1. Aligning employer strategies: Value- based insurance design and the patient- centered medical home Bruce Sherman, MD, FCCP, FACOEM PCPCC - Center for Employer Engagement - June 9, 2010

2. The primary care system must be transformed to address current healthcare issues

3. Joint Principles of the PCMH (February 2007)  The following principles were formulated by the four primary care physician organizations – the American Academy of Family Physicians, the American Academy of Pediatrics, the American College of Physicians, and the American Osteopathic Association.  Principles: Ongoing relationship with personal physician Physician directed medical practice Whole person orientation Coordinated care across the health system Quality and safety Enhanced access to care Payment recognizes the added value

4. Why should employers care about PCMH?  Improved coordination of healthcare  Enhanced quality of care  Better clinical outcomes  Improved patient satisfaction with healthcare  And (hopefully) lower health and lost productivity costs  Healthier workforce  Healthier families in workforce  Increased efficiency of care (reduces costs)  More valuable health benefit

5. Typical US employer healthcare cost distribution Improving care quality with a PCMH, will increase primary care costs But… implementation of PCMH has been shown to result in lower hospitalization rates – and lower overall health care costs.

6. Patient-Centered Medical Home 2009 Overview of Pilot Activity and Planning Discussions RI Multi-Payer pilot discussions/activity Identified pilot activity No identified pilot activity – six states

7. A comparison of then and now… Attribute1990’s – Managed care2009 and onward - PCMH Primary stakeholders involved: Health plans Employers Health plans Providers PCP role:GatekeeperMedical home Need to engage/involve:ProvidersEmployers Patients have…Limited choicesInformed choices Good health means:Lower costsEngaged individual Employer focus:Cost-reduction through appropriate utilization Value-generation through appropriate utilization Benefit design considerations: In/out of network; co-pay used as financial disincentive Value-based insurance design as financial incentive

8. 8 The importance of benefit design Wise Investments in Employee Health Are Cost-Effective Reduction in Medical Costs Reduction in Health- Related Absences Reduction in On-the-Job Productivity Losses BenefitCostBenefitCost Employers are increasingly adopting cost-effective – or value-based Insurance design strategies Employers are increasingly adopting cost-effective – or value-based Insurance design strategies

9. 9 The case for value-based insurance Design of Value-Based Co-payments ProblemProblem Some employers are responding to rising healthcare costs by adopting across-the-board cost-shifting  Many studies have shown that this reduces adherence, which may have adverse clinical effects: Ellis JJ, et al. 2004; Goldman DP, et al. 2006 SolutionSolution Set the patient co-payment amount relative to the value – not the cost – of the intervention  This means considering the complications and consequent services that are avoided on account of the intervention when assessing value Condition-specific (diabetes, hyperlipidemia) Benefit offering (preventive care, generic medications, PCMH) Adapted from Fendrick AM and Chernew ME. Value-based insurance design: aligning incentives to bridge the divide between quality improvement and cost containment. Am J Manag Care. 2006;12:SP5-SP10.

10. 10 VBID is relevant to all aspects of health management Integrated Health and Productivity Management Wellness and Health Promotion Incidental Illness and Chronic Disease Complex-Catastrophic Individual Cases Health education Health risk assessment and screening programs Lifestyle management programs Health insurance plan Short-term disability Disease management programs High-cost case management Long-term disability Centers of excellence for high-cost conditions New ACOEM and IBI partnership to promote health and productivity management in the workplace. [news release]. Chicago, IL: ACOEM. November 27, 2006. VBID Strategies

11. PCMH and value-based insurance design  Medical home is a system/means of healthcare delivery  Unless individuals are encouraged to utilize a medical home, there is no value generation for employers  Financial incentives can steer individuals to use high-value services (value-based insurance design)  Medical home is a high-value service  Incorporation of a value-based insurance design to promote medical home use can drive PCMH use

12. Value-based insurance design includes more than lowering medication co-pays Employer considerations for PCMH-related benefits  Co-pay reductions for:  Medical home visits  Specialist consults when referred by PCMH  Ambulatory services when referred by PCMH  Contributions to HRA/HSA for PCMH provider selection  Compliance with recommended care:  Tiered employee benefit contributions  HRA/HSA contributions

13. Barriers to employer adoption of PCMH  No pilots in the employer community  Employers can partner; work with health plans to implement (Kellogg, Roy O Martin Lumber, IBM)  Location-by-location implementation vs. ease of uniform benefit design change  Consider involvement in existing plan-based pilots  Short-term focus on costs  Ongoing education; build on VBID approach (Whirlpool)  Need for solid “proof of concept” data for PCMH  Enhance visibility of outcomes data for employer audience

14. Final thoughts  Value generation occurs through appropriate utilization of healthcare services  PCMH should be considered as a focus for value-based insurance design strategies  Increased use of (and payment for) primary care is offset by reductions in use of other healthcare services  Improved health results in greater workforce productivity  “My employer cares about my well-being” engenders greater employee engagement