Purchasers’ Path to Promoting
Higher Value in Health Care
Peter V. Lee
Pacific Business Group on Health
Citizens’ Health Care Working Group – Salt Lake City, Utah
July 22, 2005
Pacific Business Group on Health:
Mission and Priorities
Mission: To improve the quality
and availability of health care
while moderating costs.
Quality Measurement
and Improvement
Value Purchasing
Consumer Engagement
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Pacific Business Group on Health Members
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Cost Pressures – No End in Sight
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Quality Shortfalls: Getting it Right
50% of the Time
Adherence to Quality Indicators
Breast Cancer
75.7%
73.0%
Prenatal Care
Low Back Pain
68.5%
Coronary Artery Disease
68.0%
Hypertension
64.7%
Congestive Heart Failure
63.9%
Depression
57.7%
Orthopedic Conditions
57.2%
Colorectal Cancer
53.9%
Asthma
53.5%
Benign Prostatic Hyperplasia
53.0%
Hyperlipidemia
Adults receive about half
of recommended care
54.9% = Overall care
54.9% = Preventive care
53.5% = Acute care
56.1% = Chronic care
48.6%
Diabetes Mellitus
45.4%
Headache
45.2%
Not Getting
the Right
Care at the
Right Time
40.7%
Urinary Tract Infection
Ulcers
32.7%
Hip Fracture
22.8%
Alcohol Dependence
10.5%
0%
20%
40%
60%
80%
100%
Percentage of Recommended Care Received
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Source: McGlynn EA, et al., “The Quality of Health Care Delivered to Adults in the United States,” New
England Journal of Medicine, Vol. 348, No. 26, June 26, 2003, pp. 2635-2645
Employers Using Blunt Instruments
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Putting the Consumer in the Driver’s Seat
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PBGH Purchasing Elements for
Value Breakthrough
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Count Value:
Make Value Count:
Capture Value Gains:
Higher value options are
identified and made available
Higher value options are
reinforced by the market
Breakthroughs in health benefits
value occur
1. Health Plans are routinely
assessed on 6 IOM
dimensions of
performance*, starting
with: risk & benefitadjusted total cost PMPY,
HEDIS and CAHPS; and
implementation of
breakthrough elements 2-6
2. Individual Providers and
Provider Organizations are
routinely assessed on 6
IOM dimensions of
performance, starting with
(allocative) efficiency,
effectiveness, and patient
centeredness
3. Health & Disease (H/D)
Management Programs
and Treatment Options are
routinely assessed on 6
IOM dimensions of
performance
4. Consumer Support
enables consumers to
recognize higher value
plans, providers, H/D
management
programs, and
treatment options in a
timely and
individualized manner
5. Benefit Architecture
encourages all
consumers to select
high value options
6. Provider Payment
incents high
performance today
and re-engineering to
enable higher
performance tomorrow
Today’s Gain: Migration
Consumers migrate to more
efficient, higher quality plans,
providers, H/D management
programs, and treatment
options (= an initial 5-15 net
percentage point offset of
future cost increases; and > 2 
quality reliability)
Tomorrow’s Gain: Reengineering
Sensing a much more
performance-sensitive market,
health plans, providers, H/D
management programs, and
biomedical researchers create
stunning breakthroughs in
efficiency and quality of health
benefits (= further net
percentage point offsets of
future cost increases; and > 4 
quality reliability)
*The six Institute of Medicine performance dimensions: Safe,
Timely, Effective, Efficient, Equitable, Patient-centered
© Pacific Business Group on Health, 2005
Breakthrough Plan Competencies:
Potential Impact on Premium
Potential Premium Savings
Health Plan Competency
Low
Medium
High
1. Health Promotion
0.1%
1.7%
5.2%
2. Health Risk Management
a. Risk reduction
b. Self-care and triage
c. Disease management
-1.3%
1.1%
5.6%
3. Shared Decision-Making/Treatment Options
0.1%
0.4%
1.0%
4. Provider Options
7.3%
12.2%
17.0%
Included
above
Included
above
Included
above
Included
above
Included
above
Included
above
6.2%
15.4%
28.8%
5. Consumer Incentives & Engagement
6. Provider Incentives & Engagement
TOTAL PREMIUM VALUE
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Source: Business Roundtable; Mercer HR Consulting
Measuring Provider Quality and
Cost-Efficiency to Improve Value
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Adapted from Regence Blue Shield
© Pacific Business Group on Health, 2005
Putting Information & Money to Work
Consumer and Provider Incentives
Patient/Consumer
Incentives
Provider Incentives
 Information  Tools for
the Right People at the
Right Time
 Network Limits 
(Narrow Networks)
 Information  Tools for
Quality Improvement and
Accountability
 Value Pricing  Price
Differentiation
 P4P  Variable Payment
 Contribution
 Point of Care
