Why Value Based Purchasing for Small to Mid-Sized Employers?

1. Why Value Based Purchasing for Small to Mid-Sized Employers? Andrew Webber, President and CEO National Business Coalition on Health Michigan Purchasers Health Alliance March 25, 2011

2. Presentation Overview • “Houston, We Have a Problem” • “Imagine” • Getting Started • Final Thought

3. Identity: National, non-profit membership association of 54 business and health coalitions. Network of 7,000 employers and 30 million covered lives Vision: Better health, better care, lower cost, community by community Mission: Helping member coalitions be leaders in their communities National Business Coalition on Health

4. The Driving Principles of the Coalition Movement: • All health and health care is local! • There are limitations to what a single employer can do todrive meaningful, sustainable, change • Even a small number of employers working together can have a powerful and amplifying effect!

5. “Houston, We Have a Problem.” James Lovell Apollo 13

6. Poor Health: Why does the United States rank 37th in population health status among industrial countries?

7. 1985 2003 1995 No Data <10% 10%–14% 15%–19% 20%–24% ≥25% US Obesity Epidemic Prevalence of Obesity Among U.S. Adults Source: Behavioral Risk Factor Surveillance System, CDC

8. Uneven Health Care: • Safety - Tens of thousands die due to medical errors (IOM, 99) • Effectiveness - 50/50 chance of getting appropriate care (McGlynn, 03) • Costs of Poor Quality – 30% of direct expenditures due to overuse/misuse/waste (Juran & MBGH, 03) • Unexplained Medical Practice Variation - (Wennberg, 1973 - present) • Fragmented Care Delivery and Acute Care Focus • Absence of HIT (Brailer, 05)

9. High Costs Why does the United States spend twice as much per citizen on health care than the next closest country?

10. Health Costs Far Exceed General Inflation -1.1% 1994 SOURCE: Mercer and InflationData.com

11. With Negative Consequences for Employers On the Outcomes All Employers (of any size) Want Most: • Improved workforce health and productivity • Control over employer costs Both Impact Competitiveness and the Bottom Line in a Global Economy!

12. But with Employers to Blame! For Stressful Worksites and Unhealthy Products For a Toxic Payment System that Pays for: Volume rather than outcomes Individual units of care rather than episodes of illness Acute care not prevention Medical errors and “do overs” With no performance based payment And for a Consumer Entitlement Mentality: That insulates individuals from cost sensitivity because of 3rd party payment

13. And with Employers (of all sizes) to the Rescue? • As influencer of all the key determinants of health: - individual behavior - socio-economic - environmental - health care system • As purchaser of health care – After Government, largest health care purchaser - 1 trillion dollar spend,170 million covered lives

15. “Imagine” John Lennon

16. Let’s Imagine • Where families, schools, worksites, communities create a culture and better conditions for health. • Where providers are free to compete, based on the published value of the services they provide, and rewarded for high performance. • Where patients, as consumers, are free to choose their providers, are sensitive to the value of the services they consume, and engaged in better managing their health.

17. Four Pillars: Performance Measurement Transparency and Public Reporting Payment Reform Informed Consumer Choice/Engagement Accelerating the Pace to the Ultimate Goal: Health and Health Care Improvement Value Based Purchasing:Measure, Report and Reward

18. VBP Strategies Consumer Behavior Plan/Provider Behavior Performance Measurement and Reporting Consumer Incentives Selective Contracting Value Based Benefits Payment Reform HRAs Disease Management

19. A Few VBP Pillar Sound Bites Standardized Measurement: • The foundation of VBP • Need to measure both effectiveness of medical services and performance of providers • Need to measure clinical quality, patient care experience, health status outcomes, and efficiency

20. Transparency & Public Reporting • Public reporting leads to improvement! • Translation of performance and price information for consumers a challenge • Public reporting alone has not led to significant market shift to high performance services and providers

21. Payment Reform • Transition away from fee-for-service • Pay for performance • New payment methodologiesneeded in direction of global/bundled payments • Greater balance between primary care vs. specialty care

22. Informed Consumer Choice The Goal: To influence the individual consumer to make informed choices at many levels: • to live a healthy lifestyle; • to seek preventive services and care when sick; • to share in, and make the best, treatment decisions; • to comply with treatment regimen and self-manage, particularly chronic disease; • to select a high value plan, hospital, physician.

23. Informed Consumer Choice • Area of greatest influence for employers; • Establish a principle of self-responsibility but with robust support; • Strategies to include creative mix of: supportive worksite culture, benefit designfinancial incentives in benefit designs, timely information, coaching and counseling

24. Getting Started (as a small-mid employer)

25. Small and Mid-sized Employers - Constraints and Advantages ConstraintsAdvantages • Limited HR resources - No corporate • Small risk pool bureaucracy • Fully insured - Leadership • Broker dependency engagement • Single plan option - Worksite culture

26. Relevance of HCR Legislation • Tax credits for small employers to help defray costs of employee HI coverage • Establishment of state health insurance exchanges Participate in State Policy Development!

27. Getting Started Top Five Recommendations: • Diagnostics: profile workforce population health and total cost burden • C-Suite/Leadership Recruitment • Health and Productivity Strategy Development, targeted to employer’s workforce characteristics • Value Based Health Plan Selection. Search for innovation (e.g. embedding consumer incentives in plan design, high performance provider networks, health risk assessments) • Purchaser/employer coalition membership

28. http://www.nbch.org/vbpguide

29. eValue8 2010 Annual Report

30. Employer Health Asset Management

31. Tailoring Health Care Benefits to Your Employees

32. Final Thought

33. A Closing Thought • No single stakeholder is better positioned to influence and benefit from improved health and health care and the promise of cost control than the employer community. • Therefore, employers must lead if we are to realize meaningful and sustainable change! But will they?

34. Contact Information: Andrew Webber, awebber@nbch.org www.nbch.org