Value-Based Purchasing

As the largest purchaser of health care in America, employers are paying a high price for poor quality care.  About 55% of Americans get health insurance through employers,1 and employers pay nearly three-quarters of premiums. 2 At the same time, poor quality care, such as care that is excessive, ineffective, or harmful, costs a typical employer between $1,900 and $2,250 per employee every year. 3 Improving the quality of health care could improve health while saving money.

Slide1Even though employers are the largest purchasers of health insurance, they typically don’t leverage their influence to encourage improvements to the health care they buy or promote healthy behaviors to their employees.  With escalating costs, providing benefits to employees has become a bottom line issue for employers, and increasingly, poor quality care and chronic diseases are driving costs even higher.  Nearly three-fourths of the money spent by private insurance goes to treat people who suffer from chronic illnesses such as diabetes, asthma, heart conditions, and depression. 4 Unless we move rapidly to improve the value we get for our health care dollars, we will continue to squander precious resources on a broken system.

By working with providers, insurers and local health care organizations, employers can promote quality as well as cost savings by adding quality considerations to health care purchasing.  Value-based benefit design aligns employee incentives with the value of a given health care service – reducing barriers to receiving high-value care, and creating consequences for receiving care that has little value.

The Maine Health Management Coalition is working alongside its employer members to begin changing how care is paid for – in the way that works best for each employer.  The MHMC’s members, such as the State of Maine, the University of Maine, and The Jackson Laboratory, are using the Coalition’s GetBetterMaine quality reports to design health benefits and provide incentives for employees who go to top-rated providers.

For instance, the State Employee Health Commission (SEHC) uses the MHMC’s data to tier hospitals and providers based on the quality of care provided.  SEHC waives the $10 co-pay when employees get care from “preferred” clinician practices and the $200 deductible when visiting a “preferred” hospital.  The tiering program has generated competition among providers and spurred quality improvement and patient safety efforts across the state, leading to significant improvements in the quality and safety of care provided.

The MHMC also worked closely with The Jackson Laboratory, and helped them realize they were spending significantly more on benefits than similar employers in the region, including 50% higher hospital costs.  The Jackson Laboratory then used the quality data to redesign its benefit plan.  They offered lower co-pays for visits to “preferred” doctors, full coverage for certain surgeries and lab tests with “preferred” providers, and lower out-of-pocket costs for in-network hospitals.  In one year, the company reduced health care costs per enrollee by nearly 20%.

Employers have the potential to catalyze real, lasting change in the health of their communities and in the health care system.  As the provider of most American’s health benefits, employers can shape the way their employees manage their health and choose their doctors and hospitals.  Employers also hold purchasing power, which they can leverage to demand better care by incorporating quality and cost information into their benefit design decisions.  Many employers across the country are making real progress in addressing the rising costs in health care – an effort that’s good for health and good for business.

If you’d like to learn more about value-based insurance design, watch Dr. Mark Fendrick’s presentation from the Coalition’s 2013 symposium HERE!