WellPoint making big push toward performance-based payouts

Insurance giant WellPoint will seek to tie half its commercial reimbursement to performance-based payouts by the end of the year, up from 30% last year, company CEO Joseph Swedish told industry professionals at the American College of Healthcare Executives.

The shift is one enabled by technology, Swedish said, which paired with innovation in the marketplace could bring about a revolution to address what he described as an unacceptable status quo. Household medical bills have climbed faster than wages as national health spending increases as a share of the U.S. economy, he said. “Revolutions happen because the status quo is unacceptable,” he noted.

Performance-based payouts to providers are projected to amount to $30 billion for WellPoint this year, he said, as the system expands on efforts such as a reference-based pricing initiative with the California Public Employees' Retirement System, which reduced spending by about $3.1 million, researchers reported last year in Health Affairs.

Referencing prices cap what a health plan will pay to cover a procedure, with patients required to pick up additional expenses. WellPoint and CalPERS set the cap at $30,000 for hip and knee replacements and identified hospitals within that price range with high quality scores. Those designated hospitals performed 43% of hip and knee surgeries before the new payment policy and 63% after.

The effect on the market was immediate, Swedish said. Consumers responded and hospitals that priced surgeries above the $30,000 cap dropped their prices quickly. The insurer will increasingly look to tie its payments to what hospitals do instead of how much they do, he said. "We believe that hospital increases are earned, not an entitlement."

The industry's transformation is dependent on technology, he said. "I think we're on the cusp of seeing far-reaching victories," he said.

Technology and data aggregation increasingly allow for sophisticated analysis and predictive modeling to improve the safety and convenience of healthcare, he said. WellPoint now uses IBM's Watson supercomputer to more rapidly address pre-authorization questions from clinicians. Data will allow clinicians to better recommend treatment based on a patient's diagnosis and an analysis of data from patients with similar conditions. "We will make big data personal," he said.

With more data and easier access to information, patients and clinicians can make better informed decisions, he said. "The wisdom is out there. The system is still a hurdle," he said.

Follow Melanie Evans on Twitter: @MHmevans

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