Employers raising PPO deductibles to offset costs
CDHPs affecting other plans
The line between PPOs and consumer-driven health plans (CDHP) has become increasingly blurred as employers shift costs to reduce healthcare expenses.
One figure highlighting this shift is PPO deductibles, which nearly doubled between 2007 and 2008, according to Mercer’s National Survey of Employer-Sponsored Health Plans, a survey of 2,900 private and public employers. The median PPO deductible doubled in just one year as more employers look for ways to reduce their costs. (See Figure 1 on p. 2.)
Employers in smaller companies, especially, are raising deductibles. For larger companies (those with 500 or more employees), median deductibles for indi-vidual and family coverage were $300 and $800 respectively in 2008.
PPO deductibles are a byproduct of the consumer-ism movement, says Blaine Bos, a worldwide partner at Mercer in Minneapolis. “The introduction of the [health savings account (HSA)] may have changed employers’ thinking on just how high a deductible can go without causing employees to revolt,” Bos says. “Raising the deductible has become the fallback for employers faced with cost increases they can’t handle. It’s the easiest way to reduce cost without taking more out of every employee’s paycheck.”
Meredith Baratz, vice president of market solutions at UnitedHealthcare in New York City, says high deductibles are not new to healthcare and were around before health insurers turned to managed care. Earlier designs were low-cost and catastrophic care options, which Baratz says is different from the way CDHPs work now. Consumerism is more than merely shifting costs; it’s a way to educate individuals about costs of care. It pairs fiscal accountability with support services to help people make better health decisions, she says.
“Ultimately, at the end of the day, that’s what will drive affordability in healthcare. It’s people taking the opportunity to own their health, to stay healthy, to manage a chronic illness effectively,” Baratz says.
On the other hand, PPOs with high deductibles don’t have HSAs, and they lack the member education component.
“Now, you are in a very different model, and one that is pretty revolutionary, as we have seen it take off in the past eight years, which is the idea of creating financial accountability with the net of support information that people need to get really involved in their health decisions,” Baratz says.
Health plans and employers have created Web sites that offer price and quality information, which insur-ers contend have created better-educated consumers and are even helping members not enrolled in CDHPs. “Once that information is made available, it can be used by other employees [in PPOs or HMOs],” says Garry Ramsey, chief marketing officer at Bluegrass Family Health, an integrated health plan based in Lexington, KY. “We are seeing that the employee is much more engaged in the process because he is part of the healthcare equation.”
However, Joseph Paduda, principal at Health Strategy Associates in Madison, CT, believes high-deductible accounts, camouflaged as consumerism, are simply catastrophic plans that are forcing the poor out of healthcare. Having a $1,000 deductible is the same as having a million-dollar deductible for people with limited incomes—they can’t afford either one, Paduda says.
“I think there is a significant uptick in the number of folks who can’t afford their healthcare, whether they have insurance coverage or not,” he says.
Paduda predicts more acute episodes and chronic disease, such as asthma, depression, and chronic obstructive pulmonary disease, because members won’t be able to afford care.
High-deductible plans show that health plans are no longer managing care, Paduda says. “What’s happening is the commercial health insurers, both for-profit and nonprofit, have given up any pretense that they actually manage care. It’s managing reimbursements and managing benefits. They don’t manage care,” he explains.
In previous economic downturns, health plan members have used more medical services because they were concerned that their employer was going to stop coverage. For example, a weekend warrior who wrenched his back would head to the doctor’s office when the pain would likely subside over time. Higher utilization meant more costs. That kind of utilization might not happen this time around because deductibles place a greater cost share on employees.
“Higher employee cost-sharing—like a $1,000 deductible—could prevent that spike in utilization that we’ve seen in other recessions,” Bos says.
For the fourth consecutive year, employers held health benefit cost increases to about 6% in 2008 as employers shifted costs to employees. If employers had not transferred more costs onto their employees, Mercer estimated the costs of the largest medical plan would have risen by about 8%.
Bos says health insurers have contained premium costs because of a combination of cost shifting, health management programs, and quality initiatives. “Most of these programs today are bearing a considerable amount of fruit,” he says.
Membership low, interest high
CDHPs have been the flavor of the moment, but membership remains in the single digits, although more employers are creating the plans each year.
In 2008, nearly half of jumbo employers offered CDHPs, whereas one-fifth of large employers had the plans. Small employers have not created CDHPs as quickly. In 2008, 9% of small employers offered CDHPs, but that number is expected to jump to 14% this year. (See Figure 2 above.)
