Michigan Purchasers Health Alliance September 20,2007 Readiness to Change Survey: Employers’ readiness to adopt value-based benefit strategies Larry S

Michigan Purchasers Health Alliance September 20,2007

Readiness to Change Survey:Employers’ readiness to adopt value-based benefit strategies

Larry S. BoressPresident & CEO

Midwest Business Group on Health

Copyright MBGH 20072

Midwest Business Group on Health

MBGH is a Chicago-based, non-profit coalition of Midwest employers working together to improve the quality and cost-effectiveness of health care for purchasers and the health status of their constituents.

Founded in 1980, membership includes over 80 large, self-funded, public and private employers such as Abbott Laboratories, Boeing, City of Chicago, Kraft, Target, State of Illinois and University of Chicago. Member organizations cover over 2 million lives and spend over $2.5 billion on health care.

Employers are represented by those responsible for designing and managing health benefits: VP of HR, Director/Manager of Benefits, Medical Director, Wellness Coordinator

MBGH is one of over 60 coalitions in U.S. A member of the National Business Coalition on Health


MBGH Activities Buying Groups for Audits, Chicago HMOs, Disease Management, Incentive

Programs; Worksite & Health Management Programs, and Pharmacy Benefits Health Benefit Strategy Pilots & Quality Initiatives

“HPQ-Select” – Employer tool to identify how employees’ health impacts their productivity

“Taking Control of Your Health” – an “Asheville Model” Diabetes Ten City Challenge pilot to determine if waived drug co-pays linked to pharmacist diabetic counselors increases diabetic patient compliance with treatments

“Readiness to Change “ survey to determine employers readiness to adopt value-based benefit strategies

Learning Network Programs on health benefit management, strategies and trends Networking & benchmarking health benefit roundtables Roundtables on pharmacy management, union benefits, wellness programs

and CDHPs Medicare Employer Forum calls Health Plan & Health System User Groups

The Deterioration of the House of Benefits


Employers believe it’s time for an extreme makeover to their House of Benefits


Our house and neighborhood have been deteriorating

• Care processes are fragmented and confusing to patients;• Access to care difficult for many; • More are concerned about losing their health insurance than

losing jobs or terrorist attacks;• Uncertain value of new drugs and technologies; • Low morale within provider community; • Employees don’t recognize the real cost of health services;• Few patients take responsibility for own health;• Increasing talk of single payer system; and• Serious and systemic quality problems exist


What happened?

“The HMO – managed care strategy worked as long as new structures and incentives were at play. They were not sustained for the most part due to employers and government failing to compel HMOs to be accountable for their impact on patients’ health outcomes.

There was a lack of a public oversight mechanism for the health system’s performance. Another factor was the inclusion of non-coordinated IPAs and discount-only PPO networks that weren’t designed or committed to manage care, only to manage cost.”

- Paul Ellwood

“As major purchasers of health care services, employers have the clout to insist on change. Unfortunately, they have also been part of the problem. In buying health care services, companies have forgotten some basiclessons about how competition works and how to buy intelligently.”

- Michael E. Porter


How purchasers contributed to the problems

Strategy missteps We were reluctant to direct employees to better performing plans, giving

them the same contributions for any plan they selected We created an attitude of entitlement, rather than engagement We carved out services to obtain customized programs, better information

and services, resulting in greater fragmentation and confusion in the health system, the loss of integrated data and poor coordination of vendor services

We treated wellness as a fringe benefit, not an integral part of human capital management

We expected employees would broadly participate in health promotion and disease management programs just because we offered them

We treated health benefits as an expense, not an investment


We need an extreme makeover of our House of Benefits

The new foundation is built on integration of data and maintenance of health

The support beams: Engagement and incentives Self-management of health and chronic conditions Health management and wellness Health and quality information Transparency of physician, hospital, drug and procedure

effectiveness and cost Consumerism


A renovated House of Benefits must address a business problem

The business problem: Human capital costs Direct health costs = 1/3 of total costs Indirect costs = 2/3 of total costs

Productivity Absenteeism Presenteeism

Safety Critical incidences Poor decision-making

TechnologyWork PracticesManagement Practices - Quality Improvement - Training

Health Status

The Ceiling of Opportunity (Human Factors)

The Ceiling of Opportunity (Human Factors)

Health Status


Has Intended

EffectSaves ER $

ROI to ER

Improves Quality

No Neg.

