Evidence-Based Oncology

Health Plan Innovations in Delivery System Reforms

Published Online: June 19, 2013
Karen Ignagni
Making the healthcare system more affordable will determine whether employers can continue to provide coverage, whether individuals can purchase it, and whether important public programs can be sustained. Health plans are playing a vital role in reducing the cost of care and improving value by changing how they pay providers. At the same time, they are creating new benefit designs to encourage patients to choose high-performing clinicians and hospitals and take advantage of care coordination and case management for chronic conditions. This article describes health plans’ innovations, while also teeing up a policy agenda that would advance these changes.

New Payment Designs

Health plans are redesigning payment mechanisms to move away from the practice of rewarding volume through fee-for-service payments and toward encouraging better outcomes and improved efficiency through accountable care organizations (ACOs), patient-centered medical homes, and bundled payments. In moving away from retroactive payment to a prospective design, these new models are built on accountability, shared risk, and population-based care.

At America’s Health Insurance Plans (AHIP), our experts have been mapping these developments and will be releasing a new state-by-state compendium of activities around the country. In addition, over the past 18 months, we have convened 3 invitational summits bringing together health plans and their provider partners to discuss how they have restructured their payment contracts, outline key features of their programs, and present results.

What we are not seeing are cookiecutter, one-size-fits-all approaches. Rather, payment redesign is being structured and calibrated across the country to take account of providers’ readiness to accept financial risk. Unlike previous attempts at payment redesign, these current efforts are aimed at tackling both primary and specialty care. While they are at various stages of development and implementation, 2 distinct features are fundamental to the new models being launched across the country: there is strong evidence of collaboration between health plans and their provider partners, and both quality performance and cost reduction goals are being negotiated. This allows health plans to engage in meaningful population-based measurement and providers to have confidence that performance metrics are transparent and fair.

Another major change is that health plans are redesigning benefit structures at the same time they are changing payment mechanisms. These changes are designed to work synergistically to reward providers for achieving results, while also rewarding patients for making choices to use higher-performing hospitals and physicians and regularly obtaining services that are crucial for chronic care management. Strategies advancing either payment restructuring or benefit design cannot work optimally if they are working alone. To maximize results, they need to be aligned and coordinated, and health plans are in a unique position to make that happen.

Getting Under the Hood

In building new payment models, health plans are offering their provider partners more data, as well as decision-support tools. These data help physicians recognize gaps in care, such as which patients need comprehensive case management, which patients are most at risk of developing serious conditions, and which are in need of immunizations and preventive care.

From our research, we have noted several characteristics that are present in today’s plan-provider collaborative models that are yielding promising results. Buy-in for these new arrangements must start with leadership. Clinical integration, a culture of initiating change, a robust health information technology (IT) infrastructure, and acceptance of new payment arrangements are all key criteria.1 In addition, a relationship of 3 or more years is critical to achieving efficiencies among all partners.

Preliminary data suggest that new private-sector ACO models are off to a strong start, with initial quality improvements of approximately 10%; a 15% decrease in readmissions and total inpatient days; and an initial annual savings of $336 per patient.2

Plans also are moving to budgetbased methodologies in their provider contracts.3,4 This approach combines a fixed per-patient  payment (adjusted annually for health status and inflation) with substantial performance incentive payments tied to nationally accepted measures of quality, effectiveness, and patient experience. Other developments in the market today involve the creation and implementation of non-financial infrastructure and support systems. Plans have introduced an array of programs designed to support physicians with patientcentered medical homes, providing access to skilled care coordinators, improved data sharing, and reporting among participating practices.5,6

As noted above, patient engagement and consumer transparency tools are important complements to enhanced provider partnerships. Health plans are working closely with patients on an array of programs that help increase medication compliance, promote rewards for seeking health appraisals and meeting personal goals, and provide low-cost or no-cost coverage for certain preventive and other high value benefits. Health plans also are making information about premiums, cost-sharing, and deductibles available in readily understood, web-based formats.

Innovations in value-based insurance design (VBID) have been developed to help improve health—encouraging individuals who are healthy to stay healthy, and encouraging individuals with certain risk factors, and/or those with chronic conditions, to seektreatment. A key component of these strategies is a health-risk assessment (HRA) tool, along with administrative data to help plans identify individuals at risk and provide customized action plans. Indeed, data from a number of sources show that these programs are helping to increase drug-therapy compliance among chronically ill patientsand producing non-medical benefits, including increased productivity among the working-age population, and reduced absenteeism.8 Another important step has been the development of culturally competent care plans that bring together the patient, the patient’s family and/or caregivers, and a team of providers and experts to coordinate medical care and necessary home and community-based services.9,10

Role of Public Policy

As significant changes are taking place in the market, a key question going forward is how best to structure a policy agenda that recognizes and encourages these changes. To accomplish this, the public policy dialogue needs to be broadened. Too often, the policy debate has confused cost containment with cost shifting. This has happened because many of the policy discussions do not look at total cost but rather, how to reduce costs in a particular program—such as Medicare or Medicaid. Instead, we need a coordinated strategy to address the cost challenge systemwide.

A second issue that has held back progress is that much of the focus has been on the wrong end of the problem, namely premium increases, rather than the cost drivers that have been pushing  premiums higher. Armed with path-breaking work on the role of unit-cost increases, more policy leaders are now discussing what is driving the cost of care higher. Highlighting the right problem will raise the bar on the development of workable action plans.

With healthcare costs consuming too much of family income, employer payrolls, and public budgets, it is critical that the country begin to forge a public policy agenda that can support the market-based changes occurring across the country.

Give consumers and purchasers transparency on what they are being charged. There is widespread agreement that provider consolidation, particularly in hospital markets, has been a significant driver of costs. This market power has been exercised through hospital mergers and the creation of multihospital systems. While the Federal Trade Commission and States AttorneysGeneral are taking important steps to enhance enforcement, additional strategies should be considered. One potential solution is to create transparency on how hospital charges to employers and other commercial payers compare with those for public purchasers, such as Medicare. This ratio of commercial-to-Medicare costs could then be publicly disclosed by each facility as its “cost-shifting ratio.” This information would help consumers and purchasers understand how much more is being charged to commercial payers and how these ratios compare across facilities. This public disclosure would shine a spotlight on the wide variations in cost-shifting ratios, help researchers to determine the impact of consolidation on charges to non-governmental payers, and begin begin an important conversation about whether commercial charges that are over a certain percentage of Medicare reimbursement make sense. In particular, it would draw attention to facilities where the cost-shifting ratio is well over 200% or 300%.

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