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Push in the right direction
ACOs increasingly see insurance benefits as opportunity to offer incentives promoting value-based decisions

By Melanie Evans
Posted: March 30, 2013 - 12:01 am ET

More hospitals and doctors are signing accountable care contracts that tie payouts and sometimes penalties to delivering better results at lower costs. Some in the vanguard of that approach want to tweak insurance benefits to nudge patients toward choices that help them do it.

In Arizona, Banner Health is negotiating with large employers for accountable care contracts to start next year, and health system officials are seeking changes to benefit designs that will “drive and incentivize positive behavior,” said Dr. Tricia Nguyen, chief medical officer of Banner Health Network, its accountable care organization.

Insurance is increasingly seen as a vehicle to encourage patients not only to embrace healthy behavior and manage chronic conditions, but also to consider less expensive treatment options, especially when a more expensive path promises limited benefits. Value-based insurance benefits may also promote access to preventive services and chronic disease management programs. While Medicare has launched a rapidly growing ACO effort, private insurers have more flexibility with benefit design and that is where providers say they see promise.

Banner Health has already moved aggressively to enter into accountable care contracts, which are among the payment reform models to be tested under the Patient Protection and Affordable Care Act. Now it wants to move the concept into the commercial market. Banner was among the earliest health systems to test accountable care under Medicare as one of 32 organizations selected for three- to five-year contracts that began in January 2012.

It is moving to plant an ACO stake in the commercial market by expanding the concept to include incentives that encourage patients to seek out higher-value medical services. Banner sees greater opportunity to influence patients covered by private insurance because employers have more flexibility to modify benefit design, Nguyen said. Insurers Cigna Corp. and Aetna have entered into accountable care contracts with Banner. The patients' role in health and wellness is often overlooked in such contracts, she said. “Half of the equation is the patient taking on accountability,” she said.

If it is successful, it would add to the early successes of its Medicare ACO. Early results for the first nine months show more patients visited primary-care doctors and fewer ended up in the hospital. Hospital admissions dropped 8.5% among the roughly 51,000 Medicare enrollees included in the effort. Visits to primary-care doctors edged upward 1.1%, and visits to specialists fell 3.9%.

The push comes as new rules under the 2010 healthcare reform law will allow employers to increase the size of incentives, particularly to target smoking, starting next year. A growing number of employers are shifting incentives away from efforts that encourage self-awareness and health education and toward results, such as lower body mass index.

A growing body of research in the field of behavioral economics is seeking answers to how individuals respond to psychological and financial rewards or losses.

How we live affects our health, said Dr. David Asch, a University of Pennsylvania professor who studies behavioral economics in healthcare. But healthcare has largely been absent from our daily lives. But Asch said the industry's future lies in greater overlap with how people live. Providers also have a financial incentive to do so. Finding ways to encourage patients to eat well or correctly take prescriptions could avoid repeated hospital visits for which hospitals can now be penalized, he said.

Asch said the most effective incentives rely on more than a straightforward assumption that individuals will automatically seek to collect a reward or avoid a financial penalty, which has proven less effective. The timing and delivery of those incentives matter, he said, and research is seeking to identify the most influential methods.

He cited a 2008 study, led by Dr. Kevin Volpp of the University of Pennsylvania, of patients taking a blood thinner who enrolled in a daily lottery to win a $100 or $5 prize. The experiment yielded a drop in the rate of incorrect doses to roughly 3% from 22%. Asch said lottery winners were motivated by more than money. Patients who won forfeited the cash prize if they failed to take the medication the previous day; the desire to avoid regret appeared to be one way to motivate patients. Asch is now studying what happens if text messages are sent to relatives of patients who fail to take their medication.

Several ACO executives said changes to benefits must be made by employers who buy health plans, and hospitals and doctors have no direct influence over plan design. But as employers themselves, health system officials say they have adopted incentives for their own workforce and hope that results in the next few years will be convincing enough for others to follow suit.

“It's on the wish list,” said Dr. Lee Sacks, executive vice president and CMO for Advocate Health Care, an Oak Brook, Ill.-based system with 10 hospitals.

For employees included in the health system's ACO for the first time this year, Advocate introduced a financial incentive to quit smoking and tools to do so. Employees and dependents must quit smoking by July 1 or face a $25 fee on their monthly premiums for each smoker starting next January. Incentives previously were tied to whether employees agreed to screening for key health measures and attended coaching, and employees will continue to receive cash for healthcare costs if they get screened or seek help.

Sacks and others said providers also are seeking benefits that steer patients toward hospitals and doctors that are under the accountable care contract.

When patients confront higher out-of-pocket costs outside the limited ACO network, Sacks said, they are less inclined to shop around for providers who are ready and willing to deliver some overused services, such as imaging for back pain, even when research suggests the treatment is not needed.

A 2011 survey of accountable care that included some of the largest U.S. insurers found some had lowered premiums or copayments for patients who see ACO providers. Overall, insurers made few benefit changes, according to results of the survey by the trade group America's Health Insurance Plans.

Insurers reported some health plans already included incentives and said they delayed benefit design changes to focus first on new incentives for providers. Insurers also reported concern that patients would feel “locked in” by benefits that limited choice.

Some of the nation's largest insurers are signing healthcare providers to accountable care contracts. Those deals could include incentives for healthy behavior, but at the employer's discretion, one major insurer said.

Incentives to encourage weight loss, smoking cessation and preventive care have grown more widespread under health plans offered by employers. Cash, gift cards or reduced health insurance premiums are increasingly awarded to workers who complete health evaluations, reduce a major health risk, such as smoking, or work with coaches to prevent complications from ailments such as congestive heart failure. Other companies require workers with health risks to pay more.

Cigna has nearly 60 accountable care contracts, but the agreements' incentives to improve health stop with hospitals and doctors.

Employers separately negotiate with Cigna for health benefits that prod workers to eat well, exercise or adopt other healthy behaviors. But not all ACO executives say they need insurance benefits to help them deliver value.

Officials with the Palo Alto (Calif.) Medical Foundation, which has accountable care contracts with Cigna and two large employers, do not attempt to negotiate benefits that influence patient behavior, said Cecilia Montalvo, vice president of strategy and business development.

Montalvo said physicians have ample opportunity to improve care coordination for complex and costly patients. Indeed, many accountable care officials said the model itself allows them to better influence patients' choices through clinical efforts to improve care coordination and more effective communication

Rick Igram, vice president of contracting for St. Joseph Health System, said its accountable care contract with Blue Shield of California allows greater flexibility to use payments from the insurer to support programs help patients manage chronic diseases or reduce health risks.

Dr. Joel Kaufman, executive director and CEO of the Lifespan Physicians Professional Service Organization, which includes 950 doctors, said its accountable care effort with UnitedHealthcare is striving to remove barriers to care for complex patients and must find ways to clearly convey treatment options and recommendations to patients and between clinicians.

Lifespan's employees in January for the first time were offered $250 for a healthy weight and $50 to be smoke free—as an employer that self-insures, Lifespan is trying reduce its health spending, Kaufman said. But its accountable care contract with UnitedHealthcare did not address health benefit design. “We just haven't gotten there yet.”

TAKEAWAY: With more reimbursement riding on less costly and better care, some ACOs want patients to have a stake.


Banner Health Network registered nurse case manager Jackie Chesser speaks with a patient and spouse in their home. Banner Health was among the earliest systems to test accountable care under Medicare.



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