Ramsey says CDHPs account for 11% of Bluegrass Family Health’s business, but that amount grows every month. In fact, the number of members with CDHPs increased by 30% between December 2008 and January 2009. “As the employers raise the costs, meaning the employee contribution to the premium, as well as reducing the benefits, [CDHPs] become a little bit more attractive to the member,” says Ramsey, adding that Bluegrass expects CDHPs will account for 40% of its business within five years.
The number of members who are actually enrolled in CDHPs remains in the single digits. Membership has increased from 1% in 2004 to 7% in 2008, which supporters point to as proof of CDHPs’ growing popularity. Not surprisingly, PPO/POS topped plan type enrollment at 69%, with HMO a far-distant second. (See Figure 3 below.)
Bos suggests health insurers with a heavy HMO membership should be aware of the shift to healthcare consumerism, as that is what employers want. “I would be cognizant that if I am going to continue to be a viable offering, I am going to need to respond to that movement,” he says.
Lower costs in CDHPs
CDHPs are costing employers less money. Costs per plan member in CDHPs increased 4% from 2007 to 2008, whereas HMOs increased by 9.1% and PPOs by 6.3%. PPO plans with deductibles greater than $1,000 still cost over $400 more than CDHPs, according to the study. (See Figure 4 on p. 5.)
“Difficult economic times may speed both the adoption of CDHPs by employers and higher enrollment rates where employees have a choice of plans,” says Bos. “With so many employers already requiring relatively high deductibles, it’s not a big step for them to put in an HSA with a $1,150 deductible—the minimum amount for 2009—and use the savings to fund the account, improving overall value to employees.”
Baratz says UnitedHealthcare performed research to compare its traditional PPO plans against CDHPs and found that the consumer-directed plans cost 7%–9% less than traditional PPO plans—mostly because CDHP members were doing the following:
Those in CDHPs were more apt to follow preventive screenings, such as mammograms, cholesterol screenings, and prostate exams, because UnitedHealthcare’s CDHP does not charge members for preventive care.
“What we’re taking from those data points is that people are making informed decisions about their health and their healthcare, but they’re being smart about it. They are not forgoing care,” says Baratz. “What we’re seeing is people getting the care they need and making decisions about saving money where they can.”
CIGNA says members of its CDHP, CIGNA Choice Fund, do not put off recommended care any more than members of traditional CIGNA plans. Will Giaconia, vice president of CIGNA Choice Fund in Bloomfield, CT, says promoting consumerism allows members to compare doctors and hospitals based on quality and costs. “We have fully integrated [the tools] and made them much more powerful and real for the consumer. It’s about engaging the consumer with the information when they need it,” Giaconia says.
Breaking down CDHPs further, HSA-based plans cost $6,027 per member, compared to $6,420 for plans with health reimbursement arrangements (HRA). Unlike HSAs, HRAs are only funded by the employer rather than the employee and/or employer. More than one-quarter of employers do not contribute to HSAs, and the employers that do contribute donate nearly $700 per CDHP member, according to Mercer.
Ramsey says members are better off in CDHPs than PPOs with a high deductible because there are out-of-pocket caps and savings accounts in CDHPs.
Additionally, CDHPs are a more attractive option for employees than traditional PPOs with deductibles, says Bos. “If your employer puts money in the account and you don’t use many services, you can end up ahead. But it all depends on how you use healthcare,” he says.
Incentives on the rise
Mercer also found that many large employers are adding incentives as a way to encourage employees to use health management programs or improve health habits. Twenty-six percent of large employers and nearly half of jumbo employers offer incentives to take part in health management programs. (See Figure 5 below.) Jumbo employers are also implementing special plan provisions related to employee smoking status, such as lowering premium contribution for nonsmokers. Although nonsmokers benefit from this approach, most employers are not actively penalizing smokers.
Employers are increasingly turning to incentives, but few have implemented disincentives. Bos says this is because disincentives create a “negative environment.” For disincentives to gain popularity with employers, research is needed to show that they have a positive effect.
“It is really going to be dependent on a lot of solid case studies that that particular methodology saves more money than the carrot methodology,” Bos says.
Large employers are also using employee health risk assessments as part of their wellness offerings. Sixty-five percent of large employers offered health risk assessments in 2008, compared to 56% in the previous year.
