Skip to main content

Getting health care right

Value-Based Reimbursement and Care: The Economics of Better Health

Highmark’s True Performance reimbursement program attracted attention when it launched in 2017, and even more attention after generating impressive savings in its first year. It is central to an evolving value-based care model that also includes the Quality Blue value-based reimbursement program for hospitals, pilots in specialty areas with bundled payment programs and specialist efficiency reporting, and additional pilots in post-acute care. This work parallels value-based transformation of care delivery across the Allegheny Health Network (AHN), and through innovative programs like Enhanced Community Care Management (ECCM).

As Highmark’s director of value-based reimbursement strategy and innovation, Jeb Dunkelberger and his colleagues helped shape value-based reimbursement and support programs for all Highmark Health Plan lines of business. In his current role as VP, producer administration and service, he now explains the value of these programs to people selling health plans, such as brokers. A graduate from the London School of Economics, the Pittsburgh Business Times “30 Under 30” award winner also has unique insights into how market forces work (and don’t) when it comes to health care as an industry.

Aligning to Improve Care

Don Bertschman (DB): What inspired you to get into health care?

Jeb Dunkelberger, VP, producer administration and service for Highmark

Jeb Dunkelberger, VP, producer administration and service for Highmark

Jeb Dunkelberger (JD): I always liked that health care effects everyone. I originally wanted to be a provider, but as I started down that track, I realized that I could have a broader impact with something like this, where we’re creating incentive models and behavioral change across entire provider communities. Right now, True Performance impacts the care of 1.8 million patients.

The other issue is that health care is a huge industry — 18 percent of the GDP in the U.S. — but it is fundamentally flawed in many ways. To take one example, there’s an analogy about preventable deaths by medical error. If every day you heard that two 747s crashed, you wouldn’t get on an airplane, right? But every day we lose about that number of people in hospitals to avoidable deaths, often because of mistakes that are controllable and predictable at a system level. That drives me — I want to be involved in improving the system.

DB: That’s a good entrance into this conversation — when we talk about a health insurer’s value-based reimbursement program, people might not realize that there are humanistic motivations like that.

JD: What many people miss about value-based reimbursement is that if you do it right, the insurance company has a perfectly aligned incentive with the patient. Patients think that prior authorization, or being denied coverage for a procedure, is about the insurance company looking out for its bank account, but really it’s about medical necessity. Insurers have a role as stewards in the system. We want to make sure you don’t get and pay for unnecessary procedures or medications.

Where we’re starting to align in health care is defining success — for everyone — as keeping a population healthy. In a sense, that’s built into the basic financial model of how an insurance company works. We collect premium dollars and then pay out on claims for medical costs. If we pay out less medical costs — not because we’re restricting access but because we’re helping the population stay healthier — then we don’t have to charge so much in premiums. Once you understand that, you start to realize that Highmark is on your side.

DB: Isn’t an important aspect of True Performance and other value-based programs that it brings both sides together, so it doesn’t come down to trusting my doctor versus trusting my insurer?

JD: Absolutely. You should trust that everyone shares the same goals — quality care, controlled costs, a good customer experience. So, how do we achieve that alignment? True Performance is particularly strong in that we put the primary care physician (PCP) in the driver’s seat for our members’ care.

Although PCPs usually represent only between 3 percent and 7 percent of the total cost of care, they have the ability to navigate the patient through their care journey, and they usually have the best relationship with the patient. To be effective in that role, we have to equip them with support services — they have to have the analytics to know where the highest quality specialist is, or where there will be the least amount of avoidable costs.

If a provider tells me my headache requires an MRI, I don’t know if that’s necessary. The insurance company can step in as a steward and have its medical experts say no, try this other test first. But now we’re back to trusting an insurance company over a provider. Value-based reimbursement works by shifting accountabilities and incentives to the provider community. We get everyone thinking about total cost of care, and avoidable admissions and unnecessary tests. Then, instead of the insurance company, it’s your PCP saying, hold up, there are simpler, less costly steps before scheduling an MRI.

