Value based payment – Revolutionising PHI

Value-based payment (VBP) is a concept that is driving transformation in the US healthcare market and has become more prevalent in discussions within the Australian Private Health Insurance (PHI) industry during the last couple of years, and may soon become an imperative for our country. Why? Our 2017-18 national Medicare[1] spend has grown at an average rate of 4.89% per year, measured against our average population growth for the same period of 1.56%. This currently represents $943 per person annually, and in five years will have risen to a projected $1,144 per person, which is unsustainable.

Today, these ever-increasing costs still reflect poorly on the goals of the of improved care experience, better population health and lower costs. The transactional nature of the current fee-for-service model is widely recognised as a major contributor to wasteful spending and a barrier to improving healthcare delivery. For these reasons, payment models need to be reviewed from both the Medicare and PHI perspectives. Each should have the same set of goals although mostly driven by differing funding provisions. It is time to reconsider the fee-for-service model and consider emerging VBP programs being developed and adopted by some of the PHI funds. The rest of this blog will focus purely on the model from a PHI perspective.

VBP ties healthcare payments to measurable improvements in the quality and efficiency of patient care and shifts the emphasis from managing a resource-based health care system to managing outcomes-based healthcare.

This shift, however, places patient-associated risk with healthcare providers, creating an enormous change in terms of cultural, technology and process transformation. Health insurers are being challenged to move away from paying providers based on productivity (transactions) to payment that is driven by analytics, based on defined value and quality performance.

Let’s look at an example. A radiologist performs a chest X-ray on a patient. The question is: “Did this activity contribute to an improvement in the patient’s health status as part of a coordinated care plan?” If the answer is yes, then the PHI should pay the radiologist a higher rate. If not, and if the radiologist’s services are driven by the priority goal of making the digital x-ray machine a revenue source, then the radiologist is delivering low-quality, high-cost care that should not be rewarded. Payment should therefore be differential.

How do health insurers achieve this payment makeover? We recommend five best practices, understanding that the pace of change will vary by healthcare sectors as some may be more accepting of this approach.

  1. Inventory your claims transactions, current technology, and which service providers would be best suited to a VBP model. This will define where you are in terms of next steps. Are there standard treatment patterns that can be developed and incorporated into a VBP model, eg, standard hip replacement surgery?
  2. Develop your strategic roadmap. Roadmaps may vary by line of business, service providers and VBP model types.  Collaborate with network providers. Educate staff. Architect VBP arrangements that make business sense from a financial and quality improvement perspective.
  3. Ensure your operations and processes are updated. All insurers have core systems engineered to administer transaction-oriented payment based on a fee schedule. VBP drives payment from an analytics angle. While you still have to provide payment, analytics-based payment requires data algorithms, business process configuration, measure development, claim-bundling and advanced analytic systems. Many technologies are new and evolving as are the associated service offerings.
  4. Integrate payment design with population-based analytics and management. The design of your VBP program should include strengthening the provider-payer partnership through data-sharing targeting measures that drive success for the member, provider and insurer. For example: providing access to clear and concise information relating to upcoming patient treatment plans, expected outcomes and patient information means administrative simplification for service providers – and stronger performance for you and your members.
  5. Deliver care through provider collaboration. Data-sharing to help your providers manage populations of patients is vital for a sustainable VBP program.  Data insights will help them understand the burden of care across their patients, enable the closing of gaps in care, and allow providers to practice medicine proactively instead of reactively. Imparting longitudinal patient information and peer-comparative results will create both action and competition in a meaningful way.

For health insurers, in addition to a cultural change, VBP also means a substantial change within your operations.

This is especially true for small to medium-sized insurance companies with limited capital to invest, the need for new expertise, and resource constraints that come with competing priorities. These insurers can become stymied in trying to move forward with modernisation. Value based payment is complicated but essential to remain competitive and/or comply with new federal and state regulations.

We refer to this as the chicken-egg situation for health insurers. You need expertise. You need skills. You need the technology to drive future income.  Yet, all that requires revenue. So, no matter which came first, it’s important that you break the cycle and move forward.

We wouldn’t be publishing this blog if we couldn’t assist you in this journey. You need more than just a claims system that is good at doing fee-for-service pricing and fee-for-service payment. e5 Workflow provides claims processing for 9 out of 10 private health insurers in Australia and we understand the complexity of continuous change, regulatory pressure and member service. Using operational analytics already available in the e5 platform, we can help to identify and define member episodes to be converted to VBP models. When initiated, these VBP models can then be automatically managed through the e5 platform, giving providers visibility of upcoming appointments and clear revenue forecasts, bundling claim payments, reducing administrative costs and delivering an exceptional member experience. All the benefits of prudence and planning.

Hit the Contact link to talk to us about the VBP idea.