Healthcare Business News

Value-based insurance plans gain momentum

By Jonathan Block
Posted: March 26, 2013 - 6:45 pm ET

The movement among employers to push insurers to adopt health plan benefit designs that improve medical outcomes without raising costs is slowly gathering steam, according to an employer coalition pushing payment reform.

While only 11% of payments that commercial insurers made to in-network providers in 2012 were “value-oriented,” according to a survey from Catalyst for Payment Reform, that's more than halfway to its goal of 20%, which the group hopes to attain by 2020.

The numbers suggest there is reason to believe the insurance industry and providers can achieve the coalition's goal, said Suzanne Delbanco, executive director of the not-for-profit coalition of employer groups, which issued its first-ever National Scorecard on Payment Reform.

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Value-based insurance plans come in many forms, from capitated payments to shared savings on the plan side to reformed copays and deductibles on the beneficiary side. The goal is to incentivize beneficiaries to purchase lower-cost goods and providers to forgo services that may be wasteful. Some large employers and insurers are turning to value-based plans as a way of holding down costs without jeopardizing overall health outcomes.

The survey suggested insurers had made more headway with hospitals than other providers in moving toward value-based plan designs. Overall, 11% of hospital payments were value-oriented compared with 6% each for outpatient specialist and primary-care physician payments.

The coalition compiled the scorecard based on data voluntarily submitted by 57 health plans representing 67% of the commercial market group. The survey was funded by the left-leaning Commonwealth Fund and the California HealthCare Foundation, a non-for-profit group dedicated to improving healthcare.

The results showed that most of the value-oriented payments, 57%, were considered “at-risk” since providers could have been penalized financially if they failed to meet quality or outcome goals. These payments included bundled and capitated payments. The remaining 43% included fee-for-service with shared savings and fee-for service base payments with bonuses for performance.

A report released in January by the Commonwealth Fund found that provider payment reforms are one of three key strategies that can stem the rising tide of U.S. healthcare costs.

Many major insurers are getting into the habit of signing contracts with providers that include a value-based element to how payments are made, especially with the growth of accountable care organizations.

Jill Hummel, vice president of payment innovation for WellPoint, said that 50% of the physicians under contract with the insurer are paid based on a pay-for-performance basis. Hummel and other industry leaders joined a panel discussion Tuesday on the scorecard in Washington.

Payment reform, however, is not only a private-sector ambition. The CMS has many programs in the area, including the Pioneer ACO Program, bundled payments and the Medicare Shared Savings Program for ACOs. And during the past two years, Medicare spending per beneficiary has declined, said Dr. Richard Gilfillan, the director of CMS' Center for Medicare and Medicaid Innovation, who spoke at the forum.

Also, more than 50,000 providers are or will be providing care to beneficiaries through one of the programs, 4 million beneficiaries are receiving care through an ACO and more than 1 million through a primary-care physician program. He added that in 2012, Medicare had 70,000 fewer hospital readmissions.

In the past, many providers have resisted moving away from the fee-for-service system, but that culture has changed significantly, said Dr. Mark Smith, president and CEO of the California Healthcare Foundation. Most providers, Smith said, recognize the “inevitability of payment reform,” citing the work of the ABIM Foundation's Choosing Wisely campaign, which works with state medical societies to help providers recognize unnecessary medical tests and procedures.

And there is also a role for health plan members, said Elizabeth Curran, head of national network strategy and program development at Aetna. Aetna for years has made prices of certain services available to patients in order to help them become better healthcare shoppers. That effort ultimately promotes price transparency, Curran said.

With increased transparency, if employers find out that certain hospitals are charging more for certain procedures compared with others, those hospitals may get excluded from provider networks, Hummel said.

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