“With the total average annual cost of health care benefits exceeding $12,000 per employee, employers know all too well that rising health care costs threaten their ability to compete in the global marketplace,” a report from Mercer in collaboration with the American Benefits Council says. “Employers are working incredibly hard to slow cost growth while still ensuring employees and their families have access to high-quality care.”
Mercer has identified four areas where it believes change is most needed to create a more rational health care marketplace, called the “Vitals for Change.”
Pay-for-value strategies are steps taken by employers and health plans to move away from traditional fee-for-service reimbursement to give providers meaningful financial incentives to provide high-quality care in the right setting and to avoid wasteful, duplicative or unnecessary services, the paper explains. Successful strategies require collaboration between employers, carriers and providers around provider pay, network design and benefit design.
Some very large employers have taken the lead by directly contracting with providers and initiating payment reforms. Although most health plans have incorporated elements of pay for value into their programs, employers now have an important role to play to ensure these strategies are delivering lower cost and better quality, that health plans continue to experiment and evaluate their approaches, and that there is a road map for expansion of the successful approaches.
The paper notes that accountable care organizations (ACOs) are perhaps the most visible vehicle for delivering value-based care. An ACO is an affiliation of providers who work together to treat an individual across care settings (for example, doctors’ offices, hospitals and long-term care facilities), with payment tied to achieving cost, quality and satisfaction targets. A small number of mostly very large employers have contracted directly with providers to form an ACO
For increasing drug costs, the most common cost-management approach, used by about half of all large employers, according to the report, is simply to steer employees to a specialty pharmacy to fill prescriptions for specialty medications. But applying pay-for-value strategies may have more potential for cost savings. By carving out specialty drug management, employers can address the misalignment of incentives by separating distribution and management, and gain greater flexibility in formulary, clinical and plan design features.
Worksite clinics were once focused on treating work-related illnesses and injuries, but employers are increasingly using them to provide a wide array of primary care services. Although these offerings range in scale from a single nurse to comprehensive primary care and pharmacy services, the most robust clinics are designed to support workforce health and productivity and reduce overall medical spending—without shifting undue cost to workers.
Improving Quality of Care
Improving the quality of care is the most desirable way to lower health care spending, the report suggests. That means the right care is delivered at the right time, in the right setting, error-free. Better outcomes eliminate waste and improve care. “Though most, if not all, health plans have incorporated quality improvement into their own programs as well as their contracts with health care providers, employers have an important role to play to ensure these strategies are delivering better care and outcomes and that health plans continue to experiment and evaluate their approaches and build on their successes,” the paper says.
One approach being embraced by some large employers is a “centers of excellence” (COE) strategy—and nearly one-third of jumbo employers now provide employees with a financial incentive to use a surgical center of excellence.
Relevant, personalized and timely health information fuels action and enables shared accountability. As seen in so many internet-based businesses, data and technology can now help reach individual employees with the information they need, in the way they want it, to make a bigger impact than ever before. Health assessments, lifestyle coaching and disease management have become the mainstays of employee health and well-being programs. As the view of what constitutes employee health and well-being continues to expand, Mercer and the American Benefits Council are seeing employers adding a range of “point solutions” that address specific health issues, such as sleep disorders, or help employees better manage stress.
Rapid advances in technology, along with changing consumer preferences and higher expectations, have led to new entrants to the health care system. Embracing disruption means leveraging constant changes in the system—with internal stakeholders and external partners—to the best advantage of employees and organizations.
Potential carrier and pharmacy benefit manager (PBM) consolidations (such as CVS and Aetna) and the entry of nontraditional organizations (such as Amazon) could disrupt the pharmaceutical market. In addition, new technologies and the rapidly increasing adoption of telemedicine services by health plans are affecting how care is delivered. The report points out that while health care vendors are merging to gain efficiencies and leverage, so are some employers, citing the recent announcement that Amazon, JPMorgan Chase and Berkshire Hathaway will create an alliance dedicated to improving health benefits for their employees.“Though the direction of health care reform at the national level remains uncertain, employers clearly need to continue their efforts to keep cost growth at sustainable levels. And that will require bold—sometimes disruptive—action,” the report says.