Purchasers-employers and government programs-are primary actors for pushing for payment, benefit design, and transparency initiatives to get better value; health plans can partner.
Although we recognize that implementation is challenging, we recommend a value strategy including market based and regulatory activity rather than limiting coverage for individuals through high deductibles.
The rise in healthcare spending is affecting business, government, and individuals. Too often the reaction is to shift large chunks of financial risk to beneficiaries, which lowers cost but can work against the agenda to address the underuse of needed services and better health. Also, the shift does nothing to send price and quality signals to the delivery system. With more use of reference pricing with quality built in, for example, providers who deliver care more efficiently would receive greater market share. This would make efficiency a “business issue” for providers. Although we do not underestimate the challenges of healthcare system reform, change to delivery systems, incentives, and expectations offers a better path to getting more value for healthcare spending.
So often, health plans, providers, and beneficiaries have no good reason to obtain better value. Health plans can have higher revenues if they do less to manage total spending; indeed, new rules limiting profits, administration, and utilization management may reward the plans that do the least to manage spending. As has been amply discussed elsewhere, fee-for-service payment systems to doctors, hospitals, and other providers reward volume over value. Current payment norms also reward specialty care over primary care and procedures over cognitive services, which heavily affects the mix of what is being delivered. Providers that are successful in commanding high fees through market power or cache also are rewarded with higher revenues. Due to the way insurance coverage— both the premiums and cost sharing—is generally structured, the consumer who seeks out more cost-effective care receives no financial reward for doing so. Moreover, there is usually little financial consequence for people who make unhealthy choices; eg, have a poor diet, lack exercise, do not take charge of chronic conditions.
Value-based purchasing offers a set of tools to achieve 2 important goals:
We see purchasers—employers and government programs—as being the primary actors for pushing these changes; health plans can be partners. To the degree possible, purchasers should send consistent signals to plans, providers, and consumers about what they want the healthcare system to achieve. Providers facing different incentives and measures from different payers often have no way to respond effectively. Ironically, if all pile on in a similar direction but in different ways, the signal to noise ratio goes down. Alignment among payers is very important. This does not necessarily mean that every initiative needs to use the same measures and payment methods—innovation is important in this area and we still need to learn more about what works best. But we have seen examples of multipayer initiatives, eg, the patient-centered medical home, where collaboration among payers has sent a strong signal to primary care physicians, resulting in impressive outcomes.
Specific recommendations include the following:
Now that there is a firm start toward delivery system reform made for primary care, the next challenge is building from this model and developing others that include specialists and hospitals. One way is through the accountable care organization (ACO), with Medicare leading development. Other purchasers, including private insurance companies and Medicaid programs, are beginning to experiment with the concept; however, employers are not driving forces in this area. To make it more worthwhile for providers to invest in the systems and other organizational changes needed to run successful ACOs, payers should work together to set the same requirements for ACOs. Based on our experience with the patient-centered medical home, we also recommend that payers go beyond the set of performance measures in these initiatives to include standards that articulate, in clear and unambiguous terms, what program elements are needed to lead to success and can be evaluated consistently. Too often these programs require lengthy descriptions that can be difficult to evaluate and thus not terribly useful.
Another approach for building from the patient-centered medical home is in the “patient-centered home neighborhood” idea, aspects of which the NCQA is building into its specialty practice recognition program. This program is designed to recognize the commitment specialists make to not only coordinate the care of their patients inside their practice but also to coordinate with primary care providers. Although health reformers have developed more complex payment models with stronger incentives than the simpler versions of the pay-for-performance schemes of the 1990s, rigorous and meaningful measurement is still critical to help both plans and providers focus on what they need to do to be successful and to reassure consumers that any economies achieved will not be at the price of lower quality.
— Promoting wellness and health promotion through health appraisals and other strategies. Using financial incentives to encourage participation in programs designed to improve health; eg, smoking cessation and weight loss programs.
— Publicly reporting provider performance and involvement in delivery system reforms.
— Providing members with incentives like lower copays to use shared decision making to choose therapies.
— Covering palliative and end-of-life care and implementing strategies to ensure that providers know and follow patient preferences and decisions.
— Surveying enrollees about their experiences and how they rate providers. Then, use this information to provide feedback to physicians and construct networks.
None of these strategies alone can solve the problems of poor quality, poor health, and high healthcare costs. But synergies between them will reinforce key policy goals to improve efficiency and results.
All that we have enumerated above are pure “market-based strategies,” but we believe that a number of more classic regulatory strategies would help lower costs without diminishing the value of care. Ideas worth exploring are to simplify administrative systems, crack down on excessively high prices, work to reduce medical malpractice costs by creating safe harbors for high quality providers, and getting rid of barriers that prevent health professionals from practicing at the full scope of their training.
Author Affiliations: From Public Policy and Communications (ST), National Committee for Quality Assurance (MOK), Washington, DC.
Funding Source: None.
Author Disclosures: The authors (ST, MOK) report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.
Authorship Information: Concept and design (MOK); drafting of the manuscript (ST); critical revision of the manuscript for important intellectual content (ST); and administrative, technical, or logistic support (ST).
Address correspondence to: Sarah Thomas, MS, Vice President, Public Policy and Communications, National Committee for Quality Assurance, 1100 13th St NW 1000, Washington, DC 20006. E-mail: email@example.com.
It has taken decades for American healthcare to become the expensive, complex, and often dysfunctional enterprise it is today. While there have been attempts to redesign policy and payment to address some of the major drivers of cost and complexity, they have often been relatively timid and narrow attempts to tweak the system, and have achieved very limited results. Too often, the different sectors that pay for healthcare have worked at cross purposes, sending confusing signals to providers, or allowing costs to be shifted onto other payers or patients. We are at a unique historical moment when the costs of care are a cause of widespread concern, when new and promising models of care delivery are beginning to emerge, and when technologies to engage the patient are affordable and widely available. A comprehensive strategy of value purchasing can align the interests of health plans, providers, and patients to achieve greater value for the healthcare dollar.