Value-Based Design: Reducing Cost, Improving Outcomes€¦ · Value-Based Design: Reducing Cost, Improving Outcomes Jennifer M. Boehm Principal Hewitt Associates To protect the confidential

Value-Based Design:Reducing Cost, Improving OutcomesJennifer M. BoehmPrincipalHewitt Associates

To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Hewitt Associates LLC.

2009 Total Rewards Conference & ExhibitionTo protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Hewitt Associates LLC.

Unprecedented UncertaintyEconomic Challenges

How is our business doing?

Will cutbacks be necessary?

What is the HR “contribution”?

What does this mean for benefits?

Political Questions

What are the priorities?

Will health care be addressed?

What path will reform take?

What does that mean for employers?

Action steps—Be proactive.Develop and implement a written strategic plan that

combines short term savings and longer term investmentsto maximize results.


Employer ChallengesBenefits “Value” Still Critical

Maintaining a viable health and health care plan is a competitive necessity

Still need to attract and retain diverse workforce

Retained or regained health drives improvedproductivity but requires better return in investment(ROI)

Employee Attitudes Challenging

Employees split on the employers role (benefits versus health)

74% agree employer should educate them onhealth benefits1

Only 38% agree employer should educate them onimproving their health1

Health Plans Struggle

Can’t meet the needs of employers or members

Choices are limited (and performance is underwhelming)

Difficult to differentiate capabilities or commitment to truly change the game

“Value added” services are not integrated, unevenly delivered and hard to evaluate

“Bad” Health Behaviors Growing Cost Driver

Preventable and/or lifestyle related conditions causing high costs and lost productivity but engaging people to change their behavior is still a huge challenge

Obesity

Diabetes

Smoking

Managing an employer-sponsored health plan is more challenging than ever

1Hewitt 2008 The Road Ahead Employee Survey


To Make Matters WorseFinancial Pressures Mount

Balance between business survival and maintaining competitive position

HR being “asked” to contribute to and support cost-saving initiatives

Short-term cost savings versus long-term payoff of improved health

Financial Crisis Exacerbates Health Crisis

People forego or postponeessential care

Health behaviors erode asstress grows

Mental health issues emerge

Job losses increase number ofuninsureds


Making the ChoiceTo survive, employers might

Cut costs first—“Ready, Fire, Aim!”

Worry about longer term implications later—“Law of Unintended Consequences”

To thrive, employers must

Cut the right costs

Invest in measurable health improvement

Design, measure, revise

Be disciplined about ROI

Hewitt Associates’ (Hewitt’s) View—Employers CAN thrive in uncertainty by demanding lower cost AND higher value


To Survive and Thrive, Manage Cost, AND Improve Health

If You Can’t Measure It, Your Credibility Is at Risk—KNOW YOUR DATA

Your approach MUST be rooted in your own data, not just “big ideas”

Tackle Specific Behaviors and Conditions—PICK YOUR SPOTS

Diabetes, Obesity, Smoking, Physical Activity, Food Management

Typical employer: diabetic costs—$13,000/year, non-diabetic—$2,600/year

Fix the Things that Impede Right Behaviors—DRIVE VALUE

Build on foundation of “value-based” design


Current Employer Strategies

Purchasing Based—20%

By using all-in vendor solutions

More consolidation

Higher expectations for improved vendor performance

Assumes lack of true vendor differentiation

Modified Status Quo—40%

By adjusting current designs

More cost shifting

More “take-aways”

Minimal emphasis on behavior change

“Off the Shelf”—30%

By adopting ready-made solution

Lack of strategic plan

Lack of targeted solutions

Follow-the-leader and see where itgoes

Integrated & Targeted—10%

By changing the game

Drives changes that matter…create value in program

Increases accountability for all

Requires leadership support and personalized interventions

Embraces technology

More Progressive

Less Prevalent

Less Progressive

More Prevalent


“Value”= Getting to “Right”

The “right” outcome is about supporting all the health care that is needed, but only the health care that is needed

A Value-Based

Program

RightConnections

RightServices

RightProviders

RightIncentives


What is “Value” in a Health Care Program?Pay for services that work…STOP paying for inefficient, unsafe, and duplicative services

Employers need to support initiatives that call for

Reduction in medical errors

Elimination of wasteful and duplicative diagnostic testing

Evidence-based care guidelines

Reduction in post-op infections

Provider accountability

Appropriate care settings

Improving health care literacy


How Does Value Fit Into the Overall Health Care Program?

