1. Aligning employer strategies: Value-based insurance design and the patient-centered medical home
Bruce Sherman, MD, FCCP, FACOEM
Consulting Medical Director – Goodyear Tire & Rubber Co. – 10/22/2009

2. A comparison of then and now…
Attribute
1990’s – Managed care
2009 and onward - PCMH
Primary stakeholders involved:
Health plans
Employers
Providers
PCP role:
Gatekeeper
Medical home
Need to engage/involve:
Patients have…
Limited choices
Informed choices
Good health means:
Lower costs
Engaged individual
Employer focus:
Cost-reduction through appropriate utilization
Value-generation through appropriate utilization
Benefit design considerations:
In/out of network; co-pay used as financial disincentive
Value-based insurance design as financial incentive

3. The importance of benefit design
Wise Investments in Employee Health Are Cost-Effective
Reduction in Medical Costs
Benefit
Cost
Reduction in Health-Related Absences
While the cost for providing a particular service will increase due to co-pay reductions and increased utilization, improved employee health and productivity resulting from a value-based insurance design can outweigh increases in employer spending.
Reduction in On-the-Job Productivity Losses
Employers are increasingly adopting cost-effective – or value-based
benefits design strategies

4. The case for value-based insurance
Problem
Some employers are responding to rising healthcare costs by adopting across-the-board cost-shifting
Many studies have shown that this reduces adherence, which may have adverse clinical effects: Ellis JJ, et al. 2004; Goldman DP, et al. 2006
Solution
Set the patient co-payment amount relative to the value – not the cost – of the intervention
This means considering the complications and consequent services that are avoided on account of the intervention when assessing value
VBID adjusts out-of-pocket costs to promote the use of high-value services to help improve health outcomes at any level of healthcare expenditure.
Design of Value-Based Co-payments
Condition-specific (diabetes, hyperlipidemia)
Benefit offering (preventive care, generic medications, PCMH)
Adapted from Fendrick AM and Chernew ME. Value-based insurance design: aligning incentives to bridge the divide between quality improvement and cost containment. Am J Manag Care. 2006;12:SP5-SP10.

5. VBID is relevant to all aspects of health management
VBID Strategies
Integrated Health and Productivity Management
Wellness and Health Promotion
Incidental Illness and Chronic Disease
Complex-Catastrophic Individual Cases
Health education
Health risk assessment and screening programs
Lifestyle management programs
Health insurance plan
Short-term disability
Disease management programs
High-cost case management
Long-term disability
Centers of excellence for high-cost conditions
VBBD supports an integrated health management approach that emphasizes the promotion of health and wellness and absence/disability management
The goal is to improve workforce productivity for the PAYER and quality of life for the MEMBER and ELIGIBLE PARTICIPANTS1
Providing health and wellness to MEMBERS AND ELIGIBLE PARTICIPANTS is an investment in human capital, which can improve bottom-line returns
HPM is based on the concept that health care services are not isolated events but instead represent a continuous process that provides service from a “healthy” state to acute sickness and that can be proactively managed over time. While some factors cannot be controlled, many issues can be managed, causing a decrease in health care costs
Most MEMBERS AND ELIGIBLE PARTICIPANTS fit within the “Wellness and Health Promotion” category
– Examples of HPM strategies in this group include providing onsite flu shots (to reduce absences due to sickness) and onsite health clinics (to reduce time away from work) and offering wellness and disease management programs2
A smaller number of MEMBERS AND ELIGIBLE PARTICIPANTS fall into the “Incidental Illness and Chronic Disease” category, but these INDIVIDUALS will generate higher costs than THOSE in the first category because they have specific conditions that require treatment and are more likely to use sick days and/or require disability leave and payment
Although only a few MEMBERS AND ELIGIBLE PARTICIPANTS fit into the “Complex-Catastrophic Individual Cases” category, these INDIVIDUALS have the potential to generate high costs
This slide illustrates the concept of a stratified approach to promotion of workforce health and wellness: PAYERS can identify the proportion of the workforce that belongs in each category and develop the highest value strategies for those categories, for example, to keep workers in the first category from progressing to the second.
New ACOEM and IBI partnership to promote health and productivity management in the workplace. [news release]. Chicago, IL: ACOEM. November 27, 2006.
References
1. New ACOEM and IBI partnership to promote health and productivity management in the workplace. [news release]. Chicago, IL: American College of Occupational and Environmental Medicine. November 27, 2006.
2. Lynch WD, Riedel JE, Hymel PA, Loeppke RR, Nelson RW, Ashenfelter JW. Factors affecting the frequency of value-focused health activities and policies by employers. J Occup Environ Med. 2004;46:

6. PCMH and value-based insurance design
Medical home is a system/means of healthcare delivery
Unless individuals are encouraged to utilize a medical home, there is no value generation for employers
Financial incentives can steer individuals to use high-value services (value-based insurance design)
Medical home is a high-value service
Incorporation of a value-based insurance design to promote medical home use can drive PCMH use

7. Typical US employer healthcare cost distribution
What drives costs? Outpatient services and hospitalizations
By improving care quality with a PCMH, primary care costs will increase
However, implementation of PCMH has been shown to result in lower hospitalization rates – and will likely lead to lower health care costs.

8. Employer considerations for PCMH-related benefits
Value-based insurance design includes more than lowering medication co-pays
Employer considerations for PCMH-related benefits
Co-pay reductions for:
Medical home visits
Specialist consults when referred by PCMH
Ambulatory services when referred by PCMH
Contributions to HRA/HSA for PCMH provider selection
Compliance with recommended care:
Tiered employee benefit contributions
HRA/HSA contributions

9. Barriers to employer adoption of PCMH
No pilots in the employer community
Employers can partner; work with health plans to implement (Kellogg, Roy O Martin Lumber, IBM)
Location-by-location implementation vs. ease of uniform benefit design change
Consider involvement in existing plan-based pilots
Short-term focus on costs
Ongoing education; build on VBID approach (Whirlpool)
Need for solid “proof of concept” data for PCMH
Enhance visibility of outcomes data for employer audience

10. Final thoughts
PCMH should be considered as a focus for value-based insurance design strategies
Value generation occurs through appropriate utilization of healthcare services
Increased use of (and payment for) primary care is offset by reductions in use of other healthcare services
Improved health results in greater workforce productivity
“My employer cares about my well-being” engenders greater employee engagement