Retiree insurance drops
Although there has been much consternation about employers dropping health coverage, Mercer found that current employee coverage has remained steady during the past seven years. Sixty-five percent of employers offered health coverage to active employees, which was a slight increase over 2007. (See Figure 6 at left.) Bos suggests the consistency could be because employers are standing pat and waiting for healthcare reforms.
The coverage decrease has come in retiree medical plans. The percentage of large employers that offer coverage to Medicare eligibles and pre-Medicare eligible retirees has dropped sharply in the past 15 years. In fact, the number of large employers that offer coverage to Medicare eligibles has decreased from 40% in 1993 to 19% in 2008.
Bos says that trend is likely to continue and suggests the erosion of retiree coverage could force older employees to delay retirement.
“The slowing economy makes the lack of retiree coverage a bigger issue,” he says. “Companies that hope to reduce their work force through attrition rather than layoffs may find older workers hanging on longer because they don’t want to lose their health benefits.”
CIGNA trumpets lower costs, better prevention in CDHP
Do consumer-directed health plans (CDHP) educate members about healthcare finances, reduce costs, and result in better-quality care than traditional plans? Or do they merely move costs from the employer to the employee?
That debate remains at the heart of whether CDHPs will grow or become a failed attempt by managed care to control costs. CIGNA recently added its voice to the discussion.
Members in the organization’s CDHP, called CIGNA Choice Fund, cost less than those in PPOs and HMOs, use preventive care, comply with medication, and use the best medical practices, according to the CIGNA Choice Fund Experience Study that was released in January. The study reviewed medical claims for 440,000 CIGNA members, including 22,000 people with hypertension or diabetes.
The study found the following:
Critics of CDHPs have questioned whether the plans can affect costs in the long term and suggest that the savings realized after the initial switch to CDHPs are only temporary.
However, in this study, medical cost trend was lower for CIGNA Choice Fund, and the lower costs continued in subsequent years.
“I think that three years of studies are now backing up the fact that these plans not only reduce costs, but, while reducing costs, can maintain or reach higher clinical outcomes in quality and evidence-based care,” says Will Giaconia, vice president of CIGNA Choice Fund in Bloomfield, CT. “It’s beyond question at this point. There is always an industry debate around CDHPs and their impact. It’s really hard to say there is any question anymore.”
Integration is key
Creating a culture of consumerism goes beyond set-ting up high-deductible accounts with health savings options. CIGNA has learned from its experience since launching the Choice Fund plans on the heels of the creation of health reimbursement arrangements six years ago.
The insurer has integrated consumerism throughout the organization and offerings. Its member Web site allows members to check their account balances, monitor claims, and compare providers and pharmaceuticals on cost and quality. CIGNA states that about 55,000 members visit the Web site every day. Giving members access to tools and resources are important so they can make wiser decisions, Giaconia says. “The game now is about this idea of engaging the member holistically. That’s what it is at the end of the day,” he says.
Not long ago, CIGNA and its competitors created decision support tools but did not integrate them into their services. “They weren’t really working for consumers the way they should in an integrated way. What we have done at CIGNA is take that and integrate the individual consumer’s experience and make it feel more like the experience they would have in more truly consumer-driven industries,” Giaconia says.
Taking a cue from consumer industries, such as credit card companies, CIGNA tries to help members understand healthcare and healthcare finances. In addition to the Web site offerings, CIGNA sends quarterly statements, similar to credit card statements, to Choice Fund members. This allows members to understand their explanation of benefits and how their healthcare’s quality and cost affect their health savings account balance.
“Consumerism is about engaging the consumer 360 degrees,” Giaconia says. “It’s not just the CDHP plan design and the account balance—those are obviously very important—but it’s engaging the consumer and helping them take better care of their health using the broad array of CIGNA’s health advocacy tools.”
CIGNA has also integrated cost and quality information into other areas. For example, the most popular section of the company’s Web site is the provider directory. Rather than simply list doctors, their addresses, and their specialties, CIGNA added cost and quality information so members can make wiser decisions.
“You get a complete window into the complete episode of care,” Joe Mondy, CIGNA spokesperson, says about the revamped provider directory.
“This is a great example in terms of engaging the member at the right time,” Giaconia says. “What better time to engage a member with cost and quality tools than when they are looking for a specialist, for example? Not only is that a good opportunity tactically, because a tremendous amount of volume is through the provider directory, but it’s also the time a consumer is choosing a doctor. That is when they will want cost and quality tools.”
The insurer has a similar program on its pharmacy page that allows members to compare pharmacy costs. The program also suggests that members opt for generic rather than brand-name drugs. Giaconia says the emphasis on lowering costs helped influence lower prescription drug costs.