Consumer Focus Patient Focus

The design created is dynamic

and integrated

Offer coinsurance-based, cost-sharing, and/or an account-based plan

Cover generous preventive and wellness care

Promote healthy lifestyle programs and corporate environment support

Implement multi-channel decision support

Offer significant incentives for HRQ1/ biometric completion and

targeted risk management compliance

Require compliance with condition management protocols

Require evidence-based care guidelines

Assign personal health advocates for support/guidance

Offer high performance providers and centers of excellence

Provide higher coverage for high-valued services

1Health Risk Questionnaire


Value-Based Design (VBD)Why?

Historically, we have created “agnostic” designs that treat all conditions and treatments equally

Many employers have reached their cost sharing threshold, which is causing affordability and compliance issues for high and low value services

Only 55% of employees receive the care they need, as indicated by medical evidence1

79,000 Americans die each year because they don’t receive evidence-based care for chronic conditions2

1Rand; 2NCQA


Defining VBD

“Value” is derived from evidence-based care guidelines

Premise behind VBD

Lowering member cost-sharing may increase utilization of high value services, leading to better health outcome

Needs to work in concert with initiatives such as CDHPs, DM, HPNs, Coaching, and P4P to optimize

health care effectiveness and efficiency

Needs to work in concert with initiatives such as CDHPs, DM, HPNs, Coaching, and P4P to optimize

health care effectiveness and efficiency

Simply put…VBDs set cost-sharing on value, not price

Simply put…VBDs set cost-sharing on value, not price


VBD: Fiscally Responsible and Clinically Sensitive

Noncompliant Patient

Leads To

Increased Medical

Costs

Decreased

Productivity

VBD, when coupled with other health management programs

Reduces financial barriers to essential care

Improves compliance with necessary treatments

Reduces medical costs and improves productivity over time

Simply put…value-based designs set cost-sharing on value, not price

Simply put…value-based designs set cost-sharing on value, not price


Thoughts from Leading Employers1

Which of the following types of VBD programs or enhanced benefitdesign coverages do you currently offer or plan to offer in the future?

12%

5%

47%

36%

0%4%

52%

43%

0%>1%0%5%

10%15%20%25%30%35%40%45%50%55%60%65%

Currently in Use Adopting in 2008 Considering for aFuture Date

Do Not Plan toOffer

Offered, thenEliminated

Prescription DrugMedical

1Data Source: Hewitt’s 2008 Road Ahead Survey



36% 40%

17%

46%

61%67%

31%

89%

67%

81%

34%

87%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percent of CompaniesTargeting Conditon

Enhanced Benefit Used -Prescription Drug

Enhanced Benefit Used -Medical

AsthmaCardiovascular Diease DepressionDiabetes

Please indicate which conditions your organization is targeting for your employee population and what enhanced benefit is being used to target each condition?




Are there any prerequisites for a member to receive the enhancedbenefits (i.e., participating in a disease management program?

4%

27%

20%

0% 10% 20% 30%

Yes

No

Currently no, but will require prerequisites

Percent of Companies



The Spectrum of VBDs

Level of ComplexityLow High

Rx only

Integrated Rx

and condition

management

Integrated Rx, medical

services, and condition

management

Improvement in Health OutcomesModerate High

Individual

patient-specific

design


VBD Continuum

Target Patients

Patient Identification

Administrative Complexity

Benefit Enhancement Cost

Return on Investment (ROI)Highest Lowest

Lowest Highest

Low Specificity High Specificity

Lowest Highest

Patient AccountabilityHigh High

Target Services

Enhance benefits for clinically valuable services across broad population

Target Services

Enhance benefits for clinically valuable services across broad population

Target Patients

Enhance benefits for specific clinically-defined categories based on patient-

specific characteristics

Target Patients

Enhance benefits for specific clinically-defined categories based on patient-

specific characteristics

Additional Design Components to Contemplate


Employer ResponseHewitt has convened a roundtable of employers who have implemented or are considering implementing VBD programs

