NavigatorMD, Inc.

Jan. 31, 2012

As self-funded health benefit plan costs are expected to rise 7.5% this year, employers increasingly look to capitalize on the impact of value-based approaches. Some organizations have recently raised eyebrows at possible value in Accountable Care Organizations (ACOs), while others have seen significant success in intervention programs designed to proactively fight increasing cost trends. But the common goal among organizations with value-based approaches remains the same: decrease cost and increase health. Here are four things to keep in mind if you’re considering a value-based approach to health management and benefit planning.

1. "You can’t manage what you can’t measure." - Peter Drucker

Every successful business focuses on the principle of managing numbers. Goals and objectives guide strategic execution. Likewise, performance measures evaluate whether or not a strategy has proven to be successful, typically with a financial gain or loss figure. Historically, self-funding employers and insurance brokers focused on data based on what carriers wanted to reveal or not wanted to reveal within the data they provided. This was, for the most part, summary totals of claims expenditures, typical categorized by diagnosis groups. Today, raw data extracts are much more attainable due to its value and demand; but the knowledgeable application of data seems to straggle. When considering a value-based approach, you must understand that proficiency relies on the use of relevant information. For instance, do you understand the tendencies of emerging health risk groups that are leading to high-cost catastrophic events? Are member engagement levels struggling due to a high co-pay structure? Do you have the tools necessary to measure a plan population's engagement to procedures like cancer screenings, medical and pharmacy compliance of chronic disease populations? If your answer to any of these is no, then you need to start measuring what matters. No business operates without monthly financial statements or routine performance evaluations, so why should your health plan?

2. Chronic disease management is key.

Preventable chronic diseases have become the world’s biggest killer. For self-funded employers that understand the health of its plan populations, this should come as no surprise, and ironically, should serve as an encouraging predicament. Preventable illness makes up approximately 80% of the burden of illness and 90% of all health care costs. If the highest cost-driver in your health plan is avoidable, then you need to get creative and find a way to make forward-looking changes with backward-looking data.

3. Value-based incentives are only as valuable as plan member engagement levels.

Let's say you’re an employer who has chosen to incorporate a value-based benefit design by lowering co-pays and deductibles for a chronic condition population. The first step is effective communication. While this value-based initiative is designed to drive positive utilization by increasing member engagement and compliance levels, your members must understand that you are removing a financial barrier in order to provide him or her better care. If particular members aren't used to meeting standards of care requirements such as the number of physician visits, lab visits, prescription medication refills, or even completing educational classes on their conditions; they won't change their behavior unless they understand the incentive. The next step is monitoring progress on a monthly, quarterly, and yearly basis. If at the end of the year, member engagement levels haven’t changed – your value-based incentive and investment in the form of co-pay and/or deductible reductions will likely turn up a loss with no value in return and leave you with this question: Did we lack in our employee communication efforts or was our co-pay and/or deductible reduction simply not cost-effective for our plan members?

4. A flexible, data analytics and decision support system is a vital necessity.

If an employer says to a broker, “We want to launch a wellness program.” Where would you begin? Without any decision support or actionable data, you may suggest providing gym memberships or to include a $50 cash bonus per employee in return for completing a survey for HRA data. While those suggestions may sound attractive, where is the well-founded analysis that supports strong opportunity for a return-on-investment from those incentives? Improving lifestyle choices such as decreased tobacco use, increased exercise or developing a better health improvement partnership with physicians can help, but only if you understand your plan population. You must have a health plan management system that can quickly examine a plan population, determine prevalence rates of high-cost conditions and reveal the types of risk that exist before you commit to a value-based approach that has beneficial opportunity. The number one capability that you need from a data and decision support vendor is having effective tools that can get maximum use out of your health plan spending. Better data means having a more targeted approach. Having a more targeted approach will lead to more value that you can get out of your value-based initiatives.