The study found that members in CIGNA Choice Fund plans cost 10% less than those in traditional plans in the area of pharmaceuticals, although medication usage was higher for those in the CDHP. (See Figure 9 at right.) In fact, generic usage was nearly 5% higher for CIGNA Choice Fund plans. (See Figure 10 at right.)
“Integrating that into individual consumer experience that is natural is exactly the kind of consumer innovation that is going to occur and where we think the game-changing difference will be in the coming years,” Giaconia says.
Health advisors help members
In addition to educational outreach and combining cost and quality information into offerings, CIGNA employs health advisors who help Choice Fund members make wiser healthcare decisions.
The health advisors, who are health and wellness professionals, discuss treatment options with members, including ones that would be less costly and less intensive but likely to have the same clinical outcome. They also understand the account-based plan and can make suggestions to members about their plans and the healthcare system.
Health risk assessments and predictive modeling identifies members who may benefit from communication with health advisors, wellness programs, and self-management programs. Health advisors reach out to members who are at risk to help them take control of their health.
Prevention lowers costs
The study found that chronic diseases, such as hypertension and diabetes, cost less for CDHP members than those with similar ailments in traditional plans. CIGNA officials state that these results point to better chronic disease management in the Choice Fund plans. (See Figure 11 at right.)
CIGNA found that preventive care visits for Choice Fund members were 8% greater when compared to traditional plans. Additionally, preventive care visits for renewal-year Choice Fund members were 15% greater. (See Figure 12 at right.) The medical cost trend reduction was also higher in the areas of hypertension and diabetes for Choice Fund members than it was for traditional plans.
In the evaluation of more than 300 evidence-based measures of healthcare quality, CIGNA found that services such as mammograms and physician visits for diabetics were consistent with those in traditional plans.
CDHP opponents say putting more costs onto individuals force them to delay care—especially preventive services—because they can’t afford them. Health insurers, such as CIGNA, have responded to that charge by offering free preventive services.
CIGNA communicates the importance of prevention through its outreach and lets members know what services are covered for free. “We know, obviously, when we get people to take better care of themselves through preventive care, it reduces costs through the long run,” Giaconia says.
CDHPs work in tough economy
CIGNA says the results from its study highlight that CDHPs are a valid option for employers that are looking to save money and offer better solutions to employees.
“In these tough economic times, it’s critical that we do what we can to cut medical costs without cutting care,” Jeffrey Kang, MD, chief medical officer at CIGNA in Bloomfield, said in a prepared statement. “Critics of consumer-driven health plans contend that people will sacrifice their health to save money, when in fact, our data show that account-based plans save money even as individuals receive the same or higher levels of care than those in traditional health plans.”
Good health = good business
Study: High-performing companies investing in employee health
Whether a business succeeds or fails could depend as much on a company’s wellness culture and -employee health as its products and services. The companies that realize that fact have more productive employees and lower healthcare costs, according to Towers Perrin’s 2009 Health Care Cost Survey. The survey showed that high-performing companies are in better control of healthcare costs. In fact, high performers will pay 12% less on their healthcare premiums than low-performing companies this year.
There are other benefits to being a high performer besides saving money. A healthier work force also means improved employee productivity and engagement, wrote Towers Perrin in its 20th anniversary survey.
Al Gubitosi, principal at Towers Perrin in Parsippany, NJ, says high-performing organizations drive employee behaviors and invest in health programs.
Good health means good business, Gubitosi says. “As I look at [the results], I think that is one of the most powerful takeaways from this study,” he says.
One mistake that organizations make is viewing money spent on health programs as merely a line-item expense rather than an investment. “They are investing in the health of their employees to drive business outcomes,” says Gubitosi.
It’s important for companies, especially during difficult economic times, to avoid cutting health programs as a way to save money. “If they are looking at it as an expense line item, they are missing a great opportunity,” says Gubitosi.
High-performing companies are creating better employee behaviors through more targeted outreach, hands-on coaching, and mentoring that reinforces healthy behaviors.
Towers Perrin wrote that the right investments for businesses are ones that promote health and effective health management.
Leading companies are now building health and well-being into their culture as part of their business strategy. “They recognize the strong correlation between employee health and positive financial and operational results— a health dividend that includes lower costs, but also improved performance and overall business success,” Towers Perrin wrote.
