In contrast to all the research conducted on health care
providers, managed care organizations, and health care systems,
there has been very little systematic research on employers as
purchasers of health care. To fill this need for information, the Agency for
Health Care Policy and Research (AHCPR) has begun a research
initiative focused on employers as purchasers of health care.
This report summary provides early lessons on the scope, patterns, barriers, and possibilities of value-based
purchasing. It is drawn from in-depth discussions with nine employers and coalitions as well as
written materials from many other organizations.
The 55-page report can be obtained from the AHCPR Publications
Clearinghouse by calling toll-free 800-358-9295 and requesting
AHCPR Publication No. 98-0004.
Contents
Overview
Introduction
The Theory of Value-Based Purchasing
The Reality of Value-Based Purchasing
Measurement Activities of the Pioneers
What and Who Pioneers Are Evaluating
The Methodologies
What Are the Obstacles?
A Sense of Complacency
Lack of Dissemination Mechanisms
Inadequate Staffing
Credibility of the Information
Information Not Being Used to Drive Change
Employers Mainly Concerned With Cost Reductions
Accomplishments
Research Agenda
Project Staff
About the Authors
Overview
Employers are central figures in the current market-based health system.
In their push to contain health care expenses, employers have been a driving
force behind recent dramatic market changes: The move from indemnity coverage
to managed care, the flurry of consolidations and mergers of health plans,
the emergence of new risk-sharing and contracting patterns, and the slowdown
in the rate of premium increase. More recently, some of the more forward-thinking
employers have begun to use their market power as a force to promote quality
and value of health care services as well.
However, despite the undisputed role of employers in trying to shape
the cost and content of health care, very little is known about why, how,
or how well they exercise these powers, and we know even less about the
impact of these purchaser activities on employees, employers themselves,
and the broader health care market or community. We have a generation of
research examining the behavior of physicians and hospitals, some more
recent work on managed care organizations and health care systems, but
very little systematic work on employers as purchasers of health care.
To begin to fill this gap, the Agency for Health Care Policy and Research
(AHCPR) has begun a series of research initiatives focused on employers.
In this report, Jack Meyer, Ph.D., Lise Rybowski, and Rena Eichler, Ph.D.,
present findings from one of these projects: an examination of the state
of the art in value-based purchasing. The report, drawn from in-depth discussions
with nine employers and coalitions and written materials from many others,
provides early lessons on the scope, patterns, barriers, and possibilities
of value-based purchasing. They find that most employers are focusing
their attention exclusively on costs. Another group of "dabblers" has
begun to collect some quality information from plans and providers but
has not used the information to influence or mold purchasing decisions.
Finally, a few employers and coalitions—the pioneers—are acting in a
bold and innovative fashion to implement the principles of value-based
purchasing.
The pioneers:
- Collect data on both cost and quality.
- Use the data to select plans and providers.
- Have financial incentives for employees to enroll in plans with good performance
records.
- Sometimes work directly with providers to identify and implement best practices.
To take a strong role as a value-based purchaser, employers and coalitions
must surmount many obstacles, including complacency, inadequate dissemination
mechanisms, staffing shortages, data credibility issues, but the nine case
studies provide evidence that these barriers can be overcome. Finally,
the authors spell out a valuable list of research questions for the future—questions
that will be very helpful to the Agency and the research community as a
whole as we continue our study of the role of purchasers in shaping the
way health care is financed and delivered.
Irene Fraser, Ph.D.
Director, Center for Organization and Delivery Studies
Agency for Health Care Policy and Research
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Introduction
The purpose of this report is to describe some of the most promising examples
of private business initiatives to build quality considerations into health
care purchasing. In this overview section, we analyze the state-of-the-art
of employer-sponsored quality measurement initiatives in the context of
the strategy of value-based purchasing. In addition to laying out the activities
and accomplishments of several innovative purchasers, the report elaborates
on the obstacles keeping employers—even the innovators—from making greater
progress in this arena. The report concludes with a number of suggestions
for further research that would facilitate employer efforts to incorporate
quality information into their health care transactions. Table 1 summarizes the activities of nine particularly innovative companies and business
coalitions.
New Directions for Policy conducted in-depth telephone interviews with
nine employer purchasers in the United States. We also collected and reviewed
written materials describing the innovative activities. Five of the purchasers
are business coalitions. Four are large corporations. We began by reviewing
the activities of roughly 20 purchasers and selected the ones profiled
in this report based on the sophistication and depth of their initiatives.
Thus, this is a review of "best practices" from around the Nation rather
than a "random sample" of employers buying health care.
This report begins by reviewing the theory of value-based purchasing
and discussing the extent to which the reality of quality initiatives in
today's marketplace matches or approaches this theory. The remainder of
the report focuses on what will be required to move this reality closer
to the ideal.
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The Theory of Value-Based Purchasing
The concept of value-based health care purchasing is that buyers should
hold providers of health care accountable for both cost and quality of
care. Value-based purchasing brings together information on the quality
of health care, including patient outcomes and health status, with data
on the dollar outlays going towards health. It focuses on managing the
use of the health care system to reduce inappropriate care and to identify
and reward the best-performing providers. This strategy can be contrasted
with more limited efforts to negotiate price discounts, which reduce costs
but do little to ensure that quality of care is improved.
The key elements of value-based purchasing include:
- Contracts spelling out the responsibilities of employers as purchasers
with selected insurance, managed care, and hospital and physician groups
as suppliers.
- Information to support the management of purchasing activities.
- Quality management to drive continuous improvements in the process
of health care purchasing and in the delivery of health care services.
- Incentives to encourage and reward desired practices by providers
and consumers.
- Education to help employees become better heath care consumers.
In a system based on value-based purchasing, employers and other purchasers
gather and analyze information on the costs and quality of various competing
providers and health plans. They contract selectively with plans or provider
organizations based on demonstrated performance, or at least proposed approaches
for improving performance. Ideally, quality information becomes a factor
in the setting of plan prices, and employee contributions vary with each
plan's "score," which reflects a combination of quality and cost indicators.
In this manner, the best performing plans and providers are rewarded with
greater volume of enrollees or patients.
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The Reality of Value-Based Purchasing
Our mapping of the terrain of value-based purchasing leads to the following
conclusions:
- There are a limited number of employers and coalitions acting in a bold
and innovative fashion to implement the principles of value-based purchasing.
These pioneers are collecting data on both cost and quality, using
the data to select plans and providers, and developing financial incentives
for employees to enroll in plans with good performance records. Some are
also working directly with providers to identify and implement best medical
practices.
- There are a moderate number of employer purchasers who are taking cautious
first steps, most typically by asking providers and health plans for information.
These dabblers rarely, however, feed that information into actual
purchasing decisions.
- A very large number of employer purchasers are not undertaking any serious
initiatives to build quality considerations into purchasing. The do-nothings
look to carriers and plans to clamp down on providers' costs, and are largely
indifferent to how that is done.
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Measurement Activities of the Pioneers
What aspects of quality of care are the innovative employer purchasers
measuring? This section examines what entities employer purchasers actually
measure and the methodologies they employ to gauge quality of care. The pioneering groups whose activities are described in the report are the Dallas-Fort Worth Business Group on Health, Chicago Business Group on Health, Gateway Purchasing Association,
General Motors, Digital Equipment Corporation, GTE Corporation,
Pacific Business Group on Health, Iowa's Community Health
Purchasing Corporation and Pacific Bell.
What and Who Pioneers Are Evaluating
The Performance of Health Plans
Most of the employers and coalitions that are attempting to measure
quality are focusing on the performance of health plans. Of the employer
purchasers featured in this study, the Chicago Business Group on Health,
Digital, GTE, Gateway Purchasing Association, General Motors, and the Pacific
Business Group on Health are evaluating the performance of health plans
(see Table 1). This is, of course, one step removed from those who
actually
deliver the care: physicians, hospitals, and other health care providers.
Yet, the focus on plans has some important advantages. First, most employers
are contracting with health plans, not directly with providers. This may
change in the future as employers try to reduce costs associated with the
"middlemen" between them and providers, and reap a greater share of the
savings from new efficiencies in the delivery system (which is what employers
in the Twin Cities are currently trying to do). But at the present time,
the focus on plans is a practical response to the current environment.
Second, the focus on plans allows employers to aggregate the performance
of many individual providers into statistically meaningful information.
While much progress has been made, the science to measure the quality of
individual providers is relatively undeveloped at this time. Finally, as
employers become increasingly interested in obtaining information on health
status and the prevalence of disease at the level of their populations
or the community-at-large, large health plans become the logical collection
point and repository for the data.
When assessing health plans, employers tend to focus on both administrative
and clinical quality, where administrative quality includes such issues
as the responsiveness of member services, waiting times in physician offices,
and other factors important to enrollees. The clinical quality of health
plans, on the other hand, is much harder to define. To the extent that
they can get the information, most employers focus their attention on utilization
and preventive care measures (i.e., process measures) that are relatively
easy to understand, but not necessarily reliable indicators of quality.
Most report cards, for example, contain very little clinical information.
In contrast, the "pioneers" are trying to collect information on the outcomes
of care, and identify the procedures and providers that are achieving superior
results.
The Performance of Providers
Some employer purchasers are looking at the performance of providers.
In most cases, purchasers focus on the providers because that is where
the contractual relationship lies, i.e., through a preferred provider organization
(PPO) or similar intermediary, the employers purchase care directly from
physicians and hospitals. Iowa's Community Health Purchasing Corporation
is taking bids from competing integrated card systems. Employers are tying
health premium contribution to "benchmark" care systems, creating incentives
for employees to select them. The Dallas-Ft. Worth Business Group on Health
(DFWBGH), for example, is collecting information on both office-based and
inpatient care for pregnancy and delivery. The group also plans to evaluate
provider performance in four other disease group categories (see Table
1). In addition to a major effort to assess plan performance, the Chicago Business Group
on Health (CBGH) is also trying to evaluate individual providers. CBGH's
PPO, called EPIQual, uses some quality measures to screen hospitals for
inclusion in a network available to member companies. The coalition also
worked with hospitals to develop a critical pathway for coronary artery
bypass graft (CABG) surgery.
There are a few purchasing organizations that are evaluating provider
quality despite the fact that their contractual relationships are with
health plans. Given the tremendous overlap of provider networks in most
markets (i.e., most providers belong to several plans), it is very difficult,
if not impossible, to use information at the plan level to distinguish
differences in clinical quality. These groups recognize the need to have
information about the quality of individual practitioners and providers
organizations, as that is the point at which care is delivered to patients.
The Pacific Business Group on Health (PBGH), which contracts with major
California health maintenance organization (HMOs) on behalf of nearly 20
large employers, is engaged in several activities to assess provider quality,
including patient surveys and data-intensive analyses of claims and medical
records. For instance, in partnership with the California Office of Statewide
Planning and Development, PBGH is developing the California CABG Mortality
Reporting System. This system is collecting and reporting standardized,
hospital-level mortality data for all hospitals in the State that perform
coronary artery bypass grafts. General Motors, which has to date focused
on its health plans, is also exploring ways to use its extensive claims-based
database to derive HEDIS (the Health Plan-Employer Data and Information
Set)-like quality indicators for providers in its PPO networks.
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The Methodologies
As in any evolutionary process, there are basically two factors separating
the pioneers in quality measurement from those merely dabbling in this
arena: the sophistication of the tools they use and their ability and willingness
to absorb and apply the information they receive.
How Purchasers Get Information
In general, purchasers collecting information on quality rely on the
following tools, or methodologies:
1. Enrollee or Employee Surveys
While surveys usually focus on the question of "satisfaction" with
care or service, they are beginning to incorporate questions that elicit
reports, rather than just rankings, about care. For instance, in addition
to asking a patient how satisfied he or she was with waiting times, the
survey would ask how long the wait was (e.g., 10 minutes, half-hour).
The more sophisticated survey tools also gather information about health-related
behaviors and health status. Knowledge about behaviors, particularly risky
behaviors such as smoking, provide health plans and employers with useful
information for designing educational and behavior modification programs.
Data on health status are also useful for this purpose; in addition, these
data are critical factors in adjusting survey results to be comparable
among competing plans. Since poor health status (for example, chronic conditions
such as asthma) is known to correlate with lower satisfaction with care,
it is critical to adjust scores to reflect the health of respondents; otherwise,
health plans may be unfairly penalized for serving a relatively "sicker"
population.
While there are a number of organizations, including many consulting
firms, that develop and conduct enrollee/employee surveys, three specific
instruments are currently drawing the attention of sophisticated purchasers:
the Consumer Health Value Survey, the National Committee for Quality Assurance (NCQA) enrollee satisfaction survey, and the Consumer Assessment of Health
Plans Study (CAHPS®) survey. All three of these surveys offer a standardized
set of questions and analytical tools so that health plan results can be
fairly compared within and across markets, and can be assessed over time.
The Consumer Health Value Survey—which has been used by a number of
sophisticated purchasers, including Xerox, Digital, and GTE—was originally
developed by a team at the New England Medical Center's Health Institute
under the direction of Harris Allen, Ph.D. (the instrument is available
through Dr. Allen, who is now at Coopers & Lybrand's Boston office).
The NCQA survey was developed in an effort to provide employers with comparable
patient-derived information that would complement the health plan-derived
measures in HEDIS. Gateway Purchasing Association in St. Louis, working
with the Missouri Consolidated Plan representing State employees and over
300 local public purchasers, is using the HEDIS 3.0 Member Satisfaction
Survey in 1997 as part of an effort to evaluate the performance of plans.
Funded by the AHCPR, the Consumer Assessment of Health Plans Study (CAHPS®) is a national initiative to develop a standardized survey instrument that can capture the experiences and perspectives of consumers using the health
care system at any level. Underway since early 1996, it is a joint project
funded as a cooperative agreement between AHCPR and three consortia led
by RAND, Harvard Medical School, and Research Triangle Institute. These
grantees are producing questionnaires, a detailed manual on how to implement
the survey instrument and analyze the results, and consumer reporting formats
(print and electronic), all of which will be released into the public domain.
The official public release of the instrument took place in the summer
of 1997.
Several employers, business coalitions, and Medicaid programs are planning
to pilot test the CAHPS® survey in 1997. The survey will be administered
by independent venders, who will be able to receive some technical assistance
from Westat, which has a contract under the CAHPS® grant to provide this
service. In addition, the developers of CAHPS® are currently working with
the NCQA to develop an instrument that combines their survey with the one
now required as part of HEDIS 3.0. This blended instrument will be available
in 1998, and is expected to become the new requirement for health plans
reporting their HEDIS results. The Health Care Financing Administration (HCFA) will require the use of a Medicare version of CAHPS® for plans offering managed
care services to Medicare beneficiaries.
According to its developers, the CAHPS® instrument offers several improvements
over the existing array of survey tools. First, the researchers designed
the questionnaire to be relevant across a variety of delivery systems and
populations. In contrast, most surveys address specific insurance circumstances
(e.g., enrollment in managed care plans) and demographic groups (e.g.,
elderly, employed adults). The survey accomplishes this latter goal by
presenting core survey questions that can be supplemented by items for
specific populations, such as Medicare beneficiaries, Medicare risk plan
enrollees, Medicaid recipients, children, and people with chronic conditions
or disabilities.
For instance, in addition to the standard set of questions, consumers
who have indicated a medical condition can be asked about their particular
experiences with the health care system, with an emphasis on the coordination
and continuity of care. Among the questions asked in this situation would
be items regarding:
- The extent to which the patient agreed with the doctor regarding the management
of care.
- The extent to which the patient had any problems getting special equipment,
therapy, or rehabilitation services.
- The degree to which the patient had access to home health care.
This structure allows the administrators of the survey to collect a set
of items that will be comparable across all users, as well as any items
that meet their unique needs. It also enables surveyors to address population
groups that have not been surveyed consistently in the past.
The CAHPS® survey also takes a different perspective than the surveys
commonly in use today. Rather than focus on what purchasers want to ask,
this instrument emphasizes consumers: what they care about and what they
can report reliably. Thus, it does not ask consumers to report on the technical
quality of care they receive, which can be more reliably obtained from
other sources, but on their access to care and their interactions with
providers. However, the CAHPS® researchers are working toward adding items
that will make the survey more relevant to purchasers over time.
2. HEDIS (the Health Plan-Employer Data and Information Set)
HEDIS is a set of standardized measures developed by the National Committee
for Quality Assurance (NCQA) to facilitate employer efforts to assess health
plan performance. The wide availability of these indicators has enabled
purchasers to receive comparable sets of quality-oriented data from multiple
plans. To date, the HEDIS measures have been criticized for emphasizing
preventive and process measures, such as mammography screening rates, rather
than outcomes of care. They have also focused primarily on the health issues
relevant to the employed population.
In the winter of 1998, the NCQA will be releasing the latest version
of HEDIS (known as HEDIS 3.0), which was designed to address many of the
criticisms that have been raised. In addition to posing questions relevant
to employers, HEDIS 3.0 starts to address the concerns of Medicaid and
Medicare as purchasers of health plan services. It also contains some indicators
of outcomes. HEDIS is intended to evolve over time to meet the changing
needs of purchasers for information.
While there are probably several hundred employers and coalitions (plus
consultants on behalf of employers) requesting HEDIS results from health
plans, few are actually looking at the results and using the data in their
purchasing strategies. To be fair, this reluctance to act on the data is
in large part due to the poor quality of the information that is received;
many health plans are struggling to provide all of the measures, and some
fail to produce any data. Moreover, when employers have audited the data,
they invariably find wide discrepancies between the reported and the audited
results. Until recently, it was also difficult for a typical employer to
translate the data-intensive HEDIS results from multiple plans into usable
information. However, the NCQA has created a database called Quality Compass in order to collect HEDIS data from plans across the country and produce user-friendly reports for employers.
That said, the pioneers are encouraging plans to submit "cleaner" and
more complete data, in some cases by providing financial incentives to
do so. Perhaps more importantly, they are beginning to use the results
to determine whom to contract with, how to price the plans for employees,
and what to communicate to employees.
3. FACCT Measures
Over the past year, the Portland, Oregon-based Foundation for Accountability (FACCT) has been identifying and organizing new and existing measures that
would allow purchasers and consumers to assess quality of care for specific
conditions and populations. One of FACCT's primary goals is to bring together
sets of measures that can be used to evaluate the delivery of care regardless
of organizational structure. Unlike HEDIS, the FACCT measures should be
relevant regardless of the type of payer involved or the level of provider
integration.
The initial priorities for FACCT measures are breast cancer, depressive
disorders, asthma, low back pain, and diabetes. While no purchaser is currently
using these measures, of which only a few have been published so far, several
of the pioneers interviewed for this study explicitly indicated their interest
in participating in pilot studies of this tool over the next year or so.
There are a number of tools currently being used to assess provider
quality, although most of them focus on utilization rates, i.e., the frequency
with which a provider performs a given procedure, such as a C-section or
bypass surgery. Some purchasers are looking more closely at severity-adjusted
outcomes of care, such as rates for mortality, infections, complications,
and readmissions, which is much more expensive, complicated, and time-consuming
to do, but results in information that is more useful for both the providers and the purchasers. The
Dallas-Fort Worth Business Group on Health, for instance, is currently collecting data for obstetric care, including such specific outcomes as low birth weight, unplanned neonatal readmission,
and uterine rupture rate.
Sophisticated purchasers are paying attention to outpatient care as
well, both by collecting data from physician offices and by conducting
detailed surveys of patients who have visited the doctors or hospitals.
However, this is rarely a task that purchasers take on by themselves. While
many employers use the services of consulting firms with technical expertise
in this area, they also often need to work closely with the providers themselves
in order to ensure that they are getting the "right" information.
How Purchasers Use the Information
There is little question that what separates the pioneers from the dabblers
is their willingness to put the information they receive to use, which
creates a meaningful incentive for the plans and providers to provide credible
data. These purchasers are taking advantage of the leverage they have,
particularly with the plans, to encourage their participation in quality
measurement and improvement initiatives. GTE, for example, recognizes the
top 15 percent of its 140 plans by publicly designating them "Exceptional
Quality" plans. General Motors is designating certain plans as "benchmark"
plans based on a combination of HEDIS information, NCQA accreditation,
and site visits. These companies price these plans more favorably, creating
an incentive for employees to enroll in plans with the best performance
ratings relative to both quality and costs.
Other purchasers use financial incentives for health plans to provide
data; the Gateway Purchasing Association (GPA) in St. Louis withholds 4
percent of premiums from the health plans, which can only receive full
payment if they provide the quality information requested by the coalition.
In 1996, payment of the premium pool was linked to participation in a satisfaction
survey and the provision of 20 HEDIS indicators. Over time, sophisticated
purchasers like the GPA want to link payment of the premiums to improvement
in performance, not simply the delivery of performance data.
Finally, a number of purchasers on the forefront of using quality information
are beginning to share this information with their employees and families.
Their goal is to educate enrollees to become "value-based purchasers" themselves,
i.e., to identify and select the plans that offer the best combination
of cost and quality—not just the ones that are most convenient or offer
a particular doctor. While these employers do not expect enrollees to act
upon this information immediately, they are hoping that people will become
more sensitive and responsive to the differences among plans and choose
their plans accordingly, which will in it
self create an incentive for plans
to improve their performance.
Venders Offer Support, Databases
The pioneers are receiving a significant amount of assistance from a
number of consulting firms around the country that specialize in employee
health benefits, such as William M. Mercer, Hewitt Associates, Foster Higgins,
and MedStat. In addition to consulting services, several of these firms
offer their clients access to extensive national databases that allow for
comparisons of health plan or provider cost and quality performance. Some
firms are specifically trying to bring groups of employers together to
participate in national projects to contract with health plans based on
their ability to meet certain quality criteria, which is one way that these
venders are helping to disseminate the accomplishments of the pioneers
to other less advanced purchasers.
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