where providers are paid for their volume irrespective of the outcome.

Put another way, Carol, if you have a bad outcome and you got to repeat it. Well, guess what? You get paid again. And this just incentivizes more and more care delivery without any respect in terms of the outcomes that are anticipated.

You know, I love that explanation because at its core it makes so much sense. I started my career on the healthcare side focused in sports medicine and then in the larger circle of rehabilitative medicine and industrial medicine. And I think what always took me back when I talked with people from the general population, or even relatives, was they would say: Well, I saw an orthopedist for my knee pain and he or she said there’s really nothing I have to worry about. And I said: Ok, can you tell me more about that? And you’d hear some pretty significant symptoms. And you’d ask if they’d ever had physical therapy and sometimes they had and sometimes they hadn’t. I even find in the general population in these conversations a lack of knowledge that there can be a difference in quality, that there can be a different outcome. That they paint all orthopedic surgeons with a similar brush; all physical therapists with a similar brush.

CH: How would you tell an employer who is also a person first, who doesn’t have a background in medicine, why value and outcomes are important even though that seems like such a basic question?

The Importance of Value-Based Outcomes

SS: You actually have articulated the question and the answer. It is extremely important and there is great variation. The problem is, Carol, that I can go on Consumer Reports and learn more about a toaster oven than I can about my surgeon who’s about to take my hip or knee. And that’s just unconscionable and unacceptable.

I’m a simple-minded guy from the Bronx as you know, and there’s something called the health care value equation, and it’s  very simple. The numerator are the outcomes that matter to a given patient for their particular problem. If it’s prostate cancer and maybe impotence or bladder control, that’s what the patient really cares about over the true cost — not the charge — but the true cost of delivering that care, and that becomes a mathematical equation upon which providers can be rated and judged.

The problem is finding information about real outcomes, even if you were a very sophisticated healthcare shopper. Even YOU would have trouble. Correct, Carol?

CH: That’s absolutely correct. I have spent a lot of my career in healthcare and then insurance and then to consulting, and I’ve had the good fortune of getting to know people like you and others. Frankly, if I ever had a non-orthopedic problem, I’d probably call you and say:  Okay, this is the problem I have. Out of all the physicians you know, who is it that you would go to if you had this situation. But most people don’t have access to that kind of a network. And it’s really, really frustrating. I think most people, including our employer listeners, don’t think about it until they’re in a situation that’s a little more challenging or a little scary, and they start to realize that, perhaps, staying even in their local community may not be the best decision for them, and that’s the first time you ever think about it.

I knew you from the original rankings at Connecticut Magazine listed once a year on the best physicians. Originally the list was created by surveying other physicians and asking them the physicians they considered to be the best in their respective specialties. I spent my time in healthcare in the greater New York and New Jersey area, so I didn’t know anybody here when I moved into the area.  So, Connecticut Magazine became my way of looking and finding even a good primary care physician. So, that’s one of the challenges. You can imagine employers who are listening thinking: Okay, so I want to get my employees value; I want to get them good care, good outcomes. What do I do?

Ways Employers Can Deliver Good Care to Employees

I will tell those employers — because I spent a lot of time in the health and productivity space — you want your employees to go to a good physician because you almost always see your employees come back to work sooner, be more productive when they return, and if they haven’t left the workplace, which is the ideal situation, they also tend to be more productive while they’re being treated. They tend to be at work more often.

What we’re both sort of foreshadowing is something that can go beyond physicians, and that is if you do need a procedure.  You would either have to go to a hospital or an outpatient surgery center or something along those lines, so there is a concept of value called a center of excellence.

Can you help audiences understand what that is about?  What is a center of excellence?

The Center of Excellence

SS: Yes, and I think that is again is a great question. Unfortunately, Carol, that term — “center of excellence” — has been bastardized to some extent because anybody can claim they are a center of excellence. But with time and over time various organizations are accrediting entities as being a true center of excellence. And each has their own proprietary criteria looking at whatever metrics they can access. Unfortunately, most of this data as you know comes from CMS administrative claims databases, which are based on coding and you know there are all sorts of potential vagaries and inconsistencies and flaws. But, be that as it may, centers of excellence do make a difference.

And you know in our Forum coming up on December 6th and 7th, we’re going to be highlighting two types of centers of excellence: one being virtual with a very fascinating company called AiR Healthcare from Minneapolis — the Wainwright company — and the other one being a physical center of excellence here: the Connecticut Joint Replacement Institute.

And here’s some very simple data for the employers who are listening. This is data from another source, but it’s factual. It was from a very large employer in the United States where they referred all of their patients who were in the queue for spine operation to a spine center of excellence and 50% of them, Carol, never had a spine operation.

Now, forget the millions of dollars of savings. Just think of the human misery of those fifty percent of patients that would have had surgery that they never needed. Now that’s for spine. Spine is difficult because there is a lot of gray area, but joints to me are kind of cut and dry.

This is the way I think. If somebody has end-stage arthritis of the hip and severe pain and can’t walk, they need a joint replacement. The same source of information from a very large employer showed that 20% of the patients scheduled for joint replacement were pulled out of the surgery queue and sent to a center of excellence, and never needed a joint replacement. And that’s just striking information.

CH: I will concur with the information you’re sharing. When I worked in sports medicine and physical rehabilitation, we had a lot of people with spine complaints, including elite and Olympic athletes. And some of them — even the athletes — would often want a quick fix.

We did research at the center I was at — and I worked at a couple of world-class rehabilitation institutes, including the Kessler Institute for Rehab in New Jersey — and we’ve done research on the topic, which we’ve seen replicated in other places and that’s when people go through back surgery, in five years, they have the same outcomes as people who went through physical therapy and returned to full activity.

And I obviously know on a patient level and a one-on-one level how important that is to share this information. But since so many people receive their health care through employers, I’m really happy we are about talking about this topic.

I will add a little bit of information to the data you shared. A person who’s become a friend of mine is Tom Emerick, who was the global leader of benefits for Walmart. He’s a very dear friend. I used to consult for Walmart when Tom was the leader there. Tom really was one of the first employers who brought in a centers of excellence model. He always tells the story about contracting with Mayo and contracting with Cleveland Clinic. The first thing they offered to any covered associate in the Walmart system that who needed an organ transplant was to go to one of these two centers of excellence. Their family member could come with them. All expenses were paid; all co-pays, all the deductibles were waived. Fifty percent of the transplant patients were turned back because they didn’t need the transplant. And that to me was one of the most shocking things I ever heard. How is that even possible?

Walmart became a real leader in this field as did many others who quickly followed suit. So, I can’t emphasize enough to employers how when we think about centers of excellence, we think about big things like that, right? We think about organ transplants.

But I will tell you from having worked in the disability insurance side of the business for a while that that’s really a small percentage of what’s happening. Big dollar ticket items from a medical perspective, but a small number of people from a population perspective. That’s why things you’re talking about such arthroplasty and spine surgery and even more common become more important to find these value centers — these centers of excellence. Places where you know your employees and their family members — if you cover their family members — are going to not only get great results, they’re going to get long-lasting great results: meaning we don’t have to do things called revisions and go back in and do surgery or have complications because they’ve been in a much better place.

SS: That’s right. We’ve just covered very briefly three different procedures: organ transplant, total joints and spine. And we’re talking about 20% to 50% of unnecessary major operations. When I drill down in that data, I was really interested that this large employer on par with Walmart had saved twenty million dollars in that year. That’s a lot of money.

What I really liked about that experience was that two-thirds was saved on the quality side and only one-third was cutting a discount. In fact, for the employer — because many of these patients are travel patients — they netted out zero because they got a deal from the provider for this new volume of patients but it cost them to transport the patient and family. So that netted out zero, but the real value was going to a center of excellence and deciding: You know what? This patient doesn’t need surgery, or having surgery and reducing those risks of complications and re-admissions.

CH: Absolutely, very well said. And I do want to remind our listeners at this point about something we talked about a little bit before getting on the air, which is that not only is this movement important — and we are certainly directing our comments right now to just the employee population and their family members if they are covered. But this is relevant to the whole population. And I would imagine you see a mix of both people who are still working and people who are retired in the work that you do. And just for a brief comment because some payers by the way as you provide retiree medical care: How does this apply to the entire population?  

