Changing the basis of payments: Driving sustainable innovation in health care

Innovation is among the most popular buzzwords in health care today, and its use is also one of the broadest.

Often, innovation refers to technological advancements, wellness rewards, or fitness and health trackers. These are important forms of innovation that capture the imagination.

But many of the most promising health care innovations are considerably less flashy – and are most likely to transform the delivery and cost of care. They are, in a sense, more algorithm than app.

Where transformative innovations occur

You can compare them with many innovations in air travel. While many airlines may point to the features most likely to catch a passenger’s eye – entertainment systems, Wi-Fi, seat comfort – they are not the innovations that actually transform air travel.

The more transformative work is happening with new systems that reduce delays or mechanical issues, speed up the boarding process, or increase flight speed.

In health care, too, the most transformative innovations are behind the scenes. And as we reimagine how we pay for care, use data, and engage with patients and consumers, we see tremendous potential in improving people’s health, wellness, and financial security.

Revisiting the payment model

Much of the industry’s work begins with revisiting the payment model, and encouraging a shift from paying for volume to paying for value.

Under the traditional fee-for-service model, payors – health plans, employers, or the government – take on the financial risk. Doctors, hospitals and drug makers, meanwhile, only have an opportunity to earn more revenue when they provide more health care products and services, regardless of whether it helps patients.

Today, we see that many health care participants – from insurance provider to drug maker, doctor to hospital – are looking to embrace new value-based systems that incent more efficient and effective care for patients.

Collaboration and time

This sort of innovation takes collaboration – and time. For example, Tufts Health Plan in Massachusetts works with providers in an incremental manner to shift towards alternative payment models They have found that it takes at least 5 years to move to capitated payments.  During this time, plans and providers work together to upgrade health IT infrastructure, hire additional support and care coordinators, and determine the best way to communicate changes to providers, employers, and enrollees.

Target metrics and regular performance evaluations are key to recognizing and rewarding the incremental shift to value where providers assume more risk. Part of what this incremental approach helps achieve is physician buy-in, as they are part of the process in developing the model. Physician engagement is absolutely essential if this is to succeed.

Physician engagement is key

Tufts learned this in forming a direct relationship with the care networks for their commercial customers, with the targets and measurements instituted by the health plan, but the physician groups making decisions about how best to allocate risk. The providers not only see but are engaged in reporting and analytics, which has led to positive referral trends to lower-cost settings and lower medical expense trends than the previous fee-for-service model.

Priority Health in Michigan has found that rewarding practices that provide care management services incentivizes higher quality performance and patient experience. They equip practices with resources to create a care management infrastructure, then offer a payout that comprises about 15 percent of a primary care physician’s total compensation.

This gives doctors more freedom to focus on treating the whole patient, especially high-risk patients or those with chronic conditions. Doctors are reimbursed for time working with a patient that would not be billable under a fee-for-service arrangement.

Data drives changes

Of course, data drives these sorts of innovation. The challenge with data is that an abundance of data either unutilized or improperly used is about as valuable as having a gym membership but never showing up. Data must be actionable, and providers must know how to engage with data to better treat patients.

For example, HealthPartners in Minnesota has found that it’s essential to meet directly with providers so they understand the value-based care model and are able to offer ways to improve it.

The health plan uses a tool to develop provider-specific reports that detail hospital admissions and readmission, lab tests, and emergency room visits, among other metrics. The HealthPartners staff are then able to offer actionable areas for improvement when discussing the reports with providers. To drive innovation, data must spur action.

Payment reform makes sense

Using payment reform to drive innovation makes sense because it targets a fundamental motivation for changing human behavior: money. When providers, hospitals, and practice groups know that their compensation is tied to improving patient care and reducing costs, that provides a powerful impetus to change the way care is provided.

Among the nation’s largest insurers, more than half of all payments are now tied to value metrics. As that figure grows over time, the quality improvement and savings reductions will increase as well, as the changes need to impact the entire system and be widespread enough to shift provider behavior.

Challenges ahead

Challenges remain however, in making that change significant, scalable, and sustainable.  CDPHP has found a sustainable model that has lasted more than a decade.

In this model, primary care physicians in both commercial and public markets were moved from fee-for-service to a risk-adjustment global payment model with a significant bonus opportunity.  In 2014 alone, the program resulted in a reduction of $17.11 per-member per-month, while increasing payment to primary care doctors by $10 million.

Because physicians see gains, it has accounted for more than 80 percent of payments in primary care.

Providers must continually be engaged, trained, and empowered in new ways. Data must evolve and motivating factors must last, ensuring that innovations are not just short-term blips that become case studies, but rather a sustainable way of providing better care well into the future.

Improving patient and physician experience

While many of these payment models are effective in reducing costs, innovation becomes apparent – and important – when a patient notices improvement in the attention, quality of care, and results they receive.

Payment models can allow a single provider or practice to be empowered to ensure the patient’s needs are met, and held accountable through their compensation.

Patients will see more preventive care, coordinated and holistic care for chronic conditions, and assistance in making value and quality-driven decisions about treatment and provider options. Payments are increasingly tied to whether patients are satisfied with this type of care, with patient satisfaction surveys impacting the compensation for at least 1 in 4 physician.

Disciplines such as risk-sharing, payment models, and data analytics may not have the “wow” factor that often capture the headlines. But they are showing promise of having a dramatic impact. We need that impact now more than ever.

As health care cost trends continue to outpace the rate of inflation, families are looking for relief that makes coverage and care more affordable and accessible. By building on what we have learned and embracing new pathways to value, we can make health care work even better for hundreds of millions of Americans and their families.

Adam Beck is Vice President, Employer Health Policy & Initiatives, Commercial Exchange Policy & Operations with America’s Health Insurance Plans (AHIP).