IBM is considered a forward-thinking employer when it comes to embracing new technologies and management strategies. It shouldn't come as a surprise then, to learn that the Fortune 100 company is part of a growing movement of employers banding together and backing value-based plan designs, which identify financial incentives to increase compliance, encourage high-value care and discourage the use of unproven or poor services.
IBM also is one of several employers to recently join the Center for Health Value Innovation, formed last year by David Hom, former director of strategic HR initiatives at Pitney Bowes. (See "Rather than deductibles, value-based design focuses on behavior change" by Hom and other CHVI leaders.)
Pitney Bowes is credited as one of the first companies to install a value-based plan design model when it reduced copay rates for several classes of prescription drugs in 2002. The company has reported increased adherence and decreased use of medical services among chronically ill employees who had their copays reduced.
Through his new endeavor, Hom hopes to spread the word about the benefits of VBPDs to other employers.
"We want to increase the velocity of value-based design among health plans and employers, particularly mid-size employers, who are the bulk of employers in the U.S. today," Hom comments. "We would also like to develop a series of technology tools that would make it easy for a benefits manager to make decisions on value-based designs."
Armed with the appropriate tools, Hom continues, HR and benefits managers could quickly learn about the chronic conditions that affect their employee population, how to target employees that need help and develop effective communication programs.
Growing in popularity
Evidence is mounting that VBPDs are becoming increasingly popular among providers.
According to research from Hewitt Associates, almost one in five (19%) of large companies in the U.S. have implemented a VBPD, and another 40% are interested in learning more about them.
"Value-based design is a viable and compelling approach that, when integrated with other employer initiatives, can better support and influence the interactions between patients and providers and enable positive patient behaviors while improving health outcomes," remarks Jennifer Boehm, a Hewitt principal.
Hewitt recently announced the availability of an actuarial model that enables companies in real time to analyze the financial impact of reducing employee cost-sharing for some health care services and increasing cost-sharing for others. The tool makes use of prescription drug utilization and cost data to help employers make informed choices.
"Once a value-based design is put in place, the initial financial investment in the increased use of high-value services will likely be offset by reductions in costly hospitalizations and emergency department visits, as well as decreases in employee absenteeism and disability costs," says A. Mark Fendrick, professor of internal medicine at the University of Michigan.
Fendrick and Michael Chernew of Harvard Medical School collaborated with Hewitt to develop the actuarial model. Both are founding members of the Center for Value-Based Insurance Design at the University of Michigan. The researchers say with the help of the actuarial model, employers should be able to effectively ask "what if" questions that will help them understand what the most effective value-based design might be for their employee population.
Removing financial barriers
Fendrick and Chernew also were part of a team of researchers that measured the impact of reducing copays among two large anonymous employers - Company A and Company B. Company A reduced rates from $5 to $0 for five classes of generic medications. Copays for brand-name drugs were lowered 50% (from $25 to $12.50 for preferred drugs and from $45 to $22.50 for nonpreferred drugs).
The CareEngine system - developed by ActiveHealth Management, a provider of disease management services - is credited with identifying the most clinically appropriate individuals to benefit from copay reductions.
Adherence to medications increased in four of the five classes for Company A, reducing nonadherence by 7% to 14%. The results were published in the January/February issue of Health Affairs.
"All research to this point has shown that individuals will not buy important medical services even if there's a small financial barrier - $5 or even $2," says Fendrick. "This study showed that when you remove those barriers, people started using these high-value services significantly more."
Meanwhile, some employers aren't waiting for clinical data to use as justification for getting involved in value-based purchasing.
The University of Michigan is currently offering free or reduced-price medications and tests to more than 2,000 of its employees and dependants who have diabetes.
Aetna announced last December the launch of a new program - the Aetna Health ActionsSM Rx-Savings - under which copays for individuals suffering from diabetes, asthma and heart disease, among other chronic conditions, are covered in whole or in part by their employer. The program is designed to encourage compliance with medications that are shown to be essential for high-risk individuals.
"The use of evidence-based medicine in combination with pharmacy benefit design may significantly help to improve the overall quality of care for members with the targeted chronic health conditions by reducing the cost barrier to patient compliance with recommended drug therapies and treatments," says Ed Pezalla, national medical director of Aetna Pharmacy Management.
Marriott International has used the program in a pilot capacity and says reduced copays have resulted in increased prescription drug adherence rates. Executives with the company believe this will ultimately lower its rate of medical emergencies and hospitalizations among its workforce, which would lead to reduced health care costs.
Employers as purchasers
Proponents of VBPD almost universally discourage the use of high-deductibles, which are an integral component of other consumer-driven health plans and promote cost containment.
Under the VBPD concept, out-of-pocket costs are adjusted based on an assessment of a clinical benefit on a specific patient population. Therefore, the more clinically viable the therapy is for the patient, the lower the cost should be.
High-deductible plans that trumpet cost containment often curb the use of essential and excessive therapies alike, proponents of value-based purchasing proclaim. "We have real concerns with the high-deductible model," says Andy Webber, president and CEO of the National Business Coalition on Health.
NBCH, which is based in Washington, D.C. and has a membership of nearly 60 employer-led coalitions, is in favor of better economic incentives, improved transparency and better information for consumers.
"We're trying to get value for our investment in health care," says Webber. "We believe in competitive markets and that better value and performance should be rewarded. We're not sure that's happening in health care, and we believe that employers as purchasers have a role in driving better value and performance in the health care delivery system."
NBCH released a report last November that gathered health care data from nearly 200 health plans and insurers nationwide. While all surveyed plans said they offer provider directories - a critical tool for consumers - only 28% provide mortality or complication rates where applicable, and just 31% provide patient experience data.
"Health plans need to do a better job of sharing vital information if value-based plans are to thrive," says Webber.
Hospitals also need to be held accountable for their performance. "Too often we find in the health care system even poor quality [is rewarded]," Webber continues. "An individual comes into a hospital and gets a hospital-acquired infection, and guess what? That hospital gets paid more because the individual now has to stay in the hospital longer and ... the hospital is rewarded for actually providing poor quality of care. There's something fundamentally wrong with that picture."
