December 2011, Focus: Health Care
Value-Based Purchasing: How Employers Can Get Better Quality, Lower Cost Health Care
The Affordable Care Act (ACA) passed by Congress on March 23, 2011 addresses some important problems in health care, but it won’t be a silver bullet for employers struggling to control health care costs. But employers, as purchasers of health care, have the power to move the market if they leverage their role as value-based purchasers of health care and work together.
Employers should consider the following four goals as part of a strategic approach to managing health and health benefits:
Publicly reported cost and quality information. A prerequisite for value-based purchasing is the ability to identify and compare differences in cost and quality from one provider to another. Websites such as wchq.org, Hospital Compare and The Leapfrog Group begin to shine a light on performance, but better information is needed to help consumers choose doctors and to understand important outcomes like complication and readmission rates. Employers can help by advocating for public disclosure of more meaningful cost and quality information on both hospitals and clinicians.
Consumer engagement. Employees need to manage their health and use health care appropriately. Seventy-five percent of our health care costs are spent to treat chronic conditions, many of which could be avoided or delayed through changes to lifestyle-related factors like smoking, inactivity and poor nutrition. Health risk assessments (HRAs) with blood draws provide baseline information on cholesterol levels and other biometrics of employees and spouses in aggregate while providing each individual with a confidential assessment of their own health risks; employers can then target wellness activities to address the greatest risk factors to their employees’ health. Those that do are seeing year-over-year improvement in aggregate HRA results and lower health care costs.
Value-based benefit design. By designing benefit plans to encourage the use of high-impact care and best-value providers, employers can send clear signals to employees that help them make more appropriate choices. In many areas of the country, including here, the cost of elective procedures can vary by as much as 300 percent with no discernible differences in quality. Employers are implementing financial incentives such as gift cards, cash payouts and higher benefit levels to encourage their employees to use higher-value providers as part of this win-win strategy that saves money for both employers and employees.
Payment reform. Another way to incent providers to improve quality and control costs is by changing the way we pay for health care. The current reimbursement system is fraught with perverse incentives; payment is made for each test, procedure and encounter, regardless of the outcome of care. Hospitals charge more when patients have complications and infections, even if they were caused by the care they provided. Clinicians are penalized financially if they do an excellent job of helping patients manage chronic conditions due to avoided hospitalizations and procedures. Employers, as purchasers, have an opportunity and an obligation to change the way we buy health care by rewarding results instead of production.