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Employers Adopt Health Care Payment Strategies
 

By Stephen Miller, CEBS  6/13/2013

To ease rising health care costs, an increasing number of U.S. companies are considering adopting strategies that would improve the way they pay for health care services, according to a survey by consultancy Aon Hewitt.

Nearly 800 large and midsize U.S. businesses, covering more than 7 million employees, responded to the 2013 survey. Fifty-three percent of respondents said moving toward provider payment models that promote cost-effective, high-quality health care results will be part of their future health care strategy, and one in five identified this as one of the three highest priorities.

“As health care costs continue to rise, a growing number of employers want to ensure that the health care services they are paying for are actually leading to improved patient outcomes,” said Jim Winkler, chief innovation officer for health at Aon Hewitt. “Just as employers are requiring their employees to take more control of their health, they also are seeking to hold providers more accountable. They are beginning to work directly with health plans to embrace more aggressive techniques to reduce unnecessary expenses and create more efficiency in the way they purchase health care.”

Pay for Performance Models

Thirty-one percent of respondents reported that they decrease or increase health care vendor compensation based on specific performance targets, and another 44 percent are considering this in the next three to five years. Additionally, although just 14 percent of employers use integrated delivery models, including patient-centered medical homes, to improve primary-care effectiveness, another 61 percent plan to do so in the next few years.

”Vendor accountability models are moving beyond process-based metrics, such as customer-service call-answering speed, and shifting to ones that focus on fees at risk for clinical health-risk improvement and overall medical-spending increases,” said Tim Nimmer, chief health actuary for Aon Hewitt, in a written statement.

Reference-Based Models and Coalition-Based Pricing

Among other findings:

  • While just 8 percent of companies limit plan reimbursements to a set dollar amount for certain medical services for which costs vary widely, almost two-thirds of respondents (62 percent) are considering adopting this type of reference-based pricing model in the next three to five years. This approach has been commonplace for prescription drug coverage, with many employers requiring participants to pay the cost difference between a brand-name drug and its generic substitute.

  • Fifty-nine percent of employers plan to steer participants—through plan design or lower cost—to high-quality hospitals or physicians for specific procedures or conditions.

  • Thirty-eight percent of companies plan to participate in cooperative purchasing efforts with other employers or groups, known as coalition-based pricing; 21 percent do so today.

“Employers are increasingly gaining comfort with the notion that they do not need to pay for the wide cost and quality variations that exist in today’s health care system,” Winkler said. “Their efforts to reduce inefficiency and shift the payment focus toward services and providers that produce higher-quality outcomes are only just getting started. It is a shift that our health care system certainly needs.”

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related SHRM Articles:

Treatment Costs for 'Shoppable' Procedures Vary Widely, SHRM Online Benefits, March 2012

Applying Effective In-Network Incentives at CalPERS, SHRM Online Benefits, February 2012

Intel Chairman: Transforming Health Care Is Employer Imperative, SHRM Online Benefits, March 2008

Related SHRM Videos:

Gordon Norman Medical Payment Reform. Employers should pay health care providers for the quality of outcomes, not the quantity of services, says Andy Webber, CEO of the National Business Coalition on Health.

Bert Scott Health Networks. Bert Scott, president of U.S. Commercial Markets for Cigna, discusses some emerging trends regarding the size and configuration of health care provider networks.

Harry Reynolds Patient-Centered Medical Homes. Harry Reynolds, VP of health industry transformation at IBM, on promoting a patient-centered medical home approach to care.

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