Tuesday, 12 May 2015 05:25

The Many Moving Parts of Value-Based Purchasing

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For value-based purchasing (VBP) to succeed, we all know how important it is for providers of all types, hospitals, physicians, home health agencies, and others to work together to provide a coordinated, seamless provision of services to patients. However, we can’t forget that there are other parts of the healthcare system that need to be actively involved to get the maximum societal benefit. Clearly, this includes payors and patients. Patients must take a more active role in managing their own health, and payors need to work with providers and patients to ensure that healthcare services are provided in a cost-efficient fashion with successful outcomes. After all, the definition of “value” is quality/cost.

One of the strategies payors (which include insurance companies, employers, and federal and state governments) can use is value-based insurance design (VBID). In its simplest form, this means designing health benefits to either reduce barriers or provide incentives to maintain and improve health. This includes things such as covering preventive care, wellness visits, treatments, and medications to control blood pressure or diabetes at low or no cost. Various studies have concluded that lowering copayment amounts for patients needing certain drugs to control a medical condition demonstrated significant increases in patient compliance.

Often, under current health benefit designs, the cost of deductibles or coinsurance results in patients forgoing medications and treatments due to their high costs. To use a slightly altered old adage, it’s a pattern of “pay me now or pay me more later.” Health plans are now finding that reducing deductibles and coinsurance for these preventative services saves them money in the long run by reducing future emergency room visits and the need for expensive medical procedures. On the flip side, benefit plans are also creating disincentives as well, with higher deductibles for health services that may be deemed unnecessary – even when the same outcome can be achieved through alternative treatments at a lower cost. Many payors are beginning to use evidence-based data to identify the cost/benefit of various treatment options and to design their benefit plans.

In fact, the Patient Protection and Affordable Care Act (PPACA) emphasizes increasing quality and efficiency in healthcare through providing access to preventive services. Specifically, the Act requires that all health plans include certain preventive services without a copayment for the patient. For example, the required preventive services for adults include blood pressure screening and colorectal cancer screening.

At the forefront of this transition to value-based insurance design health benefits are many state and local governments. Given the large deficits being faced by many states and the significant unfunded liabilities for pension and health benefits state governments are seeing, opportunities exist to reduce both current budget costs and unfunded liabilities. Examples include the state of Oregon, which has implemented a VBID program for its public employees. Their plan includes lower cost sharing for preventive care, chronic disease medications, and emergency services, along with increases in employee share of costs for health services (which have been identified as overused or not evidence-based). In addition, they have added a surcharge for smokers and will no longer cover some cosmetic procedures, with the cost of certain such procedures becoming the sole responsibility of the employee.

In Colorado, the Colorado Springs school district changed its health benefit plan to provide an incentive for employees to use minimally invasive procedures for certain surgeries. They lowered the copayment amounts for minimally invasive procedures while increasing the copayment for open surgical procedures. This was done only when both types of procedures were an option. In this case, they were not only focusing on the lower direct cost resulting from the use of a minimally invasive technique, but also generating a cost savings from less absenteeism. Since the minimally invasive procedures require less recovery time, teachers were back in the classroom sooner and the cost for substitute teachers was reduced.

And in Wisconsin, in Chippewa County they have implemented a VBID program for county employees, for which out-of-pocket costs are waived for programs such as diabetes education, medications for chronic conditions, and colonoscopies. They also provide incentives for weight management. Their estimated savings from these programs was a reduction in healthcare costs of 30 percent, saving the county $1.7 million in annual health insurance costs.

Employers have also been implementing VBID programs with great success. Caterpillar implemented health risk appraisal and disease management programs for high-risk employees, with very favorable results. Ninety percent of eligible employees participated and results included a 50-percent decrease in the amount of disability days.

In the case of Marriott International, which has annual healthcare costs exceeding $400 million, copayments were reduced for medications for chronic diseases, including asthma, cardiovascular diseases, and diabetes. The company found that the additional cost for the copay reduction was more than offset by the reduction in more costly adverse events, which previously occurred as a result of noncompliance with this group of employees.

These are only a few examples of the impact of value-based insurance design on healthcare costs. The more important conclusion is that VBID programs are an essential component in the development of a coordinated, seamless healthcare delivery system in which providers, payors, and patients work together to deliver services that are cost-efficient and outcome-based. This, after all, is the definition of value.

About the Author

Greg Adams is the chief strategy officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare, including 20 years’ experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management, and real estate development. Greg is the past chair of the National HFMA, having served as the chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value-based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as president of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and chairman of the Finance Committee at St. Ann’s Home for the Aged in Jersey City, N.J.

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Greg Adams is the Chief Strategy Officer for Panacea Healthcare Solutions and has over 35 years of experience in the field of healthcare including 20 years experience as a hospital CFO. His experience includes financial operations, managed care contracting, physician practice management, patient accounting, patient access, health information management, materials management and real estate development.  Greg is the Past Chair of the National HFMA, having served as the Chair of its Board of Directors in 2011-12. In that role he oversaw the services the organization provides to its 40,000 members. Greg speaks extensively on healthcare reform and the transition to a value based payment system. His speaking engagements include national, regional, and state programs. He has previously served as a member of the National Board of Directors for the Healthcare Financial Management Association from 2002-2005 and as President of the New Jersey chapter in 1997-98. He has also served as a member of the Board of Trustees and Chairman of the Finance Committee at St. Ann’s Home for the Aged, Jersey City, New Jersey.