A Health Care Value Ecosystem Is Forming
By Brian Klepper, PhD
It may not feel like it, but the health care value movement is gaining momentum, as well as recognizable support and distribution structures. Hundreds of new health care vendors claim they are value-focused, delivering better care and/or lower costs than conventional approaches, and some are proving it with data. More impressive, it’s not just that isolated self-insured employers here and there are casting aside a standard health plan offering in favor of an alternative service or method, but that these risk management approaches are often being deployed in combination and regionally by large groups or collaboratives of smaller groups. American health care’s drive to value may be so small as to be nearly imperceptible, but it’s real and accelerating.
In Connecticut, for example, the state employees’ health plan has contracted with Remedy Partners to build episode-of-care contracts based on robust quality and cost information, creating a more competitive marketplace by driving the business to higher value providers. The goals here are to decrease (1) pricing for routine procedures and treatments, (2) the rates of avoidable events/complications, (3) use of low-value care services, and (4) the volume of unnecessary procedures. Remedy believes that this effort alone can drop the plan’s total annual health care spend by 10%.
It’s useful to appreciate that programs like this are of necessity complicated. They are being deployed within a deeply entrenched structure that has been historically uninterested in efficient health care and is generally ill-equipped to operationalize it. Lots of moving parts are required. Employee incentives must be developed that steer use towards high performing providers. Providers must be fed reports continuously that reflect their performance on all contracted episodes, so they can focus on moving to or staying in a higher tier. They must also receive lists of resource-intensive patients and patients most at-risk of adverse events, so targeted care management can be deployed.
Other vendors have undertaken operational redesign of different high value health care niches. Costco established a pharmacy benefits management (PBM) function for its own nearly 300,000 employees and dependent lives and, now, about one hundred mostly mid-sized self-funded employers. Their design looks like what you might expect from an organization that has developed a following of 90 million subscribed shoppers. All rebates are passed back to the purchasers. The employer’s contractual terms are clearly stated in 16 pages, unlike the byzantine 100+ pagers that PBMs typically insist on. All transactions are utterly transparent and the organization invites audits. The formulary is evidence-based. A single administrative fee covers all services, including those associated with managing patient care processes. Costco estimates that the average employer will experience savings of 18%-40% off current drug spend.
In Indiana, benefits advisor Richard Sutton is working to network the dozens of worksite primary care clinics he has implemented for school districts around the state. This will allow patients from one district with a clinic to use another that may be more convenient, and allow districts that don’t have clinics to piggy-back on (and share financial support for) another district’s resource. In addition, high value programming in some clinics, like IMC’s musculoskeletal management that impacts one in five patients, and Carrum Health’s high performance narrow networks, can more easily become generalized to more clinics.
Variations on these approaches can work for smaller self-funded employers as well. Benefits advisor David Contorno typically offers new clients an array of high performance health care approaches that can improve health outcomes and lower cost, but he also encourages employers to collaborate with others in the same region to increase direct contracting market leverage for all of them.
In many markets, the high value health care movement has generated enough awareness and strength to change how that market works, making it more competitive and value-focused, encouraging health care vendors of all types to seek business on more favorable terms than in the past. Every win moves us further forward, and drives faster change.
Brian Klepper is a health care analyst and the Executive Vice President of Validation Institute. He also hosts the ValidPoints Podcast, a monthly podcast featuring conversation with healthcare vendors, innovators, and employers focused on transforming health care outcomes and costs.