An Opportunity for Better Outcomes for ALL Populations

SS: I don’t really discriminate in terms of whether they’re employees or not employees, or their age bracket. Half of my practice is Medicare and actually half of my practice are commercially insured. So, the average age for a total hip replacement in my practice is about 58. There are not necessarily older. That’s the average, which means I’ve got some in their 40s and some in their 80s and some even in the 90s. So, I don’t really discriminate between what demographic they come from.

SS: Patients are a little more demanding today. They want to get back on their feet quicker. And, again, when you have an entity that’s focused as we are like a laser beam on arthroplasty, you just keep getting better and better: refining your outcomes, refining your processes, to drive better value for the patient.

CH: Wonderful. So well said. Now, we’re talking about all the positives that are involved in value-based healthcare and we certainly know that there can be some obstacles and there can be some challenges. Can you talk a little bit about that and what employers can do to help overcome those problems?

Employers Can Provide Solutions for Obstacles to Care

SS: Carol, that’s something that we’ve been thinking about here for very long time. We’ve heard interesting comments from the payer community that the providers are “tone deaf.”

And here we’re thinking as providers: Where are the employers? We’ve got an incredible product — many other people do as well — and it’s just not gaining traction. So, we’re wondering where they are. They’re wondering where we are. So, something tells me something is in the middle and not making this happen. As you learn about the complexity of the healthcare ecosystem, it becomes clear that there are many intermediaries, some of whom are not completely aligned with value. There’s nothing specifically in it for them and overcoming that takes time.

Listen. It’s a 3.2. trillion dollar a year industry of which one-third easily is waste. But that’s one trillion dollars that you’re talking about taking from somebody’s pocket and they don’t like that. And there’s all sorts of push back and political things and lobbying that that impede this movement to value.

As you know last year, we had our first annual Moving to Value forum at the Del Mar hotel in West Hartford, CT. This year, we’re having our second forum at the Marriott in Hartford. But last year we focused on obstacles: obstacles to moving to value. And we looked at it from the perspective of the provider, the payer and the employer. And each of these stakeholders have challenges.

I would say from my perspective the biggest challenge I see gets down to benefit design. If patients are not incentivized to move to centers of excellence to change their behavior, it’s just not going to occur. If it occurs it’s going so slowly that it’s not measurable. So if I want to implore employers, I would ask them to get involved at the benefit level and really start to look at this: Does this benefit design really move patients to higher value, or is it more entrenchment in old models and old designs?

You know, again, there are obstacles all along the ecosystem. For us it’s data, its position alignment. We’ve been able to make some great changes so our positions, Carol, all abide by protocols.

We have 18 clinical protocols, which we abide by so we can measure it and look how we’re doing. That’s a big challenge to get orthopedic surgeons to agree to anything, but we’ve been able to overcome that. From the employer perspective, I can tell you that if we don’t start shifting market and rewarding the providers that are spending time and resources — a lot of money — then I’m afraid it’s just going to move slowly.

There was a great piece the other day from Michael Thompson in which 60% of employers are not capitalizing on their opportunities to address the health care waste despite the fact that they all recognize there is substantial waste and inefficiency.

CH: Much like you I grew up in the New York City area except I’m a Staten Island girl. And the story you’re telling, I’ve tried to tell employers, in particular because that’s where I’ve spent the majority of the latter half of my career in working with and educating and doing design work.

I grew up on what’s called the South Shore, which means if you live on that shore, you go down to the end of the island and you can see New York City across New York City Harbor. And I can’t tell you how many people I grew up with — and when I was young, it would be more of their grandparents and sometimes their parents — who would have cardiac issues or cancer or some major health condition. And instead of driving across the Verrazano Bridge through Brooklyn to Manhattan, or taking the ferry and going into one of the world class centers of medical excellence, they would have their surgery at St. Vincent’s or Staten Island Hospital, which I’m sure are fine for average things. But you don’t give up going to world-class cardiac center when you’ve got a pretty complicated cardiac condition when you can see the place where you can get the best care. But that happens all the time.

People go to places they’re familiar with and so you have to incentivize them. I’m so glad you brought that up. Employees have to be incentivized to do it, but the employers are also going to want to incentivize physicians and reward physicians who are giving great care and producing great outcomes.

Of course my prejudice extends all the way to people when they’re out of work. So even if I were to evaluate the services that your practice does I would be like not only do you get great medical outcomes, but your patients are back to work sooner and they’re not going back into the OR because some mistake has been made or they don’t have sepsis or they have a hospital-acquired infection. Those all become important things because it gets them back to work, feeling good, and going back to their lives. And that’s really important.