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 Channeling Volume
Nearing the Tipping Point:
Millions Using Health Care “Quality” Information
Saw information on
quality among…
Used the information in
making a decision…
%
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and
Number
of all Americans
Health Plans
28%
13.4%
27 Million
Hospitals
22%
8.4%
17 Million
Physicians
11%
5.4%
11 Million
Source: Kaiser Family Foundation et al., National Survey on Consumers’ Experiences, 2004
Consumer Support for Plan Choice
Health Plan Chooser – Showing cost and
paving the way to quality
Member
preference-based
ranking:
• Cost
• Doctor
• Quality
• Features
• Services
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Consumer Incentives for Plan Choice
Supporting Equity:
UC Employee’s Family Plan Cost
Salary Level
Health Net
 Monthly $$
 % of Pay
Blue Cross
 Monthly $$
 % of Pay
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<$40K
$40-$80K &
retirees
$80-$120K
$120K plus
$36
$86
$141
$187
1.3%
1.8%
1.8%
1.5%
$172
$215
$274
$320
6.3%
4.5%
3.4%
2.6%
Source: University of California 2004
Consumer Support for Hospital Choice
Hospital Choice Tools
• Hospital quality linked to treatment choice information
• Network, cost and quality information linked to tiered benefit design
Member
preference-based
ranking:
• Volume
• Mortality
• Complications
• Length of Stay
• Leapfrog
• Cost
• Patient Experience
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Hospital Value Variation
Blue Shield of California
Variation in Facility Relative Cost for
Network Choice (Bay Area)
1.60
1.38
1.40
1.29
1.23
1.18
1.20
1.05
0.98
1.00
0.80
0.69
0.72
0.60
0.40
0.20
-
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Hospital 1
Hospital 2
Hospital 3
Hospital 4
Hospital 5
Hospital 6
Hospital 7
Hospital 8
Promoting Higher Value Medical
Groups
PacifiCare HMO Value Network Example
3.50
Value Network Avg. Cost: $141.09
Avg. Quality Score: 1.34
Non-Value Avg. Cost: $168.77
Avg.. Quality Score: 1.13
Quality Score
3.00
2.50
2.00
1.50
1.00
0.50
$100.00
$150.00
$200.00
$250.00
2004 Normalized Cost PMPM
Non-Value
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Value
$300.00
Medical Group Payments: California’s Integrated
Healthcare Association Pay for Performance
GOAL: Breakthrough improvements in quality
and patient experience
Multi-stakeholder Collaborative:





Seven health plans with nearly 14 million enrollees
Over 200 medical groups
Purchasers
State of California
Consumers
Common Measures:
Clinical Quality
Patient Experience
Investment and Adoption of IT
50% weight
30% weight
20% weight
10 HEDIS-based
preventive and chronic
care measures
5 measures ( i.e. access,
specialty care, MD
communication)
2 Measures: point of care and
population management
Reported with
Administrative data
Collected through common
statewide CAHPS-like survey
Collected through web-based survey
plus audit
Public Reporting and Performance Scorecard:
 California Office of Patient Advocate (http://www.opa.ca.gov/report_card/)
 Pacific Business Group on Health (http://www.healthscope.org)
Pay for Performance and Transparency:
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 In 2004 over $50 million paid based on common metrics
 Performance information used for consumer choice and benefit design
Bridges to Excellence: Physician Rewards
Using NCQA Recognition Programs
Physician Office Link:
• Physician Rewards of up to $50 pmpy
• Consumer Activation from report card and patient experience survey
Clinical Information
Systems
Patient Education and
Support
Care Management
Use of Patient Registries
Educational Resources
(languages)
Care of Chronic Conditions
(disease management)
Electronic RX and Test ordering
systems
Referrals for Risk Factors &
Chronic Conditions
Preventable Admissions
Electronic Medical Records
Quality Measurement and
Improvement
Care of High-Risk Medical
Conditions (care management)
Diabetes Care Link (NCQA Diabetes Recognition Program):
• 12 measures developed with the American Diabetes Association
• Physician Rewards of up to $100 pd/py
• Consumer Activation from report card, care management tool and
rewards for compliance
Cardiac Care Link (NCQA Heart Stroke Recognition
Program):
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• 6 measures developed with the American Heart Association
• Physician Rewards of up to $160 pcp/py
• Consumer Activation from report card, care management tool and
rewards for compliance
PBGH & Where to Get More
Information
To Learn More…
www.pbgh.org — an overview of PBGH programs and initiatives
www.HealthScope.org — consumer Web site with health plan
and provider quality measurements
www.PacAdvantage.org — small group purchasing pool
http://chooser.pacadvantage.org — sample site to assist
enrollees in plan selection
To subscribe to the PBGH E-Letter, go to www.pbgh.org/news/eletters
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