Aligning employer strategies: Value-based insurance design and the patient-centered medical home

Bruce Sherman, MD, FCCP, FACOEM

PCPCC - Center for Employer Engagement - June 9, 2010

The primary care system must be transformed to address current healthcare issues

Joint Principles of the PCMH (February 2007) The following principles were formulated by the four

primary care physician organizations – the American Academy of Family Physicians, the American Academy of Pediatrics, the American College of Physicians, and the American Osteopathic Association. Principles:

• Ongoing relationship with personal physician• Physician directed medical practice• Whole person orientation• Coordinated care across the health system• Quality and safety • Enhanced access to care• Payment recognizes the added value

Why should employers care about PCMH? Improved coordination of healthcare Enhanced quality of care Better clinical outcomes Improved patient satisfaction with healthcare And (hopefully) lower health and lost

productivity costs Healthier workforce Healthier families in workforce Increased efficiency of care (reduces costs) More valuable health benefit

Typical US employer healthcare cost distribution

• Improving care quality with a PCMH, will increase primary care costs

• But… implementation of PCMH has been shown to result in lower hospitalization rates – and lower overall health care costs.

Patient-Centered Medical Home2009 Overview of Pilot Activity and Planning Discussions

RI

Multi-Payer pilot discussions/activity

Identified pilot activity

No identified pilot activity – six states

A comparison of then and now…Attribute 1990’s – Managed

care2009 and onward -

PCMH

Primary stakeholders involved:

Health plansEmployers

Health plansProviders

PCP role: Gatekeeper Medical home

Need to engage/involve:

Providers Employers

Patients have… Limited choices Informed choices

Good health means:

Lower costs Engaged individual

Employer focus: Cost-reduction through appropriate utilization

Value-generation through appropriate utilization

Benefit design considerations:

In/out of network; co-pay used as financial disincentive

Value-based insurance design as financial incentive

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The importance of benefit design

Wise Investments in Employee Health Are Cost-Wise Investments in Employee Health Are Cost-EffectiveEffective

Wise Investments in Employee Health Are Cost-Wise Investments in Employee Health Are Cost-EffectiveEffective

Reduction Reduction in Medical in Medical

CostsCosts

Reduction Reduction in Medical in Medical

CostsCosts

Reduction Reduction in Health-in Health-Related Related

AbsencesAbsences

Reduction Reduction in Health-in Health-Related Related

AbsencesAbsences

Reduction Reduction in in

On-the-Job On-the-Job ProductivitProductivit

y Lossesy Losses

Reduction Reduction in in

On-the-Job On-the-Job ProductivitProductivit

y Lossesy Losses

BenefitBenefitCostCost

BenefitBenefitCostCost

Employers are increasingly adopting cost-effective – or value-based

Insurance design strategies

Employers are increasingly adopting cost-effective – or value-based

Insurance design strategies

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The case for value-based insurance

Design of Value-Based Co-paymentsDesign of Value-Based Co-paymentsDesign of Value-Based Co-paymentsDesign of Value-Based Co-payments

ProblemProblemProblemProblem

Some employers are responding to rising healthcare costs by adopting across-the-board cost-shifting Many studies have shown that this reduces adherence, which

may have adverse clinical effects: Ellis JJ, et al. 2004; Goldman DP, et al. 2006

SolutionSolutionSolutionSolution

Set the patient co-payment amount relative to the value – not the cost – of the intervention This means considering the complications and consequent

services that are avoided on account of the intervention when assessing value

• Condition-specific (diabetes, hyperlipidemia)• Benefit offering (preventive care, generic

medications, PCMH)

Adapted from Fendrick AM and Chernew ME. Value-based insurance design: aligning incentives to bridge the divide between quality improvement and cost containment. Am J Manag Care. 2006;12:SP5-SP10.

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VBID is relevant to all aspects of health management

Integrated Health and Productivity Management

Wellness and Health Promotion

Incidental Illness and Chronic Disease

Complex-Catastrophic Individual Cases

Health education

Health risk assessment and screening programs

Lifestyle management programs

Health insurance plan

Short-term disability

Disease management programs

High-cost case management

Long-term disability

Centers of excellence forhigh-cost conditions

New ACOEM and IBI partnership to promote health and productivity management in the workplace. [news release]. Chicago, IL: ACOEM. November 27, 2006.

VBID Strategies

PCMH and value-based insurance design

Medical home is a system/means of healthcare delivery

Unless individuals are encouraged to utilize a medical home, there is no value generation for employers

Financial incentives can steer individuals to use high-value services (value-based insurance design)

Medical home is a high-value service Incorporation of a value-based insurance design

to promote medical home use can drive PCMH use

Value-based insurance design includes more than lowering medication co-pays

Employer considerations for PCMH-related benefits

Co-pay reductions for: Medical home visits Specialist consults when referred by PCMH Ambulatory services when referred by PCMH

Contributions to HRA/HSA for PCMH provider selection

Compliance with recommended care: Tiered employee benefit contributions HRA/HSA contributions

Barriers to employer adoption of PCMH No pilots in the employer community

Employers can partner; work with health plans to implement (Kellogg, Roy O Martin Lumber, IBM)

Location-by-location implementation vs. ease of uniform benefit design change Consider involvement in existing plan-based pilots

Short-term focus on costs Ongoing education; build on VBID approach

(Whirlpool) Need for solid “proof of concept” data for PCMH

Enhance visibility of outcomes data for employer audience

Final thoughts Value generation occurs through appropriate

utilization of healthcare services PCMH should be considered as a focus for

value-based insurance design strategies Increased use of (and payment for) primary

care is offset by reductions in use of other healthcare services

Improved health results in greater workforce productivity

“My employer cares about my well-being” engenders greater employee engagement