There are two things I want us to talk a little bit about before we run out of time. You want to talk about the upcoming Forum because I will tell people, again, I knew Dr. Schutzer on paper.  And then I got to meet him about a year ago when I was invited to go to your first forum and was astonished.

And please don’t take that the wrong way. I was astonished by the quality of the conference and the types of people who were there. So, I want to talk a little bit about that. And I would like you to close out our talk on value-based healthcare by explaining how an employer can measure — beyond what we already discussed — that it is working for them.

How to Evaluate Success

SS: So, first of all, the Forum is December 6th and December 7th. We are having a Thursday evening venue at the Marriott and that’s going to focus on pharmaceutical costs: “Stop Overpaying for Pharmacy” is the title. We’ve got two fabulous speakers, and then the next day on Friday we’re going to focus on primary care modernization. and centers of excellence.

As far as measurement, I always say this: orthopedic surgeons are not historically known to be a group that’s really very concerned about spend. We use expensive trinkets. Our tools are expensive; our widgets are expensive; and we’ve never really paid attention to that because, guess what? We don’t pay for them. Someone else does.

So, how have we been able to take these 10 formerly competing orthopedic surgeons with completely different motives, bring them together 11 years ago, align their interests without any economic incentive, and pull off what we’ve done here. And it comes down to data.

We’ve got a very rich database of 30,000 patients. The data is clean, credible and actionable, and it helps change behavior. So, I would ask employers when their reviewing their contracts and when they’re in discussions with provider groups to ask to see their data. I wouldn’t even sit down with a provider without that data being available.

So they shouldn’t ask to see it. They should really demand it. Then the question is: Is the data clean? And that gets very difficult because you can manipulate data anyway you want.

A very quick case in point. I’ll point myself out, Carol. A few years ago, ProPublica came out with rankings of physicians, and I looked at myself as a hip surgeon / knee surgeon. I thought it was decent.

Well, I got I got listed as a high-risk provider for hip arthroplasty. I was upset by that and I did a little digging. It turned out that I was taking patients back to the operating room because of bleeding in a day when we were using Heparin as an anticoagulant. I was taught by my mentor to not to put a bandaid on it. Take them back and wash out that bleeding. So, I thought I was doing what I thought was best for the patient, perhaps saving infections. That very next day another ranking agency came out and gave me the only five-star hip replacement surgery in the state of Connecticut. So, am I a hero, or am I a zero? So confusing to me. You have the same data.

So it is not easy. You have to dig deep. You have to look into the information. Perhaps recruit some other folks like Jeff Hogan and Paul Grady who really understand this ecosystem to provide some insight into that.

CH: You’re so generous to share a personal story like that because I can’t imagine what your face looked like when you saw yourself being lowly-rated when that is not generally how you are known in the Greater Hartford area or the Connecticut community.

I have a friend who is a specialty reconstruction surgeon. Not only does he only do breast reconstruction for women who’ve had mastectomies, but he does only what’s called the DIEP procedure, which is where a woman, as you know, donates some of her own body tissue to form the breast mound.

What I’ve learned from him is there are only 12 centers around the country that do this. It’s considered the state-of-the-art procedure. But the normal flap failure rate, which is really what these breast mounds are called is 30 percent. In his practice and in his hospital it’s only one percent. But the only reason why I know that information is because I know him. And that’s the challenge that we still have. How do we get that information shared in context?

Well, this time has just flown, and I know that we’re counting down the last minute. So, I want to first of all say thank you so much for making the time to do this. I know how incredibly busy you are in all the work you do in your own professional practice, the work you do with Moving to Value, and the upcoming Moving to Value forum.

Resources: Moving to Value

I will highly encourage people to attend this forum because I’ve attended myself before and will be attending again. This is well worth your time and effort, particularly if you’re an employer in the greater New York and New England area. Consider coming to the Moving to Value forum, which people can find out more information about at It is being held in downtown Hartford, and we hope to see you there. Thank you so much, Steve.

SS: I really appreciate your time, Carol. I can’t thank you enough for this opportunity. Have a great weekend.

CH: You, too, and thank you to everyone who’s listened.