High-value health care: A model for the future

The American health care system is made up of dramatic contrasts. On one hand, the quality of medical care available can be the best in the world. But on the other hand, quality varies greatly among providers, it is increasingly unaffordable and there is little transparency into quality and cost.

Dramatic changes to the status quo are necessary in order to create a health care system that is universally high in quality, affordable and egalitarian. In order to create this high-value health care system, everyone involved – from patients and doctors, to employers and insurance providers – must demand change.

Related: Hospital price transparency compliance: How’s it going/?

Benefits brokers have an important role to play, since they are trusted advisors who can point their clients to solutions that promote high-value health care as they work to solve the problems of affordability and access.

Insured, yet struggling to afford care 

Even though many employers provide health insurance, employees often find it difficult to afford the out-of-pocket costs, including deductibles and coinsurance. Consider “Serena,” an active 52-year-old mom of two teens living in Connecticut. Her employer offers health insurance, but because her only option is a high-deductible health plan (HDHP) with a $4,000 deductible, she constantly worries about her ability to pay for the care she and her family need.

Between her monthly bills and the cost of supporting her family, Serena knows that even one minor health crisis could wipe out her meager savings due to the out-of-pocket charges she will incur. To control these costs, Serena avoids going to the doctor and occasionally skips medications or splits pills. She has a few minor health issues, which could escalate if not well managed, and could potentially result in that one financially devastating event.

Serena is not alone. About 43% of privately insured adults have reported that it’s difficult or impossible to afford their health insurance deductible, which isn’t surprising given that medical bills rank as the top cause of bankruptcy in the U.S. At the same time, more and more employers are trying to save money by moving to HDHPs. This can exacerbate employee medical issues, because they delay care to minimize both out-of-pocket costs and unpredictable or surprise medical bills. In fact, more than half of adults with employer health coverage said that in the last year, someone in their household skipped or delayed getting care or didn’t get prescriptions filled due to cost concerns.

A costly accident

Now, let’s imagine that Serena has injured herself lifting a heavy package and needs surgery to repair a hernia. Since she does not have an existing relationship with a surgeon, she seeks recommendations from friends. Depending on which doctor she happens to choose, and the hospital where she has surgery, the cost could vary by as much as 34% where Serena lives in Connecticut, according to a recent RAND report.

These cost differences are substantial for Serena. If she opts for laparoscopic outpatient hernia repair at St. Francis Hospital, the total facility cost will be about $6,000. But if she goes to Hartford Hospital, a mere two miles away, it will cost $8,041, according to the RAND report. Note that this is just facility cost and does not include surgeon’s fees, imaging or other related expenses. Her out-of-pocket costs will be higher as will her employer’s. But what additional benefit does the building provide?

In properly functioning economies, consumers make decisions knowing cost and quality or value, but all of these factors are obfuscated in U.S. health care. In other parts of the free market economy, a 34% increase in price (Hartford versus St. Francis) would be accompanied with a substantial increase in benefit, such as quality or level of service. While assessing value between these two facilities is difficult, there are indications. The RAND report used Centers for Medicare & Medicaid Services (CMS) star ratings and Leapfrog Hospital Safety Grades to categorize hospitals according to quality and reported a 4-star rating for St. Francis and a 2-star rating for Hartford Hospital. Moreover, St. Francis, her lower cost option, has an “A” safety rating, while Hartford Hospital’s has a “B,” according to Leapfrog.  Overall, the RAND study determined that over one-third of hospitals considered “low cost” had high quality ratings.

The problem that Serena and hundreds of thousands of other individuals, doctors and employers face is lack of visibility into the actual costs of health care services. And she does not have insights into the quality of care and outcomes of each doctor or hospital either. Instead, she relies mainly on the opinions of her friends and colleagues.

