Health plans accredited by the National Committee for Quality Assurance have long suggested that better quality leads to lower costs. Now they may have a high-tech way to prove their case.
Last month, the NCQA launched a Web-based program that allows employers and health plans to obtain detailed estimates of how much money companies can save by contracting with an accredited HMO.
The program, dubbed the Quality Dividend Calculator, not only stands to boost business for certain HMOs, but it may also prove to be a savvy marketing tool for the NCQA in the increasingly competitive accreditation field. The calculator is available free of charge on the organization's Web site: www.ncqa.org.
For a long time, insurers have been looking for a way to demonstrate that high-quality health coverage is a good financial investment, says Jon Hautz, a senior healthcare consultant at William M. Mercer in Cincinnati.
"Intuitively, lots of people knew this was true, but the research just hasn't been there to prove it," Hautz says.
The calculator is based on growing research into indirect costs, such as employee productivity and absenteeism. It attempts to put a dollar figure on how the quality of an HMO can affect these costs and helps employers quantify the consequences of choosing a plan that may not be particularly up to snuff.
The program, which took the NCQA about one year and $50,000 to develop, works by combining and analyzing epidemiological data, cost information and HEDIS scores. HEDIS, or the Health Plan Employer Data and Information Set, measures HMOs' performance on several quality indicators relating to treatment, prevention, access to care, customer service and claims processing. It's used by 90% of the nation's health plans.
The Washington-based, not-for-profit NCQA has found big differences in performance between accredited and nonaccredited plans on HEDIS measures such as mammograms and immunizations. Those disparities translate into differences not only in direct medical costs but also in indirect costs, says NCQA spokesman Brian Schilling.
"What's the impact of a 90% immunization rate over a 70% immunization rate?" Schilling asks. "When you take these differences in HEDIS scores and project them over a covered population, you can pretty reliably project that X number of parents are going to miss work because their kids are out sick with the chicken pox."
Here's how the calculator works: Employers enter data online about the size of their workforce, along with employees' ages and sex. They are also asked to supply data about average daily wages paid, benefit costs and spending on the replacement of absent workers.
The program then will generate several tables and charts, showing employers how productivity could be improved and absenteeism reduced by contracting with an NCQA-accredited plan. It also generates a table showing the effects on employee-replacement costs and sick-day wages in eight categories, including depression, asthma, diabetes and heart disease.
The payback of an accredited health plan managing illnesses and chronic conditions more effectively can be significant, the calculator shows. For example, a financial services firm with 7,000 employees enrolled in an accredited plan could eliminate 780 sick days per year, thereby avoiding paying out about $155,000 in wages for those days off and $120,000 in temporary worker costs annually.
NCQA officials believe accredited plans probably will be the biggest proponents of the calculator. Insurers' sales teams may find the tool particularly useful in making presentations to potential customers.
"It's in their best interest to let their clients know that there's a tool they can use to quantify the value of contracting with a good plan," Schilling says.
The calculator also could prove to be a valuable marketing tool for the NCQA itself.
Created more than a decade ago, the NCQA still leads the managed-care accreditation market, now accrediting 282 HMOs, or roughly 50% of all health plans. But the Oakbrook Terrace, Ill.-based Joint Commission on Accreditation of Healthcare Organizations and the Wilmette, Ill.-based Accreditation Association for Ambulatory Health Care have stepped up their competitive efforts this year by vying for PPO and Medicare HMO clients (Oct. 8, p. 4). The Joint Commission and the AAAHC now accredit 75 and 20 health plans, respectively.
More nonaccredited plans, suddenly faced with data showing that their performance costs employers money, could be motivated to pursue accreditation. The calculator-which has a patent pending-increases the chances that these prospective customers will go to the NCQA over rival organizations, which can't quantify the value of their accreditation in the same way.
To promote the use of the calculator, the NCQA hopes its purchaser advisory council will spread the word in the business community. A promotional mailing is also planned for later this year to all Fortune 1,000 employers.
The current version of the calculator shows only the savings an accredited plan can produce compared with a nonaccredited plan. It can't make head-to-head comparisons between specific plans. The NCQA, however, intends to make these more-detailed comparisons available next year, Schilling says. The organization also plans to add features that would measure the cost implications of service-related issues, such as time spent resolving billing disputes and arranging referrals.