How to sustain clinical transformation in Colorado, individually and through the CBGH

What Employers Can Do
The TCPi program concretely demonstrated the willingness of physicians to transform care delivery and patient experience. But unless employers transform the way they purchase and pay for healthcare. Those improved practices are likely to fade rapidly into academic history.
Here are three things employers must insist upon and make happen beginning in 2020. The first two have to do with how employers contract for care. The third has to do with how employers provide benefits for employees.
1. Reference-based pricing. Reference-based pricing imposes a price sensitivity in the healthcare market and forces upon providers (and users) what Professor James Robinson calls “A Choice Architecture.” (Click here to download a copy of this marvelous economic treatise.) There are two major alternative methods of referencing prices. Employers can either 1) compare their pricing on a procedure-by-procedure relative to prices being currently paid in the market or 2) compare their overall in-patient and out-patient pricing relative to Medicare.
  • A good example of the first approach is the California Public Employees Retirement System or CalPERS. CalPERS may very well be known most widely and is probably the first major purchaser to use reference-based pricing. You can read more about CalPERS’s experience here.
  • The State of Montana is a terrific success story for the second approach.
You can read about Montana’s success here and download a presentation describing their success. For the CBGH White Paper on Referenced-Based Pricing click here.

2. Accelerate the move to value-based payment models. We’ve known for at least 20 years that fee-for-service increases the volume of the service we receive but not the value. And because providers are financially rewarded for quality waste and avoidable complications under fee-for-service, it is antithetical – “toxic” may actually be a better word – to reengineering. Yet, through their plans, employers have been purchasing care this way for decades. Beginning now, they must insist that the health plans or third-party administrators they use have a glide path to value-based payment models. For primary care that is likely to include payment mechanisms that compensate for population health management and incentivize the reduction of risk among employees with one or more chronic conditions. For specialists and hospitals that will likely require “episode of care” payments where the entire clinical episode – from work-up through some post-discharge period – is covered. (A less desirable alternative would be case rates or bundles that cover only an in-patient experience.)

3. Use value-based benefit designs. Because we know that not all services, service lines, or providers are of equal value – either in terms of quality, price, or some combination of the two – employers with benefit designs that fail to differentiate benefits/coverage for high and low value healthcare alike are explicitly either a) discouraging use of high value care, b) encouraging use of low value care, or c) doing both. If the healthcare market is to function like most market places, price sensitivity is a sine qua non. An employer without value-based benefit designs rewards low value.

Here’s the bottom line: A sustainable, scalable transformation in clinical practice is demonstrably doable. But it will require a transformation in purchasing and benefits by employers.