Value Over Volume

Data is driving a new approach to healthcare benefits: accountable care organizations.

By Molly Loftus

With the new American Health Care Act now in the hands of the U.S. Senate, there’s no doubt that employers will play a major role in true healthcare reform. More than 70 percent of Americans receive health insurance through their jobs, so organizations must actively influence improvements in the quality and cost of care.

At this point in the evolution of employer-sponsored healthcare, reimbursement changes are very much a part of the conversation. Organizations are no longer passive consumers of insurance products; they expect their healthcare investment to yield better patient outcomes, more efficient care, and an improved member experience.   

It is widely recognized that the U.S. healthcare system is flawed and has high costs and an inconsistent quality of care. According to research from the Dartmouth Institute for Health Policy and Clinical Practice, nearly 30 percent of U.S. healthcare spending is considered waste: unnecessary care, inappropriate care settings, and medical errors. Driving this troubling statistic is a reimbursement system that rewards healthcare providers for doing more rather than for accomplishing more. As policymakers struggle for consensus on how to address these core problems, employers are taking action.

For example, in an effort to rein in costs and unnecessary procedures, more organizations are offering access to an accountable care organization (ACO), a type of value-based care system that offers incentives to groups of providers to deliver coordinated, high-quality care that saves money.  Healthcare providers in these systems are measured on both cost and quality outcomes for an entire patient population. If costs come in lower than expected, and quality standards are met, providers are paid a portion of the savings. What many people don’t realize is that lower cost does not necessarily mean lower quality. Investing in preventive care, eliminating duplicative tests, and avoiding costly ER visits by extending doctor’s office hours are all examples of ways that costs can be lowered without sacrificing care quality.

However, only 13 percent of employers offering ACOs are able to report some cost savings, while most can’t measure results, making it impossible to know if they are working.

What employers need is hard data about the geographical locations in which they operate, but such information has traditionally been difficult to come by. But the digital transformation underway in today’s organizations makes a new approach possible. Organizations can collect and integrate detailed information about healthcare providers in their top locations and tailor it to their specific needs. As an example, Mercer has been actively analyzing claims data to understand differences in practice patterns of different geographies, such as unusually high c-section rates or knee and hip replacement rates.  This data can help organizations understand where opportunities exist to lower cost and improve quality.

The data-analysis approach can help determine the extent of the opportunity for cost savings, improved quality, and a better patient experience. For each location, data on three types of problems are collected from healthcare utilization and claims data, and compared with the national average:

1. Underuse. Is there too little preventative care in the market, such as screening for cholesterol or for breast, cervical, or colon cancer?

2. Misuse. Is care being delivered inefficiently? For example, are there more complications resulting from hospital stays, requiring a high rate of re-admissions?

3. Overuse. Are there too many procedures, such as c-sections or knee and hip replacements, that may not always be necessary?

Broader healthcare issues about the metro area are also factored in. For example, there is data around whether there is an oversupply of hospital beds or an undersupply of primary care physicians. Together, the full range of data allows employers to quickly and easily identify the locations  where value-based care offers the greatest potential. 

The ultimate goal for organizations that take an ACO approach is to align reimbursement with value not volume. Employers can get started down this road by committing to this pay-for-value action plan:

• Understand what percentage of the covered workforce is being cared for by a provider with a value-based reimbursement model, either through access to ACOs or other incentives for high-quality care and improved outcomes.

• Know how much the organization is paying in additional fees for lives attributed to value-based reimbursement models such as ACOs.

• Request carrier reporting that includes the expected and actual impact of value-based reimbursement on cost, quality, and member experience.

• Build this into carrier contracts and/or RFPs.

• Define a network strategy, establishing which local and regional healthcare players can initially meet the pay-for-value benchmarks.

Building from an action plan to a thorough data-analysis approach will integrate the data on markets and providers and make it actionable for employers. The key is getting the right fit for the individual organization. Over time, the result will be an employer-based healthcare system that works for all organizations and stakeholders—and value will be its clearest metric.

Molly Loftus is a chief actuary and partner in Mercer’s health consulting practice and specializes in value-based care strategies.

Posted August 17, 2017 in Healthcare Workforce

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