High-performing companies are balancing affordability objectives with efforts to prevent illness and promote health. Nearly 80% of high performers believe they are meeting employees’ financial protection needs and that they motivate employees to manage their healthcare purchases responsibly. Meanwhile, only about half of low performers believe they are accomplishing those roles. (See Figure 13 below.)
High-performing companies view employee health as a critical component of business success. (See Figure 14 on p. 12.)
Towers Perrin stated that high performers achieve superior results by:
The role of employers is changing
The survey also highlighted the evolving role of employers. Businesses surveyed said they will need to manage costs, promote better healthcare consumerism, and require that employees take a larger role in the near future. (See Figure 15 below.)
“They expect to support those efforts by taking steps to better identify and communicate the health and financial risks employees face, as well as by providing programs and support tools to help manage them,” wrote Towers Perrin.
One issue for low performers is that they often don’t measure how wellness and better health affect the company or do not measure their healthcare programs properly.
Another problem occurs when senior leadership does not value or promote the programs. In fact, only 34% of low performers in the survey said their company supports a culture of health, whereas 77% of high performers said they promote that culture.
As a way to contain costs, Gubitosi says employers and health plans have moved their focus away from managing doctors and plan to improve employee/member health. “Employers now say, ‘I have a better chance of managing the health of my own population by devoting resources to that end,’ ” he says.
Health benefit costs on the rise
In the survey, Towers Perrin predicted that employer health benefits would increase by 6% this year, but high performers will see only a 4% increase. The survey found that high-performing companies will save $1,200 for every employee plan this year when compared to low performers.
The difference will also affect employees. Those employed at a low performer will see their costs increase by 10%, whereas those working for high performers will see an 8% increase. This difference means employees in low performers will pay an extra $324 this year for healthcare. (See Figure 16 above.)
Employer healthcare costs have risen by more than $1,700 per employee in five years. (See Figure 17 at left.) Although costs continue to rise, the annual spike is not nearly as steep as at the beginning of the decade. (See Figure 18 on p. 14.)
Pre-65 retirees face higher costs
Pre-65 retirees now pay more than half of their healthcare costs, and Towers Perrin thinks that will continue as businesses look for ways to cut costs.
Pre-65 retirees now pay three times higher premiums than other people covered by employers. Within five years, those who retire before 65 could pay as much as 80% of their healthcare coverage.
Less than half of survey respondents are confident that they will provide the same benefit programs to pre-65 retirees as they do today. However, businesses are also exploring other ways to provide coverage to retirees, including Medicare Advantage and health savings accounts, to ensure that employees will be better prepared to pay for their healthcare when they arrive at retirement age.
Employers are now asking workers to think about their health in a 20- or 30-year window rather than as a way to pay for healthcare today. This thinking leads employees to prepare for expensive health-related retirement costs, Gubitosi says.
Account-based plans numbers will increase
Account-based health plans (ABHP) will play a larger role in the coming years, according to Towers Perrin. (See Figure 19 at right.)
High-performing respondents encourage employees to spend healthcare dollars wisely, promote healthy behaviors and appropriate healthcare decisions, and build a sense of shared responsibility with employees. (See Figure 20 on p. 15.)
High performers also say that ABHPs are meeting their objectives to control employees’ and employers’ costs and sparking wiser healthcare consumers. (See Figure 21 on p. 15.)
Gubitosi says he is surprised that account-based plans—also known as consumer-directed health plans—are not rising as fast as he anticipated, but employers and health plans are devoting money to providing better decision support tools and support mechanisms.
“Account-based plans are more and more emerging to encourage savings and prepare employees for retirement,” says Gubitosi.
What’s considered a high performer?
To find the companies that are considered high performers, Towers Perrin created a formula based on self-reported observations regarding how the organization is meeting or not meeting objectives. The survey is usually filled out by the company’s benefits or HR officer.
The performance designations are based on relative costs and cost increases, coupled with metrics that test whether an organization is meeting these key areas:
Towers Perrin then divides respondents in its annual survey into three categories: low-performing, average-performing, and high-performing companies.
Patient alerts improve compliance
ActiveHealth tests Care Considerations beyond physician messaging
Consumerism is a hot topic in healthcare as insurers and employers move more costs and responsibilities onto the individual.
Members are making more financial decisions because of consumer-directed health plans, health savings accounts, higher deductibles, and cost and quality information, but there is one area in which the patient is usually not involved that could play a role in reducing gaps in care and improving outcomes.
ActiveHealth Management, a New York City–based health management services company that offers disease management, clinical decision support, and personal health records, recently tested whether clinical alerts informing patients about gaps in care, potential medical errors, and opportunities to improve care would also boost compliance.
