Consumer Incentives and Transparency Initiatives Changing the Way Americans Buy Healthcare

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1 Consumer Incentives and Transparency Initiatives Changing the Way Americans Buy Healthcare Julie Bartels Executive Director Wisconsin Health Information Organization There s a wonderful rule of thumb for American Healthcare shift happens Ewe Rheinhardt Economist, Princeton University

2 Health Care Has So Many Moving Parts Patients Agent Employer Network Benefit Plan Health Plan Providers Uninsured Numbers Annual Spend Election Cycle Politics A Working Definition of Healthcare Healthcare happens between a patient and a provider Healthcare is supported (or hindered) by the system that surrounds it Healthcare is a process, not a string of isolated incidents, and must be analyzed and managed as such

3 CDHC The Concept Patient Patient + Provider Sustainable Financing System Positive Regulatory Environment Public Opinion/Culture of Personal Accountability CDHC The Reality Public Opinion in the Courts and in the Media Regulatory Environment Patient Provider Risk Mgmt and Financing System

4 The Evolution of the Revolution Early CDHC concept (circa late 90 s) was built on an internet platform that shared pricing and quality information directly with consumers Lacked reliable data source Market demand forced premature introduction Result: Product released in an immature environment Unrealistic cost saving expectations Another shift that was smoke and mirrors CDHC Proponents Most Americans will pay less money for healthcare in the long run haul under CDHC Lower Premiums Savings Accounts will encourage consumer engagement Free-market variables will be introduced to the healthcare system to promote competition lower prices improve service

5 Essential Variables of Free Markets Broad availability of products and services Complete transparency of price and quality Consumers exercise personal choice base on value Absence of government regulation of supply, demand or price Final price is agreed to between the buyer and the seller CDHC Critics CHDC will fail Consumers will incur more expense not less Free-market variables can never exist in healthcare due to lack of transparency Without price and quality transparency Consumer may be misled or not fully informed Consumers have no way to assess value of service Government regulation of price, benefit or availability distorts consumer choice

6 From CDHC to VBP is there a difference? Built on an internet platform that shares healthcare pricing and quality information directly with consumers Assumes that a more transparent, rational healthcare marketplace will improve quality, affordability, safety and efficiency VBP is the introduction of CHDC with all the necessary moving parts The Value in VBP Measures the relationship between consumers expectation of product quality to price Benefits received / Price Quality received / Expectations VBP assumes consumer choices will be more positively influenced by being knowledgeable about cost and quality and motivated by financial incentives/penalties

7 The Role of Plan Design in VBP VBP plan design features Motivate the patient to practice self care first Require the patient to make a healthcare service choice Provide financial incentive to assure that the choice made is based on full disclosure and understanding of quality and price (a.k.a. value) Transparency is the Keystone Market transparency is essential to the success of Value Based Purchasing. Allows sharing healthcare cost and quality information with consumers. A market is transparent if: much is known by many about What products and services are available At what price Where to get them

8 Just How Useful is Cost and Quality Data in Making Healthcare Choices? Patients: How useful would it be if your insurance company provided pricing information to you?» 95% responded it would be useful Physicians: How useful would pricing transparency be to your patients?» 70% responded this would not be useful to their patients Source: Provider Fee Schedule Consumer Survey, 07/05 and Price Transparency Post Launch Assessment Survey 01/06 (Aetna) Transparency is Only the Starting Point Transformation Required Price and Qual Useful Information Data Information Educated Consumers Product Incentives and Design Motivation Engaged Change in Healthcare Consumers Purchasing Behavior

9 Just what is an Engaged Consumer? Must have: Access to credible, easy to use data Incentive/motivation to use it Ability to understand it Willing to make fact based decisions on health care Attitude counts Must believe that care will be outcome driven not cost driven VBP must be viewed as an evolving and flexible benefit rather than another round of cost shifting Consumers Are Not (yet) On Board Healthcare consumers and purchasers rarely search out cost or quality information and do not understand or trust it. It has small, although increasing, impact on their decision making JAMA 2000:283: Consumers rate anecdotal evidence from family and friends more highly than empirical data JAMA 2000 vol 283 #14

10 Consumers in the Dark (about Healthcare Costs) Harris Interactive Poll July 2005 Gap Between Consumer Guess and Actual Cost $10,000 $8,000 $6,000 $4,000 $2,000 $0 Honda Accord ($300) 4 Day Hospital Stay ($8100) What Data Do Consumers Really Need? Integrated Data is Useful Information Clinical data from the providers What treatment plan is appropriate? Where should I go to get service? Financial data from the payors What s covered? What s my out of pocket expense? Science/Technical data from Health Industry R&D What s in the pipeline? Need to speed the delivery from Research Lab to Patient delivery so consumers feel as if they re getting highest quality options

11 VBP is not ONLY about the Consumer Shifting all the responsibility to the consumer is self defeating VBP requires effective collaboration between all the moving parts Greatest impact comes from building block approach Employers Health Plans Providers Consumers The Role Employers Must Play in VBP 1. Support the re-introduction of Free Market Principles: Broad availability of products and services Complete transparency of price and quality Consumers exercise personal choice based on value Absence of government regulation of supply, demand or price Final price is agreed to between the buyer and the seller

