Health Care: Insisting on Value

HR professionals need to hold health-care providers accountable for the quality and results of their services. Value-based purchasing may be a way for them to do just that.

Friday, November 17, 2006
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Human resource leaders nationwide have long struggled to manage health-care costs and quality. For at least the past two decades, costs have risen steadily while HR departments have been unable to measure the quality of care they're purchasing for employees, dependents and retirees.

Compounding these two problems is the lack of alignment between payment and quality. As costs rise, employers pay more for care but, until recently, they have not been able to pay more for quality.

One of the reasons employers are frustrated in their ability to manage costs and quality is that few of them have accepted their role as the ultimate purchasers of health care. Year after year, they pay up whether a patient gets better or not and whether a patient is injured in the system or not. In addition, they have a long history of paying for acute care each time an employee, retiree or dependent gets sick, but few employers pay for illness-prevention efforts. Unlike other departments at most U.S. companies, they pay for process and not results.

The solution to each of these problems is straightforward: Human resource executives need to accept the responsibility that they are the ultimate purchasers of care and so have the right to demand that health plans, physicians and hospitals be more accountable for their results.

While this solution isn't new, it has been particularly difficult to accomplish, given the size and complexity of the health-care system. In addition, HR professionals have been generally unwilling to take on the role of savvy, cost-conscious and quality-conscious buyers.

Seeking Increased Accountability

Over the past few years, however, some HR professionals have been bringing more accountability to health care by fostering value-based purchasing. As the name implies, VBP means employers are making purchasing decisions based on their assessment of value from health plans, physicians, hospitals and other health-care providers.

Employers also have been at the forefront of the effort to develop pay-for-performance programs. In this way, they are paying for results while aligning costs and quality. In fact, PFP is one of the four pillars of value-based purchasing. We know from our membership surveys, for example, that more coalitions are participating in PFP initiatives, particularly those organized by Bridges to Excellence and the Leapfrog Group.

Our membership surveys also show more employers are pooling their data with that of other organizations to analyze claims and cost information. In other words, employers are collaborating with other purchasers and demanding that health plans respond to their needs.

We saw another encouraging sign this summer, when we released a report showing that more health plans are working with employers to improve the quality of care they deliver. In July, the National Business Coalition on Health announced the latest results from its "eValue8" survey, showing that employers and NBCH coalition members are using VBP to have a positive and profound effect on how health care is delivered nationwide.

The eValue8 survey is a standard request for information that employers and coalitions send annually to health plans to gather benchmark data on areas such as plan management, consumer engagement and support, chronic disease management, illness prevention, health promotion and pharmacy management.

Working Together

For the past 10 years, the NBCH and its members have been using eValue8 to assess the value of the services provided by health plans and providers. Since 2002, participation in eValu8 has grown from eight coalitions and 48 health plans to 16 coalitions and 250 plans this year. After reviewing data from those 250 health plans this year, we know, for example, that HMOs and PPOs are making significant improvements in the areas of consumer engagement, chronic disease management, provider measurement, illness prevention and health promotion.

These results are encouraging because they demonstrate that such efforts actually improve the delivery of health care nationwide. The longer we are involved in improving health care, the better we become at working with health plans as partners to reform the health-care system.

However, assessment is only one step in the four-step process of value-based purchasing. Those steps include developing and using a standard performance measurement system, reporting the results of these measurement efforts to the public, reforming the payment systems to reward the best performers and fostering informed choice for health-care buyers and consumers.

Developing a successful system of VBP is a significant undertaking, one that employers and coalitions cannot do alone. In order to spread the word about VBP to markets nationwide, they need to engage all parties in this effort, including other employers, public sector purchasers (such as Medicare and Medicaid), health plans and individual consumers.

Furthermore, VBP is not a continuous quality-improvement program. Improving quality is an admirable and important goal of the health-care system, and we encourage all participants in the system to engage in such efforts. But value-based purchasing is designed to be an external motivating factor that employers and coalitions can use to establish a business case for health-care providers and insurers to re-engineer health-care delivery.

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Collective Power

As stated earlier, identifying which health plans, hospitals and physicians should be rewarded is a four-step process.

Step one, of course, involves standardized performance measurement. HR professionals want to be sure that health plans and providers are delivering health care that is safe, efficient, effective and patient-centered.

Once employers have collected the data needed to evaluate providers, the second step is to report it publicly so that purchasers, payers and consumers can make informed decisions about which providers offer the best value. Last year, a national report on the efforts of The Alliance, an NBCH-member coalition in Milwaukee, showed that what gets measured gets improved.

But the report also demonstrated that reporting data on which providers delivered the best care fostered improvements more quickly than simply measuring results alone. As one coalition executive put it, "What gets measured gets improved, but what gets reported publicly gets improved faster."

The third step in VBP involves payment reform, in which purchasers would pay more to those providers who deliver the best performance. Such initiatives are spreading quickly as employers, coalitions and health plans see the value in offering higher payments to those who provide the best care.

The fourth and final step involves fostering informed choice among consumers. When consumers know which providers deliver the best care, then purchasers and coalitions are helping to foster health-care reform.

Ideally, top-quality performers would get more market share than other performers. The best health plans would have more members while the best hospitals and the best physicians would have more patients than their competitors.

Many employers and coalitions have developed one or more of these four steps in the VBP process. And, as more employers recognize their collective buying power to share data on quality and outcomes, they'll have a significant effect on their health-care markets. These trends mean HR professionals, no matter how small their companies, can help reform the system.

Andrew Webber is the President and CEO of the National Business Coalition on Health, in Washington. NBCH (at has a membership of 80 employer-led coalitions in the United States, representing more than 7,000 employers, and 34 million employees and their dependents.

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