ActiveHealth’s CareEngine System is a clinical decision support technology that continuously gathers medical, pharmacy, and laboratory claims data for members and compares the data against the latest findings in evidence-based literature.
A team of clinicians at ActiveHealth and a panel from Harvard Medical School spend countless hours reviewing literature and alerts to make sure the clinical alerts generated by the CareEngine system have the most up-to-date information.
ActiveHealth usually sends the clinical alerts, called Care Considerations, to physicians about potential issues, but recently studied the effects of also sending these alerts to patients.
The study found that clinical alerts based on evidence-based medical guidelines were followed at a greater rate when they were sent to patients and their physicians compared to when the alerts were sent only to physicians.
Stephen Rosenberg, MD, MPH, senior vice president of outcomes research at ActiveHealth, says notifying members about evidence-based care dovetails with the consumerism movement.
“People want to be more involved and have the knowledge and the tools to be more involved in their own care. This, in a way, empowers the consumer. We are not just telling the doctor, ‘You ought to do this for the patient.’ We are telling the patient, ‘This is in your best interest,’ ” Rosenberg says.
The authors of Supporting the Patient’s Role in Guideline Compliance: A Controlled Study, published in the November 2008 American Journal of Managed Care, wrote, “A clinically sound, evidence-based system for detecting possible gaps in care and bringing them to the attention of both patients and their physicians in a timely and constructive manner would benefit all segments of the population.”
The study found:
“The primary goals of the program are enhanced compliance with evidence-based clinical guidelines, a decrease in adverse events (e.g., strokes, asthma attacks) that should follow from compliance with guidelines, a reduction in related healthcare utilization (especially emergency room visits and admissions), and a decrease in healthcare cost as a consequence,” the authors of the study wrote.
The system currently includes about 900 types of clinical alerts in the areas of drug interactions, vaccinations, adding or intensifying therapy, and condition or drug monitoring.
The alerts and ActiveHealth’s responses are divided into three levels. Level 1 alerts focus on potentially life-threatening situations; ActiveHealth responds by calling physicians about the problem. Level 2 alerts are a serious but not immediately life-threatening situation; in these cases, ActiveHealth faxes the information to physicians. Level 3 alerts apply to routine monitoring and preventive issues and are sent through the mail.
ActiveHealth collects daily drug data from pharmacies but receives medical claims on a weekly basis or every other week. The regularity of claims data receipt is important for Care Considerations. “If there’s a longer time lag, obviously we are not being as timely sending out the warning, or there might be a false positive,” Rosenberg says.
He adds that sending clinical alerts to physicians can reinforce the latest evidence-based guidelines but does not “reach optimal levels.” One reason why this happens is that physicians may not pay attention to the clinical alerts because of the amount of information, some of it unreliable, that they receive on a daily basis from outside sources.
“These problems suggest that supplementing alerts to physicians with notices to their patients might be beneficial—encouraging patients to follow their physicians’ advice or to remind their physicians about overlooked guidelines,” wrote the study’s authors.
Rosenberg says ActiveHealth’s alerts are grounded in evidence-based care and don’t specifically deal with saving money, which is often the reason for health plan and pharmacy benefit manager correspondence to physicians.
“As physicians trust the system more, they will use it more. Unfortunately, today, physicians get bombarded by a lot of information by a lot of sources, and unfortunately, a lot of it is not good quality, and they tend to discard all of it,” says Gregory B. Steinberg, MD, chief medical officer at ActiveHealth Management.
Steinberg says ActiveHealth is exploring ways to distinguish the company’s correspondence from others. “We’re looking to find ways to get our message into physician work flow in a more elegant way,” he says.
Study finds compliance improvements
ActiveHealth’s 12-month randomized study compared overall changes in compliance with Care Considerations in a baseline year (2005) to a study year (2006). The study group included four large employers (with a combined membership of more than 100,000) that contracted with ActiveHealth to send Care Considerations to both patients and physicians in 2006. The control group consisted of 28 large employers (with a combined membership of more than 700,000) that continued with physician Care Considerations only.
During the study year, more than 13,000 measureable alerts were sent to members of the study group, whereas 64,000 were sent to the physicians of control group members. Six percent of the study group received one or more measurable clinical alerts with the most frequent alerts: add a statin, screen for or treat osteoporosis, perform an eye exam, add an ACE inhibitor, and test for microalbuminuria. (See Figure 22 below.)