Now, why would a PCP care whether you get an extra test? Because in a program like True Performance they’re measured and reimbursed on total cost of care. The patient doesn’t want to go through unnecessary tests, payers don’t want to pay for unnecessary tests, and now the PCP also has a clear incentive to avoid unnecessary tests.

PCPs also have the ability to do so much preventive care to avoid downstream costs. If your patient has bronchitis, a value-based reimbursement model like True Performance that measures admissions gives you extra incentive to work directly with that patient and make sure the bronchitis doesn’t turn into something like pneumonia, where they end up admitted to a hospital.

The Evolution of Value-Based Care

DB: Highmark and others have had value-based programs before True Performance. Can you talk about how value-based reimbursement has evolved?

JD: We can think about several stages in a value-based journey. The simplest stage is a pay-for-value program. A payer looks at specific metrics, and says, for example, evidence-based medicine shows that 85 percent of your patient population that is diabetic should have this range on their A1C, and there should be this frequency of eye exams, and so on. We’ll reimburse you at a higher rate if you hit those goals. From the provider side, that’s basically checking the box on a process.

As you evolve your value-based reimbursement approach, you get to more of a “shared success” space. If the provider can reduce the total cost of care, then the payer offers the provider a portion of the shared savings. It’s upside only — if you do this and reduce costs, we’ll give you a reward. If you don’t, no problem. At this point, the provider is usually still running a fee-for-service model — value-based reimbursement just supplements that.

To go another step, you look at how to adjust the providers’ current total cash flow, which could be an incentive plus fee schedule adjustments, and maybe withholding some of that based on value creation. You see this in other lines of business — an organization might say, you get 95 percent of your salary to start, and if you do everything expected, you get the other five percent at the end of the measurement period. But if you do more, create more value, then that 5 percent can become 10 percent, and now you’re making 105 percent of your salary.

That gets us to the phase of value-based care that we call shared accountability. Here, we shift some performance risk to the providers. This is not institutional risk — the actuarial risk that an insurer takes on and must keep risk reserves for. To use an analogy, providers can’t control a bus crashing and 75 people having catastrophic conditions — that risk remains with the insurer. But we shift accountability for what providers can control — like making sure 75 people all use high-value specialists and facilities for common, predictable procedures and care pathways.

Shared accountability can vary, but the principle is that providers accept responsibility for the cost of a given population. If you don’t work with your diabetic population to do what we know can be done to manage their condition, those diabetics will worsen and require more care, the total cost of care rises, and now the provider organization will potentially owe money because they’re sharing accountability for the cost of that population.

With shared accountability, you start seeing quality inherently built into the program, and population health management really comes alive. You also see efforts shift upstream from primary care to promotional and preventive care, because now the financial model supports that approach. In fee-for-service, it doesn’t work that way. You are paid to treat, not prevent or cure. I know many providers are noble and altruistic, but if you don’t get paid unless people are sick and coming in to utilize services, how much can we really expect you to invest in finding new ways to prevent sickness and lower utilization?

The reimbursement infrastructure has to ensure that it makes sense for providers to work on improving population health. When you know you’ll get paid downstream based on population health, it highlights the value of social workers and school programs and community health workers and other resources. You start thinking longer-term — the value of a middle schoolers’ nutritional program isn’t just about the 10-year-olds who aren’t eating healthy today, it’s about preventing those kids from being obese at 18 and having type 2 diabetes at 26.

Collaboration Enables Value Creation

DB: Across Highmark Health, there’s a mindset of looking at multiple stakeholders across a system, and getting everyone involved in creating improvements. Can you talk about how something like True Performance maintains a collaborative feel, as opposed to providers seeing this as an insurer telling them what metrics they should use?

JD: First, we go to the largest national presence for determining high-quality care, which might be a provider’s own specialty organization. AHIP and CMS have also worked to establish consensus on certain quality metrics everyone should use. But I think what has given us the most success is direct collaboration — meeting with local medical societies, creating a provider advisory council and a hospital advisory council, having dozens of clinical transformation consultants working with providers and getting their feedback.

