Health Care Purchasers Need to Hit the “Play” (not the “Pause”) Button on Value-Based Purchasing Strategies

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Health Care Purchasers Need to Hit the “Play” (not the “Pause”) Button on Value-Based Purchasing Strategies

This month’s letter is written by Deputy Director Susie Dade on a timely topic, the impact of purchasers on value-based purchasing strategies – one of her many areas of expertise.

Earlier this year, PricewaterhouseCoopers released their 2018 “Health and Well-being Touchstone Survey Results.”  This survey includes data from over 900 participating employers in 37 industries across the U.S (22% from the Northwest).  The report provides a view into the current landscape and future outlook for health care benefits and other parts of the “total rewards” equation for employers and other healthcare purchasers.

Here is one of the key takeaways from the report that caught our eye at the Washington Health Alliance, and had us wanting to know more.  “While healthcare cost increases continue to outpace general inflation, other factors such as a tight labor market and an influx of cash from tax reform have allowed employers to hit the “pause” button [on value-based purchasing]. This has resulted in a continuation of the status quo rather than the adoption of new, emerging strategies.” 

Among all survey respondents, 46% say they are not considering value-based plan design, 60% say they are not considering narrow networks, and 67% say they are not considering direct contracting with providers or ACOs.  These numbers drop somewhat for just the large employer segment (5,000+ active employees), who have been a little quicker to implement value-based buying strategies.  But still, the numbers are low overall.  Broad-network PPOs are still the predominant choice for health plan benefit design.  Employee turnover (and recruitment) is a key concern in a competitive labor market; and, compensation relative to market is the number one factor for attracting (and retaining) talent.  Health care benefits are much less important for younger employees (age 30-34) but rise to the top two spots for those ages 35 and older (tying with compensation as #1 for select age groups).

The report goes on to say that “with the continued changes in the healthcare economy – consolidations, new entrants, emerging technology, new partnerships/mergers – employers who seize this moment will leapfrog their competitors by offering more cost efficient programs that optimize spend while engaging employees/dependents.”

We wanted to informally test this idea with some health care purchasers in Washington state:  are they really “hitting the pause button” on value-based purchasing and, if so, why?  For many (but not all), the answer seems to be a tentative “yes.” Here’s what we learned in conversation with public and private purchasers in Washington about some of the reasons why:

  • Purchasers are watching and they are not convinced that the value-based products currently being offered are consistently meeting the delivery system performance standards that purchasers think should be the hallmark of so-called accountable care or value-based products. They perceive there to be more talk than action . . . more smoke than fire. Unreliable performance against standards makes it hard for them to “sell” a narrower network to their covered population.  AND, they want to know that performance standards set a high bar for quality, access and patient experience, not just lower cost.
  • Value-based product designs developed by health plans keep changing. Purchasers start to get interested in a specific product and then it changes or disappears altogether – and purchasers aren’t sure why.  Lack of insight into what is driving product design causes purchasers to feel wary.
  • Purchasers report that, generally, some health plans seem to be back-peddling on value-based product designs. Purchasers aren’t sure what the plans’ hesitancy is about, but acknowledge that they have been cautious about leaping into the deep end of the value-based strategy pool.  Maybe plans have backed off on the “sell” because they haven’t found a receptive audience.
  • When purchasers compare notes about what they are being told about value-based product design, it is not always the same, leading to confusion and an urge to wait and watch.
  • Some purchasers know that they have a large number of high utilizers with significant health conditions. They worry that narrower networks will not offer the broad net of providers needed to reliably provide high-quality, effective care to meet the specific needs of their covered population.
  • Some purchasers are viewing their role differently. For some, instead of trying to change what they perceive to be a significantly broken system, they are prioritizing the use of advocates/navigators to help their covered population effectively get and use what they need from the system that exists. While others take a more consumer-oriented approach, with stronger interest in vehicles that give individuals more choice along with more financial responsibility for their choices (for example, private exchanges with standardized plan elements, set subsidies and competition on price).


All of these seem to be reasonable concerns and potentially worthy of hitting the pause button.  But – and it’s a big BUT – this is really short-term thinking and purchasers will pay the price for it – they are paying the price for it.

Market concentration of hospital systems and physician practices is leading to higher health care costs and higher insurance premiums for patients.  Inexplicable price variation across provider organizations, coupled with high facility fees and opaque billing practices are leaving patients with big surprise bills and purchasers with a medical cost trend that exceeds inflation.

The problem of waste in health care won’t go away on its own.  Estimated at 20% to 30% of total health care spending, waste is a huge part of the total cost of care equation.   The health care industry obviously has to play the lead role in reducing waste, but self-policing will not be sufficient.  Obviously, it hasn’t been sufficient.   Health care purchasers’ use of value-based buying strategies, with clear performance standards (including appropriateness), can shape different incentives that motivate reduction of waste and the physical, emotional and financial harms that patients experience.

And, the current economy won’t last forever – a number of nationally-known pundits are already predicting the next significant economic downturn.

Bottom line:  Health care purchasers who wait to adopt value-based strategies will almost certainly find themselves far behind in the struggle to manage their health care costs and provide high value to their employees.

To get and stay ahead, the Washington Health Alliance strongly encourages health care purchasers – both public and private – to take their finger off the pause button and continue on the path of value-based purchasing.  The massive health care industry will not change significantly without concerted external pressure. We need the collective voice and buying power of Washington’s health care purchasers to drive the health care market in our state to be among the top ten nationally for quality, patient experience and total cost of care.

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