The study authors found that informing the patient in addition to the physician about clinical alerts improved compliance in most instances. (See Figure 23 on p. 18.)
The vast majority of the messaging in the study and control groups were Level 2 (constituting about 70% of the messages in both groups), and the two top outcome types were the same for each: add a medication and get tested. (See Figure 24 on p. 19.)
The researchers also found that differences in compliance depended on gender and age.
“In the study and control groups combined, men were 1.34% more likely than women to comply with alerts, but the addition of patient messaging did not have significantly different impacts on men and women. In the study and control groups combined, patients more than 50 years of age were 33.2% more likely than younger patients to comply with alerts, but again, the impact of patient messaging did not differ significantly for patients of different ages,” wrote the study authors.
The study’s authors gave three possible reasons as explanation for the benefits of sending patients clinical alerts:
Real-time communication in the future
The study suggested ways to add on to the patient alerts. “Such a system can be developed by adding patient messaging to an existing program of clinically advanced physician alerts, as demonstrated in this study, or by adding physician alerts to a system that began with patient reminders. Whichever approach is taken, the result should be one in which the two sets of messages are coordinated to reinforce each other and to strengthen the patient-physician relationship,” the authors wrote.
Rosenberg says ActiveHealth is working on quicker communication. Within three years, the company will communicate the alerts electronically rather than via phone, fax, or letter. The company is working on pilots with physicians that provide real-time communication. This will allow ActiveHealth to communicate with doctors within seconds and allow for better coordination, Rosenberg says.
“The unfortunate reality is that most physicians sadly do not have electronic capability to allow us to have the electronic handshake,” Steinberg says.
Poor risk contract results not common
Survey finds commonalities of successful programs
Skeptical physician groups often say poor risk contract financial performance is the reason they stay away from capitation. As a result, capitation is usually associated with physicians not getting paid enough, although the payment method remains popular in California and other pockets of the country. However, a recent study found that poor results are not as common as has generally been believed.
The 2008 Capitation and Risk Contracting Survey, released by the American Medical Group Association (AMGA) and ECG Management Consultants, found the following:
ECG Management Consultants believes the findings are timely because of the anticipated changes in the U.S. healthcare system.
“Regardless of the changes to the healthcare system, organizations who are able to better manage risk and demonstrate true value to purchasers of healthcare services will likely have strategic advantages over other organizations,” says Josh Halverson, senior manager at ECG Management Consultants in St. Louis.
The 2008 capitation survey was based on 2007 data and focused on medical group leaders. Seventy-five AMGA member organizations responded to the survey, which was broken down into five topics: prevalence and scope, risk contract management, health plan characteristics and performance, physician acceptance, and barriers and limitations.
Of the 75 organizations that responded to the survey, 64% have participated in risk-bearing contracts in the past three to five years. Not surprisingly, west-ern states had the largest percentage of risk-contracting participation by region (84%), and 67% of respon-dents have been involved in risk contracts for at least 11 years.
Thirty-six percent of participants reported that the revenue derived from risk contracts is greater than half of their organizations’ total revenue, including 62% of respondents in western states. On the other end, 67% of respondents in the Northeast with risk-bearing contracts said risk contracts contribute to less than 10% of their total revenue.
Thirty-three percent of those with risk contracting own a health plan and are most likely to offer commercial HMO-POS and Medicare Advantage plans.
More than half of respondents described their organizations’ financial performance in risk contracts as above average or excellent in the past two years. Less than 10% cited poor financial performance.
The survey found that professional and primary care capitation are the most attractive to providers, whereas global risk is the least attractive. (See Figure 25 below.) Primary care and professional capitation are the most frequent contract types; global and carve-out contracts lag behind. (See Figure 26 on p. 21.)
“Under professional and primary care capitation, physicians are generally at risk for services they provide. Because they have the greatest degree of control, physicians are most willing to assume professional and primary capitation,” says Halverson. “Global risk includes any inpatient episodes, which expose the group to greater levels of risk to issues beyond their control. However, groups with access to hospitalist and/or intensivist programs often are able to better manage global risk.”
On the topic of how to influence physicians’ behavior, the highest percentage of respondents said they have referrals and prior authorizations to control utilization, with physician bonus payments as the second most popular. Pay for performance and group bonus payments were each used by less than 10% of respondents. (See Figure 27 on p. 21.)