Reform required: reimagining the health plan 

Based on Serena’s experience, as well as those of many other patients, it is clear that the way our health care market is currently structured simply is not working. Changes must be made to the supply side, not just the demand side, to contain costs, improve outcomes and sync cost to benefit.

As the health plan is being reimagined to meet these goals, there are three key characteristics required to create a high-value offering:

1. Members should be effectively steered to high-value providers

Patients have typically relied on two ways to find the care they need: They search through their insurance company’s massive guide or online directory of every doctor and hospital available to them, or they follow their doctors’ recommendations. The problem with both of these methods are that neither option can provide patients with cost and quality information, leaving patients at risk of greater out-of-pocket exposure and potentially less-than-optimal outcomes. As a result, many patients find themselves unknowingly receiving care at higher-priced locations, when lower-priced ones that offer similar or better care are nearby.

Since patients trust their primary care physicians (PCPs) and their recommendations, the most effective way to reduce costs and improve quality is to equip PCPs with the right data. Then, PCPs can help patients navigate the health care system to find high-value care.

2. Make care affordable and accessible from the start

The cost and potential financial impact of health care is a primary concern. One study found that 40% of individuals said they feared the costs associated with a serious illness, which is more than the number who said they feared the illness itself. To ease these stresses, it is important that individuals have access to affordable health care at the most basic levels. If families are at financial risk simply because they need to visit their PCP, they will not regularly see their doctor to receive the preventative, routine and chronic care needed to stave off even more costly and complicated health problems in the future. Also factoring into the cost is the inconvenience and transportation required to get to a doctor’s appointment, as well as missed time at work.

Patients need a variety of options for maintaining regular contact with their PCPs and to know their financial responsibility before their appointment. In addition, it is important that costs are predictable and patients do not need to worry about surprise bills.

3. Pay for value, not quantity

Our nation’s current fee-for-service model encourages doctors to do more, see more, scan more and cut more, even when tests or procedures are not entirely necessary. If we want good results, the system must stop paying for throughput and start paying for results. When doctors are properly incentivized to do the right thing – like offering comprehensive care including behavioral health; providing better access to appointments; improving understanding, compliance, and satisfaction; referring based on data rather than relationship; and more – behaviors will change.

To achieve this requires full transparency in costs, including the costs associated with providers, carriers, pharmacy benefit managers (PBMs) and other vendors. People have a right to know exactly where their money is going and to feel secure that their doctors are recommending solutions, treatments and drugs based on quality and outcomes versus a personal relationship or a volume-driven incentive.

The optimal outcome: better care and little financial risk

In this new health plan model that focuses on high-value care, Serena is able to get the care she needs, when she needs it, and doesn’t have to go into debt. Not only can she receive basic health care services, but there will be no financial surprises when unexpected emergencies arise.

The structure of health care must change to ensure that the evolution to value-based care is a success. Primary care should be free, with no deductible and no out-of-pocket expense, so patients will not have to put finances before their own well-being. And primary care doctors and their teams should guide patient care, including advising when a specialist is required.

This approach would reward Serena with better care and savings for making good choices, including seeing her primary care physician regularly. Serena’s employer also would save money, since Serena would be guided to higher-value providers and the right treatments. There would be no hidden charges or surprise bills. And most importantly, regular care would mean that Serena and her family stay healthier, minimizing the possibility of long-term complications or expensive emergency care.  Without health problems or financial worries, Serena would be more present and productive at work, and more likely to stay with her employer long-term because she values her health benefits.

The role of brokers, too, is important in this move to value-based care. As you are advising on health plan choices, it is important to find partners who put an emphasis on the goals of the reimagined health care plan. Consider how well they are steering members to high-value providers, whether they are evolving financial remuneration to pay for value, and ensure that they have a strong focus on providing affordable coverage to working Americans.

Alan Cohen leads product development for Centivo, a “virtual ACO” health plan for self-funded employers that is designed to bring lower cost, higher quality healthcare to the millions of working Americans who struggle to pay their healthcare bills.