Effect Other

Employee Contribution StrategyHigh-performance Networks

Pay for Performance

HDHP

Rx Cost-sharing

Health Promotion

Disease Management

Price and Quality TransparencyIncentives to Activate Consumers

Use of various benefit design features

-2006 PwC study for California Health Care Foundation and PBGH

MBGH Readiness to Change Survey


Objectives of Survey Determine employer familiarity, understanding, use of and

readiness to adopt various “value-based benefit design” (VBBD) strategies: Incentives for employees Pay-for-Performance programs Consumer engagement strategies Removing barriers to improve compliance with treatment

Determine employers use and understanding of: The data required to see the total costs of health Health’s impact on productivity Adherence, compliance, quality and wellness programs

Determine the key elements required for organizations to adopt new benefit strategies

Identify what strategies or elements contribute to lower cost trends


Methodology

Review of previous surveys and literature on VBBD to determine what strategies and experiences currently are being promoted or utilized

Survey questions reviewed by Project Advisory Council composed of leading employers, coalitions, researchers, health plans and consultants

Survey and reminder disseminated via email by fourteen business coalitions to over 400 employers in various parts of country

Results received from 163 employers Analysis conducted by MBGH staff Funding and research support provided by GlaxoSmithKline


Components of Survey

Demographics of employer Cost trends from 2003-2005 Positions on various benefit philosophies Data activities Perspectives and experience with value-based

benefit strategies Perspectives on availability of quality information Sources and influencers of benefit strategy

information

Demographics of Respondents


Industries

Manufacturing34%

Finance11%

Govt10%

Retail3%

Health Care11%

Service2%

Non profit7%

Education8%

Utility2%

Other12%


Locations

North Central63%

Northwest8%

Southwest1%

Southeast3%

Northeast18%

Mountain5%

South Central2%


Size of Employer

<50032%

501-10009%1001-5000

21%

>10,00017%

5001 - 10,00021%


If you’ve seen one employer…

“Leading Edge” – 21% of respondents Employers willing to try new benefit strategies based on

their perceived, yet untested, value

“Careful Watchers” – 54% of respondents Employers willing to try a new benefit strategy once

competitors adopt it or preliminary evidence of ROI exists

“Conservative” – 25% of respondents Employers willing to try a new benefit strategy once it is

viewed as an industry standard benefit design.


Characteristics of self-identified “Leading Edge” firms

The organization is highly supportive of improving employee health Senior leadership is highly influential in designing health benefits They see a link between an employee's health and his/her

productivity In addition to company data, they look to experiences of other

“leading edge” firms and academic research to determine their benefit directions

Health benefits are seen a necessary cost of doing business and an investment in human capital, with a measurable outcome


Percent of employers

Employers’ Cost Trends 2003-05

0%

5%

10%

15%

20%

25%

30%

35%

40%

Itdeclined

Noincrease

0-2%increase

3-5%increase

5-10%increase

11-20%increase

21-30%increase

31-40%increase

Don'tknow

Cost Trend 2003-2005

Others

Leading Edge

Use of Data


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Company data & experiences

Senior leadership direction

Industry peer companies

Coalition recommendations

Research reports by coalitions

Leading edge firms offering benefit

Research reports by vendors

Influencers of Benefit Strategy

LeadingEdgeFirms

Other


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Disability claims

Group health claims

Workers compensation claims

Absence data (excluding disability)

Family Medical Leave data

Health Risk Assessment

Biometric health screenings

Presenteeism/Productivity

Employer Use of Data

Data are collected Data collection is planned

Data not collected Don't know


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Disability claims

Group health claims

Workers comp data

Family Medical Leave data

Absence data (excluding disability)

Health Risk Assessments

Presenteeism/ Productivity

Biometric health screenings

Use of Data: Leading Edge vs. Others

Leading Edge Others (Non-Leading Edge)


Does your firm integrate its data?

Yes45%

No 34%

Don't Know21%

48% of “Leading Edge” firms integrate their data

The Value of Healthand Related Benefit

Strategies


Employer views on the value of health

95% of employers agree that there is a link between an employee’s health and their productivity

84% of employers believe that health benefits are a necessary cost of doing business

85% of employers view health benefits as an investment in human capital with a measurable outcome

75% of employers are highly supportive of improving employee health

62% of employers who view themselves as “Leading Edge” will provide cash or other incentives to motivate use of preventive services, compared to 40% of other employers


0% 5% 10% 15% 20% 25% 30% 35%

Require employee tocomplete health risk

assessment to beeligible for benefits

Contribute toHRA/HSA account for

worker completingrisk assessment

Currently offer or plan to offer HRA Incentives: Leading Edge vs. Other Employers