“Managing capitation really requires a culture and a system of incentives that reward physicians for managing health. Many group practices have mixed incentives between traditional fee-for-service and capitation arrangements. To successfully manage risk, there must be an underlying culture and commitment to capitation,” says Halverson.
Half of risk-contracting respondents said they purchase stop-loss insurance to protect individual doctors from adverse contract performance, with the most common form of insurance an individual policy purchased from a separate reinsurance carrier.
Most groups perform multiple types of audits and analyses to ensure contract performance and health plan compliance, with adherence to contracted rates and coding audits the most frequently used methods.
Although more than 50% of risk-contracting respondents reconcile patient eligibility with premiums to ensure proper reimbursement, many organizations do not perform any type of premium audit. (See Figure 28 on p. 22.)
Relationships with health plans
Respondents were asked to describe their experiences in risk contracting with four major health plans: Blue Cross Blue Shield, Aetna, CIGNA, and United/PacifiCare. Researchers found that although health plans are providing eligibility data, they are not likely to supply claims data or premium data for which a group is at risk. (See Figure 29 on p. 22.) “This is cause for concern, because without this information, groups are unable to perform the necessary audits to ensure adherence to contracted rates for services rendered and proper premium payments for the covered population,” the survey stated.
Regarding primary reports, health plans most commonly provide information that share contract performance information. (See Figure 30 on p. 23.)
Most survey participants said the quality of data from health plans is within acceptable limits, but almost 30% suggested below average or poor data quality caused reporting delays and significant rework. Seventy-two percent of respondents described the timeliness of the data received from a health plan as average.
A health plan’s utilization management staff can help group practices in the areas of patient management and cost-control efforts, but most respondents said the staff was not helpful. That reaction is coupled with more than half of respondents saying their financial performance was good or excellent with a specific health plan, and it was appreciated when health plans provided more data and utilization support.
“Physician organizations indicated through interviews that valid and consistent data regarding utilization was more important than utilization management staff. Sharing of good utilization and medical expense information between health plans and physician organizations appeared to be uneven and represents a significant opportunity for improvement,” says Halverson.
Nearly 50% of survey participants said physicians’ interest in capitation within their organizations was mixed, although more than 30% suggested physicians were enthusiastic about increasing patient volumes under risk-bearing contracts.
More than half of respondents said their organization’s financial performance in risk contracts during the past two years was above average or excellent, with fewer than 10% claiming poor financial performance.
On the topic of barriers and limitations, respondents said unfavorable contract terms are the largest barrier to participating in risk contracts, with more than half of the participants pointing to physicians not willing to accept risk. (See Figure 31 above.)
Halverson says one way to avoid unfavorable contract terms is that “reimbursement must be commensurate with the level of risk assumed by groups. The most successful groups have the ability to prospectively conduct analysis to determine the level of risk and the expected reimbursement associated with contracts. Organizations must have the tools necessary to determine their risk and define an acceptable risk premium. Objective, data-driven analyses are the best tools to inform contract negotiations.”
Thirty-six percent of survey respondents said their organizations have difficulty administrating risk agreements and pointed to system limitation as the biggest barrier. (See Figure 32 on p. 24.) Those who have not had difficulty administrating the contracts say quali-fied staff members and clearly defined contract language and risk pools helped contract administration. (See Figure 33 on p. 24.)
One reason why some groups experience poor risk contract financial performance is they are unprepared to effectively manage the risk, Halverson says. Those groups often don’t have the necessary infrastructure, organizational expertise, and culture to do so. “In order to successfully manage risk, organizations must have systems and support to monitor utilization of services and medical expenses. System limitations were frequently cited as barriers. In addition, access to hospitalist and intensivist programs are necessary to effectively manage the expenses of inpatient care; these are often unavailable to groups,” says Halverson.
Brian Weible, FSA, MAAA, consulting actuary at Wakely Consulting Group, Inc., in Clearwater, FL, says many payers have discontinued risk contracting because the payer needs the fee-for-service claims data to receive accurate revenue when that revenue is contingent on diagnosis or other patient claim–specific information. These data are difficult to collect under capitation/risk arrangements.
“The exodus from acceptance of risk is really on both ends—many physicians went back to fee-for-service work, but others exited on the other side of the stage, meaning some of them actually became licensed risk-taking entities [usually HMOs or PSOs].Especially with the Medicare product, where CMS may reimburse at $1,000 per member per month or more, rais-ing $5 million to start an HMO may be quite feasible for mid to large physician groups who were successful under risk arrangements but wanted more control of product design and/or ownership of their patients,” says Weible.