How to implement value-based designs

March 1, 2009

Organizations need to use levers to build financial value for health investments

As a country we are still in our infancy of turning our health and healthcare system around. Across the board, the value-based health benefit concept of shifting the focus from cost toward prevention and wellness is shaping up as a prominent answer to curbing rampant health care costs. This approach concentrates on preventing illnesses through investments in risk reduction (nutrition, lifestyle coaching) and creating incentives to appropriate quality management such as access to care for chronic conditions, like heart disease and diabetes, according to evidence-based guidelines and effectiveness for productivity.

Once the employee health status begins to improve, the reduction in cost trend accelerates because it curtails costs associated with disability, workers' comp, unscheduled absences, and emergency room visits for conditions that could have been prevented or better controlled with person-centric care.

Ironically, companies that focus on cost-reduction strategies drive costs up because they limit access to care, so people do not get the recommended tests, physician visits, or medications in an effort to constrain their personal dollar outlay. This prohibits the positive behavior change that can change the trajectory of unscheduled absences, emergency treatment, or worsening conditions.

The first step for an organization is to deploy a health risk assessment for a data-driven picture of the current risk, including which behaviors are inappropriate for good health management. Value-based health designs rely on data to identify high-risk populations and introduce incentives to change behaviors for improved health and productivity, as well as reduction in cost and/or risk. This four-step process gathers data, designs a health program based on this data, implements behavior-changing incentives, and calculates the ongoing dividends to the organization (improved health, reduced absenteeism, reduction in emergency treatments, etc.).

Incentives could include waiving generic drug co-pays, offering self care books, a tobacco cessation program, onsite clinic, cost transparency information, co-insurance reductions for knowing/learning/acting on "numbers" (indicators of health status), and incentives to use evidence-based providers. A plan could also include biometric screenings, reduced barriers to chronic care treatment, and personalized health coaching that sets specific goals and improves total health management. Incentives like no-cost supplies and reduced-cost treatments for diabetes, high cholesterol, and high blood pressure would further reinforce positive health choices.

One organization that implemented such an approach in 2004, Hotel Employees and Restaurant Employees International Union Welfare Fund (HEREIU), a multi-employer Taft-Hartley Trust Fund in West Virginia, saved $2 million in the first year of deployment and a three-year annual medical cost trend under 3%.

Organizations could also consider offering on-site health coaches who schedule one-on-one meetings with program participants, maintain office hours for walk-ins, deliver regularly scheduled classes, and coordinate "lunch and learns," healthy cooking demonstrations, screenings, and awareness campaigns. Telephone coaching provides further guidance for weight loss management, physical activity, stress management, and nutrition.

To address the alarming increase in chronic illness, such as diabetes, among many U.S. employees, organizations could, for example, introduce health programs that target high-risk groups and offer diabetes management, access to testing and monitoring, encourage exercise programs, and reduce pharmaceutical costs.

Caterpillar Inc., a Fortune 50 company and the world's largest manufacturer of construction and mining equipment, diesel, and natural gas engines, and industrial gas turbines, took such an approach, and in 2007 reported that 12% of its employees met all elements of their healthy index composite score. In Caterpillar's general employee group, the numbers demonstrate 50% reduction in disability days and 35% smoking cessation rates, even after three years.

In terms of its diabetic population, Caterpillar reported:

Taking value-based steps like these will ultimately transform the way healthcare is delivered in this country. The larger strategy for employers and payers is to initiate a completely integrated service for each employee, regardless of need, and move from addressing healthcare as an expense toward regarding healthcare as an investment in people. This means looking at more than direct medical costs and beginning to factor in productivity losses resulting from heart disease, cancer, or diabetes. The bottom line is that a healthy employee is a competitive business advantage.

Cyndy Nayer is the CEO and a co-founder of the Center for Health Value Innovation, a community of employers and payers building evidence, tools and competency in value-based decision making for sustainable health improvement and corporate performance.

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