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Some health plans are finding success with a new program that rewards patients for seeking out cheaper care.
HealthTrust of New Hampshire offers a rich healthcare benefits package with low deductibles to nearly 46,000 public-sector workers, their familes, and retirees. The problem? How to get them to care about the cost of healthcare services and shop around. The solution? Cash incentives and checks in the mail.
Specifically, HealthTrust, a nonprofit, public risk-pool, decided to contract with Vitals SmartShopper, a company that uses cash rewards to prompt consumers to shop for certain procedures and treatments and select relatively lower-cost, same-quality settings. Members can shop online or with a customer service expert.
"We want to continuously incentivize these folks to use cost-effective facilities," says Scott Weden, HealthTrust's benefits and wellness manager. Consumers "need to have an active interest in their care and make smart decisions. That's one thing SmartShopper does for them."
In the first eight months of 2016, HealthTrust topped $1.7 million in gross savings from SmartShopper, heading toward a $2.2 million year-end goal, Wedel says. Consumers shopped for 29 services; more may be added to the shopping list for 2017. Net savings were about $1.2 million, after subtracting administrative fees to Vitals and $193,000 distributed as cash incentives to members.
RothschildIn 2015, SmartShopper's first year of implementation, HealthTrust saw continuous growth in members' engagement from aggressive education and outreach, Weden says. Gross savings topped $1.5 million, far exceeding its $1 million goal.
Across SmartShopper’s several regions, there are eight plans participating in the program, and together they saved the most in 2015 on colonoscopies: $1.8 million, or $1,170 per case. In total, plans saved almost $12 million, and 2016 is rosier, says Mitch Rothschild, Vitals' founder and chairman. "We're up by a little over 40% year-over-year so far in terms of total savings," he said. (To determine savings, Vitals compares what people using SmartShopper spend on targeted services versus what is spent by people not using it.)
Rothschild says his company's various products include Vitals Choice, used by 25 plans covering 30 million-plus lives, which links to member benefit plans and offers transparency tools. Eight plans also use Vitals SmartShopper and five more plans expect to go live by 2017. "We don't name [client] plans, but we work with a good number of Blues plans and with the smaller regionals," he says.
While it is reasonable for health plans to build transparency tools, Rothschild says the biggest challenge is getting consumers to pay attention. "We know that shopping works and the plan knows it works," he says, but at most one in five consumers uses plans' online information.
Yet SmartShopper can generate a seven-to-one return on investment with even 10% to 12% member engagement, paying out cash rewards of $50 to $500 per service, Rothschild says. The program currently has just shy of 100 procedures available to consumer-shoppers.
SmartShopper tends to focus on services, including ambulatory surgeries such as knee replacement, that Rothschild describes as having high-cost differentials depending on where the service is provided.
Graybill"Virtually never do we suggest you switch the person giving you care," Rothschild says. "We suggest a a change in location or building ... because the cost differential between doctor A and doctor B is not very high, but a colonoscopy in a doctor's office versus a colonoscopy in the hospital is much different."
Consumers may get information from SmartShopper phone representatives, who serve as personal shoppers, or go online; and the consumer doesn't necessarily call first.
"In certain situations, we get information on where an MRI is scheduled-at the local hospital, for example-and we pick up the phone and tell you [i.e., the consumer], 'We know your MRI is approved, but we know locations for high-quality, lower-cost options," says Rob Graybill, SmartShopper's vice president. "And we notify the doctor if there's a change, and you qualify for the reward."
SmartShopper contracts with plans and markets to their employer groups, so it has accurate plan-level cost data and knows provider networks, for every individual. For self-insured companies, the employer pays the cash incentives; if it is fully funded, then the plan pays. Even if the service is covered under the Affordable Care Act, the insurer/employer is responsible for the cost, so cost-sharing works the same for elective and preventive procedures. If the consumer's deductible hasn't been met, he must pay out-of-pocket, but still would earn back the cash reward-almost like a rebate.
While SmartShopper offers cost and quality information to consumers, Rothschild asserts there aren't significant quality differentials for targeted services and quality isn't compromised since providers are mainly in-network. "We're just talking about huge cost differentials even within network," he says.
Most SmartShopper customers, though branded by plans, are self-insured employers, Rothschild says. "We often operate on a shared-savings model where the employer has no risk ... or the employer can try a per-member-per-month rate," he says. "We actually make more on shared savings, but some employers want a fixed [PMPM] expenditure."
Self-insured employers are taking the risk, so any savings in healthcare costs go directly to employers' bottom line, he explains. There is less direct benefit to plans because state medical-loss-ratio laws require insurers to spend 85% of premium income on clinical services and quality improvement, leaving 15% for administration, marketing and profit.
Still, plans are trying to keep employers as customers, reduce their spend and keep them loyal, Rothschild notes, and SmartShopper can only go to employers in partnership with plans.
SmartShopper analyzes cost differentials for the same procedure; typically, the program shares 10% to 15% of cost savings with patients and payers keep 85% to 90%, less Vitals' fee.
"It's based on plan contracted rates, and you're saving the plan based on average historical cost ... and if we save $3,000, we'll get $300 to the patient and $2,700 to the plan," Rothschild says. "We present choices and out-of-pocket cost and shared savings for each choice, and we let the consumer decide. But the consumer generally makes the rational, economical quality decision."
At times, SmartShopper may create competition. "In every market in which SmartShopper operates, we've seen providers go back to the health plan and actually lower their rates so they show higher on our list," Graybill says. "... So we're actually lowering the cost of care among a variety of services."
Not long ago in New Hampshire, the only place to get a Remicade infusion was in the hospital, Graybill says. "Now, working with the local health plan [Anthem], we went from hospital-dominated to 12 locations [infusion centers and home-healthcare agencies] where you can get Remicade infusion, and we've significantly shifted costs and behavior patterns," he says.
"Last year we saved $1.7 million [on Remicade in the northeastern U.S.] in one year, and that's just on a handful of patients. There is likely double that we can't cover because they're not SmartShopper members," Graybill says.
Since SmartShopper knows payment rates negotiated between participating plans and providers, "there probably are some real savings to be had" in competitive markets for elective procedures, says Jon Kingsdale, PhD, managing director at Wakely Consulting Group LLC. Kingsdale was founding executive director of the Commonwealth Health Insurance Connector Authority in Massachusetts; before that, he was a senior executive at Tufts Health Plan for two decades.
If negotiated rates are shared with SmartShopper, Kingsdale says, "it's a terrific model. ...If I have claims history, I can see typical costs and say, 'Here's what I can save you.' That makes a lot of sense [and is] exactly what we need. ...The reason healthcare is out of line is the effective price we pay for services. For private insurers, it's a matter of paying two or three times what we pay elsewhere in the world. So the solution clearly has to do with prices ... and it's privately negotiated, so the idea of using consumers to find better prices and lower prices is revolutionary."
Judy Packer-Tursman is a writer in Washington, D.C.