Value Based Purchasing of Health Care Management Services

Background: Health Content on the Internet

Employers provide health benefits and services in an effort to attract and retain employee talent while continuously balancing employee satisfaction with efforts to maintain their labor and benefit expenses. According to the Kaiser Family Foundation (2005), family insurance premiums have increased by 73% in the past five years, outpacing increases in workers’ earnings and over all inflation. Chart 1 describes the last ten years of premium activity for a family of four, comparing these increases to overall inflation and workers’ earnings.

1996-2005 Comparison of Health Plan Premium, Overall Inflation and Workers' Earning Increases
Click image to enlarge
Source: Kaiser Family Foundation, Trends and Indicators in the Changing Health Care Marketplace, 2005

In this environment of escalating healthcare costs (driven by new technologies, medical inflation, aged workforce and retirees, etc.), employers have a heightened need to keep employee benefit expenses in check and to maintain benefits once optional but now considered more by employees as an entitlement. This has impacted their role as purchasers. They now have greater incentive to influence changes in healthcare through value based purchasing and empowering their employees to engage in healthy behaviors as well as reducing expenditures.

Value based purchasing of health care management services suggests the purchaser takes a prepared and conscious effort to encourage and reward quality improvement when negotiating pricing and deliverable services. What are the steps an employer should take in value based purchasing? According to literature review by Thomas Jefferson University (2003), employers have adopted the following common value based purchasing strategies?

  1. “Collecting information on quality;
  2. Selectively contracting with high quality providers;
  3. Partnering with plans for quality improvement;
  4. Promoting a corporate culture of quality (CQI, TQM, Six-Sigma Quality, etc.);
  5. Educating employees on quality issues; and,
  6. Rewarding high quality and penalizing poor quality.”

Employers committed to value based purchasing also understand that the consumer is an important stakeholder in the process. Protecting, empowering and educating employees are critical methods to encourage them to take responsibility for their health and make choices that minimize healthcare expenditures. Below is a chart to explain how this is done in the purchasing process.

The 3 ways to engage employees in value based purchasing:

Employee Engagement Purchase Decisions Should Ensure that Consumers:
Protect Receive safe, effective, and high quality care.
Empower Have access to information on health care cost and quality.Are able to effectively navigate the health care system.
Educate Have access to information and tools to help them learn about prevention, health risks, and their own care management.

How can employers empower employees to engage in health care quality improvement and cost containment?

Selective contracting with high quality health service providers is another value-based purchasing strategy. However, this high-quality service provider must also assist in the engagement and empowerment of consumers to use their service in an informed and accountable way. Here are some employee empowerment support qualities to look for in a service provider:

  1. Incentives for use of high quality but cost effective providers.
  2. Decision tools (such as benefit/coverage guidelines, directories, provider cost and quality information, tools for self-managed care, etc.) for employees so they can evaluate their options.
  3. Disclosure of financial transactions so there is an understanding of how the vendor’s relationships benefit the plan and employee.
  4. Consumer education that supports the appropriate use of services, discourages waste and abuse, and encourages prevention and good health habits (such as health risk appraisals).
  5. Integration of the health care service with care management coordination so there is an opportunity for reducing medical errors and supporting early interventions.
  6. Instructions on how to get assistance via email, telephone, or in person.

What questions to ask when selecting a health care management service?

Collecting quality information is a strategy in value based purchasing. However, identifying, gathering and analyzing quality data for one or more health plans or services is a considerable effort for a company. Fortunately, accreditation organizations exist to support these efforts. URAC works with industry stakeholders to develop a set of industry standards that assist employers and others with the operational and quality review of health care management services. Accreditation also demonstrates a company’s commitment to quality and continuous improvement. Here are some of the areas that accreditation standards cover and the questions they answer.

Subject Some Important Questions
Organizational Integrity
  • Does the service have an organizational structure in place and adhere to its company policies?
  • Are employee responsibilities defined and are the personnel qualified?
  • Does the service have adequate privacy/security processes regarding member information in place?
  • Is there a disaster recovery plan?· Are there processes in place for contract oversight?
Marketing/ Communication and Disclosure
  • Does the service have the capacity to disclose to and educate the member on how to best maximize their benefit as well as contain costs?
  • Is member literature about the benefit at the right reading level and is it culturally sensitive?
  • Are third-party financial relationships disclosed to purchaser and consumers?
Operations (Claims, Customer Service, Provider Network Management)
  • Does the service meet industry access standards to health care providers?
  • Are the providers credentialed?
  • Does the claims operation meet healthcare industry standards?
  • Does the service provide consumers adequate access through the web and member service call centers?
Clinical: Medical Management
  • What utilization guidelines are followed and do they adhere to them?
  • How is over/under utilization monitored and managed?
  • Do the care, utilization and disease management operations meet healthcare industry standards?
Quality Management
  • What quality measures are monitored and how does the service measure up to the industry?
  • Is there a continuous quality improvement plan and compliance process?

Where can employers go for help when making a purchase?

URAC, an independent, nonprofit organization, is a leader in promoting health care quality through its accreditation and certification programs. URAC offers a wide range of quality benchmarking programs and services that keep pace with the rapid changes in the health care system, and also provides a symbol of excellence for organizations to validate their commitment to both quality and accountability. Through its broad-based governance structure and an inclusive standards development process, URAC ensures that all stakeholders are represented in establishing meaningful quality measures for the entire health care industry. URAC offers accreditation for the following health care management services.

Health Care Management Services
Health Care Workers' Compensation Care
Health Plan Utilization Management
Health Network Case Management
Utilization Management Health Network
Case Management HIPAA Privacy and Security
Disease Management  
Health Call Center  
Independent Review Organization  
Consumer Education and Support  
Claims Management  
Provider Credentialing/CVO  
Health Web Site  
Medicare Advantage Deeming  
HIPAA Privacy and Security  
Pharmacy Benefit Management (2007)  

As early as 2008, URAC will have a series of quality measures to support the accreditation process. These will measure operational service quality, access to services, clinical decision making/clinical support, quality improvement and customer satisfaction. Stakeholders will be able to compare the key service indictors of accredited health care management services with industry averages, as well as assess how well health management services measure up in consumer empowerment.

Why should employers look for a URAC accreditation seal?

Accreditation Benefits for Employers
Supports value-based purchasing efforts.
Provides a measure of comparison in selecting health care vendors for employees.
Reduces employer-purchasers’ burden of oversight of health care vendors’ operations.
Delivers a human resources benefit to employee-consumers who value the “seal-of-approval.”
Promotes the delivery of quality health care to employees and provides access to performance data.
Helps to reduce disability and lost time through conformity with medical management standards.

Created by Matrix Group International, Inc