Other Employers Leading Edge


0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Employer contribution set to lowest cost benefitoption

Employee health premiums set by salary tiers

Higher employer contributions to HRA/HSAaccounts for those with chronic conditions

Employer contributions to an HSA/HRA accountbased on salary level of worker

Contribution Strategies: Leading Edge vs. Other Employers

Other Employers Leading Edge

Views and Strategies Around Cost-Sharing, Performance

Information and Quality


Employer views on cost-sharing

53% of employers agree that increased cost-sharing reduces physician visits

75% of employers believe an employee’s health impacts their sensitivity to cost-sharing

94% of employers agree that employees need to know their out-of-pocket costs to make informed decisions to obtain health services


Are co-pays for drugs barriers to achieving optimal outcomes?

Disagree62%

Neutral23%

Agree15%


0% 10% 20% 30% 40% 50% 60% 70% 80%

Mandate generics

Waive copays to participate in DM program

Waive employee cost sharing for chronicdisease drugs

Waive copays to use generics

Set copay on most effective drug forcondition

Currently have or plan to adopt drug strategies: Leading Edge vs. Other Employers

Leading Edge Others - Non-Leading Edge


0%

10%

20%

30%

40%

50%

60%

70%

Selecting ageneric drug when

it is an option

Selecting a higherquality hospital

Changing to ahigher quality

doctor

Going to a Centerof Excellencefacility for aprocedure

Participating in adisease

managementprogram

Participating in apreventivescreening

Completing ahealth risk

assessment

< $25

$25 - $50

$51 - $100

$101 - $300

$301 - $500

>$500

Don't know

Employers views on level of dollar incentives to change behavior



44%

15%

41%

21%

34%

45%

64%

7%

29%

0%

10%

20%

30%

40%

50%

60%

70%

A network with only "quality"providers

A network with only "cost-efficent" providers

A network with only quality& cost efficient providers

Employer Interest in "High Performance" Networks

Would offerWould not offer

Don't know


66%

15%

20%

59%

18%

23%

54%

19%

27%

0%

10%

20%

30%

40%

50%

60%

70%

Quality ofphysicians

Quality of drugs Quality and safetyof hospitals

Is information for employees available for informed choices?

Disagree Neutral Agree


Employer views on quality and cost

48% of employers believe employees have sufficient price information on prescription drugs to enable them to make informed choices

77% of employers agree that using drugs proven effective for a condition will reduce other services for that condition

60% of employers believe employees would change to better performing providers if they understood how quality varies and affects outcomes

70% of employers believe they should not pay hospitals or be billed for services provided due to preventable medical errors or infections, not related to the admission of a patient

Views on Incentives & Pay for Performance


Views on incentives vs. disincentives

Incentives are more effective

than disincentives

58%

Incentives are equally

effective as disincentives

28%

Incentives are less effective

than disincentives

14%


0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Offer employeesincentives to select

better providers

Pay employees andproviders

Do neither

Pay providers moremoney

To improve outcomes, would you rather pay employees to select better providers or pay providers for higher quality?


0% 10% 20% 30% 40% 50% 60% 70%

Incentive to use Center of Excellence

Incentive to use higher quality hospitals

Incentive to use higher quality doctors

Incentive to complete health risk assessment

Incentive to obtain preventive services

Currently use or plan to use incentive strategies: Leading Edge vs. Other Employers

Leading Edge Other Employers


Summary Value-based benefit designs are being utilized by only a small percent

of employers, primarily leading edge organizations Key leading edge approaches:

Incentives for participation in wellness, DM and adherence programs Integration of cost and productivity data Enhancing the health of employees

Major employer concern: Lack of quality and cost data on providers Adopting “leading –edge” strategies can be most effective in reducing

cost trend and improving health of workforce Over two-thirds of employers do not collect or utilize

productivity/presenteeism data Less than half of employers are integrating their data to determine the

total impact of health on their populations Two-thirds of employers have not considered or are unwilling to use

incentives tied to premiums to reduce smoking


Next Steps

Follow-up survey to see if more employers are willing to adopt VBBD

Drill down on some areas Expand number of employer respondents Develop programs to help “activate” employees and address health

literacy barriers.

For further information…

Larry [email protected]

312-372-9090 x1

Jessica [email protected]

312-372-9090 x2

Documents

Michigan Purchasers Health Alliance September 20,2007 Readiness to Change Survey: Employers’ readiness to adopt value-based benefit strategies Larry S