Put Your Money Where Your Scalpel Is

By Kim Bellard, September 22, 2014

I propose taking value-based purchasing from the payor-provider contractual backroom and putting it in the health plan benefit design, where consumers directly see and are impacted by it.

One of the most troubling things about our health care system is the lack of accountability. Providers get paid pretty much regardless of how patients actually fare under their care, and often even if demonstrable errors are committed.

Patients don't get a pass when it comes to blame either.  They don't often take good care of themselves, they don't always follow instructions, and they sometimes opt for high risk and/or unproven procedures with limited chance of success.

The mantra to combat all this is "value-based purchasing," a phrase whose meaning, like beauty, is largely in the eye of the beholder.  In theory, it involves adding performance-based financial incentives to payment arrangements, and may also include bundled payments, shared savings programs, pay-for-performance, or even penalties.

Frankly, I think none of these go far enough, nor do they adequately involve the patients.

I want to accomplish a few things with my proposed plan design approach.  One, I want to more directly relate provider payment to patient outcome -- not in the aggregate, as many incentive programs try to do, but at individual patient level.  Second, I want to reduce how much other health plan subscribers have to subsidize care that is of little benefit.  And third, I want to stop rewarding providers for care that has little or no positive impact.<

The following chart outlines how these might be accomplished (assume the "base" plan design was 80/20):

					Estimated Prevalence
	Percent of Allowable Charges:
	Insurer	Patient	Provider
Condition much improved	100	25	0		50%
Condition a little better	80	20	0		25%
Condition no better	60	15	0		10%
Condition a little worse	40	10	0		10%
Condition much worse			-100		5%
					100%
	Total Weighted Costs
	80	20	-5

In other words, a surgical procedure whose allowable charges were $10,000 would pay the provider $12,500 (125%) if things went really well for the patient, only $7,500 (75%) if the patient was no better after it -- and the provider would actually owe the patient $10,000 if he/she ended up much worse after the surgery.  Providers would not be able to balance bill patients for any of the reductions.

If I've done my math right, with the assumed prevalence rates shown above, the payouts are revenue neutral for payors (weighted cost of 80) and patients (weighted cost of 20), prior to the provider payback. 

Health plans and providers who want to test this approach would probably want to do at least a year of data collection so they can fine-tune the final payment levels for the different stages, based on the measured prevalences.  I think we might be surprised by what we'd learn.

There is good evidence that direct engagement by physicians can boost patient use of portals, and I can't

think of anything that would give physicians more incentive to do so than directly tying their payments to such use. 

Ideally, I'd like to see this approach applied not just to the surgeon's fees, but to bundled payments including the hospital/facility and any ancillary providers.  The more providers who have a direct financial stake in the actual outcome, the better.

What we need is a surgical practice and/or health system that has enough confidence in its outcomes to bet on it, and a health plan (or self-funded employer plan) who are willing to take not just the financial risk but also the risk of how to communicate the approach to members.

The question is -- is anyone bold enough to try?

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting