Employers are increasingly dissatisfied with their health care benefit expenses, and many are looking to value-based purchasing strategies to achieve a better bang for their buck. This has the potential to greatly disrupt the way health care is financed and delivered. To learn more, we talked to Neil Goldfarb, president and CEO of the Greater Philadelphia Business Coalition on Health, who discussed the topic at length at the June 11-12 PICPA Health Care Conference.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Employers are increasingly dissatisfied with the value of their healthcare benefits expenses and are looking to value-based purchasing strategies to achieve a better bang for their buck. This new way of decision-making has the potential to greatly disrupt the way employee healthcare is financed and delivered. This is a topic that Neil Goldfarb, president and CEO of the Greater Philadelphia Business Coalition on Health, will discuss at length at the June 11-12 PICPA Health Care Conference and today we get to give you a preview of his session.

The summary for the session you are presenting at the PICPA Health Care conference says employers are increasingly questioning the value of their health benefits spend and demanding higher quality and lower prices from the health care delivery system. Could you take us a little deeper into what employers’ main gripes are with the status quo?

[Goldfarb] We know that health care costs continue to rise and the U.S. pays more on a per capita basis than any other industrialized nation for health care. So the question is cost in themselves are not an issue if we're getting good value, good quality, good outcomes. But we know that we're not. In most local and international ratings, the U.S. actually comes out looking pretty poorly on a delivery of care and outcomes of care. We have a real value dilemma. We're spending more than anyone else, but we're not getting more than anyone else. It's particularly troublesome if costs continue to rise. There's no other aspect of what employers spend money on that they don't tightly control from their supply chain. Health care is one area where they seem to have no control, feelings of helplessness, seeing that they're not getting good value and starting to realize there are certain things they can do about that.

Employers are looking to value-based purchasing strategies to bolster their value, so can you explain to us what some of these strategies are and how they operate?

[Goldfarb] For the past 12 years, I've actually run a national program called the College for Value-Based Purchasing, where we walk employers through all of these different strategies. And it takes a day and a half to do that. We can't do that in a short interview and we'll do a better job of it at our presentation at the conference. But let me give you a few examples. Basically, in broad terms, value-based purchasing is the employer recognizing that they have the market power and ability to demand better value either through getting better quality and safety or lower costs. Some of those strategies are thinking about paying providers differently, paying based on value or outcomes as opposed to paying based on volume. There's a lot of effort going into payment reform, thinking about bundled payments as opposed to traditional fees for service payment, starting to develop narrow network center of excellence kinds of models where we steer care toward providers who we have outcomes data for. Providers who are doing a better job. Doing things like reference pricing where we actually pay based on some reasonable price regardless of what a provider charges and saying, as an example, we're going to pay $500 for a colonoscopy. If the provider charges $3,000, we'll pay $500 and the consumer will be responsible for the rest.

Value-based purchasing includes payment reform, but it's also thinking about how do we get consumers more engaged? How do we get providers to do a better job? How can we as employers use our market power to demand a better health care system?

How could these value-based purchasing strategies alter current funding streams for health care services?

[Goldfarb] I think that we're going to see dramatic changes in the way health care is financed, particularly for provider organizations. They need to be paying close attention to what's going on here. For any organization as a purchaser, they need to recognize there are opportunities now to do things differently. Going back to the idea of centers of excellence, as an example, that large purchasers, large self-insured national purchasers, are starting to look at which providers are able to deliver a better-quality product, better outcomes at a lower cost or at a reasonable cost. We're going to steer as much of our business as possible towards those providers. We may have a very narrow network where those are the only providers we allow people to go to. Or we may just say we're going to give consumers a financial incentive to go to those high-value providers by waiving copays, coinsurance, out-of-pocket payments.

The employer is starting to say look, provider community, if you can't demonstrate that you're delivering better outcomes or better pricing, better value, we're going to cut you out and we're going to steer our business elsewhere. That's just one example of big implications. Another one is we know some employers are taking more of a direct contracting approach with an ACO, an accountable care organization, and saying, we don't want to be at risk. Let the provider organization be at risk, be responsible for managing population health and managing costs. And we're only going to contract with ACOs or we're going to give them preferential pricing. If you're not in one of those large organizations in a particular market, where an employer is doing that, you may be cut out of that employer's network.

What sort of role could digitization play in the continuing reshaping and disruption of the healthcare industry?

[Goldfarb] There's a real technology revolution going on right now, as you know, and it definitely has implications for providers, consumers, and employers as purchasers. Getting better information on quality care or who is in my network is one way that we can engage consumers, giving them better transparency on which providers offer which services at what cost and at what quality. So we're seeing a lot of tools that are being developed by private vendors, by health plans, by provider organizations that help consumers select a high-value provider. We know that there are different ways people are now accessing care. Some of that is generational. But certainly, in addition to telemedicine or call-a-doc, you can now use an app to access a doctor, and why go to the physician and spend an hour in a waiting room if you can text an organization, a provider, get a prescription immediately filled for something like a rash. And so we need to think about how these different ways of engaging people with digitization are either fostering quality or perhaps, in some ways, impeding quality, creating a more fragmented system. But it's all happening. We need to try to recognize that it's happening and take advantage of the new opportunities to improve access to data, improve access to information that will help us identify better quality and value when we see it.