Keep in mind that this is a new area. Fee-for-service programs have operated for decades and you still have codes and methodology changes going on in that model. No one is going to get value-based reimbursement perfect right out of the box, so from our perspective the best thing is to work closely with providers, and make sure they understand that this is a collaborative effort.

Another piece that is often overlooked is that quality is also defined at the patient level, and some of it is subjective. One patient may see quality in any treatment that keeps them breathing, but others might say, if I can’t walk or talk again, that’s a low-quality treatment. Those differences need to be heard. Similarly, employers pay for a high percentage of care, so their definition of quality matters, too, and that might include less sick days, more productive employees, or longer-term retention because they offer a differentiated benefit.

DB: What about other resources Highmark offers to providers as part of its value-based approach? I’ve seen articles where providers talk about the importance of getting insurance data, for instance.

JD: Sure, if we want PCPs to get more engaged in the patient journey and ensuring high-quality care, it makes sense to do everything we can to support their efforts — from providing the proper analytics, to a technology infrastructure that’s giving you admissions, discharge and transfer feed from the hospital, and lots more.

With data specifically, Highmark is trying to take different data resources and make it so that the providers can act on the data. That’s the challenge — not just access to data, but having it drive insights and improvements. One big advantage of our integrated delivery and financing system (IDFS) is that we combine all of the Highmark health plan financial data with AHN’s clinical data. That gives us a very clear look at what we’re paying for, and what the outcomes are, so both the provider and insurer know what’s efficacious and what’s not.

We also go beyond delivery and financing data, and bring in population health data. You’ll hear that, with health and utilization, your Zip Code is more predictive than your genetic code. Ok, how can we use that data? Well, let’s say we have a community with higher utilization of the emergency department for low acuity or primary care level issues. Health care is taught like anything else within a family. If parents go to the emergency room no matter what’s wrong, kids will grow up and do the same thing — unless there is an educational intervention to get people to understand the other options.

Integrating non-traditional data sets can also help in identifying and responding to high-risk behavior. For example, you can look at publicly available arrest records, and say, within this community, a high percentage of young men have been arrested in the past year for a drug-related offense. If we want to improve health for that subpopulation, we can’t just call and say hey, are you managing your blood glucose level? We need to look at interventions addressing drug use.

In that sense, data opens up a path to understanding what are called social determinants of health, and then devising more practical ways to support health. When you get out to some communities, you realize that no one is going to pick up the phone and talk about nutritional guidelines, because they’re worried about putting food on the table at all. So, food scarcity is an issue we’re looking into, and housing is another, with regard to population health. There’s a lot going on that doesn’t get publicity because it’s not sexy work, and some people are still debating its value. With some interventions, you have to do it and then wait to see years of data before you really know the impact.

It’s important to us not just to bring in non-traditional data sets, but take the data to the providers and allow them to act on it with clinical autonomy. We can do a lot of things on behalf of the provider community, but we believe the long-lasting, sustainable programs will be PCPs acting on data, not big brother Highmark saying here’s what you should do.

A Value-Based Future

DB: You said value-based models are still evolving — what other developments do you see coming?

JD: Right now, value-based reimbursement is primarily between a provider entity and an insurance company or CMS. But the approach is starting to trickle down to the cost center — provider entities are now looking at compensating individual providers based on performance within that value-based reimbursement framework.

Employers are also adapting value-based reimbursement for the employee space. For example, if you need an MRI, your employer might offer you a $100 gift card if you choose a lower-cost, high-quality site of care instead of a high-cost hospital setting.

With any developments, quality must remain central. We want to make sure we’re creating incentives that are about the best value, not just lowest cost. We don’t want an incentive that creates such a financial barrier that you don’t go and get the care you need. That’s where some aspects of the consumer-driven approach have fallen short. With value-based care at Highmark Health, we are constantly thinking about potential unintended consequences and coming back to quality as our threshold — it’s important for employers and consumers to know that.

Follow Highmark Health on social:

A national health and wellness organization as well as the second largest integrated delivery and financing system in America, Highmark Health and our diversified portfolio of businesses employ more than 43,000 talented people who proudly serve millions of Americans in all 50 states and the District of Columbia.

Questions or comments?