I don’t know where to start with value-based purchasing!

The title of this piece is a common refrain from self-funded employers who don’t know where to start or fear to step out of the conventional box. Our entrenched employer-based health care depends on FUD (fear, uncertainty, and doubt) for its survival

Value-based purchasing sounds like the promised land of goals. And when trying to make this big goal a reality, too many employers freeze when starting to put pen to paper.

So where exactly should an employer start when they head down the path of creating a value-based purchasing model?  Here’s my four-step process.

Start by defining value. Value is quality divided by cost. The higher the quality and the lower the cost, the higher the value it is. Quality also includes the appropriateness of a visit or procedure. For example, an unnecessary surgical procedure that is excellently done without complications is still low quality.

Starting on the value journey is not difficult. A self-funded employer needs only 3 ingredients:

  • The willingness to change plan design
  • A savvy intermediary with no hidden conflicts to help with direct contracts
  • Cooperative primary care.

Let’s unpack that point by point.

Self-funded employers can – within regulatory bounds – build into the program incentives for their covered members to seek alternative avenues of treatment. Incentives can vary from reduced cost sharing to actually paying members.  There are many shades of gray in between as well. Not surprisingly, non-financial incentives are possible but money is still in first place.

The Zero Card’s success results from its simplicity.  Here’s how:  If I choose a certain provider, I will have not have an out-of-pocket. Zero.  End of story. It’s easy to understand, with no complicated charts, graphs or lectures.

Direct contracting is the second step.

Providers love commercially insured patients. They especially love getting paid promptly, not carrying accounts and not doing collections. They don’t like credit card payments, bounced checks, billing cycles and delayed payments.  So what does this really mean?  Make it easy and they’ll give you a great bundled price. Make it really easy and they’ll give you a bundled price that more than makes up for the share that the employee is no longer paying.

Remember: Use publicly available data to determine which providers you want to work with. Here in Oklahoma, we are blessed that three of the hospitals offering the broadest array of bundled services are all CMS 5-star hospitals.

The third ingredient is cooperating with primary care.

No matter the incentives, patients generally want to do what their doctors suggest. It’s hard to say “no” when your doc says go here or go there. So you need primary care docs who are aligned with your desire to have your members go to high-quality, low-cost providers.

If primary care physicians are employed by a high-cost health system, you’ll struggle to have your members referred anywhere else. That’s just a business fact. So look for primary care that is independent and conscious of the cost and quality of the specialty providers they refer to.  This is the fourth step.

It’s a common occurrence:  I sit with employers lamenting their healthcare costs. For example, we will look at quality and cost data for joint replacement in our region. The data will clearly show two providers that have the highest quality and that offer fixed-price bundled joint replacements at a saving. One other provider who did the lowest number of joint replacements had the highest costs. Never assume you can buy quality with more dollars. The inverse is usually true: high-quality providers who do procedures in higher volumes and with greater efficiency and effectiveness are able to offer lower prices.

Employers ultimately have one question they want to be answered: I know what to do, but not how.

There is a simple answer: find an intermediary partner that isn’t married to the incumbent system. An example is The Zero Card, which provides access to those low bundled prices and provides an instant, clear incentive: no copay or deductible.

Next, work with local onsite/near site direct primary care docs and let the quality/cost data speak for itself to the docs.

Then put that pen to paper and craft the health plan to make the necessary changes.

As we say in the medical world: it isn’t rocket surgery.

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