Learnings and Barriers identified by the Roundtable

“Understanding and implementing consistent outcomes—based on metrics across health plans and PBMs”

“Need better understanding of ROI possibilities and potential administrative roadblocks”

“Want to see demonstrated short and long term ROI; major barrier is finalizing design and ROI methodology”

“Administration and communication”


Hewitt’s Approach to Value-Based DesignA Value-Based Benefit Program must Integrate with Other Programs

It’s not the “silver bullet”!

VBD ROI will depend heavily on other programs already in place

VBD-specific ROI may be difficult to quantify in a well-constructed, integrated health management program

Feasibility is the First Step

Quantify at a high level whether the approach makes sense, usingemployer’s own data

Integration with other programs is crucial

Implementation needs to be in partnership with PBM and medical plans


Hewitt’s VBD Economic modelOur economic model was developed in an exclusive partnership with Dr. Mark Fendrick, MD (University of Michigan) and Dr. Michael Chernew (Harvard University)

Model is founded on economic principles of elasticity

Sits atop Hewitt’s proprietary actuarial pricing model

The model incorporates an employer’s actual prescription drug claims/utilization data to estimate impact of a VBD program

Output is the increase in cost to implement a value-based benefit design

Can incorporate the estimated offsets due to improved medical and productivity outcomes

Can also estimate the needed change in design for non-value-based prescription benefits


Hewitt’s VBD Assessment Solution

Compliance TrackeRx

Assess current Rx compliance and gaps across 11 chronic conditions

Model incentive design alternatives to target improved Rx compliance for specific conditions

Calculate level of investment or amount of cost to spread to other benefit areas

Calculate prospective ROI for direct medical costs and improved productivity

VBD Modeler


Hewitt’s VBD Modeler—Sample Screen Shots


Employer Example—Hospitality CompanyApproach

Selected targeted therapeutic classes of drugs including

Beta Blockers

Statins

Glucose Control

Reduced Rx copays

Generic: $5 to $0

Preferred Brand: $25 to $12.50

Nonpreferred Brand: $45 to $22.50

Established measurement process

Results

Nonadherance rates fell by 7%–13%

Glucose Control: -13.2%

Beta Blockers: -9.5%

Statins: -7.1%

Next Steps

Expand into medical services for targeted conditions

Target patients using enhanced clinical data

Link to participation in condition and health management programs


Employer Example—Large Power Company’s Current VBD

Enhanced benefit (half cost share) effective January 1, 2008

Targeting vascular diseases/treatments with most clinical value

Targeted Conditions – Vascular Cluster

Prescription DrugsDiabete

s CAD CAD w/ MI CHF/A-FibPAD/

AneurysmIschemic

Heart DiseaseHyper-tension

ACE Inhibitors

ARBs

Calcium channel blockers

Beta Blockers

Diuretics

Anti-arrhythmic

Statins and other antihyperlipidemics

Anti-platelets, anticoagulants and other blood thinners

Diabetic Control (oral, inhaled, injected)

Diabetic Supplies (needles, gauze, swabs, lancets strips, pumps, glucometers)


Taking VBD to the Next Level—An Integrated Solution

Value-Based Program

Wellness

Providers

Communication

Diversity Coaching

Disease Management

Health Plans/Networks

PBMs

Design

KNOW your data PICK your spots DRIVE value


InquiriesSend E-mail To:

[email protected]

For a copy of this presentation, please visit:• Hewitt.com

• LinkedIn.com

“Hewitt-WorldatWork09”

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Value-Based Design: Reducing Cost, Improving Outcomes€¦ · Value-Based Design: Reducing Cost, Improving Outcomes Jennifer M. Boehm Principal Hewitt Associates To protect the confidential