12 The Role Employers Must Play in VBP 1. Support the reintroduction of Free Market Principles 2. Raise cost awareness through plan design HDHP designs get people s attention HSA/HRAs are attractive but misunderstood The Role Employers Must Play in VBP 1. Support the re-introduction of Free Market Principles 2. Raise cost awareness through plan design 3. Educate employees Self Care concepts Quality and price information sources How to leverage plan benefits and savings accounts

13 The Role Insurers/Health Plans Must Play in VBP 1. Support the re-introduction of Free Market Principles: Broad availability of products and services Complete transparency of price and quality Consumers exercise personal choice base on value Absence of government regulation of supply, demand or price Final price is agreed to between the buyer and the seller The Role Insurers/Health Plans Must Play in VBP 1. Support the re-introduction of Free Market Principles 2. Apply technology to deliver needed information in meaningful way Health Plans hold the data that consumers need A single source, easy to access portal is key

14 The Role Insurers/Health Plans Must Play in VBP 1. Support the re-introduction of Free Market Principles 2. Apply technology to deliver needed information in meaningful way 3. Create products that offer/require personal choice based on value Incentives and disincentives Transparency and simplicity The Role Insurers/Health Plans Must Play in VBP 1. Support the re-introduction of Free Market Principles 2. Apply technology to deliver needed information in meaningful way 3. Create products that offer/require personal choice based on value 4. Work with regulators and legislators to remove or minimize regulation Environmental control

15 The Role of Providers in VBP The Provider/patient relationship allows providers to have the single most significant impact on the quality and efficiency of health care in America Providers are THE trusted source for patients Providers influence patients decisions even in highly stressful situations Providers must know more and do more to advise patients appropriately about quality and cost implications of care The Perverse Incentives of Provider Reimbursement Today: Payment is based on resource consumption and quantity Measured by what services are provided and in what quantity regardless of outcome Future: Payment will be based on the quality of the outcome and avoidance of unnecessary cost As soon as we can figure out how to measure it

16 The Role of Providers in VBP 1. Providers must demonstrate a willingness to re-introduce principles of free markets by publicly supporting healthcare price and quality transparency initiatives 2. We cannot wait for reimbursement reform What other incentives exist to motivate provider change? Transparency of Cost and Quality Supplies the Motivation for Change Provider Organizations will view public reports of healthcare price and quality as a competitive opportunity and risk management imperative Fiercely competitive in local markets Sensitive to public image Risk averse Potential legal risk if information is ignored

17 What will make the biggest difference the fastest? In Order of Impact: 1. Get credible performance information to Physicians as fast as possible 2. Public transparency of cost and quality 3. Pay for Performance programs 4. Physician Network Tiering Tying It All Together Consumers Employers Plans Providers Practice Self Care Participate in employer sponsored health care education programs. Learn where to find credible information on healthcare cost and Put Information to Work. Apply value based purchasing concepts to provider selection and health care treatment choices If you are sick, participate in disease management and scare management programs If you are healthy, get educated about healthcare information sources for future use Implement Benefit Plans that require employee engagement in the health care process. Create a work environment where self care is expected and employees are motivated to make smart healthcare decisions. Supply employees with education and incentive to support value based health care purchase decisions Push for government reform to re-introduce key elements of free market trade to the healthcare marketplace. Offer value based benefit programs and network options Integrate healthcare information in a way that is easy to access and easy to use for consumers Promote Patient Self Care through personalized web based care management programs for the sickest patients Push for government reform to re introduce key elements of free market trade to the healthcare marketplace. Publicly embrace and support healthcare cost and quality transparency initiatives Be hungry for credible information about practice performance Reengineer your practice to achieve higher quality more cost efficient performance Promote patient self care Accept and leverage your position of influence with the patient/family. Push for government reform to re introduce key elements of free market trade to the healthcare marketplace.

18 Is there a role for Government? Absolutely! As an Employer: Apply value based purchasing concepts Employee benefits design Provider contracting/reimbursement programs As a Public Servant Consumer awareness and education Broad based educational program to the general public Healthcare as a part of every schools curriculum There s a whole new vocabulary Understanding the healthcare system is a basic life skill just like banking or personal finance As a Regulator Get out of the way Contact Information Julie Bartels Wisconsin Health Information Organization JulieBartels@ThedaCare.Org

19 Consumers Practice Self Care Participate in employer sponsored health care education programs. Learn where to find credible information on healthcare cost and Put Information to Work. Apply value based purchasing concepts to provider selection and health care treatment choices If you are sick, participate in disease management and scare management programs If you are healthy, get educated about healthcare information sources for future use Tying It All Together Employers Plans Providers Implement Benefit Plans that require employee engagement in the health care process. Create a work environment where self care is expected and employees are motivated to make smart healthcare decisions. Supply employees with education and incentive to support value based health care purchase decisions Push for government reform to re-introduce key elements of free market trade to the healthcare marketplace. Offer value based benefit programs and network options Integrate healthcare information in a way that is easy to access and easy to use for consumers Promote Patient Self Care through personalized web based care management programs for the sickest patients Push for government reform to re introduce key elements of free market trade to the healthcare marketplace. Publicly embrace and support healthcare cost and quality transparency initiatives Be hungry for credible information about practice performance Reengineer your practice to achieve higher quality more cost efficient performance Promote patient self care Accept and leverage your position of influence with the patient/family. Push for government reform to re introduce key elements of free market